Log in Open account
Australia
Trick or treat: Markets ghoul out in October

Trick or treat: Markets ghoul out in October

Market Rewind
Saxo Be Invested

Saxo Group

Summary:  October was a nightmare for global equity and bond markets, as geopolitical tensions in the Middle East, mixed corporate earnings, and a strengthening US dollar cast a spell on markets.

Global equities

Global equities (MSCI World) fell 3% in October, due in part to a strengthening US dollar, which made US exports and services more expensive for overseas buyers. Corporate earnings were mixed, with energy (-4.4%), finance (-3.7%), and technology (-0.9%) sectors underperforming. Growing geopolitical tensions also weighed on markets, with oil prices down 10.8%.

Regional equities:

US -2.2%.
 Big tech stocks had mixed results in October, reflecting broader investor concerns about the impact of rising interest rates on corporate earnings. Many tech companies reported strong revenue growth in the third quarter, but their profits were squeezed by higher expenses, including interest costs. US technology stocks have struggled to move above their July high as the US 10-year yield has increased by 107 basis points, offsetting the higher economic growth rates over the same period. Amazon was able to overcome these challenges thanks to its strong cash flow and its ability to pass on higher costs to consumers. Meta, Microsoft, and Alphabet, on the other hand, were more vulnerable to the impact of rising interest rates.

Europe -3.6%.
European stocks fell 3.6% in October 2023, with the MSCI Europe index down 3.6%. Concerns about a recession in the Eurozone are renewed. S&P Global's purchasing manager figures point to a sharp slowdown in economic growth across the European region, as reported by Ft.com. The European Central Bank (ECB) kept interest rates unchanged at 4% in October, after 10 consecutive rate hikes. The ECB said it is too early to expect interest rate cuts, given high inflation and the risk of a recession.

Asia -4.2%.
Asian markets fell sharply in October, with the MSCI AC Adia Pacific index down 4.2%. Several factors contributed to this mixed performance, including the strength of the US dollar. The US dollar strengthened 0.5% in October (DXY Index), putting pressure on Asian currencies. Another factor that weighed on Asian markets is the slowdown in China's economy, which had a knock-on effect on other Asian economies. An interesting development is that the Chinese Communist Party is tightening control over China's financial industry, recruiting nearly 100 officials ahead of a landmark economic policy meeting this week (ft.com). The International Monetary Fund (IMF) finds that Asia is likely to see faster disinflation, but prospects for growth in coming years are dimming. Consumer spending has been strong in Asia this year, but there are already signs that the region's recovery may be running out of steam. The IMF expects growth in Asia and the Pacific to accelerate from 3.9% in 2022 to 4.6% this year, explained by the post-reopening recovery in China and stronger than expected growth in the first half of the year in Japan and India. 

Emerging Markets -3.9%.
Emerging markets fell 3.9% in October. Within emerging markets excluding China, some of the best performers included India, Taiwan, and South Korea. India is benefiting from strong economic growth and a favorable demographic outlook. Taiwan is benefiting from a strong semiconductor sector and a weaker Taiwanese dollar. South Korea is benefiting from a strong export sector and a government stimulus package.

Sectors:

The energy sector dropped -4.4% and oil by -10.8% October saw a sharp escalation in geopolitical risk in the Middle East, a region that accounts for more than one-third of the world's seaborne oil trade. This had investors concerned, but the same sector also saw ginormous acquisitions in October, with bets from upstream companies that oil is here to stay. Global heavyweights such as Exxon bought Pioneer for a landmark USD 60 billion deal, and Chevron bought Hess for USD 53 billion. The future of oil remains unclear, and investors should be aware of the risks of energy markets, which tend to be volatile.


The financials sector fell 3.7%. Commercial banks had a more challenging month as they faced rising costs and slowing loan growth. High interest rates make it more expensive for consumers to pay back interest, increasing the risk of defaulting on their payments. However, interest rates can also be a beneficial factor behind investment bank performance. For example, JP Morgan's quarterly earnings report showed a 35% increase in net profit thanks to higher interest income.

Bonds

Global bonds -0.71%
The bond market had a challenging October, with the 10-year US Treasury yield rising above 5%, the highest level since 2007. Strong global data, such as US GDP coming out stronger than expected, led to a renewed sell-off in global bonds. Strong growth may lead to concerns that inflation will remain elevated and has put further upward pressure on bond yields. A stronger US dollar, which has been strengthening against other currencies in recent months, also contributed to this month's decline (DXY +0.5%). The US dollar has been strengthening against other currencies in recent months, making US exports more expensive and making it more expensive for foreign investors to buy US bonds. Bonds may experience more volatility going into the year’s end, so investors should carefully consider their risk tolerance and investment objectives before making any investment decisions.
Check out the rest of this month’s performance figures here:

Sources: Bloomberg and Saxo

Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific, and EM respectively. Equity sectors are measured using the MSCI World/Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign, and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st CL Future). Gold is measured using the gold spot dollar price per ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK, and CHF. Unless otherwise specified, figures are in local currencies.

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article
  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    Read full article
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
    Read full article
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
    Read full article
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
    Read full article
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
    Read full article
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
    Read full article
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
    Read full article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia
Products & pricing
Asset Management
    Platforms
    Accounts & service
    General
    Other
    Legal

    Trading can result in losses. Please ensure you understand the risks.

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.