After a negative September, global markets largely recovered in October, supported by encouraging corporate earnings and an easing of fears around China's property sector. Nonetheless energy prices continued to climb, adding continued upward pressure on inflation. Central banks however indicated they were prepared to withdraw monetary policy accommodation to counter the inflationary pressure and persisted elevated inflation is only transitory.

In the United States economic data indicated a slowdown with third quarter GDP growth at the slowest in over a year at an annualised 2.0% quarter-on-quarter, down from 6.7% in Q2. The drop however is not so much the result of a drop in consumer demand than it is the result of disruptions in the global supply chain, especially for items such as vehicles. This however did not dissuade the Federal Reserve from its plans to bring quantitative easing to a full stop by mid-next year through $15 Billion reductions monthly. US stock indices performed the best among developed markets with the the S&P500 gaining 6,91%, the Dow Jones gaining 5,84% and Nasdaq Composite adding 7,27%. the dollar also gained a modest 0,17% against the Euro to 1,1561.

Annual inflation in the Eurozone was 4,1% in October, up from 3,4% in September. Like the FED, also the European Central Bank stood by its statement that it expects the current spike in inflation to be transitory. Eurozone Q3 GDP growth was 2,2%,, slightly above the 2,1% in Q2. Also European shares climbed throughout October, but to a lesser extent than the USA. The Eurostoxx 50 gained 5,00%, the German DAX 2,81% and the French CAC40 4,76%. The Slovenian SBITOP index trailed other indexes with a modest 0,78% gain. The British FTSE gained 2,13% while the Pound Sterling gained 1,77% against the Euro to 0,8442. Perhaps more than other countries, the UK continues to suffer from supply disruptions. There are also speculations that the Bank of England may be the first major central bank to raise their interest rate. 

Japan's Nikkei index was the only major index that booked a decline, namely by 1,90%. On October 31 a general election took place with Fumio Kishida becoming the new Prime Minister. All eyes are now on a fiscal stimulus package intended to boost consumer spending, which is expected to be announced in November.

The Hong Kong Hang Seng Index gained 3,26%, partially regaining its 5,04% loss of September as news surrounding Evergrande and other real estate companies eased down. 

Meanwhile the oil price continued its rally. After climbing 9,53% in September, oil futures climbed another 11,38% in October to close at 83,57 dollars per barrel. Also gold gained a modest 1,53% while silver gained 8,13%, countering its 8,16% drop in September.

Rudy Marchant
Fund manager Primorski skladi, d.o.o., Koper

Monthly reports - October 2021