Major U.S. stock indexes finished the week with mixed results as anxieties regarding artificial intelligence (AI) financing and spending pressured large-cap technology shares, while a shift in market leadership allowed small-cap and value-oriented stocks to outperform. The Russell 2000 Index, representing small-caps, led the primary benchmarks with a 2.00% gain, followed by the Dow Jones Industrial Average, which rose 0.41%. Conversely, the S&P 500 Index and the Nasdaq Composite declined by 0.47% and 0.71%, respectively. Within the large-cap sector, value stocks outperformed growth for the third week in a row.
Oil prices climbed late in the week following reports of escalating tensions in the Middle East, which reversed earlier losses driven by optimism regarding diplomatic talks between the U.S. and Iran.
AI spending concerns weigh on technology stocks
AI-related equities endured another week of volatility as investors balanced generally positive demand signals against worries regarding the magnitude and funding of capital expenditures. Technology shares saw a rebound early in the week following the previous week’s sell-off, bolstered by positive sentiment surrounding data center demand and anticipation of upcoming quarterly earnings from major tech firms. However, this recovery stalled on Thursday as renewed scrutiny of AI investment and funding requirements dampened investor sentiment.
Meta Platforms was among the notable decliners as investors focused on the company’s significant capital spending plans and potential financing needs, despite some positive indicators regarding AI-related demand. Other technology firms also faced increased scrutiny as investors questioned whether earnings growth could justify high valuations and ongoing infrastructure investment.
Housing market weakens amid elevated mortgage rates
<a s revised figure of 200,000 and the lowest level since July. However, continuing claims rose by 25,000 to 1.728 million.
Business activity growth remains robust despite accelerating inflation over the coming year rose to 4.7%, while long-term inflation expectations also ticked up to 3.5%.Treasuries rally as technology weakness and geopolitical concerns support demand
U.S. Treasury yields dropped sharply during the week as the sell-off in technology stocks and rising geopolitical uncertainty fueled demand for U.S. government securities. (Bond prices and yields move in opposite directions.) The benchmark 10-year Treasury yield dipped below 5% for the first time in about a month on Thursday, settling near 4.99% by Friday afternoon.
Europe
The pan-European STOXX Europe 600 Index concluded the week down 1.39% in local currency terms. Market sentiment in Europe was negatively impacted by rising oil prices, Middle East tensions, mounting inflationary pressures, and domestic political instability. Among the major stock indexes, Germany’s DAX fell 1.72%, France’s CAC 40 Index dropped 2.19%, Italy’s FTSE MIB declined 2.60%, and the UK’s FTSE 100 Index lost 1.76%.
Civil unrest and fiscal strain in France weigh on investor sentiment
Cost-of-living protests escalated into widespread rioting and looting across major French cities this week, triggering a sell-off in French bonds and equities. For instance, the yield on the nation’s 10-year bonds climbed above 5%, resulting in the widest yield spread against equivalent German bonds since 2012.
Corporate earnings season continues with mixed results
The third-quarter earnings season maintained momentum throughout the week. Certain energy companies reported surging profits, while others provided optimistic updates on commodity trading operations ahead of official results. In contrast, some earnings reports within the luxury goods sector were disappointing. Semiconductor companies generally produced solid results, though their share prices remained volatile amid the midweek global technology sell-off.
Eurozone data point to slower growth and inflation creep
The S&P Global Flash Eurozone Composite PMI Output Index indicated that growth in the eurozone decelerated in October. The PMI fell to 51.9 in October from 53.1 in September, a preliminary reading that came in weaker than the consensus estimate of 52.7.
The European Central Bank published its consumer survey, which revealed that inflation expectations among eurozone households increased in September. Respondents indicated they anticipate prices will rise by 3.1% over the next 12 months, up from 3.0% in August.
UK economic data stoke expectations for possible rate hike
UK unemployment unexpectedly dropped to 4.7% in August, down from 4.9% in July. Inflation exceeded expectations, with the annual rate climbing to 3.5% in September—the highest level since last October. Transport costs were a primary driver of this increase, largely due to higher motor fuel prices. This data bolstered expectations that the Bank of England’s Monetary Policy Committee might raise interest rates at its upcoming meeting on November 5.
There were indications that UK consumers are feeling significant pressure, as the GfK Consumer Confidence Index fell sharply to -24 in October from -13 the previous month. This represented the largest monthly decline in sentiment since the pandemic, attributed to rising borrowing and energy costs as well as uncertainty surrounding the autumn Budget scheduled for next week.
Japan
Japan’s stock markets retreated over the week, with the Nikkei 225 Index falling 4.03% and the broader TOPIX Index dropping 2.46%. Both indexes declined as investors re-evaluated the outlook for AI investment, questioning the sustainability of data center spending and how it will be financed. Global technology shares experienced volatility, and a sharp decline in U.S. semiconductor stocks late in the week triggered weakness across Asia. Furthermore, higher oil prices and Middle East tensions contributed to investor caution.
JGB yields decline amid tech stock sell-off
The yield on the 10-year Japanese government bond (JGB) fell to 2.78% from 2.94% at the end of the previous week. Bond prices increased as investors sought lower-risk assets following the global equity sell-off, a trend that also fueled a rally in U.S. government bonds. Demand for longer-dated JGBs grew significantly, with a 20-year bond auction reaching record demand, a result attributed to the search for safer assets and higher yields. Japan’s nationwide core consumer price index, excluding fresh food, rose 2.1% year over year in September, up from 1.7% in August and the first reading above the Bank of Japan’s 2% target since December 2025. This supported expectations for further rate hikes, although the BoJ is reportedly leaning toward keeping rates steady at its October 29 to 30 meeting.
The yen strengthened over the week, trading around JPY 156.7 against the U.S. dollar on Friday compared to the prior week’s JPY 157.9 level. The currency moved out of the tight range it had maintained for several weeks as risk aversion boosted demand for the yen. U.S. Treasury yields fell sharply and the dollar weakened broadly, narrowing the anticipated interest rate differential between the U.S. and Japan.
Elsewhere, Japan’s exports grew 16.7% year over year in September, falling short of the 21.3% consensus and slowing from the 19.3% increase in August, marking the weakest growth since April, though autos and chip-related products remained supportive. Imports rose 18.9%, also missing the 20.4% consensus and slowing from the 28.0% increase in August.
China
Chinese equities retreated over the week, though a rebound on Friday helped mitigate some losses following a technology-led sell-off. According to FactSet, the CSI 300 Index fell 1.57%, the Shanghai Composite Index declined 0.69%, and the Hang Seng Index dropped 4.52% in local currency terms. AI-linked shares weakened due to concerns regarding corporate earnings, financing requirements, and investment spending, while higher oil prices and losses in U.S. technology stocks added to market volatility. Hong Kong, which was closed on Monday for the Chung Yeung Festival, underperformed amid selling in biotechnology and internet shares. Mainland bank shares proved relatively resilient.
GDP growth picks up, but investment and consumption remain subdued
China’s gross domestic product (GDP) expanded 4.5% year on year in the third quarter, up from 4.3% in the second quarter and exceeding the 4.4% median forecast in a Reuters poll. According to the National Bureau of Statistics, industrial production in September rose 5.5% year on year, retail sales increased 1.1%, and fixed asset investment (excluding rural households) fell 7.2% over the first nine months compared to a year earlier. GDP grew 4.6% year on year in the first three quarters, keeping the government’s annual growth target of 4.5% to 5.0% within reach. While the stronger headline GDP figure might reduce the immediate need for broad-based stimulus, weak investment and subdued consumption suggest uneven domestic demand.
PBoC studies a change in its main policy-rate benchmark
People’s Bank of China (PBoC) Governor Pan Gongsheng stated on Monday that the central bank is evaluating whether to transition its main policy benchmark from the seven-day rate to the overnight reverse repurchase rate to enhance monetary policy transmission. No such change has been enacted. Separately, China’s five-year and one-year loan prime rates remained unchanged at 3.50% and 3.00%, respectively, meeting expectations.
Regulator calls for stronger quality controls at online platforms
China’s State Administration for Market Regulation announced on Wednesday that it held a meeting with representatives from online platforms, including JD.com, Taotian, Pinduoduo, and Kuaishou, to address consumer protection and product quality. While acknowledging progress made since guidance was issued in 2025, the regulator highlighted ongoing concerns regarding misleading advertising, counterfeit products, and inaccurate product descriptions, particularly in instant retail and livestream commerce. Hong Kong-listed e-commerce shares fell on Thursday following the announcement and a broader tech sell-off. The statement did not outline any new enforcement measures.
U.S. Treasury proposes wider outbound investment restrictions
The U.S. Treasury Department proposed updates on Thursday to regulations governing certain U.S. investments in sensitive technologies within countries of concern, including China. The proposed requirements would expand the range of transactions subject to prohibition or notification, adding specific biotechnology activities to existing areas like AI and advanced semiconductors. Several Hong Kong-listed biotechnology shares declined on Friday, though the impact on cross-border financing and individual companies remains uncertain. The proposal is currently undergoing public consultation and has not yet taken effect.
Other key markets
Indonesia
MSCI warning and policy response drive volatile week for Indonesian markets
Indonesian equities rebounded during the week, recovering from the previous week’s sharp losses following an MSCI warning that it might downgrade Indonesia from emerging market to stand-alone market status. Stocks had plummeted over the prior Friday and Monday as investors reacted to concerns regarding trading practices, ownership structures, and market transparency. This potential reclassification sparked fears of significant foreign capital outflows, which spilled into the bond and currency markets, leaving the rupiah near record lows and pushing government bond yields higher. Sentiment improved after exchange officials outlined plans to enhance price discovery and market transparency, while the sovereign wealth fund Danantara disclosed that it had been purchasing shares it viewed as attractively valued.
Bank Indonesia also worked to stabilize financial markets while continuing to support economic growth. At its Wednesday meeting, the central bank maintained its benchmark interest rate at 5.75% for the fourth consecutive time, despite some economist expectations for a hike to bolster the rupiah. However, policymakers increased the overnight deposit facility rate by 25 basis points to 5.00% to help attract foreign capital and announced intentions to lower banks’ reserve requirements to encourage lending. The central bank also boosted incentives for currency hedging. These measures reflected a balancing act between maintaining investor confidence and currency stability versus concerns over domestic growth, though uncertainty regarding MSCI’s final decision continued to weigh on the broader market outlook.
Hungary
Government unveils fiscal consolidation plans as central bank holds rates
The Hungarian government introduced a fiscal consolidation plan designed to lower the national budget deficit and prepare for eventual euro adoption. Prime Minister Péter Magyar’s initial budget proposal aims for a deficit of 4.9% of GDP in 2027, down from an estimated 7.5% in 2026, with further cuts intended to bring the shortfall below 3% by 2030. The plan involves reversing certain spending commitments from the previous administration, reducing government expenditures, and implementing tax changes, while simultaneously increasing public-sector wages and specific social benefits. Finance Minister András Kármán also expressed ambitions to adopt the euro by 2032, contingent on Hungary meeting the necessary fiscal and economic criteria. These plans mark a major shift in fiscal policy under the Magyar administration, though implementation risks persist given the magnitude of the proposed adjustments.
Regarding monetary policy, the National Bank of Hungary kept its benchmark interest rate at 5.50% on Tuesday, as widely anticipated, extending its pause following three consecutive rate cuts over the summer. The decision reflected a cautious stance amid elevated energy prices, global market volatility, and uncertainty regarding the fiscal outlook. Annual inflation rose to 1.6% in September from 1.3% in August but remained below the central bank’s target range. Governor Mihály Varga stressed that fiscal developments are crucial in determining the monetary policy outlook, noting that credible deficit reduction could help lower Hungary’s risk premium and support the forint, thereby creating more room for future interest rate cuts.
