Read our Quantic Asset Management news report for the month of October 2018. Find out more about our services https://www.quantic-am.com/en/

1. QUANTIC
Monthly Market Review
OCTOBER 2018
A review of the performance of global stock and major markets over the last month, along with relevant
insights from Quantic’s economists and investment professionals.
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2. Economic fundamentals in the US remain strong, with unemployment globally contin-
uing to fall. Falling unemployment has supported consumer confidence, which remains
close to record highs. While equity markets have struggled to find a firm footing, the
US economy is showing no signs of wobbling.
Political concerns in Europe have not vanished. There are worries about Italy’s growing
rift with the European Union (EU), as well as concerns over continued signs that trade
tensions are hurting economies throughout the region.
The government data, which measure the health of industrial output, employment, and
retail sales, suggest that Japan’s economy is stalling.
The outlook for the UK could improve further if there is news of a deal on Brexit. the
eventual agreement will probably resemble a relatively soft Brexit. The Bank of England
left its rates unchanged but said it was ready to act after Brexit.
China recorded GDP growth of 6.5% (year on year) for the third quarter. This is
marginally lower than expectations but still robust. The slowdown in China is partly due
to the increase in trade tensions with the US.
In October 2018 mixed geopolitical events weighed on share prices in most major regions. There
were several tensions that shook the currencies, commodities and global financial markets.
All global indices are influenced by trade talks between Donald Trump and Xi Jinping. Both leaders
are due to meet at the G20 summit in Argentina in late November. Trade tensions appear to have
affected activity in Europe. Investors are, however, still worried about geopolitical trends. Mixed
messages from the EU and the USA are still weighing on market sentiment, which seems to be more
negative than positive on stock Market indices. There are worries about Italy’s growing rift with the
European Union (EU), as well as concerns over continued signs that trade tensions are hurting econ-
omies throughout the region. The European commission rejected the budget plan drawn up by the
new Italian government. This decision of the European Union weighs on the euro. Moody’s down-
graded Italy’s sovereign debt. Economic data continued to show signs of slowing across the region
and the mixed political events are hurting exports and sentiment. The European Commission said
that eurozone growth would slow though 2020, pressured by trade worries, high oil prices, and over-
all uncertainty. In the Eurozone the composite purchasing managers index (PMIs) fell in October to
53.1, the lowest level since September 2016, with export orders falling for the first time since 2014.
The European Central Bank (ECB), in its recent monetary policy meeting, defined economic data as"
weaker than expected". The Bank of England left its rates unchanged but said it was ready to act
after Brexit. Meanwhile, the Times said an agreement had been reached to leave UK financial firms
with access to continental European markets. On currency markets, the British Pound promptly
gained positive results especially against the euro, as a result of this news. The outlook for the UK
could improve further if there is news of a deal on Brexit. The eventual agreement could potentially
resemble a relatively soft Brexit.

3. The midterm elections dominated sentiment throughout the first part of November. The result was in
line with expectations. A legislative standstill might take place. The strength of the dollar combined with
further rate rises is a concern for some emerging markets. Geopolitical risks such as trade tensions are
amplifying macro uncertainty. The Federal Reserve (Fed) held rates steady as expected. Short-term rates
rose on expectations of a Fed rate hike in December.
Market volatility returned in October. Economic fundamentals in the US remain strong, with unemploy-
ment globally continuing to fall. Falling unemployment has supported consumer confidence, which re-
mains close to record highs. While equity markets have struggled to find a firm footing, the US economy
is showing no signs of wobbling. The unemployment rate for the previous month fell to 3.7%, the lowest
in almost 50 years.
On the commodity markets, a continued slide in oil prices led some to wonder whether global demand
was slowing. Investors also worried about a continuing rise in oil inventories, and the price of a barrel
of West Texas Intermediate (WTI) crude fell into a bear market, down over 20% from previous four-year
highs.
China recorded GDP growth of 6.5% (year-on-year) for the third quarter. This is marginally lower than
expectations but still robust. The slowdown in China is partly due to the increase in trade tensions with
the US. Meanwhile in Japan, the government data, which measure the health of industrial output,
employment, and retail sales, suggest that Japan’s economy is stalling.
Past performance is no guarantee of future success Past performance is no guarantee of future success
Source: Bloomberg Terminal 2018 Source: Bloomberg Terminal 2018

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