• For Australian shares, the S&P/ASX 200 Index had a strong month, posting a 4.0% gain, its best monthly performance for the year, and this was once again powered by small-cap companies.
• It was another strong month on the US markets, with all major indices posting their biggest monthly percentage gain since February. The Dow Jones added 4.4%, the S&P 500 gained 2.3% and the Nasdaq rose 3.6%. It was the seventh straight rising month for both the Dow Jones and the S&P 500, while the Nasdaq posted its fourth straight monthly gain, to end the month at a record high.
• The global share index (MSCI) racked up its 12th straight rising month in October, its longest-ever winning streak, exceeding the 11 consecutive monthly gains it put together in 2003.
• Australian employment rose for the 12th straight month, whilst inflation was benign over the September quarter, with the Consumer Price Index (CPI) rising by 0.6%, which was slightly below expectations. As anticipated, electricity prices were higher (up 8.9% for the quarter), but in contrast, food prices posted their largest annual fall in five years, led by vegetables, which fell in price by almost 11% over the quarter.
• Optimism lifted among Australian consumers in October, with optimists outnumbering pessimists for the first time since November 2016, per a monthly survey conducted by Westpac; and this also saw the Index of Consumer Sentiment rise by 3.6% from the month before.
• The Reserve Bank re-affirmed the Board’s “neutral stance” on interest rates, with the cash rate remaining at a record low of 1.50%
• Despite the effects of Hurricanes Harvey, Irma, and Maria, as well as the wildfires in California, US economic data was mostly strong, with particular focus on the growing manufacturing sector.
• In Asia, events were dominated by the 19th Congress of the Chinese Communist Party, and in Japan, the snap election called last month by Prime Minister Shinzo Abe. The former saw the biggest shakeup in Chinese politics since the cultural revolution, and the enshrinement of Chinese President Xi Jinping as, in effect, China’s leader-for-life. President Xi laid out an ambitious plan not just for the next five years, but out to 2050, when China will become “a great modern socialist country” and a global leader.
• Eurozone September-quarter GDP growth beat expectations, despite it slowing slightly for an annual rate of 2.5%, which is its strongest growth rate since the March 2011 quarter. The unemployment rate for September dropped to 8.9%, the lowest joblessness rate since 2009. The economic data helped markets absorb the turmoil in Spain, where Catalonia threatened a declaration of independence. In fact, Spain, despite its political worries, posted annual GDP growth of 3.1% in the third quarter.
• September saw the US dollar fall to its lowest level against the major foreign currencies since early 2015, however the dollar rebounded in October, this saw the Australian dollar down 2.3% against the greenback, ending the month at 76.56c.
• On the commodities front, iron ore lost 5.7% on the back of pollution controls in China, and gold eased 0.6%. Nickel has surged almost 14% to its highest level since June 2015, and has risen nearly 40% in four months, with nickel sulphate and electric vehicles exciting the market.

Compiled with BT Applied Research Monthly Commentary –October 2017

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