October was another good month for risk assets with most global share markets posting healthy gains. The combination of strong profit results, improving economic growth, low inflation and easy monetary conditions have been a powerful tonic for shares.
The Australian market had a return to form posting a strong rise of 4% with the All Ordinaries index finally reaching the 6000 point level. The local bourse shrugged off a potential political crisis for the government as a High Court ruling on dual citizenship threatened their slim majority in the lower house. The best market sectors for the month were Information Technology +9.3%, Energy +5.8%, Healthcare +5.5% and Consumer Staples +5.5%.
The US was 2.3% higher on strong earnings from large tech companies such as Amazon, Microsoft and Twitter together with growing confidence that growth boosting tax cuts would be negotiated through Congress by years’ end.
The economic environment in Europe continues to improve with cyclical industries showing a strong rebound prompting the ECB to announce a EUR 30billion per month scale back of its QE program in early 2018. European stocks were 2.3% firmer led by the export laden German market, which finished 3.1% higher.
Japan improved 5.5% based on a strong Tankan business conditions survey and optimism of continued economic reform by the Abe government, which was returned to power during the month.
The $A continued its slide against the $US and has now shed close to 4 cents since mid-September. This would be welcome relief for the RBA keen to provide some stimulus to the struggling local economy without cutting interest rates. Australian bond yields fell a bit over the month as the market continued to price out any near term rate hike by the RBA, now unlikely to occur before mid-2018 at the earliest.