October might have been a bit of a horror show for the markets but Halloween saw a spirited revival of fortunes.
Fears of global slowdown, the ending of central bank support and geopolitical tensions in the middle east, not to mention the spread of Ebola, sent shares tumbling to a fifteen month low a couple of weeks ago.
Over the month the FTSE 100 fell 1.15%, its worst October performance since 2009.
But to put things in perspective, this was an improvement on the 2.89% drop recorded in September, and the market even ended the month in positive mood. The index jumped 82.92 points on Friday to close at 6546.47. Earlier the Nikkei had hit a seven year high, while European markets and Wall Street - in early trading - were also in buoyant mood. Indeed, the US market hit new intra-day highs.
The immediate catalyst was the unexpected news that the Bank of Japan planned to increase its quantitative easing programme by pumping ¥80tn (£447bn) a year into the economy, mainly through the purchase of government bonds, in a bid to ward off the threat of deflation.
With the US Federal Reserve ending its monthly bond buying programme on Wednesday, investors welcomed another central bank stepping in to fill the gap.
Chris Beauchamp, market analyst at IG, said:
Fears about a slowing global economy and other tedious fundamentals that seemed so pressing fewer than three weeks ago have been cast aside in another unseemly rush to buy shares. Having lagged behind their US counterparts in the past week, UK and European markets are now desperately playing catch-up, with the [German] Dax and [French] Cac both adding over 2%. Although some of this might be attributable to the usual month-end rally the Bank of Japan has certainly banished any lingering doubts that the end of US QE might have created.
Meanwhile banks were in the spotlight after the Bank of England unveiled new rules to govern how much capital they have to hold, which were not as onerous as expected. They must hold capital representing 3% of their exposure to outstanding loans, and this could rise to more than 4% from 2016.
Barclays, which currently has a 3.5% ratio, jumped 18.25p or 8.2% to 240.8p, while Royal Bank of Scotland, which also pleased the City with its latest results, rose 22.7p to 388p.
On Barclays, Jefferies said:
Barclays was most geared to today’s release and we estimate a 3.7% leverage requirement excluding any counter-cyclical buffer (versus our estimate for 4.8%) so meaningfully better and easily achievable given the third quarter 2014 leverage ratio of 3.5%. Bears had expected 6% so these numbers will be taken very positively.
British Airways owner International Airlines Group climbed 18.5p to 409.2p after an upbeat trading statement but Direct Line dropped 5.5p to 276p after it said premiums for the first nine months of the year fell 5% compared to the same time in 2013.
Chipmaker Arm added 36.5p to 875p as Investec raised its earnings per share forecast for this year from 22.5p to 23.4p, as well as increasing its estimates for the following two years.
But precious metal miners came under pressure as gold and silver slipped back. Fresnillo fell 19p to 697.5p while Randgold Resources lost 101p to £36.78. Randgold was also hit by concerns about the uncertain situation in Burkina Faso where it has operations.
Elsewhere Balfour Beatty edged up 0.7p to 153.7p as it completed the sale of its Parsons Brinckerhoff division to WSP Global for $1.24bn.
SuperGroup slid 55p to 830p as the fashion retailer warned on profits and followed Next’s example from earlier in the week by blaming the warm autumn weather.
Finally, Bwin.party digital fell 10.2p to 89.65p after some big trades went through the market, including the sale of 1.9m shares at 97.5p each.
