Global Market Overview | November 2023


Global markets have seen a solid rebound over November, with both equities (MSCI World Index: +9%, MSCI Emerging Markets Index: +7.6%) and fixed-income securities (FTSE World Government Bond Index: +4.8%, JSE ALBI Index: +4.5%) rallying. This was driven by a shift in interest rate expectations – a function of subtle changes in commentary from United States (US) central bank officials. This shift towards a relatively less hawkish stance, in conjunction with better-than-expected inflation data, fuelled the rally and supported the notion that interest rates have peaked and the focus has now shifted towards how long rates may remain elevated and if the US economy can achieve a soft landing and avoid a hard recession. The CNN Fear & Greed Index, a measure of sentiment/mood, swung from ‘extreme fear’ at the beginning of the month to ‘greed’, which is reflective of the rapid shift in sentiment and heightened optimism among market participants.

US markets locked in high-single-digit growth with the S&P 500 Index trading 8.7% higher towards month end. In terms of key market drivers, commentary from Fed Chair, Jerome Powell, highlighted that the recent tightening in financial conditions may reduce the need for further intervention. He also noted that while for the last 18 months the concern had been that the Fed is "not doing enough" to temper inflation, the "risks are getting closer to being in balance". More recently, Fed Governor, Christopher Waller, stated that he was “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%”. The market took this as a sign that the Fed is decisively moving away from an ultra-aggressive tightening policy and into a wait-and-see mode. Investors widely expect the Fed to hold rates in December, while pricing in a ~50/50 chance of easing in May next year according to the CME’s FedWatch Tool.

European markets also benefitted from the global rally with the EuroStoxx 600 adding 6% for the month. Investors continue to assess economic data out of the region in the context of the European Central Bank’s (ECB) cautious approach. ECB President, Christine Lagarde, reiterated that the economy is likely to remain weak for the rest of the year.

In China (MSCI China Index: +1.5%), economic data and stimulus plans remained at the forefront. Government advisers have recommended economic growth targets for next year ranging from 4.5% to 5.5% at a recent policymakers' meeting, as Beijing seeks to create more jobs and keep long-term development goals on track. In addition to accommodative monetary policy, further fiscal policy support is expected to make the 2024 growth target achievable – People's Bank of China (PBoC) Governor, Pan Gongsheng, noted that China’s economy continues to gain momentum and expressed his confidence in achieving sustainable growth in the upcoming year. The property market, however, remains a concern as the country’s real estate sector continues to struggle with sluggish sales and falling home prices.

Locally, the JSE tracked global markets higher with the All Share Index gaining 8.1% (USD terms: +8.3%). Interest rates were held steady at the final MPC meeting for the year. The notion of high rates for longer remains intact, with the MPC highlighting that it remains trigger-ready should outcomes become sufficiently adverse. While the rand strengthened, several idiosyncratic risks continued to weigh on the local currency, resulting in it being one of the worst performers in the emerging market basket. International companies, particularly manufacturers with large facilities in South Africa, have also raised their concerns about infrastructure constraints and have called for a plan of action to address these shortcomings.

Economic Data Review

The US Fed adopted a less hawkish stance with interest rates remaining stagnant

Flash estimates showed that the S&P Global Composite PMI for the US held steady at 50.7 in November, slightly higher than expectations. This indicated a marginal further expansion in private sector activity. Although manufacturing firms reported a slower pace of expansion, service providers witnessed a fractional uptick in the rate of output growth. Retail sales in October increased 2.5% y-o-y - this was better than expectations. The US trade deficit widened to $61.5 billion in September 2023, compared to market forecasts of $59.9 billion, as exports were up 2.2% and imports increased 2.7%. The unemployment rate in September increased to 3.9%, above market expectations. The annual inflation rate in the US slowed to 3.2% in October from 3.7% in both September and August, and below market forecasts of 3.3%. The Federal Reserve kept the target range for the federal funds rate at a 22-year high for a second consecutive time in November, as expected, reflecting policymakers' dual focus on returning inflation to the 2% target while avoiding excessive monetary tightening. Policymakers emphasised that the extent of any additional policy tightening would consider the cumulative impact of previous interest rate hikes, the time lags associated with how monetary policy influences economic activity and inflation, and developments in both the economy and financial markets.

Interest rates remain at multi-year highs as the ECB adopts a ‘wait-and-see’ approach

On a preliminary basis, the HCOB Eurozone Composite PMI rose to 47.1 in November, up from a near three-year low of 46.5 in October and slightly above market expectations of 46.9. The latest reading still indicated a sixth consecutive month of reduced business activity, although at a decelerated pace, with both services and manufacturing sectors contracting at a slower pace. Retail sales fell by 2.9% y-o-y in September, marking the 12th consecutive month of decline, and against market expectations of a 3.1% drop. A trade surplus of €10 billion was recorded in September, compared to forecasts of a €22.3 billion surplus, swinging considerably from a €29.8 billion gap in the corresponding month of the previous year, largely due to the stabilisation in prices of natural gas and other major resource imports into the currency bloc. The unemployment rate increased to 6.5% in September from 6.4% in August, compared with market expectations of 6.4%. Inflation for October came in at 2.9%, in line with consensus expectations. The ECB kept interest rates unchanged (as expected) during its October meeting, marking a significant shift from its 15-month streak of rate hikes and reflecting a more cautious ‘wait-and-see’ stance, influenced by the gradual easing of price pressures and concerns about an impending recession.

The Bank of England (BoE) kept interest rates at a 15-year high while assessing signs of an economic slowdown

Initial reports showed that the S&P Global/CIPS UK Composite PMI rose to 46.7 in November, up from 44.8 in October and above market expectations of 45. Retail sales decreased 2.7% y-o-y in October compared to forecasts of a 1.5% drop. In September, the trade deficit shrank to £1.57 billion compared to expectations of a £3.6 billion deficit, as imports slipped by 3.7% while exports fell at a milder 2.2%. In line with market expectations, the unemployment rate came in at 4.2%. Annual inflation in the UK dropped to 4.6% in October, down from 6.7% in both September and August, falling short of market expectations of 4.8%. The BoE maintained its benchmark interest rate at a 15-year high of 5.25% (as expected) for the second consecutive time during its November meeting, as policymakers evaluate recent signs of an economic slowdown in the UK, while simultaneously grappling with the ongoing challenge of stubbornly high inflation. The central bank also emphasised that monetary policy is likely to remain restrictive for an extended period to steer inflation back towards the 2% target.

China's economy continues to gain momentum but the property sector remains weak

China’s composite PMI fell to 50.0 in October from 50.9 in September. While indicating the 10th straight month of growth in private sector activity, the latest figure was the lowest this year, as the manufacturing sector shrank for the first time since July, while the service sector remained not far from September's nine-month low. Retail sales surged by 7.6% y-o-y in October, picking up from a 5.5% increase in the previous month and surpassing market expectations of 7%. Below market forecasts, the trade surplus in October narrowed sharply to US$56.53 billion from $82.35 billion in the same period the previous year, as exports dropped by 6.4% while imports grew by 3%. The surveyed urban unemployment was unchanged at 5% in October. China's consumer prices dropped by 0.2% y-o-y in October, compared with a flat reading in the prior month and forecasts of a 0.1% fall. The PBoC maintained lending rates at the November fixing, as was widely expected. China remains an outlier among central banks, having loosened monetary policy to revive a faltering economy, but further rate cuts would widen the yield gap with the US, risking yuan depreciation and capital outflows.

Japan’s economy contracted more sharply than expected in Q3

Early estimates showed that the Jibun Bank Composite PMI reading fell to 50.0 in October from a final 50.5 in the prior month, indicating the lowest reading since December 2022. Retail sales rose 5.8% y-o-y in September, slowing from a 7% increase seen in July and August and roughly in line with forecasts for a 5.9% gain. Japan’s trade deficit narrowed sharply to ¥662.55 billion in October from ¥2.205 billion in the same month of the prior year, less than market estimates of a shortfall of ¥735.7 billion. The unemployment rate fell to 2.6% in September from 2.7% in August, in line with expectations. The annual inflation rate rose to 3.3% (above expectations of 3.2%) in October from 3% in the prior month, pointing to the highest print since July. The Bank of Japan (BoJ) kept its key short-term interest rate unchanged, in line with market expectations. In a quarterly outlook report, the BoJ revised higher inflation forecasts for FY23 and FY24. Meantime, policymakers observed that Japan's economy was likely to continue recovering moderately, supported by pent-up demand but highlighted downward pressure from a slowing global recovery. The board reiterated that it will not hesitate to take extra easing measures if needed.

In South Africa, inflation ticked higher and is near the upper limit of the SARB’s target range

In September, the leading business cycle indicator was up 0.6% (after an increase of 0.4% a month before), retail sales improved 0.9% y-o-y (better than the forecasted increase of 0.1%) and the trade balance amounted to a surplus of ~R13.1 billion (ahead of expectations of ~R12 billion). Nevertheless, the RMB/BER business confidence index for 4Q23 came in lower at a reading of 31 (compared to a reading of 33 in the previous quarter), as high interest rates, sporadic supply-chain constraints and severe loadshedding continue to weigh on sentiment.

Mining production contracted 1.9% y-o-y in September (against expectations of a 2% decline) due primarily to lower yields in diamonds as well as falling global demand for manganese ore and other metallic minerals. Manufacturing production dropped 4.3% y-o-y, ahead of the expected slump of 2.6%, marking the sharpest decline in industrial activity since December 2022. This was particularly concerning as it reflected the first downturn in activity after five months of robust growth.

Composite PMI softened to 48.9 in October (compared to 49.9 a month before), pointing toward a further stagnation in private sector activity. This was evidenced by the downturn in manufacturing PMI to 45.4 (September: 46.2). Total new vehicle sales decreased to 45 445 units (September: 45 997 units) as buyers came under a bit of pressure due to tight economic conditions. The value of recorded building plans passed in SA’s larger municipalities fell 22.1% y-o-y, with weakness coming through from both residential and non-residential properties.

Consumer Price Inflation (CPI) accelerated to 5.9% in October (against forecasts of 5.5%) due to sustained pressure in food and non-alcoholic beverage prices, as well as transport (fuel) costs. This is near the upper limit of the South African Reserve Bank’s (SARB’s) target range of between 3% and 6%. Core inflation (which excludes the price of food, non-alcoholic beverages, fuel and energy) eased to 4.4%. During its November meeting, the SARB left its benchmark interest rate unchanged at 8.25% (in-line with expectations) and emphasised that inflation risks remain elevated though the risks for medium-term domestic growth appear balanced. The SARB’s main goal remains to firmly anchor inflation expectations around the midpoint of its targeted range.



  • We predict growth of 0.8% in 2023, lifting to 1.2% in 2024, 1.6% in 2025 and 1.8% by 2026. The near-term growth projection has improved on a lower intensity of loadshedding, while growth in the medium term continues to rely on the structural reform agenda and improving external demand. We remain concerned that further escalations in geopolitical tensions will hinder improvement in global trade and the reversion of inflation to central bank targets.
  • Furthermore, we are worried about mounting stress for vulnerable households. Cost-of-living pressures and failing service delivery have likely pushed many households into distressed borrowing, which will have implications for borrowing costs as a proportion of disposable income and the overall health of balance sheets. The next year will likely remain challenging but as inflation slows and economic growth gains momentum, we are likely to see more pronounced and broad-based employment and real wage growth.
  • Slower inflation is a key feature of the medium-term outlook but the risk that it is more sticky than projected is material. Currency and supply-side pressures continue to manifest themselves in elevated goods inflation, although to a lesser extent with the unwinding of international supply chain bottlenecks, but services highlight weak consumer demand. In line with this, core inflation generally underwhelmed expectations this year, indicating that the passthrough of elevated input costs has been constrained. This supports average annual headline inflation slowing to 5.9% in the current year, from 6.9% last year, before falling to 4.7% in 2026.
  • Weak demand-driven inflation is consistent with restrictive monetary policy. With nominal interest rates at 8.25%, and inflation falling towards 5% by year-end, real interest rates should climb above 3% and exceed the estimated level of neutral by 0.5 ppt. With policy becoming more restrictive as inflation slows and after three consecutive holds by the MPC, we are more confident that we have reached the peak in nominal interest rates. The next major risk event in the calendar is the 2024 elections, after which the MPC should be able to consider cutting rates. Ultimately, the MPC should only look to remove excess restrictiveness but not necessarily shift to an accommodative stance. This will be key to catering for funding risks while ensuring that financial conditions are consistent with inflation slowing to target sustainably.


  • Our primary concern going forward is whether the resilience of company earnings can be extrapolated into the future. We believe that this may prove difficult as fiscal and monetary policy, particularly in the US, will likely be on a restrictive path. In particular, the lagged effect of tightening monetary policy actions will likely begin to filter through to changes in both corporate and consumer spending patterns. Higher borrowing costs for both businesses and consumers will likely suppress economic activity, particularly in discretionary related areas, as economic agents look to rein in expenditure to tighten their balance sheets and income statements.
  • Households will likely continue utilising various credit instruments, particularly credit card debt which is currently at all-time highs to prop up short-term expenditure prospects. Moreover, the reactivation of over US$1.6 trillion of student debt may well present a headwind to future earnings prospects.
  • Nevertheless, if liquidity remains plentiful, the emergence of price discovery in the short-term could be prevented.  It is worth noting that the Fed has articulated the need to tighten financial conditions. We believe that persistent loosening of financial conditions could embolden the Fed to remain restrictive for longer to bring core inflation levels down to more sustainable levels.
  • In emerging markets, it is certainly encouraging to see the PBoC maintaining loose monetary policy and further injecting liquidity into the banking system. Also, the government lifted the country’s fiscal deficit, this should provide new fiscal stimulus to boost the economic recovery.  However, economic data has not fully turned and there is still weakness in the economy, particularly in the property sector. With low levels of inflation and notable excess savings combined with attractive valuation multiplies, we are of the belief that selected opportunities remain in the Chinese economy and will be on the lookout for more palatable policy responses from fiscal authorities.
  • We have reduced the fixed income underweight and moved up the yield curve. However, we remain cautious as core inflation remains elevated. A few months of good data is not enough to inspire confidence that inflation is moving down sustainably to the 2% target. We are also open to taking a more explicit position on the long end of the curve once we are confident that inflation is persistently on a downward trend and investor fears have shifted from interest rates and inflation to that of growth prospects.