Global stock markets experienced another volatile week with inflation worries and geopolitical tensions weighing on sentiment. The much-followed Volatility Index, sometimes called the fear-gauge, reached 21.4, its highest level in seven months, although not historically an extreme level for the VIX.
On Thursday US Federal Reserve Chair Jerome Powell said that “additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy”. He also reiterated that he and his colleagues were “united in our commitment to bringing inflation down sustainably to 2%”. Following his remarks the yield on the US 10-year Treasury note printed briefly above 5% and has done so again at the start of this week (a level not seen since 2007), equities sold-off to end the week and oil and gold rallied. However, Powell did hint that rates may be kept on hold at the next meeting – markets are currently expecting one more 0.25% hike this year with cuts to begin in 2024.
In the UK inflation was stable at 6.7% in September, unchanged from August which was a 18-month low. Market expected a slight decrease. The data remains well above the BoE target of 2% and continues to make things difficult for policy makers.
UK Market Chart 20th October 2023
US Market Chart 20th October 2023
US Risk Barometer 20th October 2023
Europe Risk Barometer 20th October 2023
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