Macro Insights

October 2023 wrap-up: markets remain weak as bond yields rise further

1 November 2023

Author: Griffin Tory

The month of October saw continued weakness in global fixed income and equity markets as US bond yields set fresh 16-year highs. This occurred amid persistent economic strength in the US, with GDP expanding by 4.9% (QoQ, Annualised) in Q3, the fastest pace since the end of 2021. In contrast, Euro Area performance continued to be weak, with the economy contracting slightly in Q3. News was generally more positive on inflation, with Euro Area prices growing by 2.9% (YoY) in October, marking the slowest rate in over 2 years. In the US, headline inflation also remained low relative to the recent past, although several measures of core and underlying inflation accelerated in September. At his annual New York Economic Club speech, Federal Reserve Chair Powell noted the strength of the economy, but generally expressed optimism that wage and price inflation were declining. Notably, Powell and other Fed speakers signalled a lower likelihood of future interest-rate hikes, pointing to the tightening impulse emanating from rising bond yields. 

Elsewhere, in Asia, the Bank of Japan (BoJ) announced a tweak to its Yield Curve Control (YCC) policy by relaxing the 1% ceiling on the 10-year bond yield. Meanwhile, China’s economy recorded a robust Q3 growth rate, though weak survey data and continued property-sector woes weighed on sentiment. The outbreak of war in the Middle East raised geopolitical tensions significantly, although the broader impact on markets remained muted throughout the month.

Against this backdrop, global equities were down -3%¹ over the month, alongside a -1.2%² decline in bonds and +1%³ increase in the US dollar. Commodities rose by +0.3%4, with weakness in oil, gasoline and industrial metals prices offsetting strong gains in precious metals. There was some disruption to natural gas markets resulting from the Israel-Hamas conflict, causing US futures to rise by almost 11%5.

Source: Bloomberg

About the Author

Griffin Tory

Griffin Tory is a Junior Economist working within the Macro Research team. Griffin joined Fulcrum in 2022 and prior to this, worked in the Investment Strategy Group at Vanguard. He graduated with an MPhil in Economics from the University of Cambridge in 2020.

1. Bloomberg Ticker: GDUEACWF Index

2. Bloomberg Ticker: LEGATRUU Index

3. Bloomberg Ticker: TWI USSP Index

4. Bloomberg Ticker: BCOMTR Index

5. Bloomberg Ticker: NG1 Comdty

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