November Markets In Brief

October was a busy month for markets as they reacted to the US/China trade war, the risk of a US/Europe tariff war, Boris Johnson’s Brexit deal not being voted for, a UK General Election being called before Christmas, and the White House being embroiled in an impeachment scandal.

On the plus side, President Trump declared himself ‘optimistic’ about trade talks with China.

Let’s look at all the events and figures in more detail…

UK

The month did start with some good news as Hays Travel stepped in to save the 555 Thomas Cook shops threatened with closure following the company’s collapse. Elsewhere, it was the usual tale of woe as John Lewis went looking for discounts from its landlords, Bonmarché called in the administrators and Pizza Express said it was in talks to refinance a £1bn debt pile. 

Unsurprisingly, the BBC reported that 85,000 jobs had been lost in retail over the last twelve months, with the number of retail sector jobs falling (on a year-on-year basis) for the fifteenth consecutive quarter. 

There was certainly plenty of bad news in October: the Purchasing Managers’ Index in the service sector showed a ‘heightened risk of recession’. UK car sales in September were disappointing: house price growth is at its lowest for six years and UK productivity recorded its worst fall for five years. 

Against that, figures released by the Office for National Statistics showed that the UK economy had grown by 0.3% in the three months to August.

By the end of the month, the UK was gearing up for a December General Election. The bad news was back, however, as consumer confidence dropped to minus 14 from the minus 12 recorded in September – the lowest level since July 2013. 

The UK’s FTSE 100 index was the only leading market we cover to fall in October. Having started the month at 7,408, it closed down 2% at 7,248. The pound, boosted by hopes of a deal with the European Union, went in exactly the opposite direction, rising by 5% in the month to close October at $1.2944.

Europe 

Worrying news in Europe was that the German economy appears to be heading for a recession, if it is not already in one. 

Figures released at the beginning of October showed that German industrial orders fell more than expected in August: this was due to weaker demand and added to signs that a manufacturing slump is pushing Europe’s largest economy towards a recession. 

The WTO gave the US the go-ahead to impose tariffs on $7.5bn (£5.8bn) of goods that it imports from the EU – this was largely responsible for the global share sell-off at the beginning of the month. 

On the stock markets, both the German and French indices enjoyed good months. The German DAX index rose 4% to close at 12,867 while the French stock market was up just 1% to close October at 5,730. 

US 

The US economy added 136,000 jobs in September as hiring continued to slow down: economists had been expecting a figure around 152,000. However, the previous figure of 130,000 reported for August was revised upwards to 168,000 and the two months taken together were enough to push US unemployment down to a rate of 3.5% – the lowest figure for 50 years. 

The Federal Reserve decided to cut US interest rates for the third time in four months. As US economic growth for the third quarter slowed to 1.9%, the Fed cut rates to a range of 1.5% to 1.75%.

The Dow Jones index was up in October, but only by 129 points to 27,046 – leaving it unchanged in percentage terms. 

Far East 

October got off to a bad start for Japanese shoppers as the Government – pushing worries about a sales slowdown to one side – increased its sales tax for the first time in 5 years. The rate rose from 8% to 10%. 

China now has more ‘unicorns’ – tech start-ups valued at more than $1bn (£770m) – than the United States, but the figures for the third quarter showed the economy growing at its slowest rate since 1992. 

In common with all the major stock markets, those in the Far East fell at the beginning of the month in line with the global sell-off, but they had all – even Hong Kong – recovered by the end of October. Despite the typhoon, Japan led the way, rising 5% to 22,927 and Hong Kong’s Hang Seng Index shrugged off the news about recession to rise 3% to 26,907. The Chinese and South Korean markets were both up by 1%, closing October at 2,929 and 2,083 respectively. 

Emerging Markets

It was a quiet, but profitable, month for Brazil, Russia and India as they all moved in the right direction in October. The Brazilian stock market rose another 2% to end the month at 107,220. The Russian market was up by 5% to 2,894 and the Indian market broke through the 40,000 barrier, ending October up 4% at 40,129. 

And on that note, we wish you a great month.

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