Financial market update - September 2021
Written and accurate as at: Oct 12, 2021 Current Stats & Facts
Australian Equity
Australian markets were mixed this month as the ASX300 Accumulation returned -1.89%. Energy boomed this month, returning +14.02%, as Aussie energy providers were thrust into the spotlight amongst the global electricity shortage. Materials struggled this month as markets finished down - 6.70% as compressing iron ore prices continued to spill over. As COVID restriction rollback begins to put pressure on hotspot hospitals, Healthcare markets reacted by returning -4.03%.
International Equity
Overall, global markets finished in negative territory this month, pulled down by concerns over Evergrande. The Hang Seng, where the company is listed, returned -5.04% over the month, spill over effects into Korea saw a -4.08% monthly return for the KOSPI. The Shanghai Composite defied this trend by reporting a muted positive return of +0.68%.
The Japanese Nikkei 225 had a booming month, reporting a +5.50% return, reaching valuation highs for the year. Analysts have attributed this growth to the market response to Prime Minster Suga’s resignation, however performance began to peter off towards the end of the month as the market began to correct itself and properly respond to China’s September slowdown.
In Europe, similar negative returns were seen as the Europe 600 STOXX reported -3.41%, the French CAC 40 - 2.40%, and the German DAX -3.63%. the FTSE100 Reported more muted negativity of -0.47%. US markets, especially the NASDAQ, performed inline with September’s “spooky” season market expectations, making this the year’s worst month for returns. The NASDAQ saw -5.27% returns, Dow Jones reported -4.20% and the S&P500 reported -4.65%.
Fixed Interest
With growing concerns in the global economy over energy prices pushing up inflation, markets are paying close attention central banks’ sentiments and policies. The Bloomberg AusBond Composite (0+Y) index declined during the month to return -1.51%. In international fixed income markets, the Barclays Global Aggregate TR Hedged index’s returned -0.97% over the month.
Foreign Exchange
The Australian dollar showed some depreciation over the month however seemed to be able to recover sufficiently. Ongoing concerns on the RBA’s approach to monetary policy leave worth of the Aussie dollar uncertain as dovish forward guidance could create a headwind. Against the US dollar, Aussie returned -1.22% over the month. More success was found alongside the Euro as AUD/EUR returned +0.74%. AUD/JPY reached some of the lowest lows this month, however finished on a mild negative return of -0.06%.
Commodities
Oil remained relatively stable this month, with brent crude returning +7.58% and WTI +9.53%. In the beginning of the month, port closures as a result of bad weather on the Gulf of Mexico saw mild price surges for the commodity. China also began releasing government reserves of crude as a measure to lower prices amid surging domestic energy costs. The government has also indicated that they may continue to release barries if necessary.
The price of gold drifted down this month as it recorded a return of -3.12%. Iron Ore was a big loser, returning -23.72% over the month as global demand continued to soften, unable to meet increasing supply.
Cryptocurrency
Cryptocurrency had a tumultuous run this month, spurred on by changing government regulation. At the beginning of the month, El Salvador announced that it was be adopting Bitcoin as legal tender and the government had purchased 200 coins before making this announcement. In tandem with this, their announced they would be temporality disconnecting its Bitcoin wallet. This caused a 17% plunge where the government was able to take advantage of the dip and purchase 150 more coins. El Salvador will be giving each citizen $30 worth of coins in order to stimulate this policy.
In the latter half of the month, China’s central bank declared that all transactions involving cryptocurrency is illegal, including trading and coin mining. This follows initial regulation put in place in May that prohibited financial institutions and payment companies from providing crypto related services. Markets negatively reacted to this news, as crypto enthusiasts shift their focus back to the US as a hub for growth.
