Markets have made a strong start to the week, with sentiment supported by easing inflationary pressures and lower bond yields. European equities finished mostly higher on Tuesday as softer oil prices and a slight fall in French government bond yields boosted investor confidence. In the US, the S&P 500 notched a fresh intraday record, driven by strength in large-cap technology stocks and further declines in Treasury yields.
Brazilian markets hit a record high after Senator Flávio Bolsonaro outperformed expectations in the first round of the presidential election, securing 47% of the vote versus 45% for incumbent Luiz Inácio Lula da Silva. Investors also welcomed gains by Bolsonaro-aligned candidates in Congress, which could improve the prospects for his agenda of fiscal discipline, tax cuts and privatisation. However, Brazil’s fiscal position remains challenging, with a deficit close to 10% of GDP and public debt at 81.9% of GDP. With the runoff vote due on 25 October, fiscal policy is likely to remain a key focus for markets.
Nvidia has backed US start-up Reflection, which has unveiled its first open-weight AI model, ‘Beam’. The investment highlights the growing competition within the AI sector as developers look to produce increasingly capable models at a lower cost. The move comes as Chinese AI companies such as DeepSeek and Kimi continue to attract attention with models that have performed strongly on advanced reasoning benchmarks, challenging the assumption that frontier AI development necessarily requires the huge computing budgets associated with US technology firms. Reflection has also been securing access to significant computing capacity, a key requirement for training increasingly sophisticated models that could compete with the closed systems offered by companies such as Anthropic and OpenAI.
Shortly before the RBI raised interest rates by 25 basis points, India’s services sector was shown to have picked up pace in September, with the services PMI recording its strongest monthly expansion in three months. However, the broader picture remains more subdued, with average growth across the July to September quarter falling to its weakest level since early 2022. Encouragingly, domestic demand continued to provide support. New business growth accelerated to its fastest pace since June, driven by robust consumption across financial, consumer and digital services. At the same time, cost pressures continued to ease, with input price inflation declining further. Taken together, the latest figures point to a services sector that is regaining momentum, while softer input costs and resilient domestic demand provide a relatively constructive backdrop for the Indian economy.
The story for investors now seems to turn to the release of the Fed meeting minutes later today, for clues as to the future direction of US monetary policy. The Fed’s current target range stands at 3.75-4%, following September’s 25bp rate hike, with markets currently feeling it is unlikely that another will come in October.
Still to come this week we also have Michigan consumer sentiment.
Nicola Tune, Portfolio Specialist