Shares gained in November with China and Hong Kong strongly outperforming their European and American market counterparts.

In the US the markets responded positively to data showing inflation had pulled back to 7,7% and on the expectation it will cool from here. The Dow Jones gained 5,66% and S&P500 gained 5,38% and Nasdaq Composite gained 4,37%. The Federal Reserve is expected to continue to tighten its key policy rate and keep their policy at a restrictive level for some time, although chairman Jerome Powell indicated that the pace of rate hikes will likely become less aggressive going forward. As a result the dollar continued its slide against the Euro and closed the month at 1,0405 USD/EUR or 4,37% lower.

On the other hand industrial activity slowed in November, with the flash composite purchasing manager’s index (PMI) retracting to 46.3 - a number below 50 indicates slowing activity. Also employment data, while still robust, is experiencing a loss of momentum: non-farm payrolls showed 263,000 jobs were added in November. That was above market forecasts but also the lowest job gain since April 2021.

Eurozone shares also extended the gains of October. The DAX, Eurostoxx and CAC40 gained 8,63%, 9,60% and 7,53% respectively. The Slovene SBITOP index also added 4,27% to 1064,57. Shares climbed on hopes that inflation may be moderating in the eurozone as well although it still stands at 10,0% year-on-year, down from 10,6% in October. Warmer autumn weather resulted in reduced energy demand, reducing fears of shortages, although energy costs are still the biggest contributor to higher inflation. Oil futures continued to drop, closing at 80,56 USD per barrel or down 6,9% from a month earlier. The PMI rose to 47.8 from 47.3 in October, a slight improvement but still pointing towards an upcoming recession.

The Japanese stock market also rose with the Nikkei index adding 1,38%. Also the change in expectations for US interest rate increases resulted in a reversal of the sharp weakening of the yen versus the dollar.

Chinese and Hongkong equities were stronger in November, easily recovering its double digit loss of October with the Hang Seng index gaining a staggering 26,62%. The rally in Asian shares came after US President Joe Biden and Chinese leader Xi Jinping signalled a desire to improve US-China relations at a meeting ahead of the G20 summit in Indonesia. Sentiment was also boosted by signs that Beijing was preparing to relax some of its strict Covid rules as the largest protests since 1989 broke out across the nation as a result of the continued lockdowns. China also offered support to the weak property market.

Rudy Marchant
Fund manager Primorski skladi

Monthly reports - November 2022