Recap of market movements in SeptemberGlobal share markets ended in positive territory as a whole in September with the MSCI All Country World Index (in local currencies) returning 0.3%. This was a good effort in the face of increasing trade, political and monetary policy headwinds. Optimism over economic growth and corporate earnings (particularly in the US) provided a tail-wind for global share markets pushing them to a seven-month high.
In the US, the S&P500 gained 0.4% in September which allowed the US share market to notch up its best quarterly performance since 2013. There was plenty for investors to ponder during the month with the trade war between the US and China continuing to escalate, and the Fed hiking interest rates 0.25% and firmly signalling there is more to come. The fact that the Fed is hiking because of a strong economy (with growth in the second quarter coming in at an annualised rate of 4.2%) and not because inflation is running rampant can be taken as a positive. Investors are optimistic another strong quarter of earnings growth will be delivered which should steady the market when earnings season ramps up from mid-October.
Eurozone equities also ended up having a subdued month with the Bloomberg European 500 gaining 0.3%. Trade war rhetoric at the start of September and Italian budget concerns at the end of the month weighed on market sentiment.
The Chinese share market bounced back strongly in September after a steep decline the previous month with the Shanghai Stock Exchange Composite Index gaining 3.5%. This was a particularly good performance given that during the month the Trump administration announced tariffs on a further US$200bn of Chinese imports and, in response, China introduced a retaliatory tariff list of US$60bn on US imports. Meanwhile, China’s economic activity data released in September painted a ‘mixed’ picture.
Emerging markets as a whole had another negative month with the local currency MSCI Emerging Markets Index declining 1.4%. Performance was mixed at a regional level, with share markets in EMEA (Europe, Middle East & Africa) and Latin America heading higher, whereas Asia was dragged down by weakness in India.
Over the ditch, the Australian Stock Exchange gave up most of August’s gains with the ASX200 Accumulation Index down 1.3% over the month. Towards the end of the month the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released. Upon reading it the Australian Treasurer had this to say: "Banks and other financial institutions have put profits before people, greed has been the motive as short-term profits have been pursued at the expense of basic standards of honesty. Too often simply selling products has become the sole focus of attention." See here.
Bank and insurance company stocks suffered another leg lower during the month which outweighed a positive contribution from the resource sector.
Back home and the local share market eked out a small gain with the NZX50 Gross Index rising 0.4%. This was a good performance given market heavyweight A2 Milk was down 10.8% over the month. The hunt for yield continued in September with the “gentailer” (electricity generators and retailers) and listed property sectors performing well.
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