Market Update - Month Overview (Octoberr 2025)

Summarised by Shara Cox (Report via Zenith)

International Markets Summary

Global markets strengthened again in October, supported by falling bond yields, solid corporate earnings, and ongoing enthusiasm for AI-related sectors. Developed equity markets rose further, with Japan leading gains on the back of political change favouring expansionary economic policy, while the US market saw strong contributions from major technology and financial companies. The broader environment was helped by the US Federal Reserve’s rate cut and easing inflation, although comments from Chair Jerome Powell signalled that future rate cuts are not guaranteed. Europe lagged during the month but remains a strong performer year-to-date. Emerging markets outperformed developed markets, driven by exceptional returns in South Korea and Taiwan, both benefiting from the global semiconductor and AI boom. Capital flows into emerging economies also improved as the US dollar eased earlier in the year and commodity demand remained strong. In fixed income, global bond yields initially eased but later lifted after the Fed’s mixed messaging, while credit markets remained resilient.

Australian Markets Summary

Australian equities underperformed global peers in October, with the ASX 200 posting only modest gains as expectations around interest rates continued to shift. Inflation proved more persistent than anticipated, pushing out expectations for further RBA easing and weighing on sentiment. Company earnings growth remains relatively weak, and a sharp decline in major healthcare names, particularly CSL, dragged on overall market performance. In contrast, materials and small- to mid-cap stocks performed strongly, supported by higher commodity prices and renewed appetite for economically sensitive sectors. Despite this, underlying economic signals remain mixed: inflation is sticky, productivity is weak, and unemployment has lifted, suggesting Australia’s growth potential may be lower than previously thought. In fixed interest, Australian bond yields fluctuated throughout the month, with higher-than-expected CPI data reducing the likelihood of further near-term rate cuts. Overall, while parts of the market are benefiting from strong commodity prices and global AI-related tailwinds, domestic macroeconomic uncertainty is tempering broader performance.