A Month in Review – October 2021


In spite of a further pickup in inflationary pressure, economic data and monetary policy sentiment continued to deliver support.

At the end of the month, the ECB reaffirmed its views on inflation being transitory, delivering the majors with strong support.

Weak GDP numbers from China and the U.S and Evergrande’s debt woes were market negative.

Away from the economic calendar, upbeat sentiment towards corporate earnings offset the negative influences from China, however.

The Stats

Key stats in the month included private sector PMIs for September, prelim inflation figures for October, and 3rd quarter GDP numbers.

Both data sets continued to suggest that inflationary pressures were more than just transitory.

In September, Germany’s Manufacturing PMI slipped from 58.5 to 58.4, with France’s Manufacturing PMI falling from 55.2 to 55.0.

As a result, the Eurozone’s Manufacturing PMI slipped from 58.7 to 58.6.

While manufacturing sector growth held steady, service sector growth slowed in September.

The Eurozone’s Services PMI fell from 59.0 to 56.4, leading to a fall in the Composite from 59.0 to 56.2.

On the inflation front, the Eurozone’s annual rate of inflation accelerated from 3.4% to 4.1% in October, according to prelim figures.

At the end of the month, 3rd quarter GDP numbers for member states and the Eurozone delivered mixed results.

In the 3rd quarter, the Eurozone economy grew by 2.2% quarter-on-quarter. The economy had expanded by 2.1% in the 2nd quarter. Year-on-year, the economy expanded by 3.7%.

According to Eurostat,

Among member states, with data available for the 3rd quarter:

  • Austria (+3.3%) recorded the highest increase, quarter-on-quarter, followed by France (+3.0%) and Portugal (+2.9%).
  • Latvia (+0.3%) and Lithuania (+0.0%) recorded the lowest GDPs.

From the U.S

Economic data also delivered mixed signals.

Labor Market Numbers

Nonfarm payrolls saw a modest 194k increase in September after having risen by 366k in August. While on the lower side, the U.S unemployment rate fell from 5.2% to 4.8% in the month of September.

Weekly jobless claims were upbeat, however. After having failed to fall back to sub-300k levels since the start of the pandemic. Initial jobless claims fell to 280k in the week ending 22nd October. It was a 3rd consecutive week that claims remained below the 300k mark,

Consumption and Consumer Confidence

Retail sales continued to deliver support, rising unexpectedly in September.

In spite of the continued uptick in consumer prices, consumer confidence also improved. The CB Consumer Confidence Index rose from 109.8 to 113.8 in October.

Service Sector Activity

While concerns over the pace of the economic recovery lingered, service sector activity picked up at the end of the 3rd quarter.

The market’s preferred ISM Non-Manufacturing PMI rose from 61.7 to 61.9 in September.


Concerns over inflation remained justified at the end of the quarter, however.

In September, the annual core rate of inflation held steady at 4.0%, with core consumer prices rising by 0.2% in the month.

The FED’s preferred Core PCE Price Index also continued to overshoot the FED’s 2% target, rising by 3.0% year-on-year.

Economic Growth

Disappointing economic data did muddy the monetary policy waters late in the month, however.

In the 3rd quarter, the U.S economy expanded by just 2% after having grown by 6.7% in the previous quarter.

Monetary Policy

The ECB stood pat on monetary policy in October. With inflationary pressures building further, the markets were looking for any shift on interest rate policy.

ECB President Lagarde quashed any expectations of a need to lift interest rates by reaffirming the view that inflation remains transitory.

For the FED, the tapering of the asset purchasing program remained firmly in place, while the FOMC hawks talked of a need to begin lifting interest rates.

Economic data in the month, however, suggested that the FED would need to juggle persistent inflation amidst slower growth.

The Market Movers

For the DAX: It was a mixed month for the auto sector in October. Volkswagen fell by 0.60% to buck the trend in the month. Daimler rallied by 10.74%, however, with BMW and Continental rising by 4.81% and by 7.19% respectively.

It was a bullish month for the banks. Deutsche Bank rose by 0.59%, with Commerzbank ending the month up by 9.72%.

From the CAC, it was a bullish month for the banking sector. BNP Paribas rose by 4.44%, with Credit Agricole and Soc Gen seeing gains of 9.12% and 6.03% respectively.

It was also a bullish month for the auto sector. Renault and Stellantis NV ended the month up by 0.52% and by 5.20% respectively.

Air France-KLM and Airbus SE fell by 3.85% and by 3.91% respectively.

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