Market Insights October 12, 2026

Brussels tightens restrictions on hybrid vehicle imports

As imports of Chinese hybrid vehicles continue to reach record highs in Europe, Brussels has decided to take action. Last week, the EU and China reached an agreement to cap hybrid vehicle imports at 350’000 units in 2027, with the ceiling subsequently increasing by 6% annually. To comply with WTO rules, the cap would apply to all exporting countries, although its primary objective is to address the growing prominence of Chinese carmakers. In August, nearly a quarter of all hybrid vehicles sold in Europe were manufactured by Chinese automakers.

The agreement comes at a time when the European automotive industry is facing significant challenges. In response to intensifying competition, several European manufacturers, including Volkswagen, have announced major restructuring plans. Rather than imposing unilateral measures, the EU has opted for a negotiated compromise with Beijing. Brussels is thus seeking to strike a balance between maintaining open trade and safeguarding its domestic automotive industry.

Nevertheless, the impact on leading Chinese manufacturers is expected to remain limited. These companies are accelerating the expansion of their manufacturing operations in Europe, thereby enabling them to circumvent trade barriers.

United States: inflation concerns mount, bonds regain their appeal 

The energy shock triggered by disruptions to maritime traffic through the Strait of Hormuz has reignited inflation concerns, prompting major central banks to adopt a more restrictive monetary stance. This shift has driven a sharp rise in bond yields, particularly at the longer end of the yield curve. Nevertheless, we believe that markets are now pricing in a substantial inflation premium, while several factors should help contain price pressures over the medium term.

Bond yields have been rising across developed economies, driven by tighter monetary policies and renewed inflation concerns. Switzerland, however, remains an exception. The Swiss National Bank continues to pursue an accommodative monetary policy, limiting the rise in domestic yields and making Swiss franc-denominated bonds considerably less attractive than their foreign counterparts. Internationally, bond yields have reached levels rarely seen in more than two decades, significantly improving the return prospects for this asset class.

This increase in yields does not necessarily imply that inflation will remain persistently elevated. Wage pressures remain relatively contained across major economies. Furthermore, the rapid adoption of artificial intelligence could accelerate productivity gains and help curb production costs. While these factors will not offset the immediate impact of the energy shock, they support the prospect of more moderate underlying inflation over the medium term.

Against this backdrop, we believe current yields offer attractive compensation for the risks involved. In the United States, the yield on 10-year Treasury bonds now exceeds 5.2%, a level that, in our view, already reflects substantial medium-term inflation expectations. The investment-grade corporate bond segment also presents compelling opportunities, with yields exceeding 6%.

We therefore intend to take advantage of this repricing to increase fixed-income exposure across portfolios and progressively extend duration. Our preference remains for high-quality issuers, offering attractive yields without excessive credit risk. Beyond the income generated, this strategy also provides scope for capital appreciation should inflationary pressures ease and long-term yields stabilise or decline. After several years during which bonds struggled to fulfil their traditional role, they are once again emerging as a strategically important component of portfolio diversification.

This week’s figure: 20%

Following the release of relatively weak employment data, the probability of the Federal Reserve raising its key interest rates at its next meeting on October 28 has fallen to just 20%. This probability is likely to shift further this week, as investors await the publication of September’s Consumer Price Index (CPI).