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October Markets In Brief

By 9th October 2019 No Comments

There were no spectacular rises, but September was a good month nevertheless. Japan and South Korea led the way as both markets gained 5% in the month, and a couple of markets barely moved at all – but the news was overwhelmingly positive.

UK

The big story in the UK was the collapse of Thomas Cook. It had been on the cards for a while and once the Government refused the company’s request for a bailout, the end was inevitable. There were estimated to be 150,000 people to bring home – and almost as many questions for Thomas Cook executives to answer over the bonuses they’d paid themselves as the company slid towards administration.

Figures from the Office for National Statistics for July showed that the UK economy had grown by 0.3% in the month, helped by the ‘dominant’ services sector and thus avoiding the fears of earlier this year of a recession. Average pay was up by nearly 4% compared to a year ago – the fastest increase in a decade – and unemployment was down to its lowest level for 45 years with 300,000 more people in work than a year previously.

The FTSE 100 index enjoyed a good month, rising by 3% to close September at 7,408. Helped by a ‘no-deal’ Brexit appearing less likely, the pound was up 1% in the month, closing at $1.2294.

Europe

The Eurozone economy is still flagging, and the European Central Bank (ECB) decided to take action in September, announcing that it will restart quantitative easing from 1st November, purchasing €20bn (£17.8bn) of debt every month.

The ECB said that the programme would run for “as long as necessary” while interest rates would continue “at their present or lower levels” until Eurozone inflation reached its target rate of 2%. ‘Lower levels’ might actually be something of an understatement, given that the ECB cut the deposit facility rate – the rate it pays to banks who have deposits with it – from minus 0.4% to minus 0.5%.

In keeping with most of the world stock markets, the two major European markets did well in September. The German DAX index rose 4% to 12,428 while the French stock market rose by a similar amount to end September at 5,678.

US

US jobs growth slowed in August as the trade war with China took its toll: the economy added just 130,000 jobs in the month.

As expected, the US Federal Reserve cut interest rates by a quarter of a percent, to a range of 1.75% to 2%. Despite the President’s desire to see yet more rate cuts, it seems unlikely that he will get his way, with the Fed making it very plain that they do not see rates falling below 1.5% to 1.75% any time before 2022.

For now, though, Wall Street pronounced itself satisfied with the rate cut and the pause in the trade war hostilities, rising by 2% in the month to close September at 26,917.

Far East

China’s economy is still expanding at a rate the West can only dream about, but the pace is that expansion is slowing significantly. The government is continuing to bring in measures to stimulate domestic demand, through both tax cuts and ‘introducing more liquidity into the financial system’ – or, as most people would say, making loans easier to get.

As far as the region’s stock markets were concerned, September was a good month. China’s Shanghai Composite index and the Hong Kong Hang Seng index were both up by 1% to 2,905 and 26,092 respectively – the latter despite the continuing pro-democracy protests. And as we noted in the introduction, the Japanese and South Korea markets both rose by 5%, with Japan closing at 21,756 and South Korea  at 2,063.

Emerging Markets

India announced a surprise cut in corporate tax rates – from 30% to 22% – in a bid to boost the economy and offset any slowdown caused by the US/China dispute and its impact on world trade. Unsurprisingly the move was welcomed by the Indian stock market, which rose 4% in the month to close September at 38,667.

The Brazilian market was up by a similar amount to 104,745 – but it was a very different story in Russia, where for the third month in a row, the stock market barely moved. Having closed June at 2,766, the Russian index closed July at 2,739, August at 2,740 and September at 2,747 – once more unchanged in percentage terms.

We wish you a happy October.