Overall Market Summary:
September 2024 saw continued volatility in global markets, but equities managed to close the month higher due to easing inflation and the initiation of interest rate cuts by several central banks. Global equities rose by 2.3% in USD terms, supported by renewed investor appetite, particularly in emerging markets and Chinese equities following stimulus announcements.
United States:
The Federal Reserve made its first rate cut in four years, reducing rates by 50 basis points to a range of 4.75%-5.00%. This move, aimed at stabilizing the labor market, was well received by equity markets, which rose 2% for the month. Inflation continued to cool, dropping to 2.5% in August, which reinforced the Fed's shift from inflation control to economic support. Meanwhile, U.S. Treasury yields declined as investors anticipated further cuts.
Europe:
In the Eurozone, the ECB cut its benchmark rate by 0.25% to 3.5%, as inflation fell to 2.2%. However, the region's economic data remained weak, particularly in Germany and Italy, where industrial output lagged. Despite these challenges, the Stoxx 600 index rose, benefiting from China’s stimulus measures and renewed investor optimism.
United Kingdom:
The Bank of England held rates steady in September, citing ongoing concerns about inflation, which remained at 2.2%. Core inflation ticked up to 3.6%, driven by rising service costs. The FTSE 100, however, saw a slight decline of 0.5%, reflecting caution amid broader economic concerns.
Japan:
Japan's Nikkei 225 gained nearly 3% in September, buoyed by steady inflation and the Bank of Japan’s decision to maintain its policy rate. The yen strengthened following the Federal Reserve's easing, reducing the interest rate differential.
Asia (excluding Japan):
China dominated market headlines in September as the government introduced significant stimulus measures to counter slowing economic growth. The CSI 300 index surged by 15.7%, and the Hang Seng Index rose by 13%, driven by renewed confidence in the market. This followed disappointing economic data earlier in the month, including weak retail sales and rising unemployment.
Emerging Markets:
Emerging markets led global returns in September, with equities rising 7.3%. The rebound was driven by improved sentiment toward China and a weakening U.S. dollar, which provided a tailwind for emerging market currencies and stocks.
Global Bonds:
Global bonds returned 1.1% in September, as central bank rate cuts and lower inflation expectations drove bond prices higher. U.S. Treasury yields fell, with the 10-year yield touching a year-to-date low of 3.6%, while global credit markets remained well-supported by a stable earnings outlook.
In summary, September 2024 was marked by the start of a global easing cycle, led by the U.S. Federal Reserve, which spurred optimism across equity markets, particularly in emerging markets and China. However, economic weakness persisted in Europe and parts of Asia, leaving the global outlook mixed.