Global Stocks Break Through Records in October
Dr. Jan-Carl Plagge, Head of Applied Research
Global stocks continued their push higher in October to break records, as signs of economic growth help investors brush off geopolitical risks and tighter monetary policy.
The STOXX® Global 1800 Index added 3.4%1 in the month when measured in euros, touching its highest since data starts in 1991 and posting its best performance since February. The index climbed 1.9% in dollars.
The EURO STOXX® 50 Index of blue-chip companies in the Eurozone jumped 2.3% to the highest since August 2015. The pan-European STOXX® Europe 600 Index gained 1.9%.
The STOXX® USA 900 Index, measured in dollars, rose 2.2% to a new record high. The US benchmark has posted gains every month in the past year
All major economies growing
Investors have bid equities higher in 2017 amid signs that all major economies are growing in tandem. The STOXX Global 1800 Index has advanced 19% this year in dollar terms but has gained 7.3% in euros following a jump in the European currency. The euro weakened to $1.165 from $1.181 at the end of September.
From readings of gross domestic product growth, to purchasing managers’ surveys and corporate earnings, data has reflected an economic expansion that’s gathering pace. The government reported last month that the US economy grew at a faster-than-expected annual pace of 3% in the third quarter. A measure of Eurozone’s manufacturing sector rose in October to an 80-month high.2
The EURO STOXX 50® Volatility Index, or VSTOXX®, reached a record low in the month. The VSTOXX indices track real-time options prices for the EURO STOXX 50, thus reflecting market expectations of future volatility.
US government finally presents tax plan
In the US, the Republican Party unveiled on Nov. 2 a draft bill that overhauls the tax system and includes a reduction in the corporate income tax. A new tax law has been expected for months after President Trump made fiscal reform a pillar of his campaign.
Both the Federal Reserve and the European Central Bank (ECB) moved to unwind some of the extraordinary monetary stimulus that has propelled asset prices in recent years. The Fed started to reduce its record holdings of fixed-income securities over the month. The ECB on Oct. 26 said it will half the pace of bond purchases, but extended the program’s life by nine months until September.
Index of the month
The STOXX® Japan Total Market index gained 5.4% in local currency, the best performance among 23 developed national indices, following Prime Minister Shinzo Abe’s victory in Japan’s snap elections on Oct. 22. Since returning to power in 2012, the Prime Minister has pushed for change in the form of a three-arrow economic plan consisting of large fiscal stimulus, aggressive monetary easing and structural reforms.
Spanish stocks faltered and the euro fell after the Spanish region of Catalonia unilaterally declared independence following a referendum that Spain declared illegal. As the central government suspended the Catalan Parliament and took control of the secessionist region, the STOXX® Spain Total Market index ended the month 1.5% higher than in September.
The STOXX® Finland Total Market index was the worst-performing developed market in the month, falling 0.6%. Shares in Nokia Oyj, the largest constituent in the index, plunged 17% on Oct. 26 after the maker of telecommunications network gear warned of a challenging business outlook.
The STOXX® Global 1800 Technology index surged 9.4% in October to lead gains among 19 sectors, as industry bellwethers reported earnings that topped analysts’ expectations.
The STOXX® Global 1800 Chemicals index and the STOXX® Global 1800 Utilities index followed as best-performing sectors in the month, with respective advances of 4.8% and 4.2%.
At the other end, the STOXX® Global 1800 Media index was the worst performer with a 1.8% decline. The measure was followed in losses by a 1.2% retreat in the STOXX® Global 1800 Telecommunications index.
STOXX® Global 1800 Index
EURO STOXX® 50 Index
STOXX® Europe 600 Index
STOXX® USA 900 Index
EURO STOXX 50® Volatility Index
1All performance figures are net returns.
2HIS Markit’s Flash Eurozone Manufacturing PMI.