In September, the most striking news came from Asia. China announced a package of measures to stimulate the economy. Specifically, this included a reduction in short-term interest rates, a special fund to support the stock market, and measures to shore up the ailing real estate sector. Investors responded enthusiastically and put the stock market there well higher. Interest rate cuts by the ECB (by 0.25% to 3.5%) and the Fed (by 0.50% to a range of 4.75%-5%) were largely already factored in by the market. Combined with a slight decline in inflation, this pushed market rates lower (especially shorter maturities). Commodities quoted higher, the increase for the price of gas was particularly notable (+36%).
Shares
The differences were huge in equity markets last month. On balance, the broad MSCI All Countries World saw positive returns of +1.5% (measured in euros). China (+22.9%) pulled up with the emerging markets index (+5.8%). Asia (+7.1%) also had a very strong month. The EMEA (+1.5%) and Latin America (-0.7%) regions could not match that. Developed markets outperformed emerging markets slightly more broadly with returns of +1.0%. Pacific excluding Japan (+6.5%) benefited from the sentiment surrounding China. North America (+1.3%) also posted green numbers, but Europe (-0.4%) and Japan (-1.4%) recorded losses for the month of September. Styles value (+1.3%) and growth (+1.7%) stocks were relatively close.
Bonds
September ended with another decline in market interest rates, and thus every month of the third quarter also saw declines. Interest rates (10-year rates) for Dutch government bonds (-0.17% to 2.42%) and German government bonds did not differ much. The latter recorded 0.18% lower to a level of 2.12%. The decline in US 10-year yields was slightly smaller: -0.12% to a level of 3.78%. Bonds with a higher risk profile also presented a positive picture in September. Less risky corporate bonds showed a decrease in the risk premium by 0.01% (to 1.13%). A broader decline was seen in more risky corporate bonds (0.11% to 3.22%). Similar to the development in equity markets, we also saw the largest movement in emerging market government bonds. The drop in the risk premium was as much as 0.27% to a level of 3.61%.