World markets kicked off November on steady footing. Equities were buoyed over the week by higher earnings and robust economic data, responding favorably to October employment reports in the U.S. and Canada with the labor market showing signs of momentum. A dovish Federal Reserve policy meeting also provided support. Oil prices dropped from their recent highs and are trying to stabilize despite the OPEC+ refusal to increase output.
To quote Sven Henrich, aka Northman Trader, World “Markets make record highs every year whether earnings are increasing or decreasing, even during recessions. Markets make record highs every month no matter what happens in the world. Markets make record highs every time when Powell speaks.”
Canada’s S&P/TSX Composite Index reached a new record closing high on Friday, climbing 113.69 points or 0.53% to 21,455.82. The index returned 1.99% for the five-day period ended Friday boosted by crude price gains, positive earnings reports lifting the heavyweight energy sector and positive jobs data. The unemployment rate in Canada declined for the fifth straight month to 6.7% in October from 6.9% in September. That was the lowest jobless rate since Covid-19 struck, Statistics Canada said. Job growth in a number of industries, including retail trade, was offset by declines elsewhere, including in accommodation and food services. The Toronto stock market is up 23.1% so far in 2021.
Equities posted impressive weekly gains. The S&P 500 jumped 2%, pushing its 2021 gains to 25%. The Dow Jones advanced 1.4% this week, while the tech-heavy Nasdaq rallied nearly 3.1% for its best weekly performance since early April, as October jobs report came in better than expected.
The U.S. economy added 531,000 jobs last month, the most since July and the first upside surprise in three months. Consensus estimates called for 450,000 jobs added, according to Dow Jones.
Investor also digested the Federal Reserve’s plan to begin winding down (“tapering”) its monthly pace of bond purchases, currently at $120 billion, by $15 billion per month from mid-November, putting the central bank on track to end its asset purchase program by the middle of next year.
Unsurprisingly, the Fed left rates unchanged. Fed Chair Powell reiterated the view that the recent high inflation readings will moderate. Meanwhile, nonfarm business employee output per hour decreased at a 5% annualized rate in the third quarter, the most since 1981! Labour costs jumped 8.3% last quarter, or more than the 7% expected.
In Brazil, the BOVESPA returned 1% this week. Santander Brasil’s macroeconomic team has revised projections for the Brazilian economy and now expects Gross Domestic Product (GDP) to expand 1% next year from 1.5% growth previously expected. The Selic (the benchmark interest rate) is seen reaching 11.5% by the end of 2022, compared to the previous forecast of 9.00%. In Chile, the IPSA surged 7.23%. The president of Chile’s Central Bank, Mario Marcel, said that the extent of capital outflows is comparable to the 2009 financial crisis. “We now have different risks, some more important than others, we have greater vulnerabilities and fewer remedies, and the core of these changes is in the capital market, contrary to what we have seen in other reports that have focused more on the banking system,” Marcel warned. Meanwhile, the Business Perceptions Report (IPN) conducted by the Central Bank of Chile in the second half of October revealed that 70% of more than 700 business leaders surveyed said they were not planning any investments for the next year in their business plans.
Japanese stocks were higher this week. Japan’s prime minister Fumio Kishida’s coalition secured a comfortable majority in the October 31 general election and the market started to focus on the new administration’s large-scale economic stimulus which will be decided in mid-November according to the Kyodo news agency. Japanese policymakers reaffirmed the Bank of Japan’s (BOJ) commitment to its 2% inflation target in a meeting held between the BOJ Governor Haruhiko Kuroda and the country’s economy and finance ministers. Upbeat earnings also provided support. According to Kuroda, the BOJ will not follow the U.S. Federal Reserve in dialing back easy monetary policies. In other news, the government announced Friday it will begin accepting foreign nationals coming to the country for business trips, study abroad or technical training starting Monday (Nov. 8).
Stock markets in China recorded a weekly loss as headlines about cash-strapped property developers dampened sentiment. Shenzhen-based Kaisa Group Holdings, which missed a payment on a wealth management product, reportedly put 18 property projects valued at almost $13 billion on the auction block. It comes as rival developer China Evergrande Group which is still reeling under the weight of more than $300bn of debt. Kaisha has the most offshore debt coming due over the next year in the sector after Evergrande. In other news, manufacturing PMI fell to 49.2 in October from 49.6 in September hurt by persistently high raw material prices and softer domestic demand,
while non-manufacturing PMI slowed down to 52.4 last month from 53.2 in September. A reading above 50 indicates expansion, while a reading below reflects contraction.
The benchmark S&P/ASX 200 Index gained 1.8% for the week, posting its best week of gains since May. All sectors posted gains for the week aside from energy which fell again on Friday on weaker crude prices. Sentiment also gained from upbeat news on the corporate front: from News Corp and Link Administration. The News Corp share price has surged 9% higher to $34.62. following the release of the media giant’s first quarter update. Superannuation admin company Link Administration said on Friday it will consider a fresh A$2.81 billion ($2.08 billion) offer from Carlyle Group, sending the firm’s stock up more than 12%. Meanwhile, the Reserve Bank of Australia boosted its 2022 growth forecast in a quarterly round up of the economy.
European stocks rose on encouraging corporate earnings reports and signals from the European Central Bank (ECB) that interest rates would stay low for some time. “Despite the current inflation surge, the outlook for inflation over the medium term remains subdued,” ECB President Christine Lagarde said, adding that this makes any interest rates hikes next year very unlikely. After a 22-year gap, France’s benchmark CAC 40 index hit a record high. French and German industrial production in France and Germany declined unexpectedly in September on supply bottlenecks. In economic news, Eurozone retail sales dropped unexpectedly in September, Eurostat data showed.
In Poland, the WIG20 returned 1.42%. The National Bank of Poland raised its benchmark reference rate by 75bps to 1.25%, surpassing market expectations of a 50bps hike. Central bank governor Adam Glapinski said no more rate hikes would be necessary following this week’s rise. However, Polish rate-setter Eugeniusz Gatnar said that rate hikes should continue in order to combat inflation. Of note, the Czech central bank said more increases could come following its biggest rate hike in 24 years on Thursday as headline inflation accelerated to 4.9% in September, above the upper limit of the central bank’s 1% – 3% tolerance range.
In Romania, the BET index jumped 2.22%. Romania’s foreign exchange reserves dropped to EUR39.8 billion last month and unemployment fell to a three-month low of 5%. Meanwhile, the investment fund industry in the country has 100,000 new investors in September compared to the same month a year ago and 52.9 billion lei under management, representing 4.6% of Romania’s GDP. On the macro front, the European Bank for Reconstruction and Development (EBRD) expects GDP in the south-eastern European Union to grow by 6.7% this year and 4.3% in 2022.
REST OF EUROPE
In the UK, the FTSE100 climbed 0.92%. The Bank of England (BoE) unexpectedly kept interest rates unchanged. The UK’s main interest rate, set by the Bank’s Monetary Policy Committee (MPC), has been at an all-time low of 0.1% since Covid-19 struck. BoE left its bond-buying programme unchanged, as policymakers weighed concerns over rising prices against the downside risks from slowing global growth and a potential upturn in UK unemployment following the end of the furlough schemes in September. The Swiss stock market was unable to hold on to gains on Friday. That snapped its four-day winning streak. For the week, the SMI gained 1.76%.
(Note: Trading 31/10-04/11/2021)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the first week of November was marked by price increases in all the leading share indices, similar to the trend in leading stock exchanges worldwide. The TA-35 index increased 2.0% over the week, bringing year-to-date cumulative gains to 25.9%. On the macro front, the Bank of Israel announced that the Composite State of the Economy Index for September remained stable.
In Saudi Arabia, the benchmark TASI index was off 0.06%. In Dubai, the main share index advanced to its highest level in more than three years as the emirate plans to launch a 2-billion-dirham ($545 million) market-maker fund to boost trading on its stock market, state news agency WAM reported.
In Abu Dhabi, the ADX General index climbed 1.81%. The emirate’s bourse has launched a derivatives market this week to increase liquidity. Outside the Gulf, Egypt’s blue-chip index returned 0.92%.
In South Africa, the JSE Top 40 returned 0.51%. Blue Quadrant Capital Management’s Worldwide Flexible Prescient Fund, South Africa’s top-performing equity fund has returned 125% this year, the most of any South African fund of at least R100 million, having reaped the benefit of a wager that battered stocks, particularly in the energy sector, according to Bloomberg.
In Nigeria, the NSE All Share Index lost 0.06% for the week. Despite the weekly losses, the benchmark index which stood at 42,014.50 points on Friday, is only steps away from the highest point ever reached this year, which the local bourse attained on February 1.
Elsewhere, Zimbabwe stocks have soared 370% this year, with investors turning to the bourse as a haven against inflation.
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