Markets returns were positive in September, with some dispersion in equity returns. Chinese stimulus measure announcements saw the Chinese equity market soar, while European stocks lagged on a concerning growth outlook. Within fixed income market participants became more comfortable with the outlook for the rate cutting cycle, helped by a bumper 0.5% rate cut from the US Federal Reserve. Here our investment team highlights the latest market developments:
UK
- UK equites (FTSE All Share) fell -1% in September, driven by a fall in consumer confidence following a speech by Rachel Reeves on the difficult decisions that lie ahead in the upcoming Budget.
- Figures released by Halifax showed that house prices rose in September for the third month in a row. Average house prices are now close to record highs (£293,399) amid cheaper mortgage rates.
- Figures released by the Office for National Statistics showed that the economy grew less than initially thought in the second quarter of the year. GDP grew 0.5% in the three months to June.
- The S&P Global UK Composite Purchasing Managers’ Index, an indicator for business trends, decreased to 52.6 in September, from 53.8 in August. Despite remaining in expansionary territory, surveys suggest more fragile confidence.
- Official data shows inflation rose by 2.2% in the 12 months to August 2024, unchanged from July.
- The Bank of England voted to keep interest rates at 5% with inflation pressures easing and the economy performing as expected.
Global
- Global equities gained +0.5% in sterling terms in September, but saw regional dispersion in returns.
- US equities (S&P 500) rose +1%, hitting record highs in USD terms. This was driven by inflation moving closer to target and hopes that the Federal Reserve’s rate cut would help boost the economy.
- European equities (MSCI Europe) fell -0.8% in EUR terms, underperforming as macro data further indicates a slowing economy.
- In China, the government intensified its efforts to support the property market and the economy. The stock market reacted very positively, with the mainland index, CSI 300, up 20% for the month.
- Japanese equities had a volatile September as the Bank of Japan held rates at 0.25% and the incumbent Liberal Democratic Party elected Shigeru Ishiba, known for his hawkish monetary stance, as Prime Minister.
Fixed interest
- Global bonds (Bloomberg Global Aggregate GBP Hedged) had another positive month (+1.4%), which was driven by expectations for further rate cuts by key central banks.
- The US Federal Reserve cut interest rates for the first time in 4 years. The 0.5% cut brought the target between 4.75% and 5%.
- The European Central Bank cut its key interest rate by 0.25% in September, its second cut in three months, in response to weakening economic data in the euro area and inflation falling to a lower than expected 2.2% in August.
- Global credit markets (Bloomberg Global Aggregate Corporate GBP Hedged) returned +1.8%, as confidence in the economic outlook for the global economy improved. High-yield bonds also saw gains.
- Global central banks further confirmed their data dependence, relying on official data of growth, inflation and unemployment to help guide their rate decisions.
Other
- The oil price drifted lower in September due to expectations for softer global demand and potential increased supply from Saudi Arabia.
- GBP strengthened against the USD over the month given the expectations for a faster pace of rate cuts in the US.
- Gold continued its rally, hitting new highs. Gold tends to strengthen as the USD weakens.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
