Market Commentary

Monthly market update

October 2025

Global share markets continued to advance in October, extending their strong run from recent months. The MSCI World Index – Net rose 3.3% in unhedged AUD terms and 2.6% in hedged AUD terms, marking a seventh consecutive monthly gain for global equities. Investor optimism was supported by further signs of cooling inflation, steady corporate earnings, and ongoing momentum in artificial intelligence (AI) and technology-related sectors.

The rally was underpinned by the US Federal Reserve’s second consecutive 25-basis-point rate cut, which brought the federal funds rate to a new target range of 3.75%–4.00%. This move reflected the Fed’s growing confidence that inflation is returning toward its 2% target, even as the labour market remains stable. Whilst the government shutdown has impacted the release of the payrolls data, jobless claims remain well behaved, which have eased concerns about a more protracted slowdown.

Equity markets responded with moderate gains. The S&P 500 rose 2.3%, while the Nasdaq Composite added 4.7%, supported by solid third-quarter results from major technology companies and renewed enthusiasm around AI infrastructure investments. European markets also performed well amid lower energy prices and expectations of policy easing by the European Central Bank. Emerging markets also advanced, with the MSCI Emerging Markets Index up 5.5%, supported by Chinese equities and improving investor risk appetite.

Geopolitical risks remained a source of volatility. Ongoing trade frictions between the US and China resurfaced after new technology export restrictions were announced, and political uncertainty in Europe weighed on investor sentiment late in the month.

The Australian share market rebounded in October, with the S&P/ASX 300 Index rising 0.4%, recovering somewhat from September’s decline. The Reserve Bank of Australia (RBA) may resume easing in early 2026. The RBA kept the cash rate unchanged at 3.60%, noting progress in inflation moderation but highlighting that services inflation remains elevated.

Fixed income markets posted modest positive returns. The Bloomberg Global Aggregate Index – AUD hedged rose 0.8%, as global bond yields fell in response to the Fed’s dovish tone. The US 10-year Treasury yield declined marginally to 4.1% from 4.15% in September.

In Australia, bond markets were largely unchanged, with the Bloomberg AusBond Composite 0+ Year Index returning 0.4%. Softer inflation data and expectations of an eventual RBA rate cut supporting local bond prices. The Australian cash market returned 0.3%, as measured by the Bloomberg AusBond Bank Bill Index, consistent with prior months.

 

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