In November global shares rallied, undoing four consecutive monthly losses, in the best monthly market performance in 3 years. The turnaround occured when US October inflation data was published, showing that the consumer price index (CPI) had fallen to 3,2% year-on-year from 3,7% in September. The release raised hopes that inflation is on course to fall back to the Federal Reserve's 2% target, and that further interest rate hikes may not be needed.

Other economic data painted a mixed picture for the US economy. The second estimate of Q3 annualised GDP growth was revised upwards to 5,2% compared to 2,1% growth in Q2. However, the ISM manufacturing PMI indicated contraction with a reading of 46,7. Also the unemployment rate notched up to 3,9% while only 150.000 new jobs were added, the least in almost 3 years, suggesting that while the labor market is still strong, it is further losing its momentum.

The focus however remained on the FED's upcoming interest rate decisions as speculation emerged on the timing of the first interest rate cut, despite FED president Jerome Powel's statement that no cuts were being considered yet. This pushed the 10-year treasury yield from its 17-year high near 5% down to 4,33%, and boosted both equities and bonds throughout the month. The Dow Jones, S&P500 and Nasdaq Composite soared by 8,77%, 8,92% and 10,70% respectively while the dollar weakened 2,93% against the Euro to close at 1,0886.

Also Eurozone shares gained in November amid sharp drops in inflation. Eurozone annual inflation for November was estimated at 2,4%, down from 2,9% in October. As in the US, this prompted hopes that interest rates may soon be cut. The second reading of GDP growth in Q3 however was confirmed at minus 0,1% annualised, keeping the Eurozone economy on the edge of a recession. Also the unemployment rate for October ticked slightly up to 6,5%. Nonethless the DAX, Eurostoxx and CAC40 indices soared 9,49%, 7,91% and 6,17% respectively over the month. The Slovene SBITop lagged behind other Eurozone indices but still added a solid 4,32% to close at 1215,29.

UK equities rose over the month but lagged against the Eurozone with the FTSE100 index adding 1,80% to 7453,75. Inflation in the UK showed a sharp slowdown to 4,6% year-on-year in October, below market forecasts of 4,8% and well below the 6,7% for September, adding hope that also the Bank of England may have finished its series of interest rate hikes. Also UK's GDP growth was zero in Q3. The Pound Sterling gained 0,92% against the Euro to close at 0,8621GBP/EUR.

Japan's Nikkei index added 8,52% in November. The only major markets to once again suffer losses in November were China and Hong Kong with the Hang Seng index dropping 0,41% to 17042,88. Chinese stocks failed to match the gains achieved by some of their regional peers due to ongoing concerns over weaker Chinese economic growth. Fears that stimulus measures by the Chinese government wouldn’t be sufficient to spur growth and the ongoing real estate crisis also weakened sentiment towards Chinese stocks.

On the commodity markets oil dropped 6,25% to 75,96$ per barrel as global demand is waning. Natural gas plunged 21,62% to close at 2.802 MMBtu. As a result of the dollar weakness and in anticipation of lower interest rates, gold gained 3,15% to break through the $2000 per ounce level and close at $2057,2.

Rudy Marchant
Fund manager Primorski skladi

Monthly reports 2023