Weak September
September is historically often a weak month in the stock market, and so it also performed negatively this year compared to the previous month. Higher bond yields in the US and Europe as well as a weaker economic outlook in Europe and China weighed on the markets.
The German stock index DAX ended September down -3.51% compared to the previous month. The broad European index Stoxx Europe 600 fell by -1.74% and the US S&P 500 declined by -2.52%. The Hang Seng Index of the Hong Kong Stock Exchange lost -0.56% on a monthly basis. Overall, global equities, as measured by the MSCI World, fell -2.09% - all index data in euro terms.
The ECB raised its key interest rate by another 25 basis points to 4.5% in mid-September - the 10th rate hike since July 2022. The US counterpart, the Federal Reserve, paused on interest rates as expected and left the key rate at a range between 5.25% and 5.5%, even though inflation rose slightly due to higher energy costs in the US and stood at 3.7% in August (previous month: 3.2%). Nevertheless, a so-called interest rate plateau seems to have been reached for both Europe and America. For the time being, the consensus assumes "higher for longer", as the central banks want to avoid understeering, i.e. reigniting inflation by lowering interest rates too early.
Inflation in Europe fell significantly. In Germany it was 4.5% in September compared to 6.1% in August. Inflation has also slowed in the euro area. In September, the year-on-year inflation rate was 4.3% (previous month: 5.2%), the lowest since October 2021. However, the increased key interest rate is slowing down the economy. The purchasing managers' index for the service sector, a reliable economic barometer for the euro area, remained clearly in recessionary territory at 48.4.
Yields on US government bonds with longer maturities (ten years) rose 41 basis points month-on-month to 4.52%, while yields on short-dated bonds (two years) rose 17 basis points to 5.03%. Investors expect the US to issue more bonds to finance the fiscal stimulus. This puts pressure on bond prices and pushes up yields. In addition, a so-called government shutdown was only narrowly averted.
The ECB's interest rate hike also pushed up yields on German Bunds. The yield on German short-term government bonds (two years) rose by 23 basis points to 3.2% in the course of the month. The yield on long-term government bonds (ten years) also increased from 2.47% to 2.81%. This puts the yield on German government bonds at its highest level in more than ten years.
The gold price suffered from the increased yields on the bond market and the strong dollar. The price of the non-interest-bearing precious metal fell by -4.72% to 1,848.63 UDS/fine ounce, its lowest level in 6 months. The price of oil, on the other hand, continued its rally, rising from $88.77 to $91.95 per barrel (Brent) over the course of September. Oil supply is constrained due to Saudi Arabia's production cuts and Russia's export cuts/stops for certain oil products. Oil demand, on the other hand, continues to grow. Energy stocks have therefore performed well in the last two months.
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