Falling key interest rates support the markets
Contrary to its reputation (as the weakest month of the year in seasonal terms), September went well on the global capital markets for the most part. This was mainly due to the key interest rate cuts by the major central banks in the USA, the eurozone and China.
The German share index DAX rose by 2.21%, outperforming the broad European share index Stoxx Europe 600, which fell by 0.41%. The US S&P 500 advanced by 1.12%. Internationally, however, the Chinese market stood out: the Hang Seng Index from Hong Kong gained 17.48%, favoured by the stimulus efforts announced by the Chinese central bank. Overall, global equities, as measured by the MSCI World, rose by 0.85% - all index figures in euro terms.
The equity markets were able to maintain the positive momentum from the second half of August. Investors had been expecting the US Federal Reserve (Fed) to cut interest rates since the central bankers' meeting in Jackson Hole. This was in line with expectations and lowered the US key interest rate to a range of 4.75% to 5.00%. The development of US inflation from 2.9% in July to 2.5% in August made it easier for the Fed to decide to initiate the interest rate turnaround in the US with a large rate hike of 50 basis points.
A second factor favouring the US equity market in particular was a noticeable upturn in US economic data, including above all stronger labour market figures and a fall in the unemployment rate. Market participants interpreted this as a sign that a (feared) recession or a sharp downturn is unlikely for the time being. However, the Purchasing Managers' Index for the manufacturing sector danced out of line, falling below the threshold value of 50 for the third month in a row since July, signalling a shrinking economy. Its counterpart for services, at 55.2 points, is significantly higher.
The third factor that gave the stock markets an extraordinary boost in September - at least in the short term - came from China: the Chinese central bank (PBoC) announced a series of measures to support the economy. These include a key interest rate cut of 20 basis points and a reduction in minimum reserve requirements for banks of 50 basis points, which will release around USD 142 billion in liquidity. In addition, interest rates for outstanding mortgage loans will be cut by 50 basis points, which should ease the tense Chinese property market. The PBoC also wants to set up a swap facility totalling the equivalent of USD 70 billion, through which securities firms and insurance companies are to receive liquidity for share purchases from the central bank. And a new credit facility of around USD 42 billion is intended to enable companies to buy back shares, among other things.
Inflation in the eurozone continued to fall and, at 1.8% in September (previous month: 2.2%), fell below the European Central Bank's target. As expected, it lowered its key interest rate by 25 basis points to 3.50%. However, growth prospects in the eurozone are likely to remain subdued, as the composite purchasing managers' index fell from 51.0 to 48.9 points, disappointing expectations.
The interest rate cuts made themselves felt on the bond markets, too. At 2.12%, 10-year German government bonds yielded 18 basis points lower and the yield on 10-year US bonds fell by 12 basis points to 3.78%. In an environment of falling real interest rates, the price of gold also continued to rise. The fine ounce rose by 5.24% to USD 2,634.58.
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