Overview
In October 2024, global equity markets displayed a mix of resilience and caution with significant volatility amid shifting economic indicators. Overall, while some markets reached near-term highs, market participants remain cautious, balancing optimism with caution about potential downward adjustments in the face of economic uncertainty going into the end of the year.
The U.S. economy has been a focal point, with the International Monetary Fund (IMF) adjusting its growth outlook upward for the U.S. relative to other advanced economies. This positive revision is primarily due to a resilient labour market, despite persistent inflation and elevated interest rates affecting other areas of economic activity. The Federal Reserve’s monetary policy decisions have aimed to maintain this stability while addressing inflationary pressures, with ongoing adjustments to interest rates expected to support a “soft landing” to avoid a potential recession.
Politically, the U.S. is fully immersed in the 2024 presidential election, with key issues such as inflation, foreign policy, and national security taking center stage. The election presents a significant contrast between candidates on economic policy, with debates over the best approach to manage inflation, government spending, and trade relations. Foreign policy has also emerged as a defining issue, especially regarding U.S. relations with China and commitments to NATO and other international alliances, as candidates have voiced differing opinions on America’s role in global security. With the final election push underway, the balance between economic resilience and public sentiment around inflation and job security is likely to be a crucial influence on voters as the November election approaches.
The UK Autumn Budget 2024, presented by Chancellor Rachel Reeves, included substantial tax adjustments, public service funding increases, and support for economic growth. Key measures involve a 1.2% rise in employer national insurance contributions, expected to generate £25 billion annually, alongside reforms to capital gains and inheritance taxes aimed at wealth redistribution. Reeves announced the abolishment of the non-domicile tax status by 2025, marking a shift toward a residence-based tax system. Funding increases were earmarked for the NHS and public sector wages, with additional support for retail and hospitality businesses through extended rate relief. These steps reflect Labour’s commitment to fiscal reform and economic resilience amid ongoing inflationary pressures.
Looking at the performance of major asset classes, like September, October is known as a highly volatile month for financial markets and this time it was not different too. Except Japan’s Nikkei 225 index, which provided 1.1% positive return, all other major equity markets either remained flat or ended the month with negative monthly returns. The U.S. market, led by the S&P 500, showed cautious optimism and ended the month flat. This has fostered hopes for sustained market stability, though investors remain wary of potential deceleration in earnings growth as the business cycle matures. The largest drop seen by the European equity markets where Euronext 100 fell 2.5% and UK FTSE 100 index lost 1.9%. European equities faced headwinds from mixed economic data and inflationary challenges, which continued to influence central bank policies, although central bank cut the rates again in October. The benchmark for shariah-compliant investments, DJ Islamic market index, declined by 1.6%. Chinese equities enjoyed a significant rally at the start of the month in response to the government’s pro-growth measures and easing policies designed to counter slower economic growth, however, it lost momentum later amid concerns over fiscal spending and consumption. China’s Shanghai index dropped by 1.7%. In anticipation of less aggressive moves from Fed in coming policy meetings, yields started rising again that resulted into DJ Sukuk Index falling 1.5%. Although DJ Commodity Index lost 1.9% in October, however, gold managed to book 3.2% appreciation as investors favoured the shiny metal over risk assets amid geopolitical factors and uncertain macroeconomic data. Lastly, UK pound depreciated by 2.8% against US dollar amidst rising yields and possibility of Fed rates remaining high longer.
Market Snapshot
News & Key Events in October
UK
• Annual inflation rate in the UK fell to 1.7% in September 2024, the lowest since April 2021, compared to 2.2% in each of the previous two months and forecasts of 1.9%.
• Chancellor Rachel Reeves presented the UK’s 2024 Autumn Budget on 30 October 2024, marking a significant shift in tax policy and public spending for the new Labour government.
• The United Kingdom’s unemployment rate fell to 4.0% from June to August 2024, down from 4.1% in the previous three-month period and matching market estimates.
US
• The annual inflation rate in the US slowed for a sixth consecutive month to 2.4% in September 2024, the lowest since February 2021, from 2.5% in August. However, figures came above forecasts of 2.3%.
• According to the minutes of September rate cut, Federal Reserve officials were uncertain about the extent of interest rate cuts at their September meeting but opted for a half-point reduction to balance inflation confidence with labour market concerns.
• The US economy expanded an annualized 2.8% in Q3 2024, below 3% in Q2 and forecasts of 3%, the advance estimate from the BEA showed.
• The unemployment rate in the United States fell to 4.1% in September 2024, the lowest in three months, down from 4.2% in the previous month and surprising market expectations, which had forecasted the rate to remain unchanged.
• The key focus remained on the U.S. economy, with the International Monetary Fund (IMF) adjusting its growth outlook upward for the U.S. relative to other advanced economies. This favourable outlook enhanced the probability of ‘soft landing’.
Europe
• Annual inflation in the Euro Area accelerated to 2% in October 2024, up from 1.7% in September which was the lowest level since April 2021, and slightly above forecasts of 1.9%, according to preliminary estimates.
• The ECB lowered its three key interest rates by 25 bps in October 2024, as expected, following similar moves in September and June. The deposit facility, main refinancing operations, and marginal lending facility rates will now be 3.25%, 3.40%, and 3.65%, respectively.
• The Eurozone GDP expanded 0.4% on quarter in the three months to September 2024, the strongest growth rate in two years, following a 0.2% rise in Q2 and above forecasts of 0.2%, preliminary estimates showed.
• In October 2024, the European Union approved tariffs of up to 35.3% on electric vehicles (EVs) imported from China, following an anti-subsidy investigation. The EU argues these measures are necessary to counter Chinese subsidies that enable lower EV prices, which EU officials claim threaten European carmakers and distort market competition. Although Germany, Hungary, and several other EU nations expressed concerns that the tariffs could escalate trade tensions, a coalition of countries led by France and Italy supported the tariffs as a means to safeguard European auto industries. The EU’s standard 10% duty on cars will remain in place alongside these new tariffs.
China
• China’s annual inflation rate stood at 0.4% in September 2024, below market forecasts and August’s figure of 0.6%. This was the 8th month of consumer inflation but was the lowest print since June, highlighting the need for more policy support from Beijing to address growing deflation risks.
• The People’s Bank of China slashed key lending rates to new lows at the October fixing, intensifying efforts to support a weakening economy. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was cut by 25bps to 3.1%, and the five-year rate, a reference for property mortgages, was reduced by the same margin to 3.6%.
• The Chinese economy grew by a seasonally adjusted 0.9% in Q3 of 2024, after a 0.7% increase in Q2. It was the ninth straight period of quarterly rise, supported by recent government initiatives aimed at stimulating consumption, mitigating deflation risks, and reversing the downturn in the real estate sector.
• In October 2024, China implemented a series of substantial stimulus measures to boost its slowing economy, focusing on the property market, local government debt, and consumer spending. The People’s Bank of China kicked off this wave of support with policy rate cuts and a reduction in the reserve requirement ratio, aiming to alleviate financial strains in critical sectors. Key actions included offering funds for mortgage rate reductions, dedicating capital to support major state-owned banks, and issuing bonds to help local governments restructure existing debt burdens. Altogether, this stimulus package is estimated to reach around 7.5 trillion yuan (roughly $1.07 trillion USD), one of the largest efforts in recent history, equating to about 6% of China’s GDP for the year.
• China has reacted strongly to EU tariffs, labelling the tariffs as “protectionist” and threatening retaliatory measures, including possible tariffs on European imports like brandy and dairy products. Beijing also proposed that EVs exported to Europe should have a minimum price, a move the EU rejected. Both sides are tentatively engaging in negotiations, with leaders like European Council President Charles Michel expressing a desire for a resolution. However, despite some “important progress,” significant differences remain, and the potential for a full trade war looms if the dispute cannot be resolved diplomatically.
Others
• The annual inflation rate in Japan fell to 2.5% in September 2024 from 3.0% in the prior month, marking the lowest reading since April.
• The Bank of Japan (BoJ) unanimously maintained its key short-term interest rate at around 0.25% during its October meeting, keeping it at the highest level since 2008 and matching market estimates.
• The annual inflation rate in Russia eased to 8.6% in September of 2024 from the eighteen-month high of 9.1% in the previous month, the first slowdown since December 2023, but slightly ahead of market expectations of 8.5%.
• The Bank of Russia raised its key interest rate by 200bps to 21% in its October 2024 meeting, above market expectations of a 100bps increase, and signaled that it is likely to continue raising interest rates in its upcoming December meeting.
• The annual inflation rate in Canada fell to 1.6% in September of 2024 from 2% in the previous month, the lowest since February of 2021, and well below the market consensus of 1.9%.
• The Bank of Canada cut its key interest rate by 50bps to 3.75% in its October 2024 decision, as expected, signaled that it will continue to lower its rate should the economy develop as expected.
• In October 2024, the Israel-Hamas war remained highly active, with recent escalations following the Israeli military’s announcement of Hamas leader Yahya Sinwar’s death. Israel has intensified airstrikes on Gaza to target Hamas infrastructure, while tensions have spread to Lebanon due to clashes with Hezbollah. This prolonged conflict has led to significant casualties and worsened humanitarian conditions in Gaza. Diplomatic efforts for a ceasefire continue, with international calls for de-escalation amid concerns over civilian impact and regional stability.
• Bitcoin experienced a strong October in 2024, continuing its historical trend for positive performance in this month, often referred to as “Uptober.” Driven by strong institutional interest and rising adoption, Bitcoin’s price rose significantly, buoyed by hopes for the approval of more U.S.-based Bitcoin exchange-traded funds (ETFs), which are seen as milestones toward mainstream acceptance and increased liquidity. Early October gains were bolstered by continued confidence in Bitcoin’s resilience amid economic uncertainties, and analysts noted increased trading volume and demand from institutional investors in both the U.S. and Asia.
• OPEC+ has been actively managing oil production amid volatile market conditions, primarily by extending voluntary production cuts led by Saudi Arabia and Russia through the end of 2024. Recent data shows a slight increase in overall OPEC+ production for October, driven by higher output in Iraq and Iran, which added 180,000 barrels per day to the alliance’s supply. This bump comes as some members, particularly Iraq, have faced challenges in adhering to quota limits. Saudi Arabia and Russia, however, are sticking closely to their commitments, with Saudi production holding steady at 9 million barrels per day, its lowest level in two years.
• As of October 2024, the U.S.-China semiconductor “chip war” continues to escalate, marked by ongoing restrictions and strategic manoeuvres from both nations. The Biden administration has tightened export controls on semiconductor technologies, particularly targeting high-performance chips essential for AI and military applications. This includes limitations on the export of advanced manufacturing equipment to China, significantly impacting Chinese companies’ ability to produce cutting-edge semiconductors. The ongoing chip war reflects broader tensions in U.S.-China relations, with significant implications for global technology markets and economic stability.
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