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Share markets enjoy October rally

Equity markets generally rallied during October while daily volatility was less pronounced than in recent months. Investor sentiment received a boost from the news that China’s central bank had implemented another cut in interest rates although the International Monetary Fund reduced its forecast for global economic growth from 3.3% to 3.1% for this year and from 3.8% to 3.6% for 2016.

European share prices rose strongly during October, buoyed by the news that central bank policymakers intend to re-examine their programme of stimulus measures at their meeting in December. Germany’s Dax index rose 12.3% over the month, while France’s CAC 40 index was up 9.9%. Data showed consumer price inflation in the eurozone stagnating at zero, although the region’s rate of unemployment eased to 10.8% in September – its lowest level since January 2012.

UK share prices also generally rose during October, although share prices in the mining sector remained volatile over the month. Elsewhere, several UK companies, including Home Retail Group, Pearson and William Hill issued profit warnings. Indeed, according to Ernst & Young, profit warnings among UK companies rose during the third quarter of 2015, notching up their largest quarterly increase in almost four years. Meanwhile UK economic growth lost momentum over the third quarter as the economy expanded at a quarterly rate of 0.5% during the period, compared with 0.7% in the second quarter. The FTSE 100 index rose 4.9% over October.

Across the Atlantic and as expected, US interest rates were left unchanged at zero to 0.25% at the Federal Reserve’s October meeting. Again, share prices generally rose over October and the Dow Jones Industrial Average index climbed 8.5% over the month, despite some disappointing economic data. In particular, weaker-than-expected third-quarter economic growth and anaemic employment data triggered some concerns over the strength of the economic recovery.

In Japan, central bank policymakers decided to maintain their current programme of monetary stimulus. The decision provided a boost for share prices and the Nikkei 225 index rose to its highest level since August. Over October as a whole, the benchmark index rose by 9.7%. The Bank of Japan reduced its economic growth forecast for the financial year ending in March 2016 from 1.7% to 1.2%, however, and pushed back its 2% inflation objective to the second half of the next fiscal year, citing the effects of lower crude oil prices.

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