Market Insights: Global Monthly Outlook - Global equity markets rose on continuing growth in the US

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Global Outlook

In October, global equity markets were driven higher by economic data and earnings statements. Markets appeared to shrug off the threat of North Korea, instability in Venezuela and recent developments in Washington and Catalonia to bolster business confidence and activity. US equity market was boosted by strong earnings statements, upbeat economic growth and tax reform plans. China equity market continued to rise; third quarter GDP growth of 6.8% year on- year was in line with expectations.

Index October YTD
MSCI World USD 1.9% 18.8%
S&P 500 USD 2.3% 16.9%
MSCI Europe EUR 2.0% 12.3%
MSCI Asia Pac ex Japan USD 4.1% 32.3%
Hong Kong Hang Seng HKD 2.6% 33.2%
Habg Seng China Enterprise (H-shares) HKD 5.5% 27.4%
Topix JPY 5.5% 18.6%

Source: Thomson Reuters Datastream, total returns in local currency unless otherwise stated. Data as of October 31, 2017. YTD refers to year-to-date.

 

United States

  • The US equity market rose in October, boosted by solid earnings and economic growth. The third quarter GDP rose at an annual rate of 3%, higher than expected. Technology stocks were the leaders.
  • We are positive on US economy, supported by strong economic growth in third quarter. The ambitious tax reform and favorable unemployment rate also help the economy continue to improve.

Europe (including UK)

  • European equity markets advanced in October amid solid economic growth and modest inflation. The Eurozone GDP growth stood at 0.6% for the third quarter, beating expectations. The UK equity market rose, against a backdrop of rising oil prices and continued monetary tightening.
  • We maintain a positive view on European equities, supported by strong economic activity indicators, solid earnings delivery and attractive valuations. The European Central Bank decided to reduce its bond-buying volume, which clearly acknowledges the robust and sustainable uptick in the European economy.

Asia Pacific (ex Hong Kong ex China ex Japan)

  • Asian equity markets rebounded strongly in October, with new record highs for a number of markets. South Korea was the best performing market. IT sector was the strongest performer in the region, followed by energy.
  • We remain positive on Asia ex Japan equity markets as steady economic conditions and healthy corporate earnings have supported their recent strength. The consumption story for key economies in Asia, warranted by structural growth drivers such as rising middle class, continues to present many attractive opportunities.

Hong Kong and Mainland China (H-shares)

  • Hong Kong and China equities rose in October. Notable support came from Southbound inflows and ongoing earnings upgrades.
  • The recently held China’s Party Congress enhanced centralization of power for President Xi jinping to pursue a balanced growth economy by moving steadfast with structural reforms. The Chinese economy is on track to deliver the government target of 6.5% growth, which is still an impressive expansion compared with other major economies.

Japan

  • Japan’s equity market rose in October, with the market benefiting from the large victory of the ruling coalition the election.
  • We remain optimistic in the near-term Japanese equity market, benefiting from a more stable yen that should boost the performance of exporters. Against this backdrop, we will see robust corporate earnings.

Fixed Income

  • October was a positive month for bond markets with corporate bonds in general outperforming government bonds. The US Federal Reserve began tapering and the European Central Bank announced it will taper from January 2018
  • The current backdrop of stable global growth, low inflation, and accommodative financial conditions are supportive factors.

Emerging Markets

  • In October, emerging market equities outperformed developed world peers, boosted by improving earnings. The emerging Asia led the advance. Elsewhere gains in Chile and Hungary were offset by losses in Latin America and Russia.
  • We believe the outlook for earnings growth is well supported by: robust domestic consumption, investment in infrastructure, the solid global economic outlook and a low interest rate environment globally.

From the perspective of Hong Kong pension investing. All data are sourced from Invesco dated 21 November 2017 unless otherwise stated.