Global equity indices rose in September, helped by a continued bull market in US shares, a multi-month jump for Japanese stocks and a mild rebound in Europe.
The STOXX® Global 1800 Index climbed 0.5% in dollar terms,1 a third month of gains, taking this year’s advance to 5.1%. The benchmark wrapped up a 4.9% advance in the third quarter, its best quarter this year.
The STOXX® USA 900 Index gained 0.3% in September for an accumulated return of 10% in 2018. The STOXX® Europe 600 Index of pan-European stocks and the EURO STOXX 50® Index of Eurozone blue chips also rose 0.3% in September. The former is now up 0.9% for the year while the latter is down 0.6%.
Market caught between two forces
Markets have been whipsawed this year by – on the one hand – a trade conflict between the US and partners, and rising US interest rates, and – on the other – a continued economic expansion.
The Federal Reserve in September raised rates for a third time this year and signaled it will continue to do so amid a strong economy and low unemployment. A private report, meanwhile, showed US consumer confidence hit its highest level since 2000.2 The US announced on Sep. 17 tariffs on another $200 billion of imports from China, with the Asian country announcing retaliatory measures soon after.
For Europe, it’s been a testing year so far. Stable but slow growth means investors have favored US shares, while concerns linger about a budget shortfall in Italy, the form that Brexit will take, and potential tariffs for European exports. The STOXX Europe 600 added 1.3% in the third quarter, and the EURO STOXX 50 advanced 0.4%.
Elsewhere, the STOXX® Emerging Markets 1500 Index dropped 0.9% in September, its fourth retreat in five months.
Mining and oil stocks rise
Commodity shares underpinned global markets over the month, as the price for oil and minerals rose. The STOXX® Global 1800 Basic Resources Index came on top of 19 supersectors after posting the market’s worst returns in August and July. The mining index gained 4.5% in September.
The STOXX® Global 1800 Oil & Gas Index was September’s second-best performer, with a 2.8% gain. Brent crude oil futures rose 6.9% in London over the month, closing at $83 a barrel on Sep. 28. The STOXX® Global 1800 Insurance Index came up third after a 2.3% advance.
At the other end, the STOXX® Global 1800 Real Estate Index trailed all supersectors with a 2.2% decline. The STOXX® Global 1800 Banks Index lost 1.2% and the STOXX® Global 1800 Technology Index fell 1.1%.
Japan comes up on top
With a 5.3% advance, the STOXX® Japan Total Market Index had the best performance over September in local currencies among 23 developed markets tracked by STOXX. The benchmark STOXX® Japan 600 Index also rose 5.3%, for its best month in 11. Reports said foreign investors committed in the week ended Sep. 21 the highest inflows into Japanese equities since November 2014.3
In dollar terms, Japanese shares fared half as well after a decline in the yen.
The STOXX® Luxembourg Total Market Index came in second in the month after rising 4.1%. The STOXX® Norway Total Market Index followed with a 3.2% advance.
Europe also took all three bottom slots in the month’s ranking. The STOXX® Greece Total Market Index tumbled 6.8%. The STOXX® Denmark Total Market Index fell 4.1% and the STOXX® Ireland Total Market Index dropped 3.6%.
In spite of a 3.6% slump in the month’s last session, the STOXX® Italy Total Market Index rose 2.1% in September. The country’s new coalition government on Sep. 27 agreed on a spending plan that widens a budget deficit.
Themes struggle, high dividend performs
Strategies tracking megatrends struggled, based on returns from the STOXX thematic indices. The STOXX® Global Artificial Intelligence Index was the biggest laggard after falling 4.9%, although it is still amply outperforming on a one-year basis. The biggest winner was the iSTOXX® FactSet Breakthrough Healthcare Index, which rose 2.3% to a record high.
It was also a difficult month for pure factor strategies. Five of the seven iSTOXX® Europe Factor Market Neutral Indices, which neutralize systematic risk by holding a short position in futures on the STOXX Europe 600, posted losses while one was unchanged. The iSTOXX® Europe Value Factor Market Neutral Index bucked the trend, rising 0.4%.
A minimum variance strategy outperformed strongly on a global basis in September, with the STOXX® Global 1800 Minimum Variance Index gaining 1.3%.
Among three key global income strategies tracked by STOXX, the STOXX® Global Maximum Dividend 40 Index, which only seeks high dividend-yielding stocks, rebounded 1.9%. The move echoed the gains in value strategies, which share characteristics with a high-dividend yield approach. The STOXX® Global Select Dividend 100 Index and the STOXX® Global Select 100 EUR Index, however, underperformed the broader market. The two add additional criteria to select dividend payers, including low volatility and business quality.
Featured indices
- STOXX® Global 1800 Index
- EURO STOXX 50® Index
- STOXX® Europe 600 Index
- STOXX® USA 900 Index
- STOXX® China A 900 Index
- STOXX® Emerging Markets 1500 Index
- iSTOXX® Europe Factor Market Neutral Indices
1Total returns after taxes.
2The Conference Board, ‘The Conference Board Consumer Confidence Index Increased in September,’ Sep. 25, 2018.
3‘Good September, Foreigner Return May Bode Well for Japan Stocks,’ Bloomberg, Sep. 29, 2018.