Stock markets recorded their fifth consecutive month of gains, despite two specific stock market crises at the beginning of August and September. The MSCI world index (MSCI All-Word Equity Index) recorded an increase of 2.2% in September, despite a loss of more than 4 billion euros in the first five sessions of the month.
The recovery throughout the month accelerated after Beijing announced on September 24 and 25 a direct injection into the economy equivalent to 310 billion euros, complemented by the reduction of three interest rates by the People’s Bank of China.
Beijing’s ‘bazooka’ triggered gains on the Shanghai, Shenzhen and Hong Kong stock exchanges (where the ‘stars’ of Chinese technology are listed) which offset the monthly drop of almost 2% on the Tokyo Stock Exchange (the third in the world in capitalization at the end of August) and modest gains in Europe and losses in Latin America in September.
5 consecutive months of gains
Monthly change in the MSCI world index in % in 2024
In Lisbon, the PSI 20 index (in reality with 16 listed) escaped into the red in September with a monthly increase of 0.48%, decelerating in relation to the gains of 3.5% in July and 0.77% in August. The 0.48% increase was higher than the average gain in the MSCI index for Europe (0.3%), but was far from the 4.2% increase in the Ibex 35 index in Madrid.
The determining factors in the behavior of the stock markets in September revolved around expectations regarding the cycle of interest cuts by the North American central bank until the end of the year and, at the end of the month, they counted on the Chinese mega package to support the economy.
The escalation of the war in the Middle East and the prospects of the war in Ukraine against the Russian invasion in the context of uncertainty about the results of the presidential elections in the United States on November 5th have not yet become, in September, a relevant factor in investor behavior .
The alarm signal seems to be being given in this first session of October, with the MSCI world index falling, New York in the red and Europe closing with losses above 1%. In Asia, Chinese stock exchanges will be closed this week due to holidays relating to the founding of the People’s Republic of China on October 1, 1949.
Sean Gallup
In foreign exchange markets, the euro appreciated 0.7% in September against the dollar, but depreciated slightly by 0.1% against the group of currencies of the 41 main trading partners in the euro zone, according to the index provided by the European Central Bank for the variation in the real effective exchange rate of the euro. At the end of August, the euro was worth 1.10 dollars and ended September at 1.11 dollars.
Cryptocurrencies registered an increase in market capitalization, in dollars, of 8.6%. Having closed August at just over 2 billion dollars (1.9 billion euros, at the exchange rate at the time), it ended September with a global capitalization of 2.24 billion dollars (2.02 billion euros), according to data from the website coinmarketcap.com. The year 2024 opened below $1.7 billion. The appreciation of this market has already reached 32% since the beginning of the year.
Asia led gains in September
Monthly variation of the MSCI index in %
The Chinese push
The big boost to global stock market gains in September came from Asia, whose respective MSCI index rose 4.6%, compared to 2% for New York (where the world’s two largest stock exchanges are located), a very modest rise of 0. 3% in the index that covers the 15 developed European markets and a slight drop of 0.06% in Latin America.
Asian leadership in September gains had a ‘driver’, Chinese stock markets. The MSCI China index soared 24% and the Zhong Hua index (which covers the two Chinese exchanges and Hong Kong) registered a gain of 22.5%.
The Shanghai stock exchange, which was the fourth in the world in terms of capitalization at the end of August, rose 17.3% in September. Between September 24th and 30th, the index of this Chinese stock exchange accumulated a gain of 20%.
The announcement of the Chinese ‘bazooka’ surprised the markets on September 24th. A trio of senior officials, formed by the governor of the People’s Bank of China (PBOC), the minister responsible for financial regulation and the president of the Securities Market Commission, came forward with a support package worth 2.4 billion yuan (about of 310 billion euros) divided into four major measures.
The lion’s share of the liquidity injection will come from reducing banks’ required reserve ratio by half a percentage point, releasing 1 billion yuan (around 129 billion euros), followed by two new financial instruments to allow bond and fund swaps and share buybacks by listed companies and shareholders, and finally a financing program for the purchase of unsold houses. Funding for swaps and share buyback support could triple.
Even though it did not change the policy rate, which remains at 3.35%, the PBOC reduced the 7-day rate from 1.7% to 1.5%, the 14-day rate from 1.85% to 1. 65% and the medium term from 2.3% to 2%.
Stock markets record gains in September
Monthly variation of indices in %
Choque Ishiba
The optimism of investors in Chinese stock markets offset the 1.8% drop in September on the Tokyo stock exchange, the third largest in the world. On September 30th alone, the main Japanese benchmark index, the Nikkei 225, fell 4.8%, the third biggest drop of the year.
Japanese investors were frightened by the appointment of new Prime Minister Shigeru Ishiba, who began to lead the Liberal Democratic Party, which dominates Japanese politics. Analysts have already called the negative repercussion on the Tokyo stock exchange the “Ishiba shock”, as the new chief executive is in favor of the Bank of Japan’s (BoJ) continued interest rate hike. This is a very sensitive issue for the markets, which, remember, led to the Tokyo stock market falling by 12% on August 5th, during the red wave caused by the BoJ’s decision on July 31st to increase the reference rate from 0 % to 0.25%.
Japan will hold early elections for the Lower House on October 27th and the BoJ will meet again on October 31st.
Shigeru Ishiba, the new Prime Minister of Japan
Pool
Fed’s start of cuts was not enough
Although the North American Federal Reserve (Fed), the central bank of the United States, began a cycle of lower interest rates on September 18, with a first robust cut of half a percentage point (50 basis points, in technical language ), the global impact was limited. In the three sessions from September 18th to 20th, the MSCI world index recorded an accumulated gain of 1.1%. In terms of comparison, the announcement of the Chinese ‘bazooka’ caused a 1.5% gain in the world index between September 24th and 27th.
After statements by Jerome Powell, the president of the Fed, on September 30 at the National Association of Business Economics in Nashville, the overall impact on the two New York exchanges was just 0.4%. Powell stressed that the Fed is “in no rush” to press the rate cut accelerator. Fed key rate futures now point to a 62% probability for a 25 basis point cut at the next meeting on November 7, two days after the presidential elections, and a 48% probability for a further decrease. robust 50 basis points at the last meeting of the year on December 18th.
The accumulated impact of the first interest rate cut by the Fed on September 18 and the current expectations of two more cuts by the end of the year was 2% on the rise in the stock market index for New York in September. New York has two exchanges, the New York Stock Exchange on Wall Street and the Nasdaq.
The Nasdaq itself, where the most important technology companies are listed, rose 2.6% in September, compared to a 26% rise in the Hang Seng Tech, the technology index on the Hong Kong stock exchange, where the rising ‘stars’ are listed. Chinese technology.
Main technological indices
Change in September in %
Chinese ‘magnificent’ leads in earnings
In a group of 28 technological companies, which can be considered ‘magnificent’ on a global scale, spread across the United States, Europe, China and the rest of Asia (South Korea, India, Japan and Taiwan), ten stood out in gains in September with increases above 7%. In this group, seven are Chinese, two are North American (Tesla and Meta/Facebook) and one is Swedish (Spotify).
The sharpest spike in value was registered in the Chinese JD.com, with a rise in value of almost 56%.
In Europe. Dutch ASML, NXP and STMicroeletronics, and German Infineon posted losses in September. In Asia, heavyweights India’s Infosys, Japan’s Nintendo, Sony and Keyence and South Korea’s Samsung saw their shares fall in September.
