City thinking, local knowledge

November Market Commentary

By Questa Chartered


October was the month which brought us Chancellor Rishi Sunak’s second Budget of the year. Normally that would make the headlines, but October was also a month when the world gave us plenty to worry about.

With factors such as rising energy prices and supply chain issues impacting economies worldwide, the UK’s economic outlook may well be heavily dependent on events beyond the Chancellor’s control.

Rishi Sunak had described his Budget as one for a “new age of optimism”: one that would deliver “a stronger economy for the British people”. But in China, the price of coal was rocketing, factory gate prices reached their highest level for 26 years and the country missed all its key economic targets for the third quarter.

Growth for the July to September period slumped to 2% in the US, and the German government sharply cut its growth forecast for the year, citing “supply bottlenecks and high energy prices”.

There was also plenty of political unrest in the month. Tension between China and Taiwan was described as ‘the worst in 40 years,’ with Chinese leader Xi Jinping issuing a thinly-veiled ‘keep off’ message as he described plans for re-unification as an “entirely internal” matter.

China fired a hypersonic missile round the world in a move which appears to have taken the US completely by surprise. North Korea sent a ballistic missile into the sea off Japan in a move which surprised no-one at all. Also, US President Joe Biden told new Japanese Prime Minister Fumio Kishida that the US would defend the disputed Senkaku Islands in the event of an attack by China. The islands – which are uninhabited – are currently controlled by Japan but claimed by both China and Taiwan.

The month did end with some semblance of global harmony, as world leaders at the G20 summit in Rome endorsed a deal on a global minimum corporation tax rate of 15%, which will be enforced from 2023.

So another month when there was plenty of news to digest. As always, let’s look at all the details…


As noted above, Rishi Sunak delivered his second Budget speech of the year on Wednesday October 27th. It was, in some ways, a strange speech. As you will know by now, he committed himself to an extra £150bn of spending, with the inevitable higher taxation to pay for it. Then he suddenly changed tack at the end of the speech, talking about a ‘moral challenge’ facing the country, his own dislike of higher taxes and making a pledge to reduce taxation in the future.

He sat down with Conservative backbenchers enthusiastically waving their order papers, but the Budget split opinion on all sides of the political spectrum. The left described it as a ‘bankers’ benefit’, while the right criticised what it saw as excessive spending and taxation. The Institute of Fiscal Studies made it very clear that the tax burden would continue to increase, stating that there was “clear blue water between now and any time in the past”. Looking further ahead, they saw little increase in household disposable income, which would be “almost stagnant” over the next five years, growing by just 0.8% each year.

Many business groups also criticised the Budget, with Tony Danker of the CBI saying that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants”.

The month opened with the news that business confidence had ‘fallen off a cliff’ in September, as supply chain problems, rising energy costs and the shortage of fuel all combined to drive up prices.

However, there was some good news around in October. Figures for August showed that the economy had grown by 0.4% in the month as more people ate out, went on holiday and – wellingtons at the ready – attended music festivals.

Government borrowing fell in September: at £21.8bn it was the second-highest September figure on record, but was £7bn less than in September 2020. Inflation in September dipped slightly to 3.1% from the 3.2% recorded in August, although the relief may only be temporary.

Huw Pill, the Bank of England’s new chief economist, warned that inflation is likely to hit, or surpass, 5% early next year – and said that the Bank had a “live decision” to make on interest rates at its rate-setting meeting on November 4th. The food and drink industry added weight to the argument, with Federation boss Ian Wright telling MPs that inflation is between 14% and 18% for hospitality firms – and that it will inevitably lead to price rises for consumers.

What of jobs? There were plenty of stories of companies taking on new staff in the month, with Addison Lee, London’s leading private hire firm, looking to take on 1,000 new drivers, which hopefully says something about the economic recovery in the capital. More generally, the Recruitment and Employment Confederation reported in the middle of the month that there were now 2.29m job vacancies, with more than 600,000 being added since the last week of August. The growth has been spread across the country, said the REC, making competition for staff ever more fierce.

The month ended with two pieces of good news on the jobs front, both centred on the north-east. Envision, the Chinese firm behind Sunderland’s ‘gigafactory’ announced a huge expansion – with the factory’s capacity increasing sixfold – as it looks to bolster its electric battery division. Not to be outdone, Saudi chemicals giant Sabic announced that it was to invest nearly £1bn at its Teesside plant in a move that will create and protect 1,000 jobs.

The FTSE-100 index of leading shares had a good month, rising 2% to end October at 7,238. The pound was up by a similar amount against the dollar, closing the month trading at $1.3689.


We mentioned the twin threats of power shortages and inflation in the introduction, and they were certainly in evidence in Europe.

October started with the news that inflation in the Eurozone had soared to a 13-year high, with figures from September showing inflation had risen to 3.4% from 2% in the previous month, the highest figure since September 2008.

There was perhaps even worse news to end the month, as the German government cut its growth forecast for the year from 3.5% to 2.6%. Economy Minister Peter Altmaier cited energy costs and problems in the supply chain – especially for semiconductors – as the reason. “In view of the current supply bottlenecks and high energy prices worldwide, the hoped-for final spurt will not happen this year,” he said, before adding that in 2022 “the economy will gain momentum significantly”.

In between these gloomy bookends, there was more bad news for the car industry, which is now threatened by a shortage of magnesium. Europe imports 95% of its magnesium (which is used to strengthen aluminium) from China and, according to Bloomberg, could run out by the end of November, threatening millions of jobs in sectors from the car industry to aerospace and defence.

There was some consolation for the beleaguered car industry when Volvo (now owned by China’s Zhejiang Geely Holding Group) saw its shares jump from £4.50 to £5.10 on its £13bn debut on the Stockholm stock exchange. The company had hoped to raise £1.7bn from the listing as it gears up to become fully electric by 2030.

On the political stage, disagreements between the EU and Poland over whose law takes precedence continued. Social Democrat Olaf Scholz remains the favourite to succeed Angela Merkel as German Chancellor, and a new name was whispered for next year’s French Presidential election. Right-wing commentator and essayist Éric Zemmour has not yet officially entered the race, but a recent poll put him ahead of Marine Le Pen as the likely challenger to President Macron.

Europe’s politicians – and economists – would have ended the month mulling over the latest growth figures for the Eurozone. Figures for the third quarter showed growth of 2.2% in the 19 countries that make up the Eurozone. This was ahead of expectations but inevitably gave rise to worries about further inflation, which was expected to hit 4% for October.

The region’s major stock markets were, however, in an optimistic mood. Germany’s DAX index shrugged off any worries with a 3% rise to 15,689 while the French stock market did even better, gaining 5% in the month to close at 6,830.


As we reported last month, September was a poor month for US stock markets, with the Dow Jones index falling 4% and the S&P 500 down 5%, in what was the markets’ worst month since March 2020.

October saw them regain the lost ground – and more – in a month which brought us the third quarter figures from the major tech companies. While they reported some very large numbers, however, third quarter growth for the wider US economy was down to just 2% (from 6.7% in the previous quarter) in the face of supply chain problems, rising inflation and further Covid restrictions in some states.

The month started with the news that the US had added a disappointing 194,000 jobs in September, although the unemployment rate fell from 5.2% in August to 4.8%. There are currently 7.7m people out of work – a significantly higher number than before the pandemic.

Electric car maker Tesla was much in the news. It revealed record quarterly sales and profits for the third quarter: revenues rose to $13.76bn (£10.05bn) as it sold more than 240,000 cars, with profits rising to $1.6bn (£1.18bn). A deal to sell 100,000 to Hertz saw the share price leap and made Tesla the fifth company to reach a $1tn (£730bn) valuation.

Google, of course, has already reached that landmark and announced a third straight quarter of record profits. Revenues for the July to September period were ahead of Wall Street expectations at $65.5bn (£47.8bn) with the company reporting a net profit of $18.9bn (£13.8bn).

Facebook posted profits of $9bn (£6.6bn) for the period, although the row over leaked documents and unethical behaviour from the company rumbled on. Facebook also announced that henceforth its holding company would be known as Meta – reflecting Mark Zuckerberg’s commitment to developing the Metaverse, the virtual reality future he seems intent on steering us all towards.

The name ‘Meta’ apparently comes from the Greek word for ‘beyond.’ It’s also the Hebrew word for ‘dead.’ Let’s hope it is the former Mr Zuckerberg is steering us towards…

The only one of the tech giants to disappoint the market was Apple, whose shares fell 5% after its third quarter earnings – despite being a record and 29% up on last year – were around a billion dollars short of expectations. Unsurprisingly, boss Tim Cook blamed supply chain issues and the continuing shortage of semiconductor chips.

The fall in Apple’s share price was good news for fans of Microsoft, which duly reclaimed the title of ‘world’s most valuable company.’

…And Wall Street was much more Microsoft, Tesla and Google than Apple, as US stock markets more than made up the ground lost in September. The Dow Jones index climbed 6% to close October at 35,820, while the more broadly-based S&P 500 index was up 7% to 4,605.

Far East

Let’s start off where we ended last month – with the problems at Chinese property giant Evergrande. As you may remember, the company has hundreds of billions of dollars of debt and reportedly owes money to 171 domestic banks and 121 other financial firms. September ended with the company missing a £35m interest payment to foreign bondholders – the second missed payment in a week – and throughout the month, the company’s share price lurched up and down, depending on whether a payment had been made or missed.

By the end of the month, the company chairman was apparently putting his own house up as collateral and – as we reported in October – bankers UBS estimate there are ten property developers in China with combined debt nearly three times the size of Evergrande.

To property add panic. We have reported elsewhere in this Bulletin on rising prices for both raw materials and energy. Nowhere was that more keenly felt than in China.

By the middle of the month, the price of coal had reached a record high, increasing by 10% in one day as flooding hit one of the country’s key mining areas. The impressively-named National Development and Reform Commission said that in view of the shortages the price of electricity generated by coal would be allowed to rise and fall by 20% (compared to a previous upside limit of 10% and a lower limit of 15%).

Quite what that does for planning and cash flow in Chinese industry is anybody’s guess, and it was no surprise to see another surge in factory-gate prices. In September, they grew at their fastest rate for 26 years, adding to worries about both local and global inflation.

Unsurprisingly, Goldman Sachs – which a month ago said that China would have zero growth in the third quarter – cut its growth forecast for the year from an already low 5.8% to just 5.4%.

Goldman Sachs was wrong – but not by much. Official figures confirmed that the economy grew by 0.2% in the third quarter compared to the previous three months. Year-on-year, it was up by 4.9% compared to the third quarter in 2020, against a generally expected figure of 5%. Perhaps more worryingly, industrial output in the third quarter was up by just 3.1% against a forecast of 3.8%.

There were no such worries for HSBC, which smashed expectations for profits in the third quarter, boosted by the release of reserves that had been set aside to cope with expected pandemic-related defaults. Analysts had forecast profits to come in at $3.78bn (£2.76bn): HSBC sailed past that, posting pre-tax profits for the three months of $5.4bn (£3.94bn).

The region’s stock markets, however, largely took their cue from worries about inflation and energy prices, with the exception of Hong Kong’s Hang Seng index, which rose 3% to 25,377. China’s Shanghai Composite index fell 1% to 3,547, while the Japanese stock market was down 2% at 28,893. South Korea was the worst performer, with the market there down 3% in the month to 2,971.

Emerging Markets

We have mentioned power shortages already and they will almost certainly be mentioned again in the coming months. The Emerging Markets section of the Bulletin is no exception – but let us start with a story that sounds like something a James Bond villain would envy.

El Salvador, as regular readers know, became the first country in the world to accept Bitcoin as legal tender. The country’s President took to Twitter in October to announce that the country had begun ‘mining’ Bitcoin using power harnessed from a volcano. President Nayeb Bukele said: “We are still testing and installing, but this is officially the first Bitcoin mining from a volcano.” He confirmed that the project had started by generating 0.00599179 of a Bitcoin, worth approximately £208. So there may be some way to go…

Rather more seriously, India is on the brink of an unprecedented power crisis, with more than half the country’s 135 coal-fired plants ‘running on fumes’ as coal stocks run critically low. 70% of India’s electricity is generated using coal, with the shortage threatening to derail the country’s economic recovery from the pandemic.

Like many countries, demand for power has picked up sharply in India as the country has come out of the pandemic, with consumption in the last two months up 17% on the same period in 2019. India is the world’s second largest importer of coal, so will be badly hit by global price increases.

For now this wasn’t reflected on the Indian stock market, which had a relatively quiet month, closing October unchanged in percentage terms at 59,307. The Russian market gained 1% to end at 4,150 but it was a poor month in Brazil, where the stock market fell 7% to finish at 103,501.

And finally…

The ‘And finally…’ section of the Bulletin has brought you many heroes over the years and this month we must induct another into our Hall of Fame. Step forward Danish artist Jens Haaning, who was given $84,000 (£61,000) by the Kunsten Museum of Modern Art in Aalborg to create a work of art for a forthcoming exhibition.

After receiving the money, Haaning e-mailed the exhibition’s curator saying that he had changed his mind. He duly delivered a blank canvas to the Museum, which he had titled ‘Take the Money and Run.’ He then kept the money. Many of our readers might see it as a suitable comment on modern art…

Doing rather less well in the monetary stakes was California man Mauro Restrepo. Mr Restrepo’s marriage was in trouble, apparently due to a curse placed on it by a witch hired by his ex-girlfriend. Seeking a solution, Mr Restrepo Googled ‘psychics’ and contacted Sophia Adams, a ‘psychic love coach’. Suitably convinced, Mr Restrepo handed over $5,100 (£3,700) to save his marriage. You won’t be surprised to hear that the matter is now with the lawyers…

Finally this month, we make the short trip to Ireland, where new rules to combat the spread of Covid have come into force. These now mandate the wearing of masks in nightclubs, but not when you are drinking or dancing. We can’t help but wonder exactly what else people are meant to be doing in a nightclub, if it’s not drinking or dancing!

Perhaps Mr Restrepo should have taken his wife to one. It would certainly have been cheaper than finding a psychic love coach on Google…

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