Global Market Volatility in October: Between Monetary Policy and Trade Concerns
At the close of October 2025, global markets presented a complex economic landscape. The monetary policies of major central banks interacted with trade developments between the United States and China, creating a volatile and uncertain investment environment. This was reflected in the performance of gold, the dollar, and global stock markets.
1. Central Bank Actions: Winds of Change Sweep Interest Rates
Monetary policies of global central banks underwent significant shifts in October, most notably:
- The US Federal Reserve:
Cut interest rates by 25 basis points to a range of 4.00%-4.25%, marking the second consecutive cut following a similar decision in September.
However, Fed Chair Jerome Powell cautioned that a December cut was not guaranteed, maintaining uncertainty about the future monetary policy path.
- The European Central Bank:
Kept interest rates unchanged at 2.15% for the third consecutive meeting, stating that current monetary policy was "well-positioned" to manage economic shocks. 1. Bank of Japan:
Maintained its accommodative monetary policy, keeping the interest rate at 0.50%, despite indications that it would discuss raising rates in the future if the economy moves in the expected direction.
2. Trade War: A Fragile Truce Between the Giants
Trade developments between the United States and China were a key focus of market sentiment in October:
- Limited Trade Agreement: The two countries reached a one-year agreement that included reducing US tariffs on Chinese imports from 57% to 47%, in exchange for Beijing resuming imports of US soybeans and easing restrictions on rare earth exports.
- Cautious Reactions: Markets reacted cautiously to the agreement, with analysts and investors considering it a fragile deal lacking a comprehensive framework for regulating broader trade relations, particularly regarding US restrictions on exports of advanced technology chips.
3- Financial Market Performance:
Global financial markets exhibited notably mixed performance during the month:
- Asian Markets: Continued Strength
Japan: The Nikkei index led Asian gains with a strong 16% rise in October, reaching its highest level ever and its best monthly performance since January 1994, supported by a weaker yen and rising industrial production.
South Korea: The Kospi index maintained its strength as the best-performing market globally this year, recording a monthly increase of 20%, its largest since January 2001.
China: Chinese stocks declined despite the trade agreement, with the Hang Seng index in Hong Kong falling by 1.1% and the Shanghai Composite index by 0.8%, reflecting continued investor concerns about trade tensions and a slowdown in industrial activity.
Western Markets: Volatility Under Tech Pressure
Much of the excitement in the stock market this year has revolved around artificial intelligence (AI), and the earnings season has painted a mixed picture so far, as investors struggle to understand how the massive, and still-growing, AI capital spending will translate into future profits.
Amazon (AMZN) shares surged as cloud computing revenue climbed at its fastest pace in nearly three years, lifting Nasdaq futures and setting the stage for a strong start for tech stocks.
Apple (AAPL) is also poised for a boost after the iPhone maker announced revenue guidance for the fiscal quarter ending December 31 that beat Wall Street expectations.
4. Currency and Gold Movements: Safe Havens in a Time of Volatility
US Dollar:
Maintained its strength as a safe haven, rising nearly 2% over the month, supported by the Federal Reserve's cautious stance on interest rate cuts and Powell's comments that kept the currency strong.
Gold:
Gold prices are fluctuating around the $4,000 per ounce level, heading for weekly losses but maintaining monthly gains, supported by strong demand from central banks, which purchased 220 tons in the third quarter, a 28% increase from the previous quarter.
We still expect it to rise in the medium and long term, although this rise may be punctuated by some healthy downward corrections, as happened in the last two weeks of October.
5- The Global Economic Landscape: Slowing Growth and Rising Inflation
Global Growth: The International Monetary Fund (IMF) forecasts a slowdown in global growth from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, with warnings that the risks of trade protectionism could deepen this slowdown.
Global Trade: Despite the challenges, the United Nations estimates that global trade is on track to reach a record high in 2025, with trade in goods growing by 2.5% and services by 4% in the third quarter.
