U.S. Inflation Eases Slightly Below Forecast

Equities Climb Despite Geopolitical Noise

U.S. stocks posted solid weekly gains even as markets contended with volatile headlines involving U.S.–China trade frictions and an uptick in crude prices after Washington imposed sanctions on Russia’s two major oil producers.
Small-cap benchmarks led the advance: the Russell 2000 Index and S&P MidCap 400 Index outpaced large-cap peers. Within the S&P 500, information technology and energy were the strongest sectors, while utilities and consumer staples lagged.

Inflation Numbers Arrive Below Consensus

Although the ongoing federal government shutdown has delayed several key economic releases, the Bureau of Labor Statistics eventually published September’s inflation report on Friday, October 24.
Headline consumer prices rose 3.0% year-over-year, up from 2.9% in August, but just shy of the Bloomberg consensus of 3.1%.
Core inflation—excluding food and energy—also registered 3.0%, marking a modest decline from the previous month.
The timing of the release was accelerated to enable the Social Security Administration to calculate its annual cost-of-living adjustment.

Business Momentum Improves in October

Early readings from S&P Global’s purchasing managers’ indexes signaled a pickup in activity across both manufacturing and services.
The Composite PMI climbed to 54.8 from 53.9 in September, marking the 33rd straight month above 50, the threshold separating expansion from contraction.
Services remained the key growth driver with a three-month high of 55.2, while the Manufacturing PMI rose modestly to 52.2 from 52.0.
Nevertheless, optimism among producers slipped to its second-lowest level since June 2024, reflecting uncertainty around tariffs and policy direction.

Short vs. Long Treasury Yields Diverge

Treasury yields oscillated through the week—initially falling before edging higher ahead of the inflation data.
Yields on one- and three-year notes finished the week higher, while the 10-year yield drifted lower (as bond prices move inversely to yields).
T. Rowe Price traders remarked that investors increasingly expect the government shutdown to extend into month-end, complicating monetary-policy expectations and data flow.
Municipal bonds delivered strong results, helped by steady cash inflows and limited new supply.

This table is illustrative only and does not represent any specific investment. Past performance is not indicative of future results.
Sources: Reuters via Yahoo Finance and Bloomberg.

Europe

Regional Markets Gain Momentum

In local-currency terms, the STOXX Europe 600 advanced 1.68%, supported by broad gains.
Germany’s DAX added 1.72%, Italy’s FTSE MIB +1.44%, France’s CAC 40 +0.63%, and the UK’s FTSE 100 surged 3.11%.

UK Inflation Steady; Retail Activity Surprises

Headline inflation in the UK remained at 3.8% year-on-year for a third straight month, defying expectations for a rise to 3.9%.
Core inflation ticked down to 3.5% from 3.6%.
Following the data, financial markets sharply increased bets on a December rate cut by the Bank of England.
Retail sales expanded 0.5% month-over-month, marking a fourth consecutive increase—boosted by online jewelers and technology retailers—contradicting forecasts for a 0.4% decline.

Eurozone Activity Reaches 17-Month High

Preliminary PMI figures from S&P Global/HCOB showed the Eurozone Composite Output Index rising to 52.2 from 51.2, its highest since May 2024 and above consensus 51.1.
The Services PMI climbed to 52.6 (14-month high), while Manufacturing PMI improved to 50.0 from 49.8, signaling stabilization.
Germany drove much of the growth; in contrast, France’s activity contracted for a 14th straight month, the fastest decline since February.

Consumer Confidence Improves

The European Commission’s flash survey placed Eurozone consumer confidence at -14.2 in October, an eight-month high and better than the expected -15.0.
Across the EU overall, sentiment rose 0.8 points to -13.5, indicating a gradual improvement in household outlook.

Japan

Equities Rally as New Leadership Boosts Sentiment

Japanese equities advanced strongly: the Nikkei 225 gained 3.61%, while the TOPIX rose 3.12%.
Investors welcomed Liberal Democratic Party (LDP) leader Sanae Takaichi’s election as prime minister, anticipating that her pro-growth stance and expansive fiscal agenda could lift corporate earnings.
Her coalition with the Japan Innovation Party (JIP) should provide relative political stability, even though the bloc falls slightly short of an outright majority; smaller neutral parties are expected to support key bills individually.

Currency and Bond Movements

Expectations for a large stimulus package pressured the yen, which weakened to around JPY 152.9 per USD from JPY 150.6 a week earlier.
The yield on the 10-year JGB rose to 1.65% from 1.62%.
Political uncertainty before Takaichi’s appointment had dampened prospects for an imminent BoJ rate hike; markets now see December as the earliest window.

Inflation Remains Above Target

Nationwide core CPI increased 2.9% year-over-year in September, matching expectations and up from 2.7% in August.
Energy and food costs were the main contributors, keeping inflation above the Bank of Japan’s 2% objective.

China

Technology Shares Lift Markets

Mainland indices rose amid a rally in technology names despite data highlighting soft domestic demand.
The CSI 300 added 3.24% and the Shanghai Composite gained 2.88%, while Hong Kong’s Hang Seng climbed 3.62% (FactSet data).

Mixed Economic Signals

China’s GDP expanded 4.8% year-over-year in Q3, keeping the country on track for its roughly 5% annual growth target.
Yet other figures revealed pockets of weakness: retail sales rose only 3.0% YoY in September (the slowest since November), and fixed-asset investment fell 0.5% YoY in the first nine months.
Industrial output beat expectations at +6.5% YoY, driven by export-oriented sectors.

Overall, the data underscore persistent domestic-demand fragility.
Years of housing-market stress and deflationary pressures continue to restrain spending. Encouraging consumption has become a priority for policymakers amid global trade tensions.

Policy Direction and Five-Year Blueprint

Beijing announced plans to significantly enhance scientific and technological self-reliance over the next five years and to keep manufacturing’s economic share at a reasonable level.
These objectives appeared in a communiqué released after the Fourth Plenum, which outlined themes for the 15th Five-Year Plan (2026–2030) on economic and social development.

Other Key Markets

Hungary — Rates Held Steady; Inflation to Stay High

The National Bank of Hungary (NBH) kept its base rate unchanged at 6.50%, with the overnight lending and deposit rates at 7.50% and 5.50%, respectively.
Officials acknowledged that the global backdrop has slightly improved, yet geopolitical and trade tensions remain. They also warned that the decline in worldwide inflation has slowed, citing supply-chain fragmentation and high service prices as risks.

The Hungarian economy shows dual characteristics: construction output has fallen notably even as order books grow, while retail sales and industrial production remain soft.
Headline inflation was 4.3% in September and core 3.9%.
Although the stronger forint has helped curb import prices, the NBH expects inflation to stay above its tolerance band through year-end.
Maintaining tight policy and positive real rates is viewed as essential to stabilize markets and achieve the 3% target by early 2027; thus, rates were left unchanged.

Türkiye — Smaller Rate Cut and Caution on Disinflation

Türkiye’s central bank implemented a 100 basis-point rate cut, lowering the one-week repo rate to 39.5% from 40.5%, and adjusted the overnight lending and borrowing rates to 42.5% and 38.0%, respectively.
Headline inflation rose to 33.29% YoY in September from 32.95% in August, ending a year-long disinflation trend.
Officials warned that the process has slowed notably, with food prices posing a key risk.
While the bank pledged to maintain a tight stance until price stability is secured, it did not rule out further cuts—though future moves will depend on incoming inflation data and its underlying momentum. Policymakers also stated they stand ready to tighten again if inflation deviates significantly from their target path.