GLOBAL REVIEW
Introduction from Orion Investment Managers’ Managing Director, Adrian Meager
Most international markets ended the month on the front foot as economic data in the US showed signs of resilience, reinforcing market expectations of a soft landing and optimism that the Federal Reserve (Fed) would continue with its rate cutting cycle. This was further bolstered by an expectation of an improvement in global growth prospects as both the European Central Bank (ECB) and the People’s Bank of China (PBoC) move toward a more accommodative monetary policy.
In the US, all major indices ended September in the green, despite a pullback early in the month, and reaching new record highs on the back of the Fed cutting rates by 50 basis points. The S&P 500 ended the month higher by 2.0%, the Dow was higher by 1.8%, and the Nasdaq was up by 2.7%. This also marked the first time since 2019 that all three indices ended September in the green.
In addition to the Fed’s August 50-basis point cut, indications suggest two further reductions before the year end.
In the UK, the FTSE closed the month lower by 1.7%, as inflation for the August period printed at 2.2% YoY, unchanged from the July print, and above the 2.0% target rate of the BoE. Having cut rates for the first time in four years in August, the BoE kept rates unchanged, holding steady at 5%.
The major European markets of France and Germany both ended in the green as the Chinese stimulus measures boosted markets, with the Cac up marginally at 0.1% and the Dax up by 2.2% for the month. Headline inflation in the eurozone dropped to 2.2% YoY for August compared to the July print of 2.6%. The ECB cut rates by 25 basis points to 3.5%, the second cut in its easing cycle launched in June.
Asian markets, especially China, ended the month strongly in the green as Beijing unveiled its largest stimulus package since the outbreak of the COVID-19 pandemic to revive the economy. These ‘forceful’ stimulus measures included rate cuts, a reduced reserve requirement ratio and further relaxation of mortgage rules to bolster the market.
Both the Shanghai Composite and Hang Seng indices closed the month higher by more than 17% as the US $325 billion stimulus measures boosted markets and demonstrating the Chinese government heeded warnings that the country could miss its 5% growth target for the year.
The Japanese market underperformed relative to its Chinese counterpart, closing the month lower by 1.9%, in anticipation that the incoming Prime Minister, Shieru Ishiba, would follow policies to keep the yen strong, coupled with a mixed bag of economic data. The Bank of Japan (BoJ) kept rates unchanged at the September meeting at around 0.25%.