The Global Content Team at Schroders Investment has published an article stating that global stock markets experienced several significant fluctuations in the third quarter but remained overall upward.The emerging markets performed strongly,thanks to new stimulus measures announced by China.Multiple markets saw interest rate cuts during the quarter,and expectations of further rate cuts in the future contributed to the fixed income market achieving robust returns.

Asia (Excluding Japan) Equities Achieve Steady Gains,Chinese Equities Rise Strongly

Specifically,Asia (excluding Japan) equities achieved steady gains in the third quarter.Thailand,Hong Kong,and Mainland China were the best-performing markets in the MSCI AC Asia (excluding Japan) index,while South Korea,India,and Taiwan were the worst-performing index markets.Among them,the Chinese government implemented a series of stimulus measures (ranging from interest rate cuts to fiscal support),leading to a strong rise in Chinese equities during the quarter.

Due to the sell-off of technology stocks during the quarter,South Korea was the only index market that ended the quarter in negative territory,as investors began to question how the expansion of artificial intelligence would benefit income.The appreciation of the Korean won also hit export-oriented stocks.Taiwan's stock market was also severely impacted by the sell-off of technology stocks during the quarter,with artificial intelligence stocks being particularly affected.However,despite the poor quarterly performance,Taiwan remains the best-performing index market year-to-date.

Emerging market equities recorded strong growth in the third quarter,outperforming developed markets.The quarter started with turmoil,as technology-related stocks were heavily sold off,and the Bank of Japan's interest rate hike led to the unwinding of carry trades.However,after these events,monetary policy easing measures in the United States and China helped emerging markets achieve particularly strong returns in September.

In the third quarter of 2024,Japanese stock market volatility reached historical highs.The market hit new highs in early July due to continued positive momentum.However,the market then corrected sharply at the end of July,with confusion in early August due to weak US economic data and interest rate hikes by the Bank of Japan.These interest rate changes led to significant fluctuations in the currency market.During the quarter,the yen strengthened significantly against the US dollar.The yen's strength also had a significant impact on industry performance.Overall,domestically oriented industries such as retail,construction,information,and communication performed steadily,while export industries such as automobiles and machinery performed poorly.Smaller companies performed well compared to large-cap stocks.

Fundamentally,corporate earnings and macroeconomic data showed steady progress throughout the quarter in Japan.Total earnings for the quarter from April to June exceeded expectations.The weak yen supported this performance,and domestically focused industries also showed strong recovery.After adjusting for inflation,real wages turned positive for the first time in 27 months in August and continued to maintain positive momentum in September.

Thailand performed the best in the third quarter,with a strong currency and returns from the first phase of the new government's stimulus plan implemented in September.China also achieved double-digit returns in US dollar terms in September,following the announcement of monetary stimulus measures and expectations of further measures such as fiscal stimulus.South Africa performed particularly strongly,benefiting from the smooth formation of a national unity government and the central bank following the Federal Reserve's lead by cutting interest rates for the first time since 2020 in September.

India and Brazil performed poorly,with the latter's central bank reversing recent monetary easing by raising interest rates to curb inflation,coupled with negative impacts from the government's relaxation of fiscal spending.Taiwan lagged behind the broad index,especially during the early period of a significant global sell-off of technology-related stocks,and Colombia's index market lagged behind its emerging market peers due to weak oil prices.

South Korea's returns were negative,dragged down by the aforementioned industry rotation from the technology sector and concerns about the sustainability of memory recovery.Despite the central bank's interest rate cuts,the Mexican index market also ended the quarter in negative territory due to increased uncertainty over judicial reforms.Turkey was the worst-performing index market due to local currency devaluation,weaker-than-expected earnings in the second quarter,and outflows of foreign stocks.U.S.Stock Market Rises This Quarter,Sector Performance Mixed

The U.S.stock market rose this quarter,but sector performance was mixed due to some previous winners lagging behind.At the same time,other industries that had been shunned by investors regained favor.All sectors except energy recorded positive returns,with utilities and real estate being the best performers,while information technology saw only a slight increase.

Weak employment data announced in the U.S.in early August sparked concerns that the Federal Reserve might be too late to cut interest rates and could potentially harm the economy.The market began to factor in significant monetary easing before the end of the year.At the same time,doubts arose about whether companies' substantial investments in technologies such as artificial intelligence could yield substantial returns.Both factors triggered market volatility in early August.

During this period,some adaptable companies announced profits,which helped to soothe investors' nerves.Subsequently,Federal Reserve Chairman Powell delivered a speech at the Jackson Hole central bank symposium in August,hinting at a rate cut in September.Ultimately,the Federal Reserve announced a 50 basis point rate cut.Investors' attention also turned to the upcoming U.S.election on November 5th.In July,President Biden announced his withdrawal from this year's presidential race,instead supporting Vice President Kamala Harris as the Democratic candidate.

Eurozone Economic Slowdown,Market Expects Further Rate Cuts from the ECB

In the Eurozone,Eurozone stocks measured by the MSCI EMU Index rose in the third quarter.Real estate,utilities,and healthcare sectors led the growth as the prospect of interest rate cuts prompted investors to reevaluate some previously unfashionable sectors in the market.Energy and information technology were the main lagging sectors,with negative returns for the quarter.

The European Central Bank kept interest rates unchanged at its July meeting but subsequently cut them by 25 basis points in September.Data showed that inflation slowed during this period,with the annual inflation rate falling from 2.6% in July to 2.2% in August and 1.8% in September.

However,economic activity indicators showed a slowdown in the Eurozone economy.The preliminary HCOB Eurozone September Purchasing Managers' Index (PMI) was 48.9,an eight-month low.The deep recession in manufacturing was the reason behind the overall reduction in activity.Service sector activity rose slightly to 50.5.Weak PMI data,coupled with weak inflation data,led the market to expect further rate cuts from the ECB.

In addition,the French parliamentary elections concluded in July with no political group obtaining an absolute majority.In September,President Macron appointed center-right politician Michel Barnier as Prime Minister.

The UK Will Proceed Cautiously with Further Rate CutsIn the United Kingdom,the Labour Party's overwhelming victory in the general election at the beginning of the quarter has sparked hopes for a continued recovery of the domestic economy in the UK.Coupled with market expectations of a UK interest rate cut,this led to an increase in the UK stock market for the quarter.The Bank of England announced an interest rate cut in August,the first in four years.The newly appointed UK Prime Minister,Shi Ji Xian,hinted that due to an estimated public finance deficit of £22 billion,there might be tax increases and spending cuts.The Prime Minister added that those with the "broadest shoulders" would bear the heaviest burden,sparking market speculation on which taxes might be increased.

The preliminary estimate of the UK's GDP for the second quarter was encouraging,but the Office for National Statistics subsequently revised the growth rate down to 0.5%,lower than the 0.7% quarter-on-quarter growth achieved in the first quarter.Like growth,as the quarter progressed,official inflation statistics became less encouraging.It was revealed that the annual Consumer Price Index inflation rate reached the Bank of England's 2.0% target in June,and then slightly rose to 2.2%.

Bank of England Governor Andrew Bailey pledged to cautiously proceed with further interest rate cuts.Meanwhile,Deputy Governor Clare Lombardelli added that the central bank considers the current inflation baseline to be benign,but there are still risks of inflation rising again in an "alternative world." During this period,the sectors of staple consumer goods,finance,and non-staple consumer goods performed the best.The energy sector significantly lagged behind.

US Investment-Grade Bonds Perform Strongly

Regarding global bonds,Schroders Investment noted that the Federal Reserve's interest rate cut and market expectations of a faster introduction of easy monetary policy led to the US dollar weakening against major currencies.In the bond market,US Treasury yields fell sharply this quarter,with the 2-year Treasury yield leading the decline,down by 111 basis points,as the yield curve steepened to reflect the prospect of lower interest rate policy.

In the corporate bond sector,although the performance of global high-yield bonds is still better than that of global investment-grade bonds,US investment-grade bonds performed strongly.In the face of stock market volatility,convertible bonds effectively hedged downside risks and followed the stock market with good upside participation in the subsequent recovery.The convertible bond index FTSE Global Focus rose by 5.8%.This means that with strong downside protection,the participation rate approached 90%,higher than the average.

Energy Prices Plunge,Digital Asset Returns Mixed

Furthermore,the S&P GSCI index fell in the third quarter.Due to a decline in global demand,energy was the weakest component of the index,while agriculture,industrial metals,livestock,and precious metals rose.In terms of energy,despite escalating tensions in the Middle East,energy prices plummeted due to concerns about growth leading to a weakening of global demand.

In agriculture,the prices of coffee,cocoa,and sugar rose sharply in the third quarter,while the prices of soybeans and wheat fell slightly.Among industrial metals,aluminum,zinc,and copper rose slightly,while lead prices fell.Precious metal components rose significantly in the third quarter,with gold rising steadily.

The digital asset market's returns for the quarter were mixed.Bitcoin's return for the third quarter was 1% (year-to-date +50%),while Ethereum fell by -24% in the quarter,bringing its year-to-date return to +14%.Following the August decline,the digital asset market recovered in September,supported by the Federal Reserve's mid-month interest rate cut.The main theme for cryptocurrencies this year has been institutional access,which continued into the third quarter with several major asset management companies launching their Ethereum spot ETFs.The U.S.Securities and Exchange Commission also approved options for trading on Bitcoin ETFs,which will enhance market efficiency and further link cryptocurrencies with traditional markets.This trend towards further institutionalization of digital assets is likely to continue,partly due to anticipated clearer regulation in the U.S.,as both presidential candidates now demonstrate support for the digital asset industry.