September was a mixed month for global risk assets. Developed and emerging market equities were mixed, the USD was little changed, the oil complex moved higher, the US interest rate curve shifted higher, and US corporate credit spreads were little changed. The Federal Reserve raised its key interest rate at its September meeting, raised its economic growth forecasts for 2019, and removed the term “accommodative” from the characterization of its policy. The ECB left interest rates unchanged at its September meeting, and confirmed its earlier guidance regarding the wind down of its quantitative easing program. The US job report showed that 201,000 non-farm jobs were added in August (the 95th consecutive month of job creation), the unemployment rate remained at 3.9%, the labor force participation rate dropped slightly to 62.7%, and average hourly earnings rose 2.9% from a year earlier.
Notable corporate transactions announced in September included the $1 billion acquisition of part of Novartis’ generic drugs business to Aurobindo Pharma, the $1.1 billion purchase of Episerver by Insight Venture Partners, the $1.4 acquisition of Nevsun Resources by Zijin Mining, the $900 million purchase of Caprock by EagleClaw Midstream, the $1.5 billion acquisition of Intralinks by Siris Capital, Boston Scientific’s $600 million purchase of Augmenix, the $6.7 billion purchase of IDT by Renesas, the $2.5 billion acquisition of Engility by SAIC, the $2.1 billion purchase of BlueLine Rental by United Rentals, Hershey’s $420 million purchase of Pirate Brands, the $6.7 billion purchase of a majority of Sedgwick by Carlyle, the $1.6 billion acquisition of Gerber Life Insurance by Western & Southern Financial, the $645 million purchase of MMI by a group led by Cybernaut Investment, the $6.4 billion purchase of Jardine Lloyd Thompson by Marsh & McLennan, Adobe’s $4.8 billion purchase of Marketo, the $6 billion acquisition of Randgold Resources by Barrick Gold, the $3.5 billion purchase of Pandora by Sirius XM, Medtronic’s $1.6 billion purchase of Mazor Robotics, the $2.3 billion purchase of Sonic by Inspire Brands, the $1.8 billion purchase of Ascenty by Digital Realty, the $15 billion sale of 21st Century Fox’s stake in Sky to Comcast as part of Comcast’s $39 billion winning bid for Sky, the $3 billion purchase of a majority stake in United Group by BC Partners, the $933 million acquisition of XO Group by WeddingWire, the $2.1 billion purchase of Versace by Michael Kors, the $950 million acquisition of Chaucer by China Reinsurance, ST Engineering’s $630 million purchase of MRA Systems from GE, and Transocean’s $2.7 billion acquisition of Ocean Rig UDW.
Developed market equities were mixed in September (see page 8), with gains in Japan (+5.5%), Italy (+2.2%), and the UK (+1.4%), and the largest losses in Germany (-1.5%), Australia (-1.4%), and Canada (-1%). US large caps outperformed small caps, with the Russell 1000 up 0.4% and the Russell 2000 down 2.4% (see page 3). Communication Services (+4.3%), Health Care (+2.9%), and Energy (+2.6%) were the best performing sectors in September; Real Estate (-2.6%), Financials (-2.2%), and Materials (-2.1%) were the worst performing sectors (see page 2). Large cap growth (+0.6%) outperformed large cap value (+0.2%) in September (see page 3). Emerging market equities were mixed in September (see page 9), with the largest gains in Russia (+7.2%), Argentina (+4.3%), and Brazil (+3.7%), and the largest losses in the Philippines (-7.4%), India (-7.1%), and China (-1.6%).
In currencies, the USD Index was flat in September (see page 10). The Norwegian Krone (+2.9%), Swedish Krona (+2.9%), and Canadian Dollar (+1%) had the largest gains against the USD, while the Japanese Yen (-2.3%) and Swiss Franc (-1.3%) had the largest losses. Emerging market currencies were mixed against the USD, with the largest gains in the Turkish Lira (+8.2%), South African Rand (+3.9%), and Russian Ruble (+2.8%), and the largest losses in the Indian Rupee (-2.4%), Chinese Yuan (-0.6%), and Indonesian Rupiah (-0.6%).
The US interest rate curve shifted higher in September (see page 12). 10 year rates closed the month at 3.06%, up from 2.86% at August month end. US investment grade and high yield spreads were little changed in September (see page 13).
In commodities, the GSCI index was up 3.9% in September (see page 11), with gains in Livestock (+7.8%), Energy (+5.9%), and Industrial Metals (+1.4%) and losses in Agriculture (-3.6%) and Precious Metals (-0.5%). Within individual commodities, Lean Hogs (+15.1%), Palladium (+10.8%), and Brent Crude (+7.4%) saw the biggest gains, while Cocoa (-11.8%), Cotton (-7%), and Wheat (-6.5%) saw the biggest losses. Gold was down 0.7% for the month.
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