Trade war escalates, but talks are planned for October
US Fed cuts rates – twice
ECB revives asset purchases, cuts deposit rate
Both global equities and bonds rose during the quarter, with bonds in particular posting strong gains.
Over the quarter, the MSCI AC World equity benchmark rose 1.2% (4.6% in euro terms).
Japan rose 3.6% (7.9% in euro terms) as a trade deal was agreed in principle with the US that is expected to avoid the imposition of auto tariffs.
Europe rose 2.5% (2.9% in euro terms), with the weaker euro boosting exporters. Additional monetary policy measures announced by the ECB were also supportive.
The Pacific Basin ex Japan fell -2.5% (-1.0% in euro terms), with Hong Kong particularly weak on the back of social unrest. The region was also negatively affected by weaker economic releases, much of these associated with the ongoing trade tensions.
Emerging markets fell -1.9% (+0.2% in euro terms) due to the perceived risks to global trade related to renewed escalation of trade tensions. At the same time, US dollar strength also negatively impacted emerging-market assets.
The ICE BofA Merrill Lynch Eurozone > 5-year sovereign bond benchmark rose 5.6% during the quarter. The German 10-year yield reached new all-time lows during the quarter of -0.74%, as global bond yields fell sharply mid-quarter.
In Italy, 10-year spreads against Germany fell sharply to 139bps as a new, more EU-friendly coalition was formed and the ECB announced that asset purchases would recommence in November.
The euro continued to weaken against the US dollar over the quarter, with the EUR/USD falling to 1.0899 by quarter-end.
Commodities fell -4.2% (+0.1% in euro terms). West Texas Intermediate (WTI) oil fell -7.5%, despite the sharp spike in September associated with the attack on Saudi oil facilities. These gains were quickly reversed as it was reported that Saudi production would recover much more quickly than initially anticipated.