Uncertainty ahead of the US Presidential election weighed on share prices in the US and around the world during October. Major equity markets were choppy but generally fell over the month, although Japan bucked the trend, boosted by yen weakness.
- Investors focused on the imminent US election in October
- The ECB cut rates by 25 basic points
- Japan’s ruling coalition lost its majority
US election nerves: uncertainty ahead of the US Presidential election weighed on share prices in the US and around the world during October. Major equity markets were choppy but generally fell over the month, although Japan bucked the trend, boosted by yen weakness.
“The global battle against inflation has largely been won” (IMF)
Inflation under control? “The global battle against inflation has largely been won,” according to the International Monetary Fund (IMF) , which upgraded its 2024 growth forecast for the US from 2.6% to 2.8%. France is tipped to expand by 1.1%, while Germany is set to stagnate. The IMF also warned that investors are too complacent about risks posed by possible geopolitical shocks to asset prices.
Growth in US: having grown by 3% year on year during the second quarter of 2024, the US economy expanded at an annualised rate of 2.8% during the third quarter, boosted by stronger consumer and government spending. Minutes from the FOMC’s September meeting showed that most policymakers were in favour of the 50 basis point cut but emphasised that the decision should not be construed as “evidence of a less favourable economic outlook”. Further monetary easing is widely expected; nevertheless, Fed officials appear to support a measured series of cuts in future. Although the Dow Jones Industrial Average Index hit seven new closing highs during October, it ended the month 1.3% lower.
ECB remains vigilant: the European Central Bank (ECB) cut its key interest rate by 25 basis points during October. ECB policymakers expect inflationary pressures to pick up in the coming months and then to ease in 2025. The annualised rate of inflation in the eurozone rose to 2% during October compared with September’s rate of 1.7%, dampening hopes of speedy monetary easing. Elsewhere, the eurozone’s economy expanded by 0.4% during the third quarter. Germany sidestepped recession, posting economic growth of 0.2% following its 0.3% contraction in the second quarter, and the Dax Index fell by 1.3% over the month.
Political upheaval in Japan: during October, the coalition led by Japan’s Prime Minister, Shigeru Ishiba, lost its majority . Although the ensuing uncertainty may undermine optimism in the longer term, investors welcomed a weaker yen and the possibility of slower monetary tightening. Despite political upheaval, Japanese equity indices ended October higher as the weaker yen boosted sentiment towards large exporting companies. The Nikkei 225 Index rose by 3.1% over the month.
To view the series of market updates through October, click here
