Geopolitical issues continued to dominate both international newsflow and investor sentiment during September. In particular, market confidence was undermined by news of air-strikes in Syria against Islamic State forces. Meanwhile, amid ongoing conflict surrounding Russia’s military involvement in Ukraine, the US and European Union announced further sanctions against leading Russian banks and energy companies.
In the UK over September, much attention was focused on the referendum on independence in Scotland. The result – a 55% vote against independence – was greeted warmly by equity markets as speculation over the result had preoccupied investors in the run-up to the poll, and the uncertainty had been reflected in share prices. The FTSE 100 index fell 2.9% during September and by 1.8% over the third quarter.
Across the Channel, eurozone interest rates were cut to a fresh low of 0.05% by the European Central Bank and policymakers announced a programme of measures designed to support the economy. Investor sentiment in Germany registered its ninth consecutive month of decline during September, dampened by economic uncertainty and concerns over Ukraine. Germany’s Dax index remained broadly unchanged over September as a whole, despite a certain amount of daily volatility.
At their September meeting, Federal Reserve policymakers confirmed the US central bank’s programme of stimulus measures would finish in October, but reiterated US interest rates will rise only after “a considerable time” has elapsed. Disappointing data from the labour market curbed any thought of an imminent increase – although the rate of unemployment edged lower to 6.1% in August, fewer jobs than expected were added to the economy over the month. Nevertheless, wage growth gained some momentum during the month, rising at an annualised rate of 2.1%. The Dow Jones Industrial Average index edged 0.3% lower during September although it was up 1.3% over the third quarter of 2014.
Japan’s economy contracted during the second quarter at a quarterly rate of 1.8% and an annualised rate of 7.1%, dampened by April’s increase in sales tax. A further sales tax increase is scheduled to take effect in October 2015 although prime minister Shinzo Abe is coming under intensifying pressure to postpone it amid concerns over its economic impact. The Nikkei 225 index climbed 4.9% during September and was up 6.7% over the third quarter. Elsewhere in Asia, pro-democracy political protests in Hong Kong caused the Hang Seng index to drop 7.3% over the month.