The S&P/ASX 200 Accumulation Index fell 2.1% cent in October, after rising 0.5% the previous month.  The most commonly used index for Australian Fixed Interest securities (the Bloomberg Ausbond Composite Index) fell by 1.3% in the month.

Most markets and indices finished the month lower. U.S. equities declined despite what appeared to be a better-than-expected U.S. reporting season. Emerging markets and Japan performed better. Also prominent during the month was a pick-up in M&A activity and increased focus on the upcoming U.S. Presidential election.

The rise in bond yields weighed on defensive sectors and stocks that have been considered “bond proxies” by investors for their regular income. These stocks such as Transurban, Sydney Airport and Westfield had rallied over the past year while bond yields were at record lows, but as bond yields rose these stocks have fallen sharply in price.

Health Care and real estate investment trusts (REITs) were the worst performing sectors over the month, both globally and domestically. Mining and Banks were the best performing sub-sectors, again both globally and domestically.

The iron ore price extended its rally in October to hit a six-month high above $US 63 a tonne. For the iron ore miner Fortescue Metals Group, that has translated into a 13% rise in the month and a 200% surge in the share price this year.

The extraordinary bull market in coal continued: hard coking coal once again rose sharply, up 20% during the month to more than $US 260 per tonne, although this month it was outdone by thermal coal, which rose 33%. 

The Australian share market was hit by poor performance from defensive industrial stocks, as was the case overseas, although the Australian market lagged its overseas peers due to its higher weighting in these under performing sectors.

Most major markets' long bond yields rose steadily through the month, with the U.S. 10-year Treasury yield reaching its highest level since May.

The Australian dollar rose against most major currencies (except the U.S. dollar), boosted by rising commodity prices. The U.S. dollar was generally stronger over the month on growing expectations that the U.S. Federal Reserve will raise interest rates in December.

However, the biggest currency story of the month was the British pound, which fell heavily against most major currencies on fears over a “hard” exit from the European Union, hitting a 31-year low against the U.S. dollar. A “hard Brexit” arrangement would most likely result in the UK giving up full access to the single European market. 

The Chinese yuan continued to weaken, hitting its weakest level against the U.S. dollar since September 2010.