Economic Review
Global Equity Markets
Global shares made good gains in October. Robust corporate profit results for the September quarter outweighed concerns over rising global price pressures and China’s slowing economic activity.
Wall Street made new record highs as early estimates show a 36% annual rise in corporate profits, according to Factset. US business surveys such as the ISM and Markit PMIs also suggest solid activity and orders. However, inflation concerns are still evident given surging energy prices and continued transport delays. US consumer price inflation was running at 5.4% in September which is a 13-yearhigh. The Federal Reserve is expected to reduce monthly bond purchases at the coming November meeting but this is seen as only a mild tapering of very easy monetary policy settings.
European shares also made strong gains in October buoyed by favorable corporate profit results. European economic activity expanded strongly in the September quarter with Real GDP increasing by2.2%. However accelerating price pressures were also evident with Europe posting its highest annual inflation rate in the past decade at 4.1%.
Asian share markets generally made solid gains in October. The Chinese market rebounded with property developer Evergrande eventually making a delayed debt repayment. However, China’s slowing economic activity results for September tempered the share rebound, especially compared to American and European share markets. Japanese shares were a notable exception to the global share rally and fell by more than 1% ahead of the parliamentary election on 31 October.
Table 1: Global share market performance – October 2021
US S&P 500 7.0%
US Dow Jones 5.9%
Euro Stoxx 50 5.0%
German DAX 2.8%
UK FTSE 100 2.2%
Japan Nikkei 225 -1.9%
China Shanghai Composite -0.6%
Source: Factset, financial data and analytics, October 2021
Australian share market review
Australian shares disappointed in October with a near flat return. There were mixed performances across sectors. The Information Technology sector followed Wall Street’s robust performance. Health care and financial sector shares also made solid gains. But the resources sector generally disappointed given concerns about prospects for China’s property sector and its impact on iron ore prices. The industrial sector and consumer staples sectors fell given the sensitivity to the sharp rise in Australian bond yields experienced in late October.
The Australian Dollar (AUD) rose by 4.2% against the US Dollar (USD), finishing the month at USD0.7518.
Table 2: Australian share market performance – October 2021
S&P/ASX 200 Accumulation Index -0.1%
S&P/ASX 200 Industrials Total Return Index 0.1%
S&P/ASX 200 Resources Total Return Index 1.2%
S&P/ASX Small Ordinaries Total Return Index 0.9%
S&P/ASX 200 A-REIT Total Return Index 0.4%
Source: Factset, financial data and analytics, October 2021
Large Caps (S&P/ASX100)
Oz Minerals was the top performer (+11.6%) in October followed by Reliance Worldwide (+11.4%) and JB Hi-Fi (+10.9%). The weakest performance came from Star Entertainment (-18.1%) on media reportsaround potential anti money laundering breaches. Washington H Soul Pattinson shares were down by16.8% and Domino’s Pizza shares declined by 15.6%.
Listed property
The S&P/ASX 200 AREIT Total Return Index posted a 0.4% increase in October, which bettered the 0.1% decrease in the S&P/ASX 200 Total Return Index. Retail AREIT’s were again the strongest (+1.6%), followed by Industrial sector AREITs (+0.9%) and Office (+0.1%). Diversified AREITs (-0.8%) finished the month in the red.
Written 4 November 2021.
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