This week is a kind of a big one for the markets! Check out October’s most important market movements and our outline of what to keep an eye on over the coming month. In the past month, markets have increased their wagers on a faster and closer rise in interest rates in the US and other developed markets. Interestingly, the declining bond prices did not stop the equity market from hitting new all-time highs at the end of October.
The first week of November promises to be the most crucial in determining market trends for the whole month and possibly for the longer term. The first days of November are scheduled to include the FOMC’s rate and QE decision and forecasts (Wednesday), the Bank of England decision and OPEC+ meeting (Thursday) and the monthly US jobs report (Friday). Any of this news has the potential to start new or intensify a dominant trend.
In a sharp move on Friday, EURUSD closed the month lower and again below 1.1600. The Euro is losing ground on accelerating inflation. At the same time, the ECB has failed to signal any retreat from its ultra-soft monetary policy stance, pushing real government bond yields deeper into negative territory.
Markets have a lot of data and commentary to weigh in the coming days. In addition to the US news mentioned above, there is also preliminary PMI estimates for services in Europe on Thursday. Short-term traders should note that a move out of the 1.1500-1.1700 range could be accompanied by more volatility as the pair moves outside of its current trading range.
Gold added 1.5% in October, closing the month at $1783. The bull and bear forces were almost balanced, and volatility was declining as we have seen a sequence of rising lows and declining highs in the previous three months. The Dollar and Gold have been moving in opposite directions most of the time. A solid rise in the American currency risks putting more pressure on gold. If price growth gains momentum above $1830, it will signal that the downtrend from August 2020 has been broken.
Brent & WTI Crude Oil
The Crude Oil price has added 6.6% in October, rallying to 3-year highs in Brent. WTI made an even more impressive surge, adding 10%, at one point to above $85 and making new 7-year highs. The price was pushed up by increased energy demand in Europe and the US.
Investors and traders should pay attention to OPEC+ comments on plans to increase production quotas faster. Acceleration from the current +400k/month for the cartel and allies could pressure Crude prices. The US production is also worth keeping an eye on, as it might rise in response to higher prices and increasing demand.
The S&P500 recorded its best October in 6 years, adding 6.99% for the month. Several large-cap stocks pulled up the broad market index following solid quarterly reports in the second half of the month. While economic recovery and abundant liquidity remain the central element of market gains, it is worth paying attention to the fact that Fed policy tightening, economic slowdown, sustained yields and dollar growth are often harbingers of corrective pullbacks in equities.