Market Key Points
- The September quarter delivered positive returns across most major asset classes as trade tensions eased.
- Global technology stocks, linked to AI, dominated investment headlines in September.
- Emerging markets continue to outperform versus developed markets.
Australian equities
The S&P/ASX 200 Accumulation Index fell 0.8% in September, reversing August’s gains, with nine of 11 sectors finishing lower. Energy (-9.8%) led declines amid expectations of rising supply, softening demand, and the collapse of the Santos Limited (STO) takeover. Other laggards included Consumer Staples (-4.4%), Health Care (-4.1%), and REITs (-3.1%). In contrast, Materials (+6.1%) rose strongly, driven by copper, gold, and iron ore stocks as commodity prices surged.
The S&P/ASX 200 Small Ordinaries Index gained 3.4% in September, up 15.3% over the past three months, supported by capital rotation into resource stocks. Gold mid-caps dominated performance, with Regis Resources (RRL), Bellevue Gold (BGL), Emerald Resources (EMR), Westgold Resources (WGX), and Perseus Mining (PRU) each rising over 30%, fueled by an 11.9% jump in gold prices, bringing the 12-month gain to 46.5%. Conversely, Santos (STO) fell 16.1% after an Abu Dhabi-led consortium withdrew its takeover proposal.
On the economic front, unemployment held steady at 4.2% in August, while CPI rose to 3.0%, its highest since July 2024, driven by housing costs. The RBA kept the cash rate unchanged at 3.60%, with markets pricing in one to two further cuts to a terminal rate of 3.10%.
Global Equities
Global equities posted another strong month, with Developed Markets up 2.0% (MSCI World Ex-Australia Index, AUD). US equities outperformed for the second consecutive month, with the S&P 500 up 3.5%, hitting record highs on the back of a 25bps Fed rate cut, strong AI and semiconductor news, and robust Q2 earnings. Growth (+4.6%) and Momentum (+4.8%) led factor performance, followed by Quality (+3.2%) and Value (+1.8%). Global small caps slowed, returning 0.7%.
European markets were mixed, with Germany’s DAX down 0.1%, while the UK’s FTSE 100 surged 6.7%. Japan’s Nikkei 225 rose 5.2%, supported by a weaker yen, easing inflation, strong foreign inflows, and optimism around tech stocks. US inflation eased to 2.9% in August from 3.1%, while retail sales grew 0.6%. Labor-market data weakened, with nonfarm payrolls up only 22,000 and unemployment rising to 4.3%, signaling cooling demand. The Fed cut rates by 25bps to 4.00%, its first move in 2025, citing easing inflation and labor softness.
Commodities were steady, with the S&P GSCI up 0.1%. Oil fell 2.6% on oversupply concerns, while gold rose, and iron ore edged up 0.4%. Copper jumped 4.1% after production cuts at Freeport’s Grasberg mine, and aluminum prices remained firm.
Emerging Market Equities
Emerging market equities outperformed developed markets in September, rising 5.8% (MSCI Emerging Markets Index, AUD). China continued its rally on improving domestic sentiment and expectations of targeted policy support, with the CSI 300 up 3.2%. Economic data remained mixed: the official manufacturing PMI edged up to 49.8 from 49.4, still below the 50-point expansion threshold, while the non-manufacturing PMI dipped to 50.0, signaling slower services growth. Industrial production grew 5.2% year-on-year in August, down from the prior reading, and retail sales rose 3.4%, highlighting ongoing weakness in consumer demand.
Fixed Income
Global bond markets saw modest yield declines in September. U.S. 10-year Treasury yields fell 8bps to 4.23%, while UK 10-year Gilt yields dropped 2bps, German yields eased 1bps, and French yields fell 3bps amid ongoing political instability and rising inflation concerns in Europe. Manufacturing PMIs in Germany and the UK remained below 50, signaling near-stagnation.
In Japan, the 10-year yield rose 5bps to 1.65%, hitting a three-year high as the Bank of Japan held rates at 0.75% and inflation eased to 2.7% from 3.1%. Domestically, Australian bond yields increased 3bps to 4.30%. The RBA kept the cash rate at 3.60%, citing mixed economic data and moderating inflation but warning of near-term price pressures. Markets continue to expect one to two more cuts by year-end.
Property and Infrastructure
The S&P/ASX 200 A-REIT Accumulation Index broke its upward trend, falling 3.1% in September and reducing rolling 12-month returns to 4.1%. Global real estate equities posted modest gains, up 0.9% (FTSE EPRA/NAREIT Developed Ex Australia Index, AUD Hedged), while global infrastructure returned 1.5% (S&P Global Infrastructure TR Index, AUD Hedged).
Australia’s residential property market continued to grow, with the Cotality Home Value Index rising 0.7%, the strongest monthly gain since May 2024. Brisbane led with +1.2%, followed by Perth (+1.1%) and Darwin (+1.0%), while Sydney (+0.8%) and Melbourne (+0.3%) posted solid increases. Hobart remained weak, declining 0.2%
This article contains information first published by Lonsec. Voted Australia’s #1 Research House for 2019.
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