Despite higher-than-expected US CPI data, bond and equity markets remained calm initially. The jump in inflation was attributed to a temporary rise in energy prices and air travel. However, volatility set in due to the IPO of British chip maker ARM, pushing markets up by around 2%. Fears of a further rate hike set in causing US markets to close flat. Conversely, European, Australian, and UK markets ended the week positively, driven by the performance companies reliant on Chinese exports.

Equity markets around the world fell more or less in unison last week by about 3-4%, before bouncing slightly on Friday. The UK was really the only market to buck the trend, as the Bank of England unexpectedly kept rates on hold after inflation fell by more than forecast.

Last week markets were down again, reflecting the trends that took root in September - long-term yields pushing higher with markets on the back foot.

If we had written this commentary early in the week as intended, we would have said that markets were still on the back foot, as they were down another few percent. However, having got to the end of this week things have improved quite a bit and most markets are now actually up a few percent, with China leading the way.

This week rates have headed resolutely upwards, and stocks have not liked it much with most markets heading steadily downwards throughout the week.

Equity markets declined over the past week, with the S&P/ASX 300 down -3.3% and the MSCI World Ex Australia index falling 2.7% in local terms, but only -0.9% in Australian Dollar terms for the unhedged Australian investor. Most of the falls happened overnight as a higher-than-expected GDP number put upward pressure on short-term rates.