Australian Economy – Data in October was somewhat mixed with good unemployment numbers offset by flat readings on many of the key economic indicators1. The AUD was off another couple of US cents, and is now heading back to the US 75c, having run up to 80c in July.
Global Economy – The US economy continues to move forward strongly, with employment, production and home sales data all coming in above expectations2. Earnings announcements by US corporates were also mostly positive in October. In Europe, with economic growth having taken root, the ECB announced that it would begin to reduce its bond buying by half over the coming 12 months. As part of their review of China's 5-year goals, central planners in China have indicated that economic growth is no longer the main driver of policy. Reducing pollution has taken a prominent role in Chinese planning, with improving living standards somewhat usurping the goal of increasing economic output.
Investment Markets – Markets shook off any thoughts of an October correction, with most stock markets around the world posting solid gains. The US, Europe and Hong Kong were all up a little over 2 %, whereas Australia and China both saw gains of over 4%. The Japanese share market was the big winner, up over 8% for the month3.
Outlook – The RBA and Australian markets will be hoping the recent falls in the currency will continue. This will provide a further boost to corporate earnings and give the RBA some space to consider raising interest rates back from their historical lows. Across the Pacific, passing of tax reform in the US will be the major focus for the investment world.
S&P/ASX 200 – 12 months to 31 October 2017
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. US Dept of Labor; 3. Bloomberg data.