Market summary – Review of October 2026

US equities saw a loss of 1.8% in October. However, this masked significant differences beneath the surface. Concerns about the cost and financing of AI investment weighed heavily on technology-related stocks, particularly semiconductor companies and some of the market’s largest names. In contrast, small- and mid-cap stocks were up by 1.3% and 2.0%, respectively, highlighting broader resilience. Energy, consumer staples, and healthcare also performed well as investors moved towards more defensive companies.

European equities were mixed, down by 1.0% overall, with defensive sectors providing support while political and fiscal uncertainty in France weighed on sentiment. Concerns over French government borrowing costs put pressure on financial companies, particularly banks, while worries about AI investment affected technology stocks. Energy and consumer-focused sectors were more resilient. Eurozone economic growth slowed to 0.4% in the third quarter, while the European Central Bank kept interest rates unchanged at 2.5%.

The UK was the strongest-performing major equity market in October, ending the month up 1.3%. The market benefited from its relatively high exposure to energy and defensive sectors such as healthcare, consumer staples, and utilities, which proved attractive as investors became more cautious. UK inflation rose to 3.5%, while the Autumn Budget prompted a relatively muted market reaction.

Japanese equities had a difficult month in October seeing a loss of 5.0%. Growing concerns about how investment in AI infrastructure would be funded and whether it could be maintained put pressure on technology-related businesses. Meanwhile, cybersecurity concerns added to market uncertainty. Financial companies also struggled as long-term bond yields declined. Higher oil prices and wider geopolitical uncertainty added to negative sentiment. However, defensive areas, including pharmaceuticals and energy-related stocks, held up better than the wider market.

Emerging market equities were among October’s weakest performers, falling by 8.8%. Technology-heavy Asian markets were hit particularly hard as investors reassessed the outlook for AI spending. Korea and Taiwan suffered sizeable declines, while Indonesia also fell sharply. Meanwhile, political developments hurt Brazilian equities following President Lula’s unexpected election victory. India proved more resilient, while Mexico was the strongest emerging market, supported by improving economic activity and more encouraging inflation data.

Government bonds generally performed well as investors sought higher-quality assets amid falling equity markets. US Treasuries gained 2.4%, while UK gilts were also up by 1.6%. Investment-grade corporate bonds also benefited from falling government bond yields, although high-yield bonds were less resilient. European high yield was particularly weak amid concerns about France and AI-related financing.