Developed market (DM) equities continued their strong run (MSCI World Index +1.9% MoM), leaving the global equity benchmark up 33% YoY with only two negative months in the past twelve. The US Federal Reserve (Fed) was a key catalyst driving investor optimism in September. Fed members agreed to cut rates by 0.5% at their September meeting, a larger cut than many investors anticipated. It was also the first rate cut from the Fed since the easing at the start of the COVID-19 pandemic in March 2020 and dropped the Fed’s overnight rate to 5%, off the 20-plus year high it has been at since mid-2023. The Fed cited some early signs of weakness in the US labour market as the motivation for easing monetary conditions. Still, it remained confident that positive economic growth would be sustained in the world’s largest economy. The rate cut helped to nudge the US government’s 10-year borrowing rate slightly lower to 3.8% at the end of September. That borrowing rate has remained below 4% p.a. for two months after spending most of the prior twelve months above the 4% p.a. level.
Emerging market (EM) stocks comfortably outperformed their DM peers (MSCI EM +6.7% MoM), with Chinese stocks as the primary source of outperformance. The Chinese government announced slightly larger than anticipated monetary easing measures in September, accompanied by a raft of other unexpected stimulus measures aimed at helping China’s economy overcome a multi-year period of lacklustre growth. Amongst the stimulus measures announced were some targeted specifically at boosting Chinese stock prices, including at least US$110bn of lending facilities for Chinese corporates to purchase equities. US-listed Chinese corporates were up 30% MoM with notable performances from JD.com (+48% MoM), YUM! China (+33% MoM), and Alibaba (+27% MoM).
Brent crude oil (-9% MoM) fell in September, as the expectations for tapering OPEC+ production cuts later this year brought the prospect of imminently increasing oil supply. The price of Brent crude oil fell briefly below US$70/bbl during September, breaching that level for the first time in almost four years. Industrial metals rallied (Bloomberg Industrial Metals Index +6% MoM) on hopes that increased Chinese economic activity would improve demand for industrial metals. The US dollar struggled under the weight of falling US rates and the US Dollar Index (-0.9% MoM) fell for a third consecutive month as the greenback struggled against most major currencies in September.
