Market Monitor - 24 September 2021
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Market Monitor – 24 September 2021

In a rollercoaster week, global stock markets have managed to claw back sharp losses as fears of a major debt crisis in China eased. The latest instalment of the saga involving the Evergrande property empire sent markets into a tailspin on Monday: concerns that the company was about to default on a multi-million-dollar bond repayment sent share prices crashing all over the world with investors in Europe and the United States worried about the potential for contagion.

Indices on both sides of the Atlantic suffered their worst day in several months, while bourses in the Far East fared even more negatively. Fears over the Evergrande situation played into ongoing concerns about the overvaluation of stocks in general – indeed, recent investment manager surveys have suggested that many analysts expect a major correction at some point this year, while September is traditionally seen as a particularly weak month for markets.

At the same time, there are worries that central banks, especially the Federal Reserve in the US, are about to start unwinding stimulus measures, removing a significant level of support from both the real economy and financial markets.

Monday’s slump turned out to be a false dawn for the bears, however: markets rallied on Tuesday as it became clear that any Evergrande default was likely to be contained within China – and would not lead to the sort of domino effect seen during the financial crisis. To calm nerves further, the property giant agreed a new repayment deal with bondholders on Wednesday, apparently heading off any immediate danger.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.5% up for the week so far, with the S&P 500 0.4% ahead. Wednesday’s Fed announcement that it expects to have both begun and ended its tapering programme by mid-2022 did little to dent the post-Evergrande rebound, with investors having now largely come to terms with the idea that stimulus measures will start to be withdrawn before the end of this year.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 1.6% up for the week, having endured its worst day since July on Monday. Shares in travel companies fared especially well following the US government’s decision to reopen the country to international visitors and an overhaul of the UK’s quarantine system for overseas arrivals.
Further gains in London were limited by news on Thursday that the Bank of England expects inflation to remain above target levels for much of the rest of the year – making a hike in interest rates more likely. Britain is currently suffering from a sharp rise in energy prices in addition to its ongoing supply chain problems, with retailers warning that shortages of a wide range of products are likely as we move into autumn.
In Frankfurt, the DAX index ended Thursday’s session up 1% for the week, while France’s CAC 40 gained 2%. Stocks across the eurozone made a strong recovery from the week’s early losses.

Asia

In Asia, the Hang Seng index in Hong Kong finished 1.6% down – which marked a significant recovery having slumped to almost 9% below its September high at the end of trading on Monday. Japan’s Nikkei 225 index of leading shares, meanwhile, closed 2.8% lower, giving up some of the strong gains made earlier in the month.

 

September 17
September 23
Change (%)
FTSE 100
6963.6
7078.4
1.6
FTSE All-share
4023.3
4081.3
1.4
S&P 500
4433.0
4449.0
0.4
Dow Jones
34584.9
34764.8
0.5
DAX
15490.2
15644.0
1.0
CAC 40
6570.2
6702.0
2.0
ACWI
730.0
731.6
0.2
Hong Kong Hang Seng
24920.8
24511.0
-1.6
Nikkei 225
30500.1
29639.4
-2.8
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 16/9/2021.
24 September 2021
Mark King
Mark King
Head of Investment Content
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Market Monitor – 24 September 2021

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