Executive Summary

Global financial markets retreated during October 2024 as investors confronted rising government bond yields, geopolitical tension and uncertainty ahead of the United States presidential election. Equities remained comparatively stable through much of the month but weakened during the final trading sessions, while government bonds declined as markets reduced expectations for rapid Federal Reserve interest-rate cuts.

US economic data remained resilient. Employment, consumer spending and business activity indicated that the economy continued to expand despite restrictive borrowing costs. This reduced concern about an immediate recession but caused investors to question whether the Federal Reserve would need to ease policy as quickly as previously anticipated.

The Federal Reserve did not hold a policy meeting during October. Markets entered the month expecting further reductions following September's half-point cut, but stronger economic data and persistent underlying inflation caused Treasury yields to increase substantially.

US equity indices produced mixed to negative returns. The S&P 500 and Nasdaq reached record levels during parts of October but declined near month-end. Technology earnings remained generally resilient, although investors scrutinised the enormous expenditure required to build artificial-intelligence infrastructure.

The European Central Bank reduced its deposit rate by 0.25 percentage points to 3.25%. The cut reflected weaker regional growth and inflation that had temporarily fallen below the ECB's 2% target. European equities nevertheless declined as Germany's industrial downturn and subdued Chinese demand continued to affect businesses.

UK markets focused on the new Labour government's first Budget, delivered on 30 October. The Budget included substantial tax increases, additional public spending and greater government borrowing. Gilt yields rose as investors assessed the inflationary and fiscal implications.

Chinese equities began October strongly following the policy measures announced in September, but the rally lost momentum as investors sought more detail regarding fiscal spending and direct support for household consumption.

Oil prices were volatile as conflict in the Middle East raised concern about potential supply disruption. Prices fell sharply near month-end after Israel's response to Iran avoided oil and nuclear infrastructure. Gold continued its record-setting advance, supported by geopolitical uncertainty and central-bank demand.

Key Themes During October

• Global equities and government bonds both declined.
• Strong US economic data pushed Treasury yields higher.
• Markets reduced expectations for aggressive Federal Reserve easing.
• The ECB cut its deposit rate to 3.25%.
• US election uncertainty affected investor positioning.
• China's equity rally weakened as investors awaited detailed fiscal support.
• The UK Budget increased taxation, spending and borrowing.
• Middle East tension created substantial oil-price volatility.
• Gold reached additional record highs.
• AI infrastructure expenditure remained a central corporate theme.

Global Economic Overview

The global economic outlook remained uneven during October. The United States continued to outperform other major developed economies, while the eurozone remained close to stagnation and China struggled to restore domestic confidence.

United States

US economic activity remained stronger than anticipated. Consumer spending continued to expand, service-sector surveys remained positive and third-quarter GDP showed another period of solid growth.

The labour market also appeared resilient. Employment data reduced fears that the economy was moving rapidly towards recession, although job creation was affected by hurricanes and industrial disputes near the end of the month.

US Inflation and Monetary Policy

Annual consumer-price inflation continued to moderate but was slightly firmer than expected. Housing and services remained the most persistent components, while goods-price pressure was comparatively subdued.

Following September's half-point rate reduction, investors initially anticipated another substantial move. Stronger growth and inflation data instead increased expectations that the Federal Reserve would proceed in smaller increments.

The Federal Reserve's next decision was scheduled for early November. Markets generally expected a quarter-point reduction rather than another half-point move.

Eurozone

The eurozone economy remained weak, with manufacturing in contraction and service-sector momentum moderating. Headline inflation temporarily declined below the ECB's 2% target, partly because of lower energy prices.

The ECB reduced its deposit rate from 3.50% to 3.25%, delivering its first back-to-back cuts since the eurozone debt-crisis period. President Christine Lagarde emphasised that future decisions would remain data dependent.

Germany

Germany continued to face serious industrial challenges. Weak global demand, high energy costs and competition from Chinese manufacturers affected automotive, machinery and chemical businesses.

Volkswagen's consideration of factory closures and substantial cost reductions highlighted the pressure facing the German automotive industry as it adjusted to electric vehicles and lower-cost Asian competition.

United Kingdom

UK growth remained modest, while inflation fell below the Bank of England's target during the month. This increased expectations of another rate reduction in November.

The government's Autumn Budget introduced higher employer National Insurance contributions, changes to capital taxation and increased public investment. Greater borrowing was expected to support near-term growth but also placed upward pressure on gilt yields.

China

China's third-quarter growth remained below the pace authorities considered desirable. Property values, household confidence and private investment continued to limit domestic demand.

Officials announced measures to support local-government finances, property and bank capital. However, investors were disappointed by the absence of a clearly quantified programme aimed directly at household consumption.

Japan

Japan's economy continued its gradual transition away from exceptionally loose monetary policy. The Bank of Japan maintained its policy rate but remained open to future increases if wages and inflation developed as expected.

A general election resulted in the governing coalition losing its parliamentary majority, increasing political uncertainty. The yen remained weak as US yields rose.

Global Outlook

The global economy remained capable of avoiding a severe recession, but the path towards lower interest rates became less straightforward. Strong US growth supported corporate earnings while simultaneously delaying monetary relief.

Geopolitical tension, elections, government borrowing and trade restrictions remained important risks for inflation and financial stability.

Equity Markets

Global equities declined during October as higher bond yields reduced valuations and investors adopted a more cautious position ahead of the US election. Japan was among the more resilient major markets, while Europe and emerging markets generally weakened.

United States

The S&P 500 declined modestly after reaching record highs during the month. The Nasdaq performed comparatively well through much of October but weakened near month-end as technology earnings and capital expenditure came under scrutiny.

Financial companies benefited from resilient economic activity and improved investment-banking conditions. Energy shares were volatile alongside oil prices, while utilities and property companies were affected by rising bond yields.

Artificial Intelligence and Mega-Cap Technology

Large technology companies continued to report strong demand for cloud computing and AI services. However, investors increasingly focused on the scale of spending required for processors, data centres, networking and electricity.

Microsoft, Alphabet, Amazon and Meta all indicated that capital expenditure would remain elevated. Strong revenue growth supported the investment case, but the period required to earn attractive returns remained uncertain.

Tesla shares rallied after stronger-than-expected profitability and an improved vehicle-growth outlook offset disappointment surrounding its earlier robotaxi presentation.

Europe

European equities declined as weak regional growth and rising global yields outweighed the ECB's rate reduction. Technology, industrial and consumer businesses with Chinese exposure were particularly volatile.

European banks remained supported by strong capital positions, although investors expected lower policy rates eventually to reduce interest margins.

United Kingdom

UK equities weakened modestly. The FTSE 100 was affected by commodity and internationally exposed companies, while domestic shares responded cautiously to the Budget.

Higher employer taxes raised concern about labour costs and corporate margins. Housebuilders and infrastructure companies could benefit from public investment and planning reform, although higher gilt yields represented an offsetting headwind.

Japan

Japanese equities were comparatively resilient. Yen weakness supported exporters, while corporate-governance reform and share repurchases remained constructive themes.

Political uncertainty increased after the governing coalition lost its majority, but expectations of fiscal support limited the market impact.

China and Hong Kong

Chinese equities initially extended September's powerful rally. Performance subsequently reversed as investors questioned the scale and composition of fiscal measures.

Internet platforms, brokers and consumer companies remained above their pre-stimulus levels, but property developers continued to face difficult operating conditions.

Emerging Markets

Emerging-market equities declined as the dollar strengthened and US yields rose. Chinese volatility and uncertainty surrounding the US election also reduced demand.

Indicative October Performance

Fixed Income Markets

Global fixed-income markets declined during October as stronger US economic data caused investors to reduce expectations for rapid monetary easing. Government yields rose across several major economies.

US Treasuries

The US 10-year Treasury yield rose substantially and returned towards the mid-4% range. Shorter-dated yields also increased as markets anticipated a slower and shallower Federal Reserve easing cycle.

Government borrowing and election-related fiscal proposals also influenced longer maturities. Both major presidential candidates supported policies that could maintain large budget deficits.

European Government Bonds

German Bund yields rose despite the ECB's rate cut, reflecting the global movement in bond markets. Weak eurozone activity limited the increase relative to US Treasuries.

French spreads remained sensitive to fiscal concerns, while Italian bonds were comparatively stable.

UK Gilts

UK gilt yields increased following the Autumn Budget. Investors assessed the combination of higher borrowing, additional public investment and increased employer taxation.

The Office for Budget Responsibility expected the measures to raise growth in the near term but also create some additional inflation pressure.

Japanese Government Bonds

Japanese yields remained influenced by expectations of future Bank of Japan increases. Political uncertainty and weak global bonds created mixed performance.

Corporate Credit

Investment-grade and high-yield bonds declined as underlying government yields rose. Credit spreads remained comparatively contained, reflecting confidence in corporate fundamentals.

Tight spreads continued to provide limited protection against future economic or market deterioration.

Private Credit

Private-credit activity remained strong. Floating-rate borrowers benefited from September's Federal Reserve cut, but rising longer-term yields demonstrated that financing conditions would not necessarily ease uniformly.

Competition for high-quality loans continued to reduce spreads and weaken some documentation. Underwriting discipline remained essential.

Foreign Exchange

The US dollar strengthened during October as resilient economic data and rising Treasury yields supported demand. Political and geopolitical uncertainty added to its defensive appeal.

US Dollar

The dollar recorded a strong monthly gain. Markets reduced the number and scale of anticipated Federal Reserve cuts, increasing the expected return from dollar assets.

Euro

The euro weakened as the ECB reduced rates and regional economic data disappointed. The difference between US and eurozone growth became increasingly pronounced.

Sterling

Sterling declined against the dollar. Expectations of a November Bank of England cut and concern about the fiscal implications of the Budget affected the currency.

Japanese Yen

The yen weakened as US yields rose and the expected interest-rate differential widened. Domestic political uncertainty also reduced support.

Chinese Renminbi

The renminbi weakened as monetary easing and disappointment over fiscal detail reduced the momentum created during September.

Emerging-Market Currencies

Emerging-market currencies generally faced pressure from the stronger dollar. Countries with high external borrowing requirements were particularly vulnerable.

Commodities

Commodity performance was mixed during October. Gold reached further record highs, while oil experienced substantial geopolitical volatility and industrial metals surrendered part of their September gains.

Oil and Energy

Oil prices rose during parts of the month as conflict between Israel and Iran increased concern about regional supply. Traders considered the risk of attacks on oil production or transport infrastructure.

Prices fell sharply after Israel's late-October response avoided Iranian oil and nuclear facilities, reducing the immediate probability of a wider supply disruption.

Weak Chinese demand and the prospect of future OPEC+ production remained longer-term headwinds.

Gold

Gold reached new record levels. Central-bank buying, geopolitical tension, election uncertainty and concern about government debt supported demand.

The metal advanced despite rising US yields, demonstrating the strength of demand for reserve diversification and defensive assets.

Copper and Industrial Metals

Copper and other industrial metals weakened as optimism surrounding Chinese stimulus moderated. Investors awaited evidence of stronger construction, manufacturing and household demand.

Iron Ore

Iron ore remained volatile. Chinese property support provided some optimism, but steel demand remained constrained by weak residential construction.

Agricultural Commodities

Agricultural markets remained mixed. Cocoa and coffee continued to reflect weather-related supply constraints, while several grain markets were influenced by improving harvest expectations.

Digital Assets

Digital assets advanced during October despite higher bond yields. US election expectations, institutional inflows and growing interest in digital-asset policy supported the market.

Bitcoin

Bitcoin rose towards its previous record high. Spot Bitcoin ETFs received renewed inflows, while investors considered the possibility of a more supportive US regulatory environment after the election.

The asset remained volatile and sensitive to leverage, liquidity and broader risk appetite.

Ethereum

Ether produced a more modest return. Spot ETF demand remained below Bitcoin's, while the absence of staking rewards continued to reduce the relative appeal of regulated funds.

Institutional Development

Financial institutions continued exploring tokenised funds, deposits and securities settlement. Regulated applications of blockchain remained one of the sector's more durable institutional themes.

Risk Considerations

• Election expectations could reverse rapidly.
• ETF flows remained an important source of short-term demand.
• Leverage continued to amplify market movements.
• Regulatory treatment differed substantially by jurisdiction.

Private Equity

Private-equity markets remained active but selective during October. Strong US growth supported portfolio-company earnings, while higher government yields complicated the expected improvement in financing conditions.

Deal Activity

Mid-market transactions continued across healthcare, software, business services and specialist industrial sectors. Large buyouts remained dependent upon strong debt-market access and substantial sponsor equity.

Financing

The increase in Treasury yields limited the benefit of September's Federal Reserve reduction. Borrowers continued to face financing costs substantially above those of the previous decade.

Banks and private lenders competed strongly for high-quality assets, allowing selected companies to refinance or extend maturities.

Exits

Exit markets remained open but selective. Public-market volatility ahead of the US election affected IPO timing, while trade sales and sponsor transactions remained more dependable.

Fundraising

Fundraising remained concentrated among established managers. Investors continued to prioritise distributions, realised returns and specialist strategies.

Secondaries

Secondary-market activity remained strong as limited partners sought liquidity and portfolio rebalancing. Mature, high-quality funds attracted the strongest pricing.

CE Global Private Equity Observations

• Strong growth supported operating performance.
• Higher long-term yields limited financing relief.
• Mid-market deals remained more achievable than mega-buyouts.
• Multiple exit routes remained essential.
• Secondaries continued to provide valuable liquidity.

Artificial Intelligence & Technology

Artificial intelligence remained a central investment theme during October, with corporate earnings demonstrating strong infrastructure demand alongside rapidly increasing capital expenditure.

Cloud Computing

Major cloud providers reported continued growth in AI-related services. Customer demand remained strong for computing, storage, data management and model-development platforms.

Capital expenditure increased substantially as companies constructed data centres and purchased advanced processors. Investors continued to question the timing and scale of future returns.

Semiconductors

Advanced processor and memory demand remained robust. Supply constraints and rapid product cycles created both pricing power and execution risk.

Export restrictions affecting China remained an important uncertainty for semiconductor and equipment companies.

Enterprise Adoption

Businesses expanded AI deployment within software development, customer service, research and marketing. Organisations increasingly required measurable productivity gains before committing to large-scale implementation.

Power Infrastructure

Electricity availability remained a major constraint. Technology companies pursued long-term agreements involving renewable energy, natural gas and nuclear generation.

Technology Risks

• Capital expenditure could exceed near-term revenue.
• High valuations offered limited tolerance for slower growth.
• Power and grid constraints could delay new capacity.
• Export controls could affect semiconductor demand.
• Copyright and competition disputes remained unresolved.

Sector Spotlight

European Automotive Manufacturing

October's sector spotlight examines Europe's automotive industry as manufacturers faced slowing electric-vehicle demand, high costs and intense competition from China.

Industry Pressure

European manufacturers invested heavily in electric vehicles but struggled to produce lower-cost models at the speed achieved by several Chinese competitors.

Consumer demand grew more slowly as subsidies were reduced and buyers remained concerned about price, charging infrastructure and resale values.

German Manufacturing

Germany's automotive sector faced particularly significant pressure. High energy and labour costs, complex corporate structures and weak Chinese demand affected profitability.

Volkswagen's consideration of domestic factory closures highlighted the scale of the required restructuring.

Chinese Competition

Chinese manufacturers benefited from integrated battery supply chains, substantial production scale and competitive pricing. European tariffs provided protection but risked retaliation and higher costs.

Supply Chain

Component suppliers faced changing demand as electric vehicles required different powertrains and fewer traditional mechanical parts. Battery systems, software and power electronics became increasingly important.

Private-Market Opportunities

• Automotive software and cybersecurity
• Battery testing and recycling
• Power electronics
• Charging infrastructure
• Specialist engineering services
• Aftermarket maintenance

Investment Perspective

The European automotive sector required substantial restructuring. Opportunities were likely to favour specialised suppliers and technology providers rather than manufacturers carrying large legacy cost bases.

Regulatory Update

Regulatory developments during October focused on artificial intelligence, fiscal policy, digital markets and international trade.

Artificial Intelligence

Organisations continued preparing for the staged implementation of the EU Artificial Intelligence Act. Governance, staff training and identification of high-risk applications became immediate priorities.

Technology Competition

Authorities continued examining cloud and AI partnerships, digital advertising and platform practices. Regulators focused on access to data, processors and distribution.

Automotive Trade Policy

The European Union moved forward with additional duties on Chinese electric vehicles following its subsidy investigation. Businesses assessed the effect on supply chains, prices and possible retaliation.

UK Fiscal Policy

The UK Budget introduced substantial changes affecting employer taxes, capital taxation and government borrowing. Companies began assessing the impact on employment costs and investment.

Private Markets

Private-fund managers continued to face scrutiny over valuation, fees and continuation-vehicle conflicts. Higher public-market volatility increased the importance of timely comparable-company analysis.

Compliance Priorities

• Prepare staff and governance processes for AI regulation.
• Review technology partnerships for competition risk.
• Assess exposure to electric-vehicle tariffs and retaliation.
• Model the impact of UK tax and employment-cost changes.
• Maintain current and independent private-asset valuations.
• Review sanctions and geopolitical exposure.

Looking Ahead

Markets entered November focused on the US presidential election, the Federal Reserve's next decision and the likelihood of additional fiscal support from China.

US Election

The election outcome would influence taxation, tariffs, regulation, immigration and government borrowing. Market volatility could increase if results were delayed or contested.

Federal Reserve

The Federal Reserve was expected to reduce rates by a quarter percentage point. Investors would focus on whether strong growth and persistent inflation might slow subsequent easing.

Bank of England

The Bank of England was also expected to cut rates. The inflationary effect of the Budget could encourage a more cautious outlook for 2025.

European Central Bank

Weak regional activity increased the probability of another ECB reduction in December. Wage and services inflation remained the principal constraints.

China

Investors expected additional detail on fiscal support after the US election. Direct assistance to households and measures addressing local-government debt would be particularly important.

Corporate Earnings

Technology companies would continue to face questions about AI capital expenditure and monetisation. Consumer companies would provide information about household demand and pricing power.

Geopolitics

Conflict in the Middle East and Ukraine remained capable of affecting energy, inflation and market confidence with limited warning.

Private Markets

Greater political clarity could improve transaction activity. However, rising longer-term yields and potential tariff changes required cautious underwriting.

CE Global Private Equity Perspective

October demonstrated that interest-rate cuts do not guarantee declining market yields. Strong growth, fiscal borrowing and political policy proposals can place upward pressure on longer-term financing costs even as central banks ease.

Artificial intelligence continued to generate substantial demand, but the investment cycle increasingly involved physical infrastructure, electricity and long-duration capital commitments.

CE Global Private Equity believes that opportunities remain across cybersecurity, healthcare, power infrastructure, specialist industrial services and selected technology businesses. Conservative leverage and multiple exit options remain particularly important.

Investors should maintain liquidity and avoid relying upon a rapid return to the financing environment that existed before 2022. Policy easing is likely to be gradual and uneven across economies.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.