Scary Season? Global stocks get rare gain as bruising month concludes

Publish: 1:05 PM, November 1, 2018 | Update: 1:05:PM, November 1, 2018

NEW YORK – Despite a euphoric rally Wednesday in global stocks to close the month, October lived up to its reputation as a chilly period for investors.

The broad-based S&P 500 ended at 2,711.74 up 1.1 percent for the day, but with a loss of 6.9 percent for the month, its biggest monthly decline since 2011.

The MSCI World Index, which contains stocks from 23 developing countries around the world, fell more than eight percent, its worst drop in six years.

The CAC in Paris lost more than seven percent, its biggest fall since August 2015, while the Hang Seng index in Hong Kong plunged more than 10 percent, its deepest monthly dive in almost three years. Frankfurt and London also suffered significant pullbacks.

The losses have been steep, estimated at the end of Tuesday’s session as $5 trillion globally, according to S&P Dow Jones Indices.

“Even after this morning’s gains, global equity markets are left licking their wounds after a brutal month,” said XTB analyst David Cheetham. “The question going forward now is whether the worst of it is over or if there’s another wave of selling into year-end?”

Key drivers of the selloff have included worries about effects of central banks phasing out easy-money policies, led by the US Federal Reserve, which has vowed to keep hiking interest rates.

– Litany of worries –

The Fed has already raised the benchmark lending rates three times this year and is expected to increase again in December. Markets are nervous over the moves due to worries the higher rates will crimp growth and wreak havoc
in developing economies that see their currencies plummet next to the dollar.

Adding to that angst is lingering uncertainty over the state of global trade relations, particularly connected to the US-China dispute. In the latest sign of trouble due to the dispute, a key measure of Chinese factory activity for October came in below market expectations, according to data Wednesday from the National Bureau of Statistics.

The trade war also has bruised the valuations of several large US companies that have been hit by higher costs due to tariffs. Investors punished Caterpillar after its earnings report earlier, part of a 20 percent fall during the month.

Other factors include worries about a potential Democratic takeover in the US Congress with next week’s midterm elections, political uncertainty in the eurozone connected to Italy’s budget plan, and the future of Germany now that
Chancellor Angela Merkel has announced plans to exit the stage in 2021.

Even with the declines, some markets remain relatively high by historic standards. Just a month ago, US indices stood at all-time highs, while the MSCI World Index reached its highest level since a January record.

Analysts see echoes in the stock market’s retreat from other Octobers, notably the 17 percent drop in 2008 and the 22 percent nosedive in 1987.

The S&P 500 since 1928 has averaged a gain of only 0.5 percent in October, well below the 1.2 percent gain in the average month, according to an analysis by Shamik Dhar, chief economist of BNY Mellon.

“This phenomenon is difficult to explain” Dhar said in a note, adding that the index should be too diversified to be affected by seasonal factors.

“Perhaps the markets are feeling the start of the autumn ‘blues,’” Dhar added in a note with images that included a haunted house and ghosts.

– Key figures around 2030 GMT –

New York – Dow: UP 1.0 percent at 25,115.76 (close)

New York – S&P 500: UP 1.1 percent at 2,711.74 (close)

New York – Nasdaq: UP 2.0 percent at 7,305.90 (close)

London – FTSE 100: UP 1.3 percent at 7,128.10 (close)

Frankfurt – DAX 30: UP 1.4 percent at 11,447.51 (close)

Paris – CAC 40: UP 2.3 percent at 5,093.44 (close)

EURO STOXX 50: UP 1.6 percent at 3,197.51 (close)

Tokyo – Nikkei 225: UP 2.2 percent at 21,920.46 (close)

Hong Kong – Hang Seng: UP 1.6 percent at 24,979.69 (close)

Shanghai – Composite: UP 1.4 percent at 2,602.78 (close)

Euro/dollar: DOWN at $1.1322 from $1.1345 at 2100 GMT on Tuesday

Pound/dollar: UP at $1.2771 from $1.2706

Dollar/yen: DOWN at 112.86 from 113.13

Oil – Brent Crude: DOWN 44 cents at $75.47 per barrel

Oil – West Texas Intermediate: DOWN 87 cents at $65.31 per barrel