October 2024 Market Report
October was a volatile month, with stronger-than-expected US economic figures placing a handbrake on future rate cuts. While praising the major milestone of reigning in inflation, the International Monetary Fund (IMF) noted that “downside risks are rising and now dominate the outlook”. Gold continued to set record highs.
Australian Markets
Inflation is easing in Australia however the path to lower interest rates remains unclear. The September Consumer Price Index report revealed inflation continues to ease, with the annual rate falling to 2.8%.
The headline number however does not tell the full story, with government subsidies distorting true cost pressures. The central bank’s preferred trimmed mean inflation measure remains stubbornly high at 3.5%.
Data Source: RBA
Market participants subsequently pushed back the prospect of rate cuts until June next year, with Australian 10-year Government Bond yields increasing 54 basis points to 4.51%. Unemployment remains steady at 4.1%, well above pre-pandemic averages. The S&P ASX 200 fell 1.3% on new material news. Several ASX-listed companies hold annual general meetings in October and November, which should provide updates regarding FY25 trading.
Global Markets
Equity and bond markets cooled in October, with the MSCI World Index retreating 0.9% while the Bloomberg Global Aggregate bond index declined 3.4%. Higher-than-expected labour and inflation numbers reduced market expectations of a recession in the US and the size of future rate cuts. In response, US 10-year Treasury yields rallied (prices fell) 50 basis points to 4.25%.
After a strong first nine months to the year, the S&P 500 retreated 0.9% weighed down by the upcoming US election and the potential implications for global trade and inflation. On the later, Republican candidate Donald Trump has floated tariffs exceeding 60% for goods imported from China and a 10-20% tariff on all US imports – including possibly Australia. The AUD/USD exchange rate subsequently fell 4.8% to $0.658.
After several months of positive gains, equities except for Japan retraced as developed economies continued to slow. The MSCI Emerging Market Index fell 4.3%, the UK FTSE declined 1.6% and MSCI Europe ex-UK gave up 3.2%. All three indexes however have recorded robust year-to-date gains. The latest World Economic Outlook from the IMF downgraded growth projections for both Europe and Japan. Germany is not expected to grow at all in 2024, while China is unlikely to meet its 5% annual growth target despite unleashing another round of rate cuts and raising the local government debt ceiling. Gold continues its record year, adding 9.9% in AUD for the month, bringing year-to-date gains to 36.5%.
