• Worries over China had a knock-on effect on commodity prices and emerging markets fell 1.5% in the past month, as countries reliant on exports to China suffered
• In the UK, the pressure on resource and mining stocks caused the FTSE All Share Index to fall 2.7%
“Global equity markets continued to fall throughout September, driven by continued concerns that China would experience a ‘hard landing’; Barclays downgraded its China growth forecast to 6.6% for 2015 and 6.0% for 2016 and the FTSE China Index lost 0.4% during September and 20.4% over the last three months. Such concerns over Chinese growth have had a knock-on effect on commodity prices and emerging markets fell 1.5% during September, as countries reliant on exports to China have suffered. In particular, Brazil’s economic woes have worsened: the country has seen sharp falls in the Brazilian Real, and its credit rating has been downgraded to ‘junk’ status by Standard and Poors.
“In the US, the Federal Reserve did not increase interest rates despite a strong economy due to concerns that developments in the global economy could restrain US activity. In the UK, the Bank of England followed the Fed as expected and held interest rates at 0.5%. The FTSE All Share Index fell 2.7% during September as resource and mining stocks came under pressure. Glencore led the sell-off with the share price falling nearly a third in one day, and down 75% for the year, and the Volkswagen emissions testing scandal weighed further on European sentiment, with the FTSE Europe Index down 3.1% over the past month.
“As expected, given the volatile equity markets, yields on UK gilts ended lower over the month, with the 20 year gilt yield at 2.5% p.a. at 30 September. Market expectations for an increase in the BOE base rate have been pushed out to later in 2016, and have priced in a rise in the 20 year gilt yield to 3.1% over the next 5 years.”
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