World shares head for best month since late 2020
World shares are on track for their strongest month since late 2020, as global markets continue to rally. Despite concerns over Europe’s far-right election shock and the postponement of an Opec+ meeting, investors remain optimistic. Traders are keen to make their moves before the annual US Thanksgiving holiday, with several key events and data releases attracting attention. Inflation data from Germany and France exceeded expectations, while the Swedish krona dropped as the country’s central bank left rates unchanged. Dutch bank stocks fell following a significant election win by anti-EU far-right populist Geert Wilders. The focus will now shift to the European Central Bank’s meeting minutes and Turkey’s interest rate decision.
Robert Alster, Chief Investment Officer at Close Brothers Asset Management, commented on the economic situation in Germany: The latest PMI figures from Germany show some improvement, but it is still too early to conclude that the economy has turned the corner. We are still witnessing a contraction in activity. He also addressed the surprising election result in the Netherlands: The victory for the far-right in the Netherlands is unexpected, and the market will closely monitor the formation of any coalition government.
In Asia, attention was directed towards China, where the struggling property market received further support. While trading in the region was relatively quiet due to Japan’s holiday, Chinese real-estate stocks saw a notable increase following reports that debt-laden Country Garden would receive support. However, concerns arose after a major wealth manager with significant exposure to the property market disclosed potential insolvency with liabilities totaling up to $64 billion. Chinese government advisers are anticipated to recommend economic growth targets for next year to be set between 4.5% and 5.5%.
The S&P 500 in the US is nearing a new high for 2023, and both the S&P 500 and MSCI’s all-country world index have climbed more than 8% this month alone. This performance marks the best showing for MSCI world since November 2020 when markets were boosted by Covid-19 vaccine breakthroughs.
Key bond yields remained relatively stable, with Germany’s 10-year bund slightly higher at 2.57% and US treasury yields unchanged at 4.4%.
Currency markets witnessed the euro strengthen, pushing the dollar index towards a two-and-a-half month low. This followed Wednesday’s news that the number of Americans filing new unemployment claims had fallen more than expected. Sterling also recovered from losses incurred after UK finance minister Jeremy Hunt unveiled tax cuts alongside a more pessimistic economic forecast.
In commodity markets, oil prices dipped after Opec+ postponed its weekend meeting. Brent and US WTI both fell by 1.4% due to expectations that the group might cut output less than anticipated.
Cryptocurrencies experienced mixed performance as news broke that Binance chief Changpeng Zhao had stepped down and pleaded guilty to violating US anti-money laundering laws as part of a $4 billion settlement. Bitcoin fell by 0.77% on Thursday following a nearly 5% increase the previous day.
Overall, global markets are demonstrating resilience and optimism as they head towards their best month in over a year. Traders are closely monitoring upcoming events and data releases that could impact investor sentiment and market dynamics.
