Global stocks beat all assets in the
best quarter since the start of 2012 and commodities rose the
most in a year after the Federal Reserve maintained economic
stimulus and growth in China and Europe strengthened.
Equities rallied more than bonds, the dollar and metals as
the MSCI All-Country World Index (BHYC) of shares in 45 markets climbed
8.1 percent including dividends in the past three months.
European shares jumped the most since 2009. The Standard
Poor’s GSCI Total Return Index of 24 raw materials added 4.8
percent, while the Bloomberg Dollar Index fell 2.8 percent, the
biggest drop in three years. Bonds of all types rose 0.8 percent
as of Sept. 27, based on Bank of America Merrill Lynch’s Global
Broad Market Index.
Equity values worldwide increased by $4.9 trillion during
the quarter as the Fed unexpectedly refrained from reducing its
monthly bond purchases and confidence in the euro area rose for
a fifth month. Chinese manufacturing and exports rose, spurring
gains in industrial metals and sending copper to the first
quarterly advance in a year.
“The economy has stayed a little bit stronger than people
had expected, and stocks represent relatively good value,” John Carey, a fund manager at Boston-based Pioneer Investment
Management Inc., which manages about $200 billion, said by
phone. “There’s a lack of compelling alternatives, with the
bond market’s weakness due to concerns about rising rates.”
Bull Market
Equity benchmarks in Spain, Italy and France jumped more
than 10 percent last quarter and the Hang Seng China Enterprises
Index entered a bull market. The Standard Poor’s 500 Index
briefly surpassed 1,700 last month before closing at 1,681.55
yesterday, for a total return of 5.2 percent.
Global stocks pared gains in the last week of September, as
a stalemate over the U.S. federal budget threatened the first
government shutdown in 17 years. Democrats and Republicans also
face a clash this month over the nation’s debt limit, which the
Treasury Department has said will be reached on Oct. 17.
Investors poured $25 billion into stock mutual funds in
July and August, while pulling $46.3 billion out of bond funds,
according to data from the Washington-based Investment Company
Institute.
The euro rallied 4 percent to $1.3527 last quarter, its
biggest gain since the beginning of 2011. Ten-year Treasuries
have climbed for the past three weeks, the longest winning
streak since April. Gold dropped 4.9 percent in September,
bringing its decline for the year to 21 percent.
“The fact that Europe is now out of recession and showing
some degree of economic momentum is a positive for global risk
assets,” said Jim Russell, a senior equity strategist at U.S.
Bank Wealth Management, which manages about $112 billion.
Job Market
The U.S. unemployment rate dropped to 7.3 percent in
August, a more than four-year low, in part because workers left
the labor force. Growing concern over the outlook for hiring and
wages hurt sentiment among Americans last month as the
Conference Board’s consumer confidence index registered the
weakest reading since April.
“Conditions in the job market today are still far from
what all of us would like to see,” Chairman Ben S. Bernanke
said Sept. 18 after a meeting of the Federal Open Market
Committee. He said there is no predetermined schedule for
tapering the asset purchases that have helped push the SP 500
up as much as 155 percent since March 2009.
The SP 500 gained 3.1 percent in September after the Fed
said its $85 billion-a-month bond-buying program will continue
until it sees stronger evidence of economic expansion. The
equity benchmark’s valuation increased to 16.12 times reported
operating earnings from 15.69 at the beginning of the quarter.
Dow Reshuffling
Goldman Sachs Group Inc., Visa Inc. and Nike Inc. were
added to the Dow Jones Industrial Average in September,
replacing Bank of America Corp., Hewlett-Packard Co. and Alcoa
Inc. in the biggest reshuffling of the gauge since April 2004.
Goodyear Tire Rubber Co., Netflix Inc. (NFLX) and Regeneron
Pharmaceuticals Inc. rallied more than 39 percent in the quarter
to lead gains in the SP 500.
Wall Street strategists, who began 2013 predicting a 7.6
percent rise in the SP 500 to 1,534 by year end, raised their
forecasts as stocks climbed. The average estimate of 17
strategists surveyed by Bloomberg calls for a 2 percent increase
to 1,715 in the next three months. The benchmark will reach
1,844 by the end of 2014, according to the average projection.
The MSCI Emerging Markets Index advanced 5.9 percent in the
third quarter, the biggest gain in a year. Turkey’s benchmark
equity gauge jumped 12 percent last month, leading 21 emerging
markets tracked by Bloomberg, amid optimism the Fed’s decision
to maintain stimulus will spur capital inflows the country needs
to fund its current-account deficit.
Emerging Markets
“The Fed decided to play hero with zero tapering,”
Wellian Wiranto, an investment strategist at the wealth-management unit of Barclays Plc, which oversees about $217
billion worldwide, said from Singapore. “If China’s growth
remains on the stabilization path as we have seen, it will be a
good thing for emerging markets into year-end.”
An index showed Chinese manufacturing expanded in
September, according to a reading released yesterday by HSBC
Holdings Plc and Markit Economics, and August exports topped
analysts’ estimates. Rebounding Chinese demand means industrial
metals may climb through the end of the year, according to
Deutsche Bank AG.
Raw Materials
The Standard Poor’s GSCI Total Return Index of 24 raw
materials rose 4.8 percent in the three months ended Sept. 30,
the biggest quarterly gain in a year, on speculation China’s
strengthening economy will bolster demand for energy and metals.
Cocoa, silver and cattle led the advances.
“We started to see signs of not only a bottoming in
Europe, but more important, a stronger Chinese economy,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at
BBT Wealth Management in Birmingham, Alabama, said in a
telephone interview on Sept. 25. That “generally means higher
commodity prices,” he said.
Bullion dropped in September as Russia backed a plan to rid
Syria of chemical weapons, reducing the chance of a U.S.
military strike. Prices will decline into 2014 as re-accelerating U.S. growth prompts the Fed to trim its monetary
easing, Goldman Sachs Group Inc. said. Prices may fall 2.4
percent to $1,295 an ounce in the fourth quarter, according to
the median estimate of 28 analysts.
Record Crop
The SP GSCI Agricultural Total Return Index is down 3.4
percent since the end of June, the fourth straight quarterly
decline. Corn lost 8.4 percent in September, the seventh monthly
decline this year. U.S. farmers are projected to harvest a
record crop this season after fields recovered from last year’s
drought, the worst since the 1930s. Corn may rebound 13 percent
to $5 a bushel in the fourth quarter, according to the median
estimate of 14 analysts surveyed by Bloomberg.
Brent crude prices rose 6.1 percent last quarter after
touching a six-month high of $117.34 a barrel on Aug. 28, amid
concern that an attack on Syria would disrupt Middle East
supplies. Brent has slid 3.9 percent since Sept. 14, when the
U.S. and Russia reached a framework deal on Syria’s chemical
weapons.
“Seventy percent of that jump is due to tensions in the
Middle East,” said Gordon Kwan, head of regional oil and gas
research at Nomura International Ltd. in Hong Kong. “The other
30 percent of the increase in oil prices is on expectations that
the global economy will recover.”
Dollar Drops
Brent will average $107 a barrel this quarter, based on the
median of 32 analyst estimates compiled by Bloomberg. West Texas
Intermediate oil is forecast to average $103.
The Bloomberg Dollar Index, which tracks the dollar against
10 major peers, fell 2.8 percent in the quarter, the biggest
drop since 2010. The index touched its lowest level since
February last month after the Fed refrained from reducing asset
purchases.
New Zealand’s dollar rallied 7.3 percent against the
greenback, the biggest gain among its 31 most-traded peers.
The euro has climbed 0.5 percent in the past three months
against nine developed market peers tracked by the Bloomberg
Correlation Weighted Index. The region’s economy emerged from a
record-long recession in the second quarter, according to data
released in August. An index of European executive and consumer
sentiment increased more than economists forecast in September,
a report by the European Commission in Brussels showed.
Bond Returns
The European currency is forecast to weaken to $1.3 by the
end of 2013, according to the median estimate of 87 economists
and strategists surveyed by Bloomberg. Japan’s yen fell 0.9
percent last quarter to 98.27 versus the U.S. currency and is
forecast to weaken to 102, according to a separate survey.
Bonds of all types returned 0.8 percent in the quarter, the
biggest gain since the end of 2012, according to Bank of America
Merrill Lynch’s Global Broad Market Index, which tracks debt
securities with a market value of about $44 trillion. The gauge
has fallen 0.5 percent in 2013.
Average yields fell 11 basis points, or 0.11 percentage
points, last month to 2.01 percent as of Sept. 27. High-yield
bonds returned 3.6 percent last quarter, according to the
Bloomberg Global High Yield Corporate Bond Index.
Treasuries gained 0.01 percent in the past three months as
of Sept. 27, after falling for the prior four quarters. Yields
on 10-year U.S. government debt may climb to 2.9 percent by the
end of the year, from 2.6 percent, according to the median
estimate of 74 economists surveyed by Bloomberg.
Greek bonds were the best performers among the 26 sovereign
markets tracked by Bloomberg and the European Federation of
Financial Analysts Societies, rising 13 percent in the third
quarter. New Zealand’s debt lost the most with a 1.3 percent
decline.
“Investors are more comfortable with stocks,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated
Investors Inc., which oversees about $364 billion, said in a
phone interview. “They’re observing the trailing returns of
stocks and want a piece of the action. Simultaneously, for the
first time in a long time, they’re feeling some pain for having
held bonds.”
To contact the reporters on this story:
Nick Taborek in New York at
ntaborek@bloomberg.net;
John Detrixhe in New York at
jdetrixhe1@bloomberg.net;
Elizabeth Campbell in Chicago at
ecampbell14@bloomberg.net
To contact the editor responsible for this story:
Lynn Thomasson at
lthomasson@bloomberg.net
New York Stock Exchange
Jin Lee/Bloomberg
Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Global stocks pared gains in the last week of September, as a stalemate over the U.S. federal budget threatened the first government shutdown in 17 years.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Global stocks pared gains in the last week of September, as a stalemate over the U.S. federal budget threatened the first government shutdown in 17 years. Photographer: Jin Lee/Bloomberg
Oct. 1 (Bloomberg) — James Bianco, president of Bianco Research LLC, talks about the outlook for markets amid a U.S. partial government shutdown and investment strategy.
He speaks with Betty Liu, Julie Hyman and Scarlet Fu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
Oct. 1 (Bloomberg) — Martin Lakos, a Sydney-based director at Macquarie Private Wealth, talks about Reserve Bank of Australia monetary policy.
He also discusses the outlook for global financial markets as investors awaited a potential shutdown of the U.S. government. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Lakos spoke before the House voted 228-201 to pass its third version of a short-term extension of government funding in the past 10 days. Source: Bloomberg)
Stocks Rise Most Since "12 in Quarter, Tops Dollar, Bonds
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