Sharemarket review - October 2017

Global sharemarkets were firmer in October. Media marked the 30th anniversary of the October 1987 sharemarket crash, but the news stories failed to spook investors. Major issues in focus over October include earnings results and discussion about the likelihood of President Trump getting tax cut legislation passed by Congress. There was also discussion about the appointment of the next Federal Reserve Chair. And investors watched developments in Spain, after the Catalonia parliament declared independence.

• Global sharemarkets improved over the month

• Dow Jones rose above 23,000 points

• US Senate passed Budget resolution (tax reforms move closer)

• Australian market had its best month since December 2016

The month began with strong US economic data – the ISM manufacturing index hit a 13-year high in September. As a result the Dow Jones index rose 152 points or 0.7 per cent on October 2. And gains continued over the following three days before a flat finish on October 6. The Dow Jones put on 1.6 per cent over the week. European and Asian markets also rose although the Spanish sharemarket was choppy as investors tracked developments in Catalonia.

On October 10, the International Monetary Fund released the latest economic forecasts. The IMF raised forecasts for both 2017 and 2018 by 0.1 percentage points (to 3.6 per cent in 2017 and to 3.7 per cent in 2018.

Investors also responded to mixed earnings results in the second week of October. And on October 12 the German Dax rose above 13,000 points for the first time in its 30-year history. Global sharemarkets finished the second week of October with more gains with Australia and Japan out-performing (both up around 2 per cent)

The US Dow Jones rose each day in the period from October 13-20, lifting 2.1 per cent. The Australian ASX 200 wasn’t far behind with a 1.8 per cent lift. On October 17 the Dow Jones exceeded 23,000 points for the first time. The US Federal Reserve released the Beige Book on October 18 and it showed that the economy grew at a modest to moderate pace in September through early October.

On October 20, US sharemarkets rose on news that the US Senate had passed a Budget resolution. The hope was that the successful vote would pave the way for Congress to pass President Trump’s tax plans.

In the week October 23-27 global sharemarkets were choppy. US and European corporate earnings, the political situation in Catalonia and President Trump’s tax plans were key issues. US technology shares soared on October 27 in response to a raft of positive corporate news. Shares in Amazon rose 13.2 per cent.

The Australian ASX 200 hit the highest levels in almost six months on October 30. And total returns on shares (All Ordinaries Accumulation index) hit record highs on the same day.

Over October the US Dow Jones rose by 4.3 per cent and the S&P 500 lifted 2.2 per cent while the Nasdaq rose 3.6 per cent. Across Europe the German Dax rose by 3.1 per cent while the London FTSE lifted 1.6 per cent. In Japan, the Nikkei soared 8.1 per cent. In Australia the ASX 200 and All Ordinaries indexes both gained 4.0 per cent.

Across the 21 industry sectors in Australia only Retailing (down 0.2 per cent) fell in October. Food, beverages & tobacco rose 13.7 per cent; Software & services rose 8.6 per cent; and Health Care Equipment &Services rose by 8.1 per cent.