Monthly Market News September 2024 – Market trends

Alexandre Gauthy - Economist

September was a positive month for markets, which welcomed the Fed's 0.5% rate cut, Chinese stimulus measures, as well as encouraging inflation and US growth figures. Our expert, Alexandre Gauthy, analyses the market trends for September 2024.

Equity markets: strong rebound in the stock markets

After a difficult August, equity markets rebounded in September. Recession fears that prevailed during the summer correction were eased by better economic news in the United States. Initial jobless claims have started to fall again, retail sales data for August have been robust and the growth rate of the US economy has been revised upwards.

The big gainer of the month was Chinese equities that benefited from government stimulus announcements. China has announced monetary and fiscal stimulus measures that have triggered a significant upward movement in Chinese assets. The central bank lowered banks' reserve requirement ratios, cut policy rates, and lowered interest rates on existing home loans. This was followed by fiscal measures aimed at restoring purchasing power to households, through subsidies for the purchase of durable goods and allowances for households with more than 2 children. Finally, the package also aimed to bail out the finances of local governments.

Bond markets: bond yields remain on a downward trend

Bond yields remained in a downward trend during the month of September on the backdrop of a larger rate cut by the Federal Reserve and continued rebalancing of the labour market. Eurozone bond yields have fallen by a greater magnitude than long-term US yields due to the deteriorating economic outlook for the region as well as encouraging inflation figures in most countries in the monetary union.

Central banks: rate cuts in all directions

September was marked by rate cuts by major central banks, including the Fed, ECB, and China's central bank. The ECB, which had refrained from cutting rates in July, cut its key rate for a second time in September.

On the Fed side, the 0.5% rate cut was more aggressive than expected by the market. Fed members expect only 50 basis points of additional cuts by the end of the year. The Fed's new economic projections explain the reluctance to support an even more aggressive rate-cutting cycle.

The month was marked by a surprise rate cut by China's central bank, which is part of a package of measures taken by the government to revitalise economic growth.

Currencies: The dollar depreciates

The dollar depreciated slightly against the euro during the month. The Fed's larger rate cut as well as stimulus announcements in China have helped the euro. Nevertheless, the common currency was negatively affected by weakening growth prospects in the region, which limited the euro's gains against the dollar.