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October 2024 market review: International
Upcoming US elections and escalating geopolitics in the Middle East dominated the markets. Read our October 2024 market review.
Weighing campaign promises
After a strong third quarter, global equity and bond markets retreated in the face of mixed economic data and event risk. Upcoming US elections dominated, with markets assessing the possibility and impact of higher tariffs and larger fiscal deficits. Geopolitics in the Middle East escalated, with Iran launching a missile attack on Israel. In a moment that could have broadened the conflict meaningfully, Israel retaliated, but opted to give critical nuclear and oil sites a miss. Despite daily volatility, weaker global demand prospects curtailed the oil price increase to 1,9% over the month. The IMF published its latest World Economic Outlook, keeping economic growth forecasts steady, just above 3,0%, alongside lower global inflation projections.
US headline inflation declined to 2,4% y-o-y in September, marginally ahead of expectations, while core inflation edged higher to 3,3%. Producer prices printed at 1,8 from 1,9% the prior month, coming in ahead of expectations.
Data for the US personal consumption expenditure price index (PCE) was recorded at 2,1%, the lowest level since February 2021 and in line with expectations. The annual rate for core PCE (the Fed’s preferred measure of inflation) remained steady at 2,7%. Third quarter economic growth for the US recorded at a healthy 2,8% (annualised), while strong non-farm payroll figures for September and upward revisions to July and August figures saw markets pull back expectations for the interest rate cutting cycle. After several weeks, strikes at US ports were resolved, a positive for congestion and supply chain friction.
China recorded economic growth of 4,6% y-o-y in the third quarter, weakening from the previous quarter and below the 5,0% growth target. Chinese activity gauges have languished against a deflationary and meagre demand backdrop but improved into October. Policymakers announced various fiscal measures over the month, the magnitude of which disappointed the market. More information is expected from the National People’s Congress (NPC) Standing Committee meeting in early November.
UK inflation printed at 1,7% in September from 2,2% the previous month, with wage growth continuing to slow. The newly elected Labour party delivered its first budget, which outlined higher taxes and borrowing to fund public infrastructure and services, notably health and education. The Office of Budget Responsibility (OBR) believes the budget will provide a short-term boost but is unlikely to lift economic growth over the next five years. Inflation for the Euro area moderated to 1,8% y-o-y from 2,2% the previous month, printing below the 2,0% inflation target for the first time in three years. In line with expectations, the European Central Bank (ECB) cut the policy rate by 25bps.
US earnings season started on a mixed note, with earnings from several technology companies and the large banks beating expectations. On average, however, analysts lowered forward guidance. The US 10-year bond yield steadily moved back above the 4,0% mark, ending the month at 4,3% as markets digest resilient US economic and polling data. The Bloomberg Global Aggregate Bond index declined 3,4%, bringing the return year to date to a marginal 0,1%. With geopolitics still prominent and interest rates trending lower, gold remained well supported, gaining 3,9% in October and bringing the returns since the start of the year to 32,8%. The US dollar gained 3,2% in October, helping the greenback appreciate by 2,6% year to date on a trade weighted basis.
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