A further spike in global bond yields sent equity markets lower in October for the third consecutive month. The Australian market fell by 3.8% as higher bond yields impacted valuations particularly for growth stocks. The only bright spot was the gold sector which rose as geopolitical uncertainty in the Middle East saw the gold price spike by 7%.
Elsewhere in the world, global markets suffered similar declines with the US down 2.3%, Europe 3.3% the UK 3.6% and China 4.2%. Commodity markets were a mixed bag with the oil price falling 8% giving back last month’s gains, while iron ore was only marginally lower.
Bond yields were higher across the board with the Australian ten-year bond yield up 44 basis points to 4.92% while the US 10-year treasury note rose by 33bps to 4.77% as the burgeoning US deficit saw Moody’s downgrade the credit outlook from stable to negative.
In Australia, the new RBA governor Michele Bullock demonstrated a strong commitment to fighting inflation by staring down political pressure and raising cash rates by a further 0.25% to 4.35%. A stronger greenback saw the AUD decline by 2% to finish just over US 63 cents.