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D-PIMS Weekly Market Update - Week of 24th to 30th October 2022

Today’s Monday update:

Over the course of last week, market moving headlines were mostly related to economic and geopolitical matters:

• On Monday, China's economy rebounded at a faster-than-anticipated rate in the third quarter, but a more robust revival in the longer term will be challenged by persistent COVID-19 curbs, a prolonged property slump and global recession risks. Helped by a raft of government measures, gross domestic product of the world's second-biggest economy expanded 3.9% in July-September from a year earlier, official data showed on Monday, outstripping the 3.4% pace forecast in a Reuters poll and faster than the 0.4% growth in the second quarter.

Rishi Sunak will become British prime minister on Monday after other candidates quit the race to lead the Conservative Party, leaving him with the task of steering a deeply divided country through an economic downturn. He defeated centrist politician Penny Mordaunt, who failed to get enough backing from lawmakers to enter the ballot. "This decision is an historic one and shows, once again, the diversity and talent of our party. Rishi has my full support," Mordaunt said in a statement as she withdrew from the race just minutes before the winner was due to be announced.

• On Tuesday, Rishi Sunak said on Tuesday he was not daunted by the scale of the challenge as he became Britain's third prime minister in two months, pledging to restore trust, rebuild confidence and lead the country through an economic crisis. "I fully appreciate how hard things are," he said outside the prime minister's residence at Downing Street where he shunned the normal tradition of standing with his family and political supporters. "I understand too that I have work to do to restore trust, after all that has happened. All I can say is that I am not daunted. I know the high office I have accepted, and I hope to live up to its demands.

• On Wednesday, Russian forces are digging in for the "heaviest of battles" in the strategic southern region of Kherson, a senior Ukrainian official said, as the Kremlin prepares to defend the largest city under its control from Ukraine's counter-offensive. Russian forces in the region have been driven back in recent weeks and risk being trapped against the west bank of the Dnipro river, where the provincial capital of Kherson has been in Russian hands since the early days of the invasion of Ukraine eight months ago.

Britain has postponed the announcement of a plan to repair the country's public finances to Nov. 17 for it to reflect the "most accurate possible economic forecasts," Chancellor Jeremy Hunt said on Wednesday. "Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way, and for that reason, the medium-term fiscal plan is extremely important," he said of the fiscal statement, previously scheduled for 31st October.

• On Thursday, British retail sales rebounded this month, according to an industry survey published on Thursday that contrasted with other, gloomier gauges of the consumer economy. The Confederation of British Industry's monthly retail sales balance rose to +18 in October from -20 in September. "Retail sales volumes recovered to grow at a firm pace this month, but retailers continue to face a challenging operating environment due to rising costs, higher interest rates, and labour shortages," said CBI economist Martin Sartorius.

President Xi Jinping said China is willing to work with the United States to find ways to get along to the benefit of both, Chinese state television reported on Thursday, ahead of a possible meeting with U.S. President Joe Biden in Indonesia. As major powers, China and the United States should strengthen communication and cooperation to help provide stability to the world, Xi said in a message to an event of the National Committee on U.S.-China Relations

U.S. economic growth rebounded more than expected in the third quarter amid a continued decline in the trade deficit, but that overstates the economy's health as the Federal Reserve's aggressive interest rate increases curbed consumer spending. Gross domestic product increased at a 2.6% annualized rate last quarter, the Commerce Department said in its advance GDP estimate on Thursday, ending two straight quarterly decreases in output, which had raised concerns that the economy was in recession. The economy contracted at a 0.6% pace in the second quarter.

• On Friday, Germany staved off the threat of recession in the third quarter with unexpected growth, data showed on Friday, but indicators pointed to even higher inflation driven by the painful shift away from Russian energy in Europe's biggest economy. Gross domestic product increased by 0.3% compared to the previous quarter in seasonally adjusted terms, the federal statistics office said. A Reuters poll had forecast a 0.2% contraction.

The Bank of Japan kept ultra-low interest rates on Friday and maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy, as recession fears dampen prospects for a solid recovery. The central bank also announced plans to increase the frequency of its bond buying next month, doubling down on efforts to defend its ultra-loose monetary policy.

• Over the week, the main global stock markets were mostly up apart from China and Hong Kong which were well down. Although the strengthening Pound meant reduced returns on overseas stocks for UK investors. Over the week, all the D-PIMS portfolios were up. The portfolios were particularly helped by their UK equity allocations. The lower risk portfolios were also helped by their Bond holdings, after an overdue good week for Bond investments.

The value of investments and the income from them can fall as well as rise and you may not get back the original amount you invested.

Past Performance is no guarantee of, or guide to future returns.

The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.