In October, US and Europe stock market advanced given the rising expectation that the most intensive interest rate hikes might be left behind soon. SP500 rallied by 8.0% to 3872. DAX increased by 9.4% to 13254. China market underperformed due to the weak economic demand and sustained restrict Covid Zero policy post 20th Party Congress. HSI plunged by 14.7% to 14687 while SHCOMP declined by 4.3% to 2893. Commodity prices remained weak. Copper price eased by 1.5% to $7450. Zinc price plummeted by 9.1% to 2884. Aluminum price gained mildly by 2.8% to $2222. Gold price moderated by 1.6% to $1634. Oil price outperformed by rebounding 8.9% to $86.53.
Global economy continued to slow down. PMI declined to 49.4 from 49.8. By regions, US PMI dropped to 50.2 from 50.9 yet standing still above expansion zone. Eurozone PMI contracted further to 46.4 from 48.4. China PMI retreated to 49.2 from 50.1 due to strict Covid Zero policy in October. On the other hand, inflation continued to mount up in Europe while moderate slightly in US. Headline CPI rose further to 9.9% in Europe while decreased slightly to 8.2% in US. Central banks continued to tighten policies. ECB raised interest rate by another 75bps in October. Market expects Federal Reserve to raise rates by 75bps as well in November. Despite monetary tightening continued, central bank officials started to show cautiousness in recession and hinted smaller hikes ahead. Market rallied on this dovish tone and potentially peaking of rate hikes. Dollar strength continued given its resilient demand and high real interest rate over other regions.
For the outlook of November, market volatility should persist, but less downside risk than previous months given less concern on interest rate hikes and potential Covid Zero easing in China. US economy is still on the track of soft landing thanks to the solid job market. European economy may continue to face pressure but slow in a milder magnitude as gas supply bottleneck has temporarily eased thanks to the warm winter. China economy may still consolidate at low level with policy continues to ease.