D-PIMS Weekly Market Update - Week of 31st October to 6th November 2022
Today’s Monday update:
Over the course of last week, market moving headlines were mostly related to economic and geopolitical matters:
• On Monday, Ships brought grain from Ukrainian ports, suggesting Moscow had stopped short of reimposing a blockade that might have caused world hunger, despite suspending its participation in a U.N. programme to safely export grain from the war zone. The resumption of food exports from Ukrainian ports suggested that at least one dire scenario had been averted for now. International officials had feared that Moscow would reimpose a blockade on Ukrainian grain, after Russia announced on Saturday that it was suspending its role in the U.N.-backed programme that escorts cargo ships through the Black Sea.
• On Tuesday, mortgage lender Nationwide said that house prices recorded their first monthly fall since July 2021 last month, after the market was hit by turmoil during Prime Minister Liz Truss's short-lived premiership. Borrowing costs soared and many lenders temporarily stopped issuing loans after Truss's £45 billion unfunded package of tax cuts caused a fire sale of assets by pension funds that forced the Bank of England to stabilise the market. Nationwide Building Society said house prices dropped by 0.9% in October after being unchanged in September.
U.S. and Chinese officials are still working to arrange a face-to-face meeting between President Joe Biden and Chinese President Xi Jinping at the G20 summit in Bali later this month, the White House said on Tuesday. National security spokesperson John Kirby told reporters that staff-level work is ongoing to set up a potential meeting. "Staffs are still working through the modalities," he said.
• On Wednesday, Russia said it would resume its participation in a deal freeing up grain exports from war-torn Ukraine, reversing a move that world leaders had said threatened to exacerbate global hunger. Moscow announced the sudden reversal after Turkey and the United Nations helped keep Ukrainian grain flowing for several days without Russian participation in inspections. The Russian defence ministry justified the U-turn by saying it had received guarantees from Kyiv not to use the Black Sea grain corridor for military operations against Russia. Kyiv did not immediately comment on that, but has denied in the past that it used the agreed shipping corridor as cover for attacks.
• On Thursday, The Bank of England raised interest rates to 3% on Thursday from 2.25%, its biggest rate rise since 1989 as it warned of a "very challenging" outlook for the economy. Thursday's decision - the biggest in 33 years apart from a failed attempt to support the pound on Black Wednesday in 1992 - was in line with economists' expectations in a Reuters poll, but was not unanimous.
• On Friday, Chinese markets soared, and the yuan rose, with about a trillion dollars added to the value of Chinese stocks in week, as rumours and news reports fed hopes for twin relief in U.S.-China tension and China's tough COVID rules. Bloomberg News reported initial U.S. inspections of audit papers at U.S.-listed Chinese companies - a long-running point of regulatory tension and risk - finished ahead of time, raising hopes that the U.S. officials were satisfied. Unsubstantiated social media posts flagging an aim to relax COVID rules next March have also driven optimism all week and seemed to get new momentum on Friday.
Chinese President Xi Jinping on Friday met with German Chancellor Olaf Scholz, the first G7 leader to visit China since the COVID pandemic began. Scholz's one-day visit is testing the waters between China and the West after years of mounting tensions, analysts say, with talks touching on Russia's war on Ukraine, climate change, and reciprocal market access. During lunch with Scholz, Xi stressed that it is easy to destroy political trust, but difficult to rebuild it and both sides need to take care of it, according to a readout of the meeting from the state-run Xinhua News agency. Xi also told Scholz that China and Germany should respect each other and take care of each other's core interests, according to Xinhua.
U.S. employers hired more workers than expected in October, but a rise in the unemployment rate to 3.7% suggested some loosening in labour market conditions, which would allow the Federal Reserve to shift towards smaller interest rates increases starting in December. Nonfarm payrolls increased 261,000 last month, the Labour Department's closely watched employment report showed on Friday. Economists polled by Reuters had forecast 200,000 jobs, with estimates ranging from 120,000 to 300,000. Wages increased 4.7% year-on-year in October after advancing 5.0% in September as last year's large increases dropped out of the calculation. Other wage measures have also come off the boil, which bodes well for inflation.
• Over the week, the main global stock markets were mixed, with the US down the most and China and Hong Kong by far, up the most. Over the week, all the D-PIMS portfolios were up, especially the higher risk portfolios. The portfolios were particularly helped by their China, other Far East, and Emerging Market allocations.
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