Global shares fell for the fourth consecutive month in October amid worries that US interest rates may remain higher for longer, given still strong inflation and labour market. Bonds also fell, with 10-year Treasury yields rising sharply, temporarily testing 5%, the highest level in 17 years.

The geopolitical situation was another concern for investors, following the October 7 surprise attack by Hamas on Israeli citizens near the Gaza border. Israel swiftly responded with air strikes and later on a ground invasion that are still ongoing and resulted in thousands of Palestinian casualties in Gaza, raising concern for a further escalation in the Middle East. Concern for a potential disruption in the oil supply temporarily pushed oil prices higher but, by the end of the month, the oil price had fallen 10,76% to $81,02 per barrel as falling demand outweighed the geopolitical concerns.

Gold on the other hand rose by 6,87% to 1994,3$ per ounce, and shortly also exceeded $2000 for a few days, as investors sought safe haven assets.

The US economy expanded at an annualised rate of 4,9% in Q3 2023, exceeding market forecasts of 4,3% growth and accelerating from the 2,1% advance in the second quarter. The expansion was largely driven by strong consumer spending. Also U.S. job growth unexpectedly surged in September, while the unemployment rate held steady. Nonfarm payrolls increased by 336,000, well above the 170,000 estimated by economists. This could impact Federal Reserve monetary policy and caused equity indices to take a hit. The Dow Jones, S&P500 and Nasdaq Composite dropped 1,36%, 2,20% and 2,78% respectively. The dollar remained unchanged against the Euro and closed at 1,0576.

Also European markets dropped in October. The DAX, Eurostoxx and CAC40 indices lost 3,75%, 2,72% and 3,50% respectively over the month. The Slovene SBITop performed modestly better with a 0,79% loss to close at 1165.

The European Central Bank (ECB) held interest rates steady at its October meeting, ending a series of 10 consecutive increases. Annual inflation had fallen to 2,9% in October from 4,3% in September. As it's gradually approaching the ECB's 2% target rate, expectations are getting stronger that the rate-hiking cycle may be over.  Still teetering on the edge of a recession, Eurozone GDP was reported to have decreased by -0,1% in the third quarter.

Hong Kong shares were also lower in the third quarter. The Hang Seng index closed the month with a 3,91% loss. Investor sentiment towards China continued to weaken due to the country’s economic slowdown and insufficient measures taken by by the Chinese government. Foreign investors continued to reduce their exposure to China on concerns over ongoing US-China tensions.

Rudy Marchant
Fund manager Primorski skladi

Monthly reports 2023