DAILY REPORT OCTOBER 31ST

October is known to be a terrible month for stock market. The stock market crash of 1929, Black Monday of 1987 and the start of the GFC in 2007 all occurred in October. However this year the market seems to have broken the curse. October was the best month for the stock market in the last ten years. October 31st closes out what has been an almost uninterrupted four week rally.

The reason for this surprisingly good month lays at the feet of Europe which seems to be finally getting its hands around the European debt crisis. While the month itself has been a dream run for investors the finish was anything but. The final day of the month saw stocks down 276 points. It made an appropriate bookend to a month which started the first day of trading by losing 258 points. The S&P Index was down 32 points or 3.2% for the day to 1,253.30. With materials and energy companies showing the largest falls. The NASDAQ composite was also down 1.9% to 2,684. Despite these falls the benchmark S&P 500 was up nearly 11 percent for the moth.

The new European plan announced on Wednesday was just what the markets were looking for. The plan calls for a three pronged strategy to deal with the crisis including increasing the European Stability Fund up to $1.4 Trillion, Europe bank capitalisations and cuts to Greece’s debt obligations. The markets strong reception demonstrated that this maybe the solution that investors were looking for. Greece is the first in line to receive support, however other countries will also benefit from the plan.

The late drop of Monday ending the golden run for the month was due to the announcement by Greek Prime Minister George Papandreou that he would be putting the new rescue package to a referendum. It is only natural however after such a strong run that the markets would pull-back a little. The rescue package will help to alleviate the situation as it stands but the crisis is anything if completely resolved.

The referendum also increases the chances that the country will move into default if the proposal is rejected by the Greek voters. The Prime Minister is under heavy pressure both from within his party and voters. The array of austerity measures including increased taxes and pension and wage cuts have caused a massive amount of social unrest. Polls also show that the majority of Greeks believe the new rescue package will be negative overall for the country.

Also negatively affecting the market was an intervention by the Japanese Government into the yen market in order to curb its currencies appreciation. This caused the U.S Dollar to shoot to a three month high.