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• Further pain was felt across markets in September as inflation numbers remained stubbornly high and continued to beat expectations globally. As a result, central banks of most major economies continued to hike interest rates, which forced markets to price in a more depressed growth outlook. Consequently, yields have risen sharply and the Morgan Stanley Capital International (MSCI) All Country World Index lost 9.7% in September. Developed markets have fared better than their emerging counterparts, with the MSCI World Index losing 9.5% as compared to 11.9% for the MSCI Emerging Markets Index.
• The US economy showed signs of resilience early in September after the Institute of Supply Management’s Manufacturing Purchasing Managers Index (ISM Manufacturing PMI) remained steady at 52.8 in August, beating expectations for a drop to 52.0. Despite the positive reading, manufacturers are still expressing concerns about a softening economy. The services sector continues to advance, with the ISM Services PMI edging higher to 56.9 in August, beating expectations and pointing to the strongest growth since April.
• US inflation remains stubbornly high after annual CPI data showed a jump to 8.3% in August as compared with forecasts for a drop to 8.1%. However, the primary concern is the fact that core CPI, which excludes the effects of volatile items like food and energy, rose by 0.6% month-on-month in August, as compared to 0.3% in July. This highlights the fact that inflation has seeped into the stickier parts of the economy and may be harder to bring down than expected.
• Unsurprisingly, the high inflation reading and strong PMI data pushed the Federal Reserve to raise interest rates by 75 basis points at their September meeting. However, of more importance was that it came across with a strong message that a Fed pivot is not coming any time soon and that rates will remain higher for longer.
• Not much has changed in China as its zero-Covid policy continues to disrupt economic activity. According to a statement made by the World Bank, this, coupled with the housing market crisis has put China’s economic growth behind the rest of Asia for the first time in over 30 years. It is now forecasting GDP growth of only 2.8% for China in 2022, as compared to the 5.3% expected for the rest of the region.
• The United Kingdom continues to struggle as the Flash Composite PMI fell to 48.4 in September from 49.6 the month before. This marks the second consecutive contraction and highlights the fact that businesses are struggling to keep up with the negative effects of higher prices and weaker demand.
• Slight relief came when UK annual inflation unexpectedly dropped to 9.9% in August from 10.1% the month before. While the drop took many by surprise, it does little to change the trajectory of UK inflation going forward. Consequently, the Bank of England raised rates by 50 basis points for the second consecutive meeting.
• Locally, there seems to be no end in sight to South Africa’s energy struggles as Eskom struggles to keep the lights on. The constant waves of load shedding continue to put a strain on the economy, with mining production shrinking for the sixth consecutive month by 8.4% (year-on-year) in July. The manufacturing sector broke its three-month contractionary trend after manufacturing production rose by 3.7% from a year earlier in July. While encouraging, the advance is likely due to the low base effects caused by the social unrest in July 2021.
• On the inflation front, annual CPI eased to 7.6% in August, down from 7.8% in July but beating expectations for a drop to 7.5%. The drop was largely expected due to the recent decline in key food and fuel prices. Despite this, the South African Reserve Bank still sees upside risks to the inflation outlook and thus raised interest rates by 75 basis points at their meeting in September. This brings the repo rate to 6.25% and the prime lending rate to 9.75%.
• South African equities followed their global peers lower with the JSE All share index losing 5.3% in September. Industrials were the worst performing sector after losing 7.3%, followed by financials and resources with -7.2% and -0.1%, respectively.
• One-month index movements:
  • JSE All Share Index: -5.25%
  • S&P 500 Index (US): -9.34%
  • FTSE 100 Index (UK): -5.36%
  • Hang Seng Index: -13.69%

Source: Investing.com and Trading Economics