In September, all eyes were again on interest rates and inflation. As expected, the ECB raised the policy rate by 0.25% and the Fed left it unchanged at 5.5%. Recent figures show that inflation, to the liking of financial markets and central banks, is not falling hard and fast enough. As a result, the market expects central banks to keep interest rates high for longer. We saw this reflected, for example, in a sharp rise in government bond yields and a decline in equity markets.
Energy is a relatively small element that affects the level of inflation, but within this category it was oil (7%) and gas (more than 20%!) that became considerably more expensive last month. OPEC signaled it was limiting oil production and gas prices rose due to a strike at Chevron in Australia. The US dollar continued to strengthen against the euro (2.4%).
Shares
In September, the MSCI All Countries World Index (measured in euros) had to give up some ground again: -1,7%. Unlike last month, it was now emerging markets (-0.2%) that fared relatively better than developed markets (-1.9%). Within developed markets, Japan (+0.4%) was the only region to make a positive return. North America (-2.2%) remained the furthest behind. Europe (-1.6%) and Pacific excluding Japan (-0.6%) also failed to stay in the green this month. Among emerging markets, Latin America (albeit only just: +0.2%) was the only region to stay above zero. However, Asia (-0.1%), China (-0.3%) and EMEA (-0.5%) showed no major losses for the month. The financial sector benefited from further rising interest rates (+0.5%), and the energy sector received a boost from rising oil and gas prices (+5.0%). The IT sector lagged relatively behind.
Bonds
In September, we saw that interest rate developments in Europe were more in line with the US than in August. In the U.S., 10-year interest rates continued to rise to 4.57% (+0.46%). German 10-year rates rose 0.38% to 2.84%. This is almost identical to the movement for Dutch 10-year rates: 0.39% higher (to 3.19%). Movements in risk premiums were considerably smaller than for interest rates. Emerging market government bonds (4.31%) and more risky corporate bonds (4.38%) both saw increases of 0.09%. Less risky corporate bonds (1.51%) actually saw the risk premium fall slightly (-0.04%) in September.