Despite ongoing concerns regarding inflation and supply shortages, global equity markets offered positive returns in October. The FTSE 100 index, which tracks the largest companies in the UK, reached its highest level since before the pandemic, while the S&P 500 index in the US reached a new all-time high. Oil prices continued to rise, with the price of a Brent crude oil futures contract surpassing $80 per barrel for the first time since 2018.
Chancellor Rishi Sunak delivered his Autumn Budget to the House of Commons. Among the key announcements were a rise in the National Living Wage to £9.50 per hour and an 8% cut to the Universal Credit taper rate. As usual the Budget was accompanied by the latest economic forecasts from the Office for Budget Responsibility (OBR). The UK’s GDP growth estimate for 2021 was revised upwards from 4% to 6.5%, with a further 6% growth expected in 2022 before dropping back to 2.1% in 2023. Inflation meanwhile is expected to average at 4% over the next year, well above the Bank of England’s targeted rate of 2%.
Full round-up of October’s performance
Here is the full round-up of October market performance. In the UK, the FTSE 100 index rose 2.21%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index declined 0.24% and 1.18% respectively. In the US, the S&P 500 USD index surged 7.01% while in Europe the Eurostoxx 50 EUR index gained 5.18%. Japanese stocks measured by the Topix JPY index slipped 1.42%.
Emerging markets had a mostly positive month, with the MSCI Emerging Markets index rising 0.91% in local currencies. Chinese equities measured by the MSCI China local index jumped 2.99% while Latin American equities, measured by the MSCI Latin America local currency index, slumped 3.34%. Indian stocks rose 0.30% according to the Nifty 50 INR index.
In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, were up 2.15%, while long dated (over 15 years to maturity) gilts climbed 5.51%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, gained 0.45%. In the high yield market, the Bank of America Merrill Lynch Sterling High Yield index declined 0.91%.
There were positive returns in the commodities market. The S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, gathered 5.80%. This was led by the rise in oil price, as crude oil futures rose 11.38% during the month. In the agricultural markets, corn and wheat futures picked up 5.87% and 6.51% in USD respectively, and in the precious metals markets, the S&P GSCI Gold and Silver indices amassed 1.53% and 8.63% in USD respectively.
In the currency markets, it was a stronger month for the pound as it appreciated 1.54% against the US dollar, 1.73% versus the euro and 4.03% against the yen.