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November market commentary. After three months of fairly constant bad news in this bulletin, it would be tempting to report October as the month when world stock markets turned the corner. Every major market rose and if you were lucky – or wise – enough to be invested in Argentina, you’d have seen gains of over 22%.

Almost inevitably though, events in Europe – and particularly in Greece – dominated the month. George Papandreou’s threat of a referendum on the European bailout package meant that markets lost some of their gains in early November, but at the time of writing (November 7th) Papandreou has agreed to stand down. Greece will now have a coalition government until elections are held and this will hopefully lend stability and see the bailout package accepted.

In other political events, October saw the death of Colonel Gaddafi and, perhaps more significantly, the death of Crown Prince Sultan, the successor to the Saudi throne – which could ultimately lead to political instability in that country.

As to what November will bring, the only certainties are dark nights and foggy mornings. Certainty is the one thing stock markets want above all others: unfortunately, it’s the one thing they don’t have at the moment.


Having closed September at 5,128, the FTSE finished October at 5,544 – a rise of just over 8%. GDP for the last quarter rose by 0.5% (exceeding City expectations), the trade gap narrowed and Nationwide reported a year-on-year increase in house prices for the first time in six months.

So it would be tempting to file October under ‘good news’ and leave it at that. Unfortunately there were ominous comments from the Chartered Institute of Purchasing & Supply who reported a slump in the manufacturing sector. The Manufacturing PMI fell to a 28 month low and Chief Executive David Noble said, “We live in worrying times.” He reported that the mood amongst his members was “sombre.”

Presumably Bank of England Governor Mervyn King was also feeling sombre when he announced an additional £75bn in Quantative Easing, to help us through what he described as the “worst crisis ever.”

However, there was good news in Wales, where Airbus opened a £400m factory to build aircraft wings – but they did warn that the UK needed to invest in its ‘intellectual infrastructure’ otherwise it risked jobs going abroad, ‘where the talent is.’


What can you say about Europe? One day the Euro was collapsing, the next day it had been rescued. One day Angela Merkel and Nicolas Sarkozy had fallen out, the next they’d come together to save the Continent. Now the possibility of the Greek referendum has thrown everything back into the melting pot.

Bubbling away in the background – and seemingly temporarily forgotten – are potential debt problems in the Italy and Portugal. Solving the Greek crisis does not mean solving the European crisis.

Despite all this, European stock markets rose in October: the DAX index started the month at 5,502 and finished it at 6,141 – a gain of over 11%. France and Italy also reported double-digit gains. This was despite Spanish and Italian debt being sharply downgraded by Moody’s and Carrefour issuing its fifth profits warning of the year.


October saw Mitt Romney move ahead of his rivals as the likely challenger to Barack Obama next year – but among the technology and creative communities it will be remembered for the death of Steve Jobs.

The Dow Jones index gained solidly in October, finishing just over 1,000 points up at 11,955. The US economy grew by 2.5% in the third quarter, and the trade deficit held steady, so once again, it would be tempting to say the US had a good month.

When you look more closely at the trade figures however, they make alarming reading. Total US exports for the month were $177.8bn – total imports were $223.2bn to give a trade deficit of $45.4bn. To put it another way, those figures mean that the US is adding a trillion dollars of debt roughly every two years. Suddenly, stimulus packages and smaller-than-expected increases in inflation don’t seem like such good news.


Around the world, China saw a slight slowdown, with its trade surplus down to $14.5bn and GDP growth falling to a mere 9.1%. Interestingly, the trade surplus for the month was almost identical to Russia’s.

Japan also recorded a surplus after some negative months following the tsunami and the Japanese government intervened in the markets to reduce the strength of the Yen, saying that it did not reflect the true state of the economy. They blamed Forex speculators for pushing the currency to unrealistic levels.

Virtually all stock markets around the world rose in October, although China was a notable exception, falling by 1.7%.

And finally…

October was the month in which the word ‘haircut’ officially took on a new meaning. Having previously been something you tried to squeeze in between meetings, ‘taking a haircut’ now means accepting less than the face value of an investment; as in ‘Banks prepare to take 50% haircut on Greek debt.’

Meanwhile David Cameron joined the rest of us on LinkedIn. Is he adding the former Greek Prime Minister as a friend? Somehow I doubt it…

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