The US Federal Reserve surprised markets with a 50bp maiden rate cut for the cycle, taking the Federal Funds Rate to a target range of between 4.75% to 5.0%. Fed Chairman Jerome Powell noted that he doesn’t “see anything in the economy right now” that suggests the likelihood of a recession or a downturn is elevated. US CPI inflation continued its downward trend, printing 2.5% for the year to August vs 2.9% for the prior print. Australian CPI inflation printed 2.7% for the year to August, down from 3.5% in the year to July. The European Central Bank cut its official cash rate by a further 25bp and the RBA held rates steady. The PBOC announced a significant and multi-faceted stimulus package that included interest rate cuts, bank reserve requirement cuts, a reduction in property deposit requirements and other measures designed to facilitate share buybacks and further investment into equities by institutions. The Shanghai Composite index rose around 20% in the final 6 days of the month in response.
The ASX300 Accumulation Index gained +3.0% and A-REITs surged +6.5%. Global share markets gained 1.4% however currency-unhedged investors returns were (-0.5%), hindered by the AUD which gained against the US dollar, Euro and Japanese Yen.
The Australian 2-year government bond yield declined by -0.03% to 3.64% and the Australian 10-year government bond yield was little-changed at 3.97%. The US 2-year government bond yield declined by -0.28% to 3.64% and the US 10-year government bond yield fell by -0.12% to close at 3.78%.
AUTHOR: Allan Grant
Disclaimer: The above is intended as general market commentary only and is not intended as, and does not constitute, advice of any kind. No liability is accepted for any action taken based on the above or for any loss suffered as a result of reliance on the same.
