Equity markets dipped early in September, dragged lower by concerns about the outlook for the US economy that were compounded by disappointing employment data and sharp declines in technology share prices, including Nvidia. By the end of the month, however, US equity indices had reached new highs, boosted by a much-trailed cut in interest rates.
- US interest rates were cut by half a percentage point
- The ECB is expected to cut rates again in October
- China announced a range of stimulus measures
US markets reach fresh highs: equity markets dipped early in September, dragged lower by concerns about the outlook for the US economy that were compounded by disappointing employment data and sharp dips in technology share prices, including Nvidia . By the end of the month, however, US equity indices had reached new highs, boosted by a much-trailed cut in interest rates, while Chinese equities surged following stimulus measures, and Japanese share prices slumped amid expectations of a tighter monetary backdrop.
“The Fed confirmed that it had ‘greater confidence that inflation is moving sustainably towards 2%”
Fed cuts by 50 basis points: the Federal Reserve (Fed) implemented its first cut in interest rates for over four years1 during September, reducing the federal funds rate1 by a half a percentage point to a range of 4.75% to 5%. Inflationary pressures continued to ease in the US: the annualised rate of consumer price inflation fell to 2.5% in August, representing the lowest 12-month growth since February 2021. In a statement, the Fed confirmed that it had “greater confidence that inflation is moving sustainably towards 2%”. The Dow Jones Industrial Average Index rose by 1.8% in September and registered seven new closing highs during the month, taking the total so far this year to 33.
ECB expected to cut again: business sentiment in Germany declined for a fourth consecutive month during September, according to the Ifo Institute’s Business Climate Index, with the manufacturing index falling to its lowest level since July 2020. Meanwhile, European Central Bank President Christine Lagarde stoked expectations of another cut in eurozone interest rates when policymakers meet in October, commenting that recent developments had strengthened the central bank’s confidence that inflation will return to target in a timely manner. Nevertheless, she acknowledged that Europe’s economic recovery continues to face headwinds. Over September, the Dax Index rose by 2.2%.
China surges: in a bid to boost China’s faltering economy, the country’s government set out measures to improve consumption, while the People’s Bank of China announced a package designed to support China’s real estate sector. The news sent Chinese share prices soaring, and the Shanghai Composite Index jumped by 17.4% over the month. In contrast, Japanese share prices dropped at the end of the month over concerns that incoming Prime Minister Shigeru Ishiba would support a policy of higher interest rates. The Nikkei 225 Index fell by 1.9% over September.
To view the series of market updates through September, click here
