Mixed investor sentiment abounds

• Global shares rose 5.4% and 1.7% in hedged and unhedged terms, respectively. The market was led higher by US stocks with the Nasdaq (a tech-heavy index) up 7.3% while the benchmark S&P 500 index was up 6.9% (both in USD terms) as investors were positive on the September quarter earnings results with tech giant Microsoft up 17.9% as one example.
• Australian shares underperformed global shares, falling 0.1% in October. The leading sectors were Technology (up 2.1%) and Health Care (up 1%). Industrials (down 3.3%) and consumer staples (down 2.3%) were the worst performers. Technology returns were supported by Computershare which benefitted from rising bond yields given its higher interest income on client cash balances.
• Fixed income returns were poor particularly for the Australian market. An increase in bond yields predominantly of short to intermediate duration saw both Australian and international bond markets sell off. The pain was more severe domestically as it became clear the RBA had abandoned its yield curve control for the 3-year bond which ended the month at 1.22% (compared to the RBA 0.1% target).
• The Australian dollar (AUD) rose 3.8% against major currencies and 4% against the US dollar. A key boost came from the reopening of the economy after lockdowns while the rise in bond yields also made our currency more attractive to speculators