Global Commentary For November
Global equities rallied further in November (MSCI World +6.8% MoM), stringing together the first back-to-back positive months in equity markets for over a year. The month started with a much-anticipated fourth consecutive 0.75% rate hike from the US Federal Reserve (Fed), and investors were rattled by the message from Fed Chair Jerome Powell that the Fed members were of the view that they would end up pushing rates higher than they had previously expected. However, investor sentiment was buoyed mid-month by weaker-than-expected US inflation data (7.9% YoY vs expectations for 8.1%), with signs that shelter inflation was slowing and car prices were falling. Investors interpreted this as a sign that the Fed could ease the pace of monetary policy tightening. The tech-heavy Nasdaq 100 Index, which has been amongst the assets worst-impacted by central bank tightening, rallied 7.5% on the day the inflation data were released, while US 10-year government bond yields dropped 0.3% to 3.8%, and the US Dollar Index had a two-day fall of 4.1%.
Emerging market (EM) stocks easily bested their developed market (DM) peers (MSCI EM +14.2% MoM) in their first double-digit month since 2016 and their best month in thirteen years. Foreign-listed Chinese corporates were by far the stars of the EM rally (Hang Seng China Enterprises +29.1% MoM, Nasdaq Golden Dragon China Index +42.1% MoM). Chinese stocks received a triple boost for the month, with seemingly constructive talks between President Xi Jinping and US President Joe Biden at the G20 summit, an announcement of some bailouts for China’s beleaguered property sector and initial signs that the Chinese government will start to ease strict COVID-19 lockdown restrictions as the population grows increasingly frustrated with China’s zero-COVID policy.
Commodities had a mixed month, with industrial metals rallying (iron ore +22% MoM) on the prospect of increased demand from improving Chinese economic activity and government support for the property sector. In comparison, Brent crude oil (-10% MoM) ended the month at US$85/bbl as it appears the European cap on Russian oil prices will be set at a level unlikely to reduce supply.
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