Written Version
- Stocks picked up exactly where they left off at the beginning of November, with most major indexes continuing to rise. The rise in share prices has been reversed in the last few trading sessions due to fears over the spread of the new Covid-19 variant causing investors to flee to safety. As such the MSCI All Country World Index ended November down 2.51% (in USD). The risk-off sentiment hurt emerging markets more than developed with the MSCI World Index printing -2.30% against -4.14% from the MSCI Emerging Markets Index.
- Supply disruptions and soaring prices continue to hurt manufacturing production in the US with the ISM Manufacturing PMI printing 60.8 in October, down from 61.1 the month before. Whilst this figure points to a slight slowdown it is still well above the expansionary 50 level.
- Inflation continues to run hot in the US with CPI coming in at 6.2% (y/y) in October, as compared with 5.4% the month before. The rise in prices can be attributed to supply chain issues, rising energy costs and wage increases. It also marks the highest reading since November 1990.
- With the US economic recovery underway and inflation continuing to rise, the Federal Reserve announced that bond-buying would be slowed by $15 billion per month at their November meeting. Minutes released after the meeting also had a hawkish tilt which has raised market expectations for rate hikes in 2022 and has pushed up treasury yields.
- Growth in the United Kingdom slowed in the third quarter, with GDP growth coming in at 1.3% (q/q) as compared with 5.5% in Q2 and missing expectations of 1.5%. The slowing growth is a result of supply constraints and a slowdown in exports hurting the manufacturing sector and net trade respectively. Whilst the UK economy has made good progress, it is still 2.1% below its pre-pandemic level.
- Market participants were for the most part anticipating a rate hike from the Bank of England at their November meeting, however, they surprised markets when they kept the interest rate unchanged. This subsequently caused the Sterling to lose ground and fall against all the majors.
- Inflation also continues to surge with CPI jumping to 4.2% (y/y) in October from 3.1% the month before. This is the highest reading since December 2011 and can be attributed to the surge in global energy prices. With yet another large jump in inflation, a rate hike is largely expected at the BOE’s next meeting.
- Locally, economic growth forecasts have been revised down from 5.3% to 5.2% for 2021 due to a larger than expected effect on output from the July unrest. Also weighing on the economy is weak job creation and constrained investment due to the high risk of load shedding and uncertainty.
- Inflation also printed above the 4.5% midpoint for the sixth consecutive month coming in at 5% (y/y) in October. The rise was predominantly due to the increase in oil prices causing fuel costs to rise 23.1%.
- Despite a still-fragile economy, the South African Reserve Bank raised the repo rate by 25 bps at their November meeting. As such, the prime lending rate of commercial banks now also rises to 7.25%. Sarb Governor Kganyago said the decision was made in response to increased inflation risks over the medium term.
- The rand has weakened considerably due to hawkish shifts by many central banks in November, however, most notably due to worries about the new Covid-19 variant – omicron. The rand lost 4.40% against the greenback and pushed above the 16 mark for the first time in about a year. It also lost 2.37% against the euro and 1.39% against the pound.
- Despite a choppy month for markets, the South African stock market continued its move higher with the FTSE/JSE All Share Index advancing 4.46% in November. Resources and industrials were yet again the standout performers, printing 6.77% and 6.44% respectively. Financials were negative for yet another month after losing 2.61%, and listed property ended up 1.11%.
- One month index movements:
- JSE All Share Index: 4.46%
- S&P 500 (US): -0.83%
- FTSE (UK): -2.46%