November was a positive month for financial markets with global equities as measured by the MSCI World rising 6.8%. Better than expected inflation data was the key driver as financial markets anticipated a potentially slower pace of monetary tightening. While inflation softened, third quarter company earnings presented a mixed outlook and the US midterm election results were too close to call.
In October, US consumer price inflation slowed to 7.7% versus a prior month of 9.1%. Core inflation which strips out volatile food and energy prices also eased. On a component level vehicle price, medical care cost and airline fares declined, although rents rose. Monthly core CPI rose 0.3% from previous month below the 0.6% recorded in September.
It was a mixed bag of earnings for US companies with 69% of companies reporting earnings surprises which was at the lower end of the long-term average. Apple Inc reported better than expected numbers and positive guidance while conversely Microsoft, Alphabet, Amazon and Meta earnings disappointed. Meta and Amazon also announced labour force cuts.
US mid term elections went to the wire with the Democrats retaining control of the Senate through gaining the state of Pennsylvania from the Republicans. The Republicans as expected took control of the House meaning the pace of Biden pushing through new legislations slows.
The US central bank continued to increase rates with a fourth hike of 0.75% in November to 3.75% – 4.0% range. Fed minutes later in the month pointed to a slow down in pace of tightening but the underlying message of maximum employment and price stability remain; with a subtle undertone of willingness to take the economy into a recession to curb higher prices.
