October 2018 was undoubtedly a bad month for global equity markets – the worst monthly performance since the global financial crisis (GFC).
Rising US interest rates, Donald Trump’s trade war with China, the health of the Chinese economy; worries about the Italian budget and the impending Brexit by the UK combined to undermine momentum and investor sentiment on repeated occasions.
Global share markets tumbled with the MSCI World Index finishing 7.6% lower for the month. Growth stocks sold off sharply, with Technology stocks (-9.5%) among the worst performing global sectors. China yet again bore the brunt of the selling, with the Chinese share market tumbling 11.3% across the month.
Australia fared marginally better, with the benchmark S&P/ASX 200 Index down 6.1% in October. The ASX had its worst month in more than three years in October – the 6.1% slump was the biggest fall since August 2015. Every single sector of the ASX 200 index lost ground over October. Defensives stocks, such as utilities (gas and electricity) and staples (food and grocery) bucked the trend, and fell only 0.8% and 2.3%, respectively. Safe-haven assets rallied, with the traditional sanctuaries of gold (+1.9%) and the Japanese yen (+0.6%) moving higher.
The rising US dollar dragged the Australian dollar 2.1% lower in the month. Investors moved money back into “safer” currencies such as the US dollar, amid the October market uncertainty.
Iron ore continued to break higher in October, crossing the US$75/t mark amid tight fundamentals and record-high Chinese steel production. However, global oil prices trended lower amid the financial market slump that raised concerns about oil demand.
The Brent crude price sank about 9% during October, the worst monthly performance since January 2016. The ASX 200’s energy sector shed 10.2% of its value in the month – helped by the Morrison government’s attacks on electricity and oil companies. Meanwhile, gold registered its first monthly increase since March 2018, rising 1.9% to US$1,215/oz.