Highlights
Major U.S. stock indexes delivered mixed results over the week as concerns about the cost and financing of artificial intelligence (AI) investments weighed on large technology companies. Smaller-capitalization and value stocks performed better as market leadership continued to broaden beyond growth-oriented technology shares. The Russell 2000 led the major benchmarks, gaining 2.00%, followed by the Dow Jones Industrial Average, which advanced 0.41%. In contrast, the Nasdaq Composite was lower by 0.79%, while the S&P 500 shed 0.47%. Within the large-cap segment, value stocks outperformed growth stocks for a third consecutive week. Oil prices rose toward the end of the week following reports of renewed tensions in the Middle East. The increase reversed earlier losses that had been driven by optimism surrounding diplomatic engagement between the U.S. and Iran. In the week, AI-related equities experienced another unsettled week as investors balanced encouraging signs of demand against questions about the scale, sustainability, and funding of the industry’s capital expenditure plans. Meta Platforms was among the notable movers. Investors focused on the company’s substantial investment commitments and potential funding requirements, despite indications that demand for AI-related products and services remained favourable. On the macro front, S&P Global’s preliminary October survey indicated that U.S. business activity continued to expand at a robust pace, although growth moderated slightly. The Flash U.S. Composite Purchasing Managers’ Index (PMI) declined to 57.6 from 58.4 in September. Readings above 50 indicate expansion. Meanwhile, consumers’ expectations for inflation over the coming year edged up to 4.7%, while longer-term inflation expectations increased slightly to 3.5%. In Europe, the pan-European Euro STOXX 600 Index ended the week 2.12% lower. European markets faced pressure from surging oil prices, escalating Middle East tensions, renewed inflation concerns, and domestic political instability. France experienced a deterioration in civil unrest during the week, as cost-of-living demonstrations escalated into widespread riots and looting in major cities. The unrest contributed to selling pressure in both French equities and government bonds. The developments heightened concerns about the country’s political stability, fiscal outlook, and ability to manage its public finances. Meanwhile, third-quarter earnings announcements gathered momentum during the week, with results varying considerably across industries while the S&P Global’s preliminary Eurozone Composite PMI Output Index indicated that regional economic growth moderated in October. Separately, UK labour market and inflation figures reinforced speculation that the Bank of England might raise interest rates at its next policy meeting on November 5; annual inflation accelerated to 3.5% in September, its highest level since October of the previous year. Moving along to Asia, Japanese equities declined over the week, with the Nikkei 225 decreasing by 4.03% and the broader TOPIX lower by 2.46%. Despite the inflation reading coming in at 2.1% and above the Bank of Japan’s (BoJ’s) 2% target since December 2025, reports suggested that the BoJ was leaning toward keeping interest rates unchanged at its October 29–30 meeting. Finally, China’s economy expanded 4.5% year over year in the third quarter, accelerating from 4.3% in the second quarter and exceeding the median Reuters poll forecast of 4.4%. GDP growth for the first three quarters reached 4.6% year over year, leaving the government’s full-year growth target of 4.5%–5.0% within reach.
Data Highlights
CAD Inflation Rate YoY (Sep) rose +10bps, from 3% to 3.1%, consensus was for a +20bps increase, from 3% to 3.2%. CAD Retail Sales YoY (Sep) rose +30bps, from 5.1% to 5.4%, against expectations of a -20bps decrease, from 5.1% to 4.9%. GBP Unemployment Rate (Aug) fell -20bps, from 4.9% to 4.7%, analysts expected the rate to remain unchanged at 4.9%. GBP Inflation Rate YoY (Sep) rose +40bps, from 3.1% to 3.5%, analysts expected an increase to 3.4%. CNY Unemployment Rate (Sep) fell -10bps, from 5.3% to 5.2%, consensus was for the rate to remain the same at 5.3%. CNY GDP Growth Rate YoY (Q3) rose from 4.3% to 4.5%, consensus was -10bps softer, from 4.3% to 4.4%. JPY Inflation Rate YoY (Sep) rose +20bps, from 1.9% to 2.1%, against expectations for an increase to 2.3%.
Week Ahead
USD ADP Employment Change Weekly, USD New Home Sales (Sep) – Tuesday | AUD CPI (Sep), NZD RBNZ Interest Rate Decision, CAD BoC Interest Rate Decision, USD Fed Interest Rate Decision – Wednesday | EUR ECB Interest Rate Decision – Thursday | JPY Unemployment Rate (Sep), JPY BoJ Interest Rate Decision, EUR GDP Growth Rate YoY (Q3), CHF Retail Sales YoY (Sep), EUR Unemployment Rate (Oct), EUR GDP Growth Rate YoY (Q3) – Friday
