Global Equity Markets September review
Global Equity Markets in Review
• Wall Street ends week with modest gains as Fed signals another rate hike
• Positive economic data and M&A activity lifts European markets
• Japanese market rally on yen weakness, while China remains steady despite rating downgrade
Dow Jones, S&P 500 edge higher, while the Nasdaq retreats
The S&P 500 (up 0.4%) and Dow Jones Industrial Average (up 0.1%) jumped to new-highs early in the week before falling back a bit. The technology-heavy Nasdaq Composite Index (down 0.3%) also hit new highs but ended the week in negative territory.
In its September meeting, the US Fed kept its benchmark interest rate target unchanged at 1.0-1.25%. However, the central bank but maintained its forecast for one more rate hike in 2017 despite persistently subdued inflation data and damage caused by natural calamities. Energy sector stocks performed well as oil prices hit a three-month high. Financial stocks recorded solid gains as upbeat Fed pushed Treasury yields higher. Whereas, interest rate-sensitive real estate and utility sector stocks lagged.
European markets end the week in positive territory
Healthy economic data supported the European markets during the week. Eurozone continued to witness steady improvement in economic activity. The bloc’s September Flash PMI reading came in better than expected. Flash Manufacturing PMI rose to 58.2 in September from 57.4 in August, while Flash Services PMI jumped to 55.6 in September from 54.7 in August. Moreover, consumer prices in the Eurozone rose 1.5% y/y in August, slightly higher than 1.3% y/y gain in the previous month.
M&A activity was also one of the key driving factors for European markets. Germany’s BASF acquired nylon division of Belgium’s Solvay chemicals. Thyssenkrupp and Tata Steel officially unveiled their plan for a 50/50 European steel joint venture. Moreover, Italy’s Italcementi bought Cementir’s Italian assets.
The pan-European Stoxx 600 gained 1.6% during the week. Germany’s DAX added 0.6%, while France’s CAC gained 1.3%. The UK’s FTSE 100 rose by 1.3% during the week.
Japanese market soars, while Australia and India decline
Japanese markets rallied on weakness in the yen after the Fed hinted at another rate hike in 2017 and unveiled its plan to unwind its massive balance sheet. In contrast, the Bank of Japan made no changes to its monetary policy and opted to continue with its stimulus program. The benchmark Nikkei gained 1.9% over the week, with mining and energy sectors among the best performers.
S&P Global Ratings downgraded China’s sovereign rating by one notch to A+, citing ballooning debt. The rating agency said, "a prolonged period of strong credit growth has increased China's economic and financial risks”. Real estate sector stocks struggled as many other cities joined Beijing in raising mortgage rates for homebuyers. The Shanghai Composite Index finished flat over the week.
Australia’s stock market continued its downtrend as the benchmark ASX finished the week in red for the fourth time in the previous five weeks. Cyclical stocks were under pressure as ANZ economists changed their interest rate projections. They now anticipate the Reserve Bank of Australia to raise the cash rate by 50 bps to 2.0% (from current 1.5%), considering the high level of household leverage. The ASX recorded a modest decline of 0.2%.
India's stock market ended the week in negative territory following heavy losses on the last trading day of the week. On Friday, Nifty witnessed sharpest single-day fall in 2017 as foreign institutional investors pulled out their investments amid growing political tensions in Asia. Moreover, concerns that the government could widen its fiscal deficit amid disappointing economic performance in last few quarters also impacted the market. The benchmark Nifty index declined by 1.2% over the week.
Global equity market performance
Source: Reuters Eikon, Bloomberg