The central banks' turnaround

September was a positive month for most stock exchanges worldwide. At the same time, the European and US central banks once again had to pull on their monetary-policy joysticks.

During the month as a whole, the American S&P 500 Index rose by 1.9 per cent measured in USD, while the European Stoxx 600 Index increased by 3.7 per cent measured in EUR and the Nordic VINX Index climbed 1.9 per cent measured in NOK. In Norway, the Oslo Stock Exchange (OSEBX) rose by 2.9 per cent.

European 180 degrees

Following a long period of speculation, the European Central Bank issued confirmation in September. In addition to cutting the interest rate by 10 basis points to minus 0.5 per cent, quantitative easing (QE) was relaunched only three quarters after it was stopped. Euro 20 billion per month is slightly less than expected, but the ECB sugared the pill by announcing that the purchases will continue for as long as necessary and start as early as in November. This turnaround is driven by weaker macro figures which seem to show that the German manufacturing sector in particular is stagnating.

American consumers

The US central bank also followed up with a new interest-rate cut in September, among other things as a result of weaker manufacturing barometers. At the same time, the service sector is doing well, as is consumer confidence and private consumption. However, the big question is whether consumption and the service sector will decline like the manufacturing sector or if the opposite will happen. If the manufacturing sector starts to dismiss employees, it is natural for this to negatively affect consumption and, gradually, the service sector. In the opposite case, if the labour market and consumption remain unchanged, the manufacturing sector may well recover.

Macro down, surprise up

Although global macro figures are on the whole continuing to decline, there are also some positive factors. The so-called Surprise Index, which measures the difference between expectations and actual macro figures, has risen over the past two months following a long period of disappointments. Analysts have lowered their expectations in line with the facts, but it is nonetheless good for the markets that the macro figures are positively surprising even though they are falling.

The road ahead …

The mood in the stock markets shifts from month to month. The same is true for the sectors and types of shares that are popular. Although there are more fluctuations, shares still appear to be the most attractive alternative.

"At the end of the day, it's not a normal condition to have interest rates at zero"
Lloyd Blankfein