In the face of increasingly grim news, financial markets rallied during October. Jeremy Hunt's appointment as chancellor and Rishi Sunak's as prime minister went down well.
Expectations of tighter fiscal policy presaged a drop in UK government borrowing costs. The 10-year gilt yield dropped to 3.5 per cent, a percentage point below October's peak of 4.5 per cent. The one piece of good news was the fall in European gas prices, helped by unseasonably warm and windy weather. That meant that storage levels would stay higher for longer. Electricity prices fell back to levels seen in the summer. While welcome, prices are still well above those in pre-pandemic times. The US markets bounced back as investors again looked towards a 'pivot' to looser monetary policy from the Federal Reserve. There were no interest rate announcements from the Bank of England or the Federal Reserve during October. We had to wait until November, but more on that later.
Continental European markets were robust, with the DAX up 9.4 per cent, the CAC up 8.8 per cent and the MIB up 7.3 per cent. Markets shrugged off higher inflation numbers out of Germany (10.4 per cent) and Italy (11.9 per cent). In the US, the S&P 500 gained 8.0 per cent, but the Nasdaq Composite was up just 3.9 per cent as some of its most significant components came a cropper. Amazon was down 9.4 per cent on reduced guidance for the fourth quarter.