This has been a positive period for world equity markets though volatility has been on the increase, picking-up on the gyrations in bond markets.
The inflation figures just keep getting worse and the central banks are treading a fine line, the wooden spoon definitely goes to the Bank of England for guiding for a November increase and then failing to deliver. The strain has been taken by sterling, down 3% vs the US dollar over this period.
With the exception of a small fall for Chinese stocks, all major markets rose, the NASDAQ led America (overall it was a strong Q3 reporting season) and European stocks were good across the board. London lagged somewhat as big oil, along with the banks and miners, came on offer again.
Tesla added significantly to market volatility with an extraordinary 44% gain in just two weeks, prior to a 20% retrenchment as Elon Musk gave another demonstration of his publicity genius and started to reduce his personal holding (he has raised around $5.7bn since). Over this particular period, the gain in Tesla was actually eclipsed by a 27% gain for Ford Motor, following through on their gain last month, but, of course, these days Ford is a mere minnow by comparison with a value equivalent to around 7.3% of Tesla’s.
The major oil companies turned down led by an 8% fall for Royal Dutch Shell. At least the price of oil has stopped going up and does appear to be faltering, possibly more encouraging is some definite faltering in the price of natural gas, which hit a peak on 6 October but has since been falling back. Also weakening were the miners as the price of iron ore resumed its slide concerned with a slowing Chinese economy, Rio Tinto came off around 10%.
It was a more mixed picture for the financial sectors, with ten-year bond yields turning down again (actually, up then down then up again, generally disorderly) banks gave back some of their recent gains, Citigroup, Goldman Sachs and Morgan Stanley were all down. Standard Chartered were the worst with a fall of around 7% following dull figures, they really are in need of a strategic shake-up or somebody else might do the job for them. In contrast, most of the insurers and re-insurers showed gains, Swiss RE being the best of them with a 9% move.
The consumer staples had a much brighter month led by L’Oréal after reassuring results and gains for Nestlé following strong revenue guidance for their third quarter. The spirits companies also featured with gains for Diageo, Pernod Ricard and Remy Cointreau. The tech sector appeared to feature something of an old/new split, IBM sank 11% after disappointing figures, Intel fell 8% after their Q3 figures and Texas Instruments by 5% after theirs. In contrast, Microsoft gained around 8% (possibly hard to call this one new tech but certainly rejuvenated..) while Alphabet and Salesforce also rose.
The pharmaceutical sector saw a lot of excitement following the announcement of Pfizer’s success with their proposed pill for the treatment of COVID-19; their stock gained nearly 20%. Roche Holding and Novartis unwound their near twenty year cross holding as Roche bought-in Novartis’ stake for $20.7bn, they will be cancelling the shares (extraordinary to think that they were bearer shares, a train robbers’ delight). As I write, Johnson & Johnson has just announced that they will be splitting the Company into two new listed entities, one focussed on drugs and medical devices and the other on consumer products (e.g. Neutrogena, Tylenol, Band-Aid etc.). Expect to see many corporate bankers at work in the pharmaceutical sector over the next six months…
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