October saw bond yields rise and stock markets weaken. Australian bonds had a bad month, losing around 2.2%, as did stocks.

The grind higher in government bond yields around the globe was attributed to stronger US economic data, which suggests an imminent interest rate rise in the US. The US economy clocked its fastest growth in 2yrs, growing 2.9% in the third quarter. Consumer confidence is at 9 year highs, exports grew 10%, but business is still carrying a lot of inventory.

There is a growing realisation from Central Banks that monetary policy alone cannot deliver growth objectives. Germany recorded its fastest inflation in 2 years, and has record low unemployment (4.2%). The broader EU cant say the same, with unemployment still in the double digits.

Australia weathered a Bank Inquiry, with the heads of the major banks fronting a House of Representatives Standing Committee. Key take outs were talk of bank account portability, and rate tracker loans.

The Reserve Bank left interest rates unchanged, and released their semi-annual Financial Stability Review. They note China as one of the greatest risks to the global financial system with their growing debt vs slowing economic activity. They made specific comment on property development in Australia, and how price growth is slowing but household debt to income ratios continue to rise.

China’s growth was “confirmed” at 6.7%, with some weaker underlying trends. State fixed asset investment has gone from 10%  to 25% yoy , private is 10% yoy now 3%. This has been interpreted as the State incurring debt to buy growth, rather than the private sector investing.

Australian inflation came out higher than expected, but was attributed to weather events causing fruit to rise 20%, vegetables and electricity also up 5%.