The Middle East potentially took another step closer to all-out war as Israel stepped up its attacks on Lebanon, claiming it had killed several senior Hezbollah leaders, and Iran launched a barrage of missiles against Israel, prompting fears of an even larger response.
Chinese equities recorded their best week since 2008 after Beijing launched the biggest economic stimulus package since the pandemic. European markets also benefitted amid hopes luxury groups would benefit from stronger consumer spending in China. Industrial metals, such as copper, of which China is a huge consumer because of its vast manufacturing sector, also surged.
UK
The FTSE 100 rose 0.6% over the two weeks.
The S&P Global UK Composite PMI fell to 52.9 in September from 53.8 in the previous month, with support from both the services sector (52.8 vs 53.7 in August) and the manufacturing sector (51.5 vs 52.5).
Second-quarter UK GDP growth was revised down to 0.5% from an initial estimate of 0.6%.
Bank of England governor Andrew Bailey said UK policymakers could be “a bit more aggressive” on lowering borrowing costs if inflationary pressures continued to wane.
US
The S&P 500 gained 0.6% over the two weeks.
Federal Reserve chair Jay Powell signalled that the US central bank would consider reverting to its more usual quarter-point cut in November if economic data remained robust.
The S&P Global Flash US Composite PMI edged lower to 54.4 in September from 54.6 in August. Growth in the services sector remained strong, although it slowed slightly (55.4 vs 55.7) while the manufacturing contraction deepened (47 vs 47.9).
The core PCE Index rose by 2.7%, compared with a 2.6% increase in July.
US non-farm payrolls rose by a larger-than-expected 254,000 jobs in September, while data for August was revised up to a gain of 159,000.
Europe
The Eurofirst 300 increased 0.9% over the two weeks.
The HCOB Flash Eurozone Composite PMI fell for a fourth consecutive month to 48.9 in September, the lowest since January, compared to 51 in August. The downturn in manufacturing output extended to an 18th consecutive month (44.5 vs 45.8) and particularly marked in Germany and France. Service sector growth slowed sharply (50.5 vs 52.9), amid a renewed decline in France.
The HCOB Flash Germany Composite PMI fell for a fourth straight month to 47.2 in September, the lowest since February.
Eurozone inflation fell to 1.8% in September, the lowest since April 2021 and compared to 2.2% in August.
The German Ifo Business Climate indicator dropped to 85.4 in September from 86.6 in August. It was the lowest reading since January and missed expectations of 86.
The Riksbank lowered its key policy rate by 25 bps to 3.25% during its September meeting, following a similar cut in August. The Swiss National Bank cut its key policy rate by 25 bps to 1% in September 2024, a third consecutive reduction and pushing borrowing costs to the lowest since early 2023.
Japan
The Nikkei 225 jumped 2.4% over the two weeks.
Shigeru Ishiba secured an unexpected victory in the battle to become Japan’s next prime minister. He immediately announced a general election to be held on October 27. Shares fell given Ishiba’s apparent support for higher corporate taxes. He was also not expected to strongly resist the Bank of Japan’s plans to raise interest rates but the yen later fell when he said the Japanese economy was “not in an environment” for further interest rate rises by the Bank of Japan.
Bank of Japan (BOJ) Governor Kazuo Ueda said they have time to assess market and economic developments before adjusting monetary policy, suggesting the BOJ is in no rush to hike rates further.
The au Jibun Bank Flash Japan Composite PMI fell to 52.5 in September from a 15-month high of 52.9 in August, largely supported by the service sector as manufacturing activity shrank for the third month.
Pacific Basin ex Japan
Chinese equities posted their best week since 2008, reaching their highest levels in a year, after the Chinese authorities launched the largest stimulus measures since the pandemic. The CSI 300 index rallied more than 20% in less than a week, while Hong Kong’s Hang Seng index has now gained 30% since the start of the year, making it the best-performing major market over that time frame.
The People’s Bank of China Governor slashed banks’ reserve requirement ratio by 50 bps and lowered key medium- and short-term rates to encourage borrowing and boost liquidity. The government also relaxed rules for homebuyers, moved to lower mortgage rates and announced measures to support the domestic shares, including encouraging leveraged investment in the stock market.
China’s official composite PMI rose to 50.4 in September, the highest figure since June. The manufacturing PMI rose to 49.8, up from August’s six-month low of 49.0, while the non-manufacturing PMI in China came in at 50.0, down from 50.3 in August. However, China’s Caixin manufacturing PMI fell to 49.3 from August’s 50.4 and the lowest level since July 2023, while the services PMI slipped to 50.3 in September and the lowest figure since September 2023.
Emerging Markets
The MSCI EM Index surged 6.6% over the two weeks.
The HSBC India Manufacturing PMI declined to 56.7 in September from 57.5 in the previous month. It marked the softest expansion in factory activity since January, amid a softer growth in output and new orders, with foreign sales rising the least so far this year.
Economic activity in Mexico expanded by 3.8% from the previous year in July, rebounding from the 0.6% drop in the previous month and the sharpest expansion in three months and the third sharpest increase of the year.
Hungary’s central bank lowered its base rate by 25 bps to 6.5% during its September meeting, following a pause in its rate-cutting cycle last month after ten consecutive reductions since October 2023.
Poland’s annual inflation rate accelerated to 4.9% in September, marking the sixth consecutive month of rising consumer prices and the highest level since December 2023.
Turkish inflation slowed to 49% in September, the slowest pace since July 2023.
Bonds
The yield on the 10-year US Treasury rose to a two-month high of 3.96%, an increase of 24 bps over the two weeks, on stronger-than-expected non-farm payrolls data. Two-year yields rose 31 bps to 3.89% over the same period.
The yield on the 10-year German Bund closed the two weeks unchanged at 2.21%.
Commodities
Oil prices soared to their highest level in more than a month, with Brent crude approaching $79 a barrel.
