Global Markets Rally in September

In September, global bond and equity markets experienced strong gains, driven by rate cuts from major central banks, including the Fed, ECB, and BoE. The MSCI World Index rose 1.9% month-on-month (m/m), while the MSCI Emerging Markets Index surged 6.7% m/m. U.S. inflation eased to 2.5% year-on-year, while the 10-year Treasury yield fell to 3.8%, boosting global bonds. China’s aggressive stimulus measures led to a rally in Chinese equities, with the CSI 300 up 21%. European markets saw modest gains, while the U.S. dollar weakened following the Fed’s rate cut. 

Highlights in the article reveal:

• Global bonds and equities surged in September, driven by recent and anticipated rate cuts. 
• During August, stock markets were quite volatile driven by concerns over a potential U.S. recession and the impact of a greatly strengthening Japanese yen.
• The month began with a sharp decline in global stock markets following disappointing U.S. economic data and an interest rate hike by the Bank of Japan.
• However, by the end of the month, markets rebounded as investors anticipated more aggressive policy easing by the U.S. Federal Reserve (Fed). 

Despite increased volatility in developed markets, both equity and bond indices posted gains in September. Inflation eased across many economies, approaching central bank targets, leading major central banks such as the U.S. Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) to lower interest rates.  

 The Fed delivered a 50-basis point cut, its first since March 2020, while China’s substantial fiscal stimulus package further boosted global sentiment.  

Inflation in the U.S. cooled to 2.5% y/y, and the overall unemployment rate lowered slightly to 4.1%. The Eurozone also saw inflation ease to 2.2%, while the UK’s inflation rate remained unchanged at 2.2%. 

The MSCI World Index, a key gauge of developed market equities, rose 1.9% m/m, while the MSCI Emerging Markets Index surged 6.7% m/m, outperforming developed markets. Excluding China, the MSCI Emerging Markets Index posted a more modest 1.3% m/m gain, highlighting China’s outsized influence in driving the broader index’s performance. 

Turning to bond yields, the benchmark 10-year U.S. Treasury yield declined by 12 basis points to reach 3.8% by month-end, supporting global bonds on a total return basis, resulting in a 1.7% m/m and a 3.6% YTD gain, as measured by the Bloomberg Global Bond Index. Elsewhere, the 10-year UK gilt yield remained flat at 4%, while 10-year German bond yields saw a significant decline from 2.3% in August to 2.12% in September. In real estate, despite headwinds within this sector, the FTSE EPRA Nareit Developed Rental Index managed to gain a modest 3% m/m as the recent rate cut provided some relief to tenants. 

The U.S. ISM Manufacturing Index remained in contraction territory, unchanged at 47.2 index points, marking six consecutive months of contraction. This continued slowdown raises concerns about the health of the world’s largest economy. 

In Europe, markets fared modestly, supported by China’s robust stimulus measures, which provided relief to its ailing economy. 

Germany’s DAX gained 2.2% m/m, and France’s CAC rose 0.2% m/m, buoyed by improving inflation figures and a rate cut from the ECB. However, the UK’s FTSE 100 lagged, falling 1.5% m/m, as sticky inflation concerns weighed on market sentiment. This is despite the UK labour market showing resilience, with the unemployment rate edging down to 4.1% (previously 4.2%) as expected. 

Turning to Asia, Japan’s Nikkei 225 fell by 1.3% m/m, as investors anticipated the new Prime Minister, Shigeru Ishiba, who took office on 1st October 2024, weighing on sentiment. In contrast, China’s aggressive stimulus efforts sparked a strong rally in Chinese equities, with the CSI 300 gaining 21% m/m and Hong Kong’s Hang Seng Index up 18.3% m/m. The People’s Bank of China (PBoC) cut the RRR by 50 basis points, injecting RMB 1 trillion in liquidity and lowering repo rates, with more cuts expected. Core Tier-1 capital was injected into state banks to boost lending, mortgage rates were reduced by 50 basis points, benefiting 50 million households, and down payment ratios were cut to 15% from 25%.  

The PBoC also committed to fully finance local governments for the purchase of unsold homes and extended financial support for property developers through 2026.  

Additionally, a $42 billion stabilisation fund and loan facilities for stock buybacks were introduced to support the equity market. 

Elsewhere in emerging markets, India saw a market gauge of equities, as measured by the SENSEX, rise 2.4% m/m, although economic growth slowed to 6.65% y/y in Q2 2024, missing expectations due to reduced government spending. In Africa and frontier markets, the MSCI Africa ex-South Africa Index posted a strong 4% m/m gain, bolstered by gains in Kenya (up 4.9% m/m in KES terms, as measured by the Nairobi Securities All Share Index) and Morocco (up 3.6% m/m in MAD terms, as measured by the MASI Free Float All Share Index). The MSCI Frontier Market Index recorded a modest 0.6% m/m increase. 

The Fed’s rate cut dampened demand for the U.S. dollar, causing the Dollar Index to fall 0.9% m/m. Gold surged by 5.2% m/m to $2,634.58 per ounce, driven by strong central bank demand from emerging markets. However, Brent crude oil prices plummeted 8.9% in September, closing at $71.77 per barrel amid oversupply concerns. 

About RisCura Global monthly market commentary 

Explore the retrospective RisCura Global monthly Commentary, spanning vital regions like the USA, UK, Europe, and emerging markets. Gain clarity on economic phenomena with benchmarks on inflation, interest rates, commodity prices, and credit ratings. Tailored for value-driven investors, our insights inform asset allocation across diverse global markets.

Stay informed – subscribe now for insightful perspectives from the RisCura Global Commentary.