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Blog Posts — October 2, 2019

Stocks Eke Out Third-Quarter Gain with September Rebound

Stocks rebounded in September amid hopes for a thaw in the trade war between the US and China and as the world’s major central banks lowered interest rates to support faltering economic growth.

The STOXX® Global 1800 Index rose 2.1% in dollar terms1 during the month, following a 1.8% drop in August, wrapping a 0.7% advance in the third quarter.

The Eurozone’s EURO STOXX 50® Index increased 4.3% in euros and the STOXX® Europe 600 Index rose 3.7%. The STOXX® North America 600 Index gained 1.7% and the STOXX® Asia/Pacific 600 Index increased 3.1%, both in dollars. The STOXX® Japan 600 Index rose 5.9% in yen, its best monthly showing since July 2016.

Throughout the month, investors took positive cue from continued talks between the US and China as both nations negotiate an agreement to facilitate bilateral trade. Under President Trump, the US has imposed tariffs on the Asian country.

The European Central Bank on Sep. 12 cut interest rates further into negative territory and renewed a bond-purchasing program to stimulate demand. The US Federal Reserve followed suit days later with its second rate cut since July.

Markets also shrugged off news of an impeachment enquiry against Trump, the start of a process that could lead to his removal from office.

Gains across markets

All 25 developed markets tracked by STOXX advanced during the month when measured in euros. In dollar terms, two of them declined: the STOXX® Denmark Total Market Index lost 0.5% and the STOXX® Hong Kong Total Market Index shed 0.2%.

The STOXX® Developed Markets 2400 Index rose 3% in euros and 2% in dollar terms, as the common currency retreated 1% against the greenback during the month.

Fourteen of 21 emerging-market national indices climbed when measured in dollars, led by a 12% advance in the STOXX® Turkey Total Market Index. The STOXX® Emerging Markets 1500 Index advanced 3.2%.

Banks lead advance

All but three of 19 supersectors in the STOXX Global 1800 Index gained in the month. The STOXX® Global 1800 Banks Index led returns with a 7.2% advance, even if lower interest rates tend to hurt the industry’s income. The STOXX® Global 1800 Media Index was the month’s worst performer, after falling 1.3%.

Pure factor exposure falls back to losses

Exposure to pure factor premia resumed this year’s negative run during September. All seven iSTOXX® Europe Factor Market Neutral Indices, which hold a short position in futures on the STOXX Europe 600 to help investors neutralize systematic risk, had a loss for the month. The iSTOXX® Europe Value Factor Market Neutral Index posted the narrowest loss, although it still logged its eighth consecutive monthly retreat.

Factor returns also underperformed as measured by the EURO STOXX® Multi Premia® and Single Premium Indices, which are exposed to the market’s systematic risk. All but one of eight indices trailed their benchmark, the EURO STOXX® Index, which added 3.7% in euros during September. Just as with the iSTOXX Europe Factor Market Neutral Indices, the group’s best performance came from the index tracking a value strategy: the EURO STOXX® Value Premium Index rose 5%.

ESG and sustainability

STOXX’s ESG and sustainability indices outperformed during September.The STOXX® Global ESG Impact Index topped the STOXX Global 1800 Index by 28 basis points. The former selects stocks based on key sustainable performance indicators.

Most STOXX Climate Indices also fared better than the market.The STOXX® Global Climate Impact Ex Global Compact Controversial Weapons & Tobacco Index came ahead of the STOXX Global 1800 Index by 90 basis points and the STOXX® Global Climate Change Leaders Index did so by 40 basis points.

Thematic indices underperform

Twelve of the 17 revenue-based STOXX® Thematic Indices, which look at companies’ sales exposure to sectors closely related to specific trends, trailed the STOXX Global 1800 Index during September.

For a second consecutive month, the iSTOXX® FactSet Breakthrough Healthcare Index had the group’s worst performance, shedding 4.4% this time. The STOXX® Global Electric Vehicles and Driving Technology Index, at the other end, was the best performer after rising 7.1%.

Within STOXX’s artificial-intelligence-driven thematic indices, the iSTOXX® Yewno Developed Markets Blockchain Index stood out during September with a 4% gain. The AI-driven thematic indices employ computational systems to select businesses investing in the adoption of intellectual property underpinning the respective theme.

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1All results are total returns before taxes.