September was a fairly strong month for global risk assets. Developed and emerging market equities were mostly higher, with small cap and value outperformance in the US, the USD strengthened, oil rebounded, and credit spreads were little changed. At a news conference early in the month, ECB chief Draghi indicated that the central bank had discussed options for reducing stimulus in 2018 as Eurozone growth strengthened and inflation showed signs of picking up. Later in the month, the Fed indicated that it was on track for one more rate hike in 2017 and, in a unanimous decision, that it would begin reducing the size of its balance sheet in October. The US job report showed that 156,000 non-farm jobs were added in August, the unemployment rate ticked higher to 4.4%, and the labor force participation rate remained at 62.9%.
Notable corporate transactions announced in September included the $23 billion acquisition of Rockwell Collins by United Technologies, Nasdaq’s $705 million acquisition of eVestment., the $1.1 billion purchase of NeoTract by Teleflex, the $305 million sale of Blue River Technology to Deere & Co, Fortive’s $770 million acquisition of Landauer, CEFC’s $9.1 billion purchase of a 14.16% stake in Rosneft from Glencore and the QIA, the $7.8 billion purchase of Orbital ATK by Northrop Grumman, the $328 million acquisition of R2Net by Signet Jewelers from Francisco Partners, Google’s $1.1 billion purchase of a stake in HTC, the $3.5 billion purchase of Ash Grove Cement by CRH plc, Genuine Parts’ $2 billion acquisition of Alliance Automotive Group, the $2.6 billion acquisition of GE’s industrial solutions group to ABB Ltd, the $2.7 billion sale of Carver to Unilever, the $5.3 billion acquisition of Nets by a consortium led by Hellman & Friedman, the merger of Siemen’s rail operations with Alstom, and the $17.7 billion acquisition of Toshiba’s memory chip unit to a group led by Bain Capital.
Developed market equities were mostly higher in September (see page 8), with the largest gains in Germany (+6.2%), France (+4.9%), and Japan (+4.3%); the worst performing were the UK (-0.8%), Hong Kong (-0.5%), and Australia (flat). US small caps outperformed large caps, with the Russell 2000 up 6.2% and the Russell 1000 up 2.1% (see page 3). Energy (+9.9%), Financials (+5.1%), and Industrials (+4%) were the best performing sectors in September, while Utilities (-2.7%), Real Estate (-1.4%), and Consumer Staples (-0.9%) were the worst performing (see page 2). Large cap value (+3%) outperformed large cap growth (+1.3%) in September (see page 3). Emerging market equities were mostly higher in September (see page 9), with the biggest gains in Argentina (+10.3%), Brazil (+4.8%), and Russia (+3.7%); Taiwan (-2.9%), Mexico (-1.8%), and India (-1.6%) were the worst performing.
In currencies, the USD Index was up 0.4% in September (see page 10). The strongest developed market currency against the USD was the British Pound (+3.6%); the worst performing were the Swedish Krona (-2.5%), Norwegian Krone (-2.5%), and Japanese Yen (-2.3%). Emerging market currencies were mostly weaker against the USD, with the biggest gains in the Malaysian Ringgit (+1.1%) and Russian Ruble (+0.9%) and losses in the South African Rand (-4.1%), Turkish Lira (-3.1%), and Indian Rupee (-2.1%).
The US Treasury yield curve shifted higher in September (see page 12). 10 year rates closed the month at 2.33%, up from 2.12% at August month end. Investment grade and high yield credit spreads were little changed in September (see page 13).
In commodities, the GSCI index was up 3.3% in September (see page 11), with gains in Energy (+5.9%), Livestock (+4.3%), and Agriculture (+0.1%) and losses in Precious Metals (-3%) and Industrial Metals (-2.7%). Within individual commodities, Crude Oil (+8.3%), Brent Crude (+8%), and Feeder Cattle (+7.6%) saw the biggest gains, while Platinum (-8.6%), Gasoline (-7.6%), and Sugar (-5.6%) saw the biggest losses. Gold was down 2.7% for the month.
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