Market Rally on Easing Bond Yields and Monetary Policy Stance

In the week gone by, global stock markets traded with a cautiously positive undertone, supported by easing bond yields, expectations of monetary policy easing, and resilient corporate earnings, though regional divergences persisted.

In this blog, we’ll know in detail what happened last week (October 6, 2025 to October 10, 2025) all across the globe.

US Market Rally on Fed Rate Cut

Investor sentiment was shaped by moderate oil price increases following OPEC+ output decisions and the IMF’s warning of a “new normal” in global economic uncertainty. In the United States, equity indices extended their rally as expectations of Federal Reserve rate cuts strengthened after softer inflation and retail data. Cooling U.S. Treasury yields lifted risk appetite.

The Federal Open Market Committee (FOMC) minutes from its September 16-17, 2025 meeting highlighted broad support for continued monetary easing, with most members voting to lower the federal funds rate by 25 basis points to a 4.00-4.25% range, while one member favored a deeper 50-basis-point cut to support economic momentum. Across Europe, performance remained mixed.

Germany Market Remained Volatile

The Eurozone Composite PMI rose slightly to 51.2 in September from 51.0 in August, marking the fourth consecutive month of expansion and reflecting a gradual recovery in private sector activity.

However, Germany’s stock market faced volatility amid weak manufacturing and export data, while the UK market traded range-bound due to subdued industrial production and fiscal uncertainty.

Japan Saw Strong FII Interest

In Asia, Japan’s equities advanced on the back of strong foreign inflows into technology and auto stocks, supported by a stable yen and robust corporate earnings. The Bank of Japan’s accommodative policy stance continued to attract investors.

Meanwhile, China’s markets lagged behind, pressured by ongoing property sector distress, sluggish consumption, and limited policy stimulus, which weighed on sentiment.

Looking ahead, global equities are likely to remain volatile but upwardly biased, with direction guided by upcoming macroeconomic releases such as U.S. retail sales, inflation, and consumer sentiment data, as well as central bank communication from the Fed, ECB, and BOJ.

Continued moderation in inflation could reinforce the case for policy easing and support equity valuations, while any inflationary surprise or weak signals from China and Europe may trigger short-term corrections.

RBI’s GDP and Inflation Forecast

Back home, Indian stock markets mirrored global trends, maintaining a mixed yet resilient tone backed by strong domestic fundamentals. Sentiment was buoyed by easing input costs, GST rationalization progress, and expectations of monetary easing.

The Reserve Bank of India’s dovish outlook and downward revision of FY26 inflation forecasts further supported optimism. However, cautious foreign institutional inflows and concerns over slowing exports capped gains. The HSBC India Composite PMI Output Index eased to 61.0 in September from 63.2 in August, indicating slower but still strong expansion.

Future Outlook

Looking ahead, key data on inflation, industrial production, and future outlook by the Indian corporates post announcement of Q2 FY2026 corporate earnings will guide sentiment. With inflation under control and growth steady, Indian equities are expected to maintain a modestly positive bias in the coming week, supported by domestic resilience amid global volatility.

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Reference:
SMC Global Securities’ Research Team

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