D-PIMS Weekly Market Update - Week of 3rd to 9th 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, Ukrainian forces achieved their biggest breakthrough in the south of the country since the war began, bursting through the front and advancing rapidly along the Dnipro River on Monday, threatening to encircle thousands of Russian troops. Kyiv gave no official confirmation of the gains, but Russian sources acknowledged that a Ukrainian tank offensive had advanced dozens of miles along the river's west bank, recapturing a number of villages along the way. The breakthrough mirrors recent Ukrainian successes in the east that have turned the tide in the war against Russia, even as Moscow has tried to raise the stakes by annexing territory, ordering mobilisation and threatening nuclear retaliation.
British Prime Minister Liz Truss was forced on Monday into a humiliating U-turn after less than a month in power, reversing a cut to the highest rate of income tax that helped spark turmoil in financial markets and a rebellion in her party. Finance minister Kwasi Kwarteng said the decision to scrap the top rate tax cut had been taken with "some humility and contrition", after his party's lawmakers reacted with alarm to a move that favoured the rich during an economic downturn.
British manufacturing output fell for a third month in a row in September and orders declined for a fourth consecutive month, hurt by falling foreign demand, according to a closely watched survey released on Monday. The S&P Global manufacturing Purchasing Managers' Index (PMI) rose to 48.4 from August's 27-month low of 47.3 but remained below the 50-level that separates growth from contraction and was a fraction weaker than the initial 'flash' estimate of 48.5.
• On Tuesday, Britain's new Prime Minister Liz Truss promised to "unshackle" the City of London to fuel growth, but crashing the bond market over tax cuts will take the shine off her "Big Bang" plan for financial services. In a rare move, the Bank of England was forced to buy unlimited gilts to restore calm and avert what some have called a near "Lehman moment" in UK government bonds, casting a pall over the City of London financial district.
Australia's central bank on Tuesday surprised markets by lifting interest rates by a smaller-than-expected 0.25% basis points, saying they had already risen substantially, although it added that further tightening would still be needed.
Global stocks climbed for a second day on Tuesday, after Britain's decision to ditch part of a controversial tax-cut plan and slightly paler expectations for aggressive central bank action returned some confidence to investors.
U.S. job openings fell by the most in nearly 2-1/2 years in August, though staying at high levels as demand for labour remains fairly strong, which could keep the Federal Reserve on its aggressive monetary policy tightening path. Job openings, a measure of labour demand, dropped 1.1 million to 10.1 million on the last day of August, the Labour Department said in its monthly Job Openings and Labour Turnover Survey, or JOLTS report, on Tuesday. Economists polled by Reuters had forecast 10.775 million vacancies.
• On Thursday, A new COVID-19 wave appears to be brewing in Europe as cooler weather arrives, with public health experts warning that vaccine fatigue and confusion over types of available vaccines will likely limit booster uptake. In the week ended Oct 4, COVID-19 hospital admissions with symptoms jumped nearly 32% in Italy, while intensive care admissions rose about 21%, compared to the week before, according to data compiled by independent scientific foundation Gimbe. Over the same week, COVID hospitalisations in Britain saw a 45% increase versus the week earlier.
• On Friday, climate minister Graham Stuart said Britain is not asking people to use less energy, despite a warning from the National Grid that homes and businesses could face three-hour planned blackouts this winter. The National Grid's warning on possible power cuts was based on a worst-case scenario, if Britain is unable to import electricity from Europe and struggles to attract enough gas imports.
• Over the week, the main global stock markets were up by varying amounts, with Japan doing the best and India the worst. Over the week, the D-PIMS portfolios were well up, especially the higher risk portfolios. Although rising Bond yields did not help lower risk holdings, the portfolios were particularly helped by Natural Resources, Japan and US Smaller Company allocations.
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The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.