Market Update

Global equity markets kicked off the week with fervor as the Reserve Bank of Australia's smaller-than-expected 0.25% interest rate increase raised hopes that other central banks might also shift to a more gradual approach to monetary tightening.
However, as the week unfolded, this enthusiasm waned, leading to some retracement of earlier gains. Several factors contributed to this shift, including a significant surge in oil prices, the release of US employment data, and geopolitical tensions arising from North Korean missile launches.
The price of Brent crude oil soared by approximately 15% to nearly $100 per barrel following OPEC+'s announcement of a production cut of 2 million barrels per day. This development, while intended to stabilize oil markets, raised concerns about exacerbating inflationary pressures and potentially prolonging the cycle of monetary tightening.
On a more positive note, it's worth noting that many OPEC members are currently producing less than their assigned quotas. Consequently, the actual reduction in production may be closer to 1 million barrels per day than the headline 2 million barrels.
Adding to the week's negative tone was the US employment data released on Friday, October 7, 2022. The data showed a higher-than-expected job addition of 263,000, and the unemployment rate unexpectedly declined from 3.7% to 3.5%. This suggests that a swift shift to a more gradual monetary tightening approach in the US is unlikely. In fact, it indicates that Federal Reserve policymakers may continue their aggressive interest rate hikes, despite recent company announcements and economic data releases indicating a slowing US economy.
Looking ahead to the coming week, key highlights include the release of minutes from the last Federal Reserve monetary meeting held on September 21, 2022, as well as US Consumer Price Index (CPI) and UK Gross Domestic Product (GDP) data for August.