General Market Review
The month of September was lined with several central bank decisions. The most important one was the FED’s decision to cut its key policy rate by 0.5% bringing down the effective rate under 5%. Nonetheless, this decision was already expected by market participants. Since Powell was focusing on the short-term path of labor markets again, the magnitude of further rate cuts is expected to drive the performance of the US-equity markets in the coming months. Currently the pattern is still intact with defensive stocks outperforming cyclical stocks, same pattern applying to growth compared to value stocks.
Another focus was on the Chinese central bank, People’s Bank of China (PBOC), as it rolled out a raft of measures aimed at countering a prolonged downturn in its property market, as this is weighing heavily on the Chinese economy. The support measures have been quite substantial as mortgage rates were reduced by 0.5% and so down payments from 25% to 15%. According to estimates that could potentially help around 150mn people reduce household interest to be paid by an average of about 150bn yuan ($21bn equivalent) per year, which would be tremendous.
US economic data was slightly stronger in August as non-farm payrolls increased by +142k in August from +114k in July. The unemployment rate diminished to 4.2% in August from 4.3% in July, reversing the slightly increasing trend of the last months.
In the Eurozone unemployment rates were unchanged at 6.4%.
In the US, consumer price inflation further continued to decrease as headline inflation was at +2.5% (y-o-y) – mostly impacted by decreasing energy prices of around -0.3% – and core inflation at +3.2% (y-o-y) for the month of August versus previous readings of +2.9% and +3.2%.
In the Eurozone, consumer price inflation figures in August came in significantly lower as headline inflation was at +2.2% due to decreasing transportation costs. The core inflation in the Eurozone was at +2.8%.
US 10-year treasury yields decreased from 3.9% to 3.8% at the end of September, whereas 10 year-German government yields went down to 2.1% from 2.3%.
The MSCI World Index rose by +1.8% (USD den.) and the MSCI Europe Index decreased by -0.4% (EUR den.).
Energy and Transportation
The price of Brent oil fell from $ 80.7 to $ 78.8 at the end of the month. Despite ongoing tensions in the Middle East market participants have downplayed political risks as there has been no major supply disruption. As investors became more concerned about the potential demand outlook for oil the Stoxx 600 Oil & Gas Index (Euro denom.) fell by -3%
On the other hand, the S&P Global Clean Energy Sector Index was able to partly recover from the previous month losses. The index increased by +1.4% in August. With that the renewable energy segment is still down by -7.5% year-to-date.
Transportation segments were mixed during the month. The DJ Transportation Average Index was flat at the end of the month. The aviation segment was weak. Within the airline segment airfares are expected to fall in the winter season. At the same time labor costs continue to be a headwind. The US Global Jets Index dropped by -2.0%.
The Russell 2000 Marine Transportation Index has decreased by -3.3%. Freight rates have been mixed. Despite the ongoing disruptions in the Red Sea container freight fell by -11% in the month of August. The SCFI (Shanghai Containerized Freight Index) is now up by +187% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates have decreased from $25k/day to $ 14k/day at month end, whereas product tanker rates (MR earnings) have softened further from $27.4k/day to $ 22k/day. VLGC (Very Large Gas Carrier) rates have increased from $31.9k/day to $ 51k/day at month-end and Capesize-Rates have increased solidly from $20k /day to $25k/day.
Fund Performance
The price of Brent oil fell from $ 78.8 to $ 71.7 at the end of the month. Investors became more and more concerned that increased oil supply from the Non-OPEC countries, mainly America and others, would exceed global oil demand. As the Chinese economy is slowing down, oil demand growth is expected to be subdued. This has prompted OPEC to delay a plan to reverse more than 2mn. barrels a day of oil cuts. The Stoxx 600 Oil & Gas Index (Euro denom.) fell by -5,3%
On the other hand, the S&P Global Clean Energy Sector Index was able to gain another +2.9% in September. With that the renewable energy segment is still down by -4.8% year-to-date.
Transportation segments were positive during the month. The DJ Transportation Average Index increased by + 1.7%. As two of the largest US airline carriers have issued upbeat guidance on revenue and travel demand for the rest of the year, the aviation segment was strong. Moreover, Delta Airlines has indicated that capacity across the industry was moderating. The US Global Jets Index has increased by + 11,1%.
The Russell 2000 Marine Transportation Index has increased by +1.9%. Freight rates have been mixed. Despite the ongoing disruptions in the Red Sea container freight rates fell by another -28% in the month of September. The SCFI (Shanghai Containerized Freight Index) is still up by +141% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates have increased from $14k/day to $ 27k/day at month end, whereas product tanker rates (MR earnings) have softened further from $22k/day to $ 17k/day. VLGC (Very Large Gas Carrier) rates have decreased from $51k/day to $ 43k/day at the month-end and Capesize-Rates have increased solidly from $25k/day to $30k/day.
For more information, you can find our latest Factsheet – September 2024.
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