In September 2023:
1/Inflation and Central Banks, 2/Higher Dollar and 3/Higher Oil
1/Inflation and Central Banks. EU: the ECB rose rates by 25bps and signaled that the peak may have been reached. Following Lagarde’s news conference on the 14th of September, the EURUSD declined by -81bps%, 10Y yield declined and equity rose. UK: wage growth kept the BOE under pressure to raise rates again. However, the CPI rose by 6.7% YoY in August, the slowest pace in 18M and below the 7% exp. The Core CPI, excluding volatile items, rose by 6.2% YoY down from the previous month and below estimate. The BOE held its key rate at 5.25%. US: The Fed’s message triggered fear in the market. It dragged yields higher and equity lower. The 2Y hit a high at 5.1973% this week – for the 1st time since July 2006. The 10Y rose as high as 4.6861% - its highest since 2007. Since mid-September, volatility rose by 4.7 points and SPX declined by 4.67%.
2/Higher Dollar. In September, the dollar, as measured by the DXY, strengthened against major currencies for 4 weeks in a row. It rose by 2.47% to 106.174.
3/Higher Oil. Oil rose, supported by the cross of its 50DMA above the 200MA mid-august. It came back to level seen in November 2022. Higher Energy prices and a weaker currency are not a good mix for imported inflation in Europe.
September Performance highlights (USD)
Equity Indices: SX5E: -5.27%, NASDAQ: -5.07%, MSCI WORLD: -4.45%, SPX: -4.87%, STOXX 600 OIL & GAS: +2.72%
Bonds: GER 10Y: +37bps, US 10Y: +46bps, GER 2Y: +23bps, US 2Y: +18bps,
Commodities: Gold: -4.72%, Oil: +9.73%,
FX: DXY: +2.47%, USDJPY: +2.63%
From a regional perspective, International DM, Swiss and US equities were bought, while Europe, International EM and Brazil were sold. On the fixed income side, strong appetite for European government bonds.
On equity indices: The MSCI WORLD ESG SCREENED, MSCI ACWI ESG, S&P and the SMI were in demand. A mixed activity was recorded on the MSCI USA CLIMATE CHANGE ESG, DAX and FTSE 100. On the other hand, FTSE MIB was sold.
On fixed income: The Euro Govt 1-3Y and Euro Govt Bonds across the curve were bought while the US 7-10Y and US Govt inflation linked all Maturities recorded a mixed activity,