USA
In October, the US stock market S&P500 increased by 7.82% – from 3601.50 to 3883.00, while Nasdaq100 appreciated by 3.96%. The decline since the beginning of the year for the S&P500 is currently 18.61%, and for the Nasdaq100 – 30.93%.
The dollar index fell 0.59% in September. Growth since the beginning of the year amounted to 16.55%
The cost of a 5-year credit default swap (CDS) in the US in October increased by 38.93%, the figure at the end of the month was 29.87. The implied probability of default is 0.50%.
The Fed rate is 4.00% (last change in November 2022: +0.75%).
According to Standard & Poor’s, the US credit rating is AA+.
Fed
Excerpts from FOMC statement (November 2, 2022)
The committee decided to raise the target range for the federal funds rate to 3.75%-4.00%. The committee expects that a continued increase in the target range will be appropriate to bring inflation back to 2% over time.
The Committee will continue to reduce its holdings of Treasury securities and agency debt, as well as agency mortgage-backed securities, as described in the Federal Reserve’s May plans to reduce the size of the Federal Reserve’s balance sheet.
In determining the pace of future increases in the target range, the Committee will take into account cumulative monetary tightening, the lag in which monetary policy affects economic activity and inflation, and economic and financial developments.
Inflation
In October, the consumer price index rose by 7.7% over the past 12 months, seasonally adjusted.
Core CPI (excluding food and energy) fell 0.3% in October to 6.3% YoY.
Core Consumer Price Index (CPI)
The median consumer price index (calculated by the Cleveland Federal Reserve Bank and considered the best indicator of underlying inflation trends) fell to 6.532% in October.
Median CPI
Labor Market (July)
- Number of initial claims for unemployment benefits: 225K (previous revised: 214K);
- Change in the number of employed in the private non-agricultural sector: 233K (previous revised: 275K);
- Unemployment rate: 3.7% (prev. 3.5%).
The Fed’s balance sheet for September decreased by 0.94% ($82.697 billion), since April (from the peak) – by 3.22% ($288.617 billion).
Fed balance sheet
The yield spread of 10- and 2-year Treasury bonds continued to decline and is -0.68%.
Yield spread of 10- and 2-year Treasuries
The yield spread of 10-year and 3-month Treasury bonds fell below the levels of the pre-crisis inversions of 2007 and 2019: -0.65%.
Yield spread of 10-year and 3-month Treasuries
Market yield on 10-year inflation-indexed US Treasuries: 1.45%.
The yield on 10-year US Treasury securities indexed for inflation
Eurozone
European Central Bank Monetary Policy Decisions (October 27, 2022)
- The Board of Governors has decided to raise the ECB’s three key interest rates by 75 basis points. The interest rate on the main refinancing operations and the interest rates on the margin credit line and the deposit line will be increased to 2.00%, 2.25% and 1.50%, respectively, from November 2, 2022.
- The Board of Governors also decided to change the terms of the third series of targeted long-term refinancing operations (TLTRO III).
- Asset Purchase Program (APP) – reinvest in full.
- Pandemic Contingency Buying Program (PEPP) to reinvest principal payments of securities maturing through at least the end of 2024.
Eurozone inflation
Commodity market
- The overall commodity market, represented by the DBC (Invesco DB Commodity Index Tracking Fund) ETF, rose 5.06% in October.
- Gold futures (GC) fell 1.91%.
- The futures price for the WTI mark (CL) increased by 8.11% – from 79.74 to 86.21 $/b.
- The cost of freight, presented by the BDRY fund (as an indicator of the slowdown in the global economy), continued to decline and at the end of October was $7.10. The decrease from the maximum values (October 2021) was: 83.11%.
The composite world container index (Drewry World Container Index) also continued its decline – to 2591.41 $/40ft.
Drewry World Container Index
In October 2022, the FAO Food Price Index* (FPPI) averaged 135.9 points and remained virtually unchanged from September; at the same time, the price indices of all groups of goods included in this index – with the exception of grain – decreased compared to the indicators a month earlier.