Global equity markets rebounded last week, recovering from 3 consecutive days of declines in late September. The MSCI World Index up 1.6% as investors looked past the U.S. government shutdown and weaker employment data. Market sentiment improved on expectations that the Fed will deliver a 25 bp rate cut in October, now fully priced by futures markets. Outside the U.S., Europe and emerging Asia led gains, buoyed by stronger inflation commentary from the ECB and continued resilience in regional growth indicators.

The S&P 500 rose 1.1% to a new record high of 6,716, while the Dow Jones and Nasdaq each added 1.1% and 1.3%, respectively. Market breadth remained narrow, with gains concentrated in large-cap growth and technology names. In Europe, the STOXX 600 advanced 2.9%, making it its best weekly performance since April. In Asia, emerging markets surged 3.4%, led by South Korea (+7.0%) and Taiwan (+6.3%), while Japan’s Topix slipped 0.4%. China advanced +4.1% as investor confidence improved following renewed policy support.

Sector performance was led by Healthcare (+6.9% in the US and 9.1% in Europe) – the sector rallied on Pfizer-Trump deal. Utilities and IT sectors have also outperformed, while Energy lagged in both regions. Notable corporate movers include large cap Pharma stocks, many of which rallied 10% or more (incl. Eli Lilly, Astra Zeneca, Roche, Merck). Semiconductor memory players rallied on SK Hynix deal with OpenAI (SK Hynix +15%, Samsung +5% and Micro +19%) and CoreWeave was up (+7%) on news of a $14bn cloud deal with Meta. Meta itself was weak (-4.5%) due to lukewarm reception of its new AI-generated video feed and Netflix (-4.7%) on Musk’s criticism and call for boycotts.

Markets broadly dismissed the U.S. government shutdown, historically associated with limited equity downside, and took comfort in the Fed’s dovish bias despite the first decline in ADP private payrolls since 2020. Gold rallied 2.7% to a record $3,900/oz on safe-haven flows, while oil fell 7.3% to $61/barrel amid oversupply concerns.