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  • Markets continued to rally in November as softer-than-expected CPI data from the US raised investor hopes that we are in the late stages of the Federal Reserve’s tightening cycle. Consequently, the Morgan Stanley Capital International (MSCI) All Country World index ended November up 5.3%. Developed markets followed suit, with the MSCI World index ending up 4.5%. The MSCI Emerging Markets index was further supported by hopes of easing restrictions in China and, as a result, ended up 12.4%.
  • One of the key events at the beginning of November was the US Federal Reserve interest rate decision. As expected, they raised interest rates by 75 basis points for the fourth consecutive time. More importantly, Fed Chair Jerome Powell signalled that the Fed is happy to slow down the pace of rate hikes but is also prepared to continue hiking for longer than expected.
  • US retail sales surged 1.3% month-on-month in October, marking the largest increase in eight months. The release beat the flat reading of 0.0% for September and shows that despite inflation and high-interest rates, consumer spending remains resilient in the world’s largest economy.
  • Despite the above, the Institute of Supply Management’s Manufacturing Purchasing Managers Index (ISM Manufacturing PMI) fell for the second consecutive month to 50.2 in October from 50.9 the month before. New orders contracted for the fifth month, emphasising that companies are looking to reduce inventories due to concerns about lower demand in the future. The ISM Services PMI also fell from 56.7 to 54.4, with respondents citing difficulties in finding skilled labour and economic uncertainty as causes for the downturn.
  • Promising data came on the inflation front, with annual CPI cooling to 6.3% in October, beating market forecasts of 6.5%. Even more encouraging was that core CPI declined to 0.3% as compared to 0.6% in September. The report was well received by Wall Street and raised bets that the Federal Reserve would slow the pace of rate hikes, which subsequently sent Treasury yields lower and lifted risk sentiment.
  • Weak data from China continues to show the negative effects that their stringent Covid policies are having on the economy, with manufacturing and services PMI falling to 48.0 and 46.7 in November, respectively. The ongoing lockdowns in the face of rising cases have sparked nationwide riots, putting pressure on the government to ease restrictions. While the riots will further disrupt business activity in the short term, many investors have raised bets that it may lead to an easing of restrictions, which has caused a sharp rally in Chinese equity markets.
  • The UK economy continues to battle with a looming recession and political uncertainty. The manufacturing and services sectors both contracted for the fourth consecutive month as the PMIs came in at 46.2 and 48.8 in November, respectively. The sharp slowdown highlights the negative effects that inflation and high interest rates are having on consumer and business sentiment.
  • Despite the clear contraction in economic activity, the Bank of England was forced to raise rates by 75 basis points in an attempt to fight off runaway inflation. However, their efforts are having little impact for the time being, with the latest CPI report showing a jump to 11.1% year-on-year in October as compared to 10.1% the month before.
  • Not much has changed locally as the country continues to deal with ongoing bouts of load shedding and economic uncertainty. Consequently, annual mining production fell by 4.5% in September, marking the eighth consecutive month of decline. To the surprise of many economists, manufacturing production increased by 2.9% year-on-year in September, despite forecasts for a decline of 2.4%. While this shows that the manufacturing sector has found ways of coping with the power outages, in the long term, the rolling blackouts will hamper countrywide economic growth.
  • Inflation surprised to the upside after CPI jumped to 0.4% month-on-month in October, beating forecasts of 0.2%. This brings the annual CPI number to 7.6% and is largely due to another sharp increase in food prices, which now stands at an annual rate of 12.3%. This led the South African Reserve Bank to raise rates by another 75 basis points, bringing the repo rate to 7.00%.
  • South African equities followed their global peers higher in November, with the JSE All Share index ending up 12.2%. All sectors were in the green with the biggest contributor being resources advancing 17.3%, followed by industrials and financials with 15.1% and 5.5%, respectively. SA listed property also ended up for the second month in a row, returning 5.2%.
  • One-month index movements:
    • JSE All Share Index: 12.23%
    • S&P 500 Index (US): 5.38%
    • FTSE 100 Index (UK): 6.74%
    • Hang Seng Index: 26.62%

Source: Investing.com and Trading Economics

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