In October equity markets recovered their September losses and resumed their upward trend, regardless of inflationary pressure. In the United States, nominal interest rates almost equaled the maximum levels set last March, while in Europe they accelerated more than expected and are at the highest level since 2008.
American inflation is still struggling to stabilize, having risen from 5.3% in August to 5.4% in September, the highest level in the last thirteen years. This is the fifth consecutive month in which it has exceeded 5%, and increases in energy prices could keep it at high levels, thus contradicting the Federal Reserve’s view that it is transitory. In the Eurozone the preliminary inflation figure for October was 4.1%, the highest in thirteen years and up on September’s 3.4%. Rising energy prices and supply difficulties raised production costs, which companies then passed on to consumer prices.
In spite of this context, the main share indices recorded excellent performances, for example the MSCI World global index rose by around +5%. The same trend was recorded in the United States, where the S&P 500 index rose by 5.70% and the Nasdaq by 6.40%. The rise was driven above all by the quarterly results of listed companies, which in most cases were better than the estimates of the various analysts. Europe also did very well with the Euro Stoxx index up 5.33%, on the same track also the various peripheral indices. Good also the Swiss SMI index +4.60%. Weighed down by what is happening in China, the main Asian indices performed modestly with the Japanese Nikkei index up 0.42% and the Chinese CSI 300 index up 0.87%. Hong Kong performed better with a positive return of +3.26%.
Although we still see good economic growth due to strong consumer balance sheets, current factors including rising interest rates, supply chain disruptions, high energy prices and increasing cases of COVID 19 contagion could generate volatility in the markets.