By Nicolas Bickel, Group Head of Investment Private Banking & CIO
Reflecting seasonality (MSCI World -1.17% on historical average), equity markets mostly fell in September. The majority of MSCI World sectors delivered a negative performance, affected by the further rise in energy prices and the sharp rise in sovereign yields. However, this decline remains rather moderate compared to the movements observed on the bond markets. Equity markets remain supported by high corporate profitability, particularly in the technology sector, and by a global economy that remains resilient.
Rising sovereign yields do not affect all markets in the same way
The exceptionally large and broad-based rise in sovereign yields, fueled by the inflation premium but above all by economic growth momentum and governments’ growing financing needs, has impacted all bond markets. This movement has moderated the upward trend in equity markets, particularly the most rate-sensitive sectors.
Indeed, the German 10-year yield rose above 3.56% while France’s 10-year yield approached 5%, its highest level since 2002. The yield spread between France and Germany has widened to levels not seen since the financial crisis across the curve, with a peak of 140 basis points on the 10-year maturity. The US 10-year yield rose by more than 0.5% in September, the largest monthly increase in 4 years. It has since hovered around 5.3% while the 2-year yield remains close to its year-to-date highs at 4.80%.
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