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October 2022 - A month of ups and downs

 MARKET REVIEWS


marchésOctober 2022 - Despite setbacks, October saw a significant rebound, particularly on the North American and European stock markets, after they touched new lows early in the month. In a context of very persistent global inflation, hopes that the main central banks would start to slow their rate hikes were beneficial at the end of the month. Even so, the Asian market and emerging markets struggled the most as they were dragged down by the historic decline of Chinese equities.

Closing 31-10-2022 Variation vs 30-09-2022 Variation vs 31-12-2021
Interest rate in Canada (%)
Key rate 3.75 0.50 3.50
Commodities ($ US)
Oil (WTI) $86.16 8.4% 14.4%
Gold $1,639.00 -2.0%▼  -9.2%▼ 
Currencies CAD Variation CAD Variation
EUR /CAD 1.35 0.9%
-6.4%▼ 
JPY /CAD 0.01 -3.2%▼ 
-18.2%▼ 
USD /CAD 1.36 -0.4%▼ 
7.4%

Sources: Bank of Canada, Fundata.

CANADIAN MARKET 5.8%(MSCI Canada 31-10-2022)
After a disappointing September, the Canadian market benefited from the broadly based advance on the Western markets and recorded a solid return in October. At the end of the month, the Bank of Canada surprised everyone by raising its key interest rate by 50 basis points, rather than the 75 basis points that the markets were expecting. Investors welcomed the news. As a result, the return was 5.8% on the month, as measured by the MSCI Canada Index. Most of the sectors contributed to the return, especially Energy, which once again benefited from the rising oil price. Conversely, the Utilities and Materials sectors had the most difficulty during the month.

U.S. MARKET 7.2%(MSCI USA 31-10-2022 in CAD)
The U.S. market outperformed its peers, even though some of its Big Tech stocks had a difficult end to the month. The market returned 7.9% in local currency, as measured by the MSCI USA Index. The return was 7.2% in Canadian dollars. All sectors, without exception, recorded a positive return during the month. Even though the Energy sector had the largest gains in absolute terms, it was the Information Technology sector that contributed the most to the market’s performance.

EUROPEAN MARKET 6.4%(MSCI Europe 31-10-2022 in CAD)
Even though the European market returned 6.1% in local currencies, as measured by the MSCI Europe Index, it had a tumultuous month. The U.K. market saw a substantial selloff in mid-October with the announcement of the mini-budget of former Prime Minister Liz Truss, who was forced to resign a few days later. In Canadian dollars, the return was 6.4%. All sectors recorded gains, led by Energy and Industrials.

ASIAN MARKET -2.7%▼ (MSCI Asia-Pacific 31-10-2022 in CAD)
Unlike the Western markets, the Asian market failed to rebound in October. Despite positive contributions by Information Technology, Health Care and Energy, the market ended the month with a return of -0.7% in local currencies, as measured by the MSCI All Countries Asia Pacific Index. Consumer Discretionary, Communication Services and Consumer Staples subtracted the most value. Owing to the loonie’s strength against the Asian currencies, the return for October was -2.7% in Canadian dollars.

EMERGING MARKETS -3.8%▼ (MSCI Emerging Markets 31-10-2022 in CAD)
As for emerging markets, they were not part of the global trend either and also declined in October. Their weakness was due mainly to the historic rout of Chinese equities, which represent about 30% of the MSCI Emerging Markets Index, after the 20th Congress of the Chinese Communist Party. President Xi Jinping’s decisions were very poorly received by investors, especially his move to consolidate power by surrounding himself with a large number of loyalists.

 

On the positive side, India stood out from its neighbour in a difficult context. Emerging markets ended the month with a return of -2.6% in local currencies, as measured by the MSCI Emerging Markets Index. In Canadian dollars, the return was -3.8%. Even so, some sectors posted gains during the period, such as Energy and Industrials, while Real Estate and Consumer Discretionary posted the largest losses. 


Sources: Bank of Canada and MSCI Inc.
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