In the United States, the Federal Open Market Committee (FOMC) announced a 50-basis point cut in the federal funds rate, bringing the target range to 4.75%-5.00%. This marks the beginning of a monetary easing cycle, despite robust economic growth fuelled by strong retail sales and industrial production. However, indications of weakness in the labour market influenced the Committee’s decision for a more aggressive cut. Chairman Powell emphasised the necessity to recalibrate policy in light of current conditions, suggesting that future cuts may be more modest in magnitude.

In the Eurozone, September’s manufacturing and services PMIs were underwhelming, with both output and new orders showing signs of weakness. The manufacturing PMI dropped to 44.8, the lowest level since December 2023, indicating continued contraction in the industrial sector. This decline was characterized by reduced new orders and order backlogs. Among major economies, German manufacturing was particularly weak, while France’s manufacturing PMI showed relative stability.

On the services front, the Eurozone PMI fell to 50.5 in September, marking the eighth consecutive month in expansion territory, yet still the lowest reading since February 2024. Here too, new business slowed, with Germany’s services PMI declining and France’s services PMI losing some of the momentum gained during the Olympics in August. Overall, the composite Eurozone PMI fell to 48.9 in September from 51.0 in August, representing the first contraction since February.

The European Central Bank (ECB) responded by cutting its Deposit Rate to 3.50%, acknowledging moderating inflationary pressures while maintaining a data-dependent approach for future decisions. The ECB revised its GDP growth forecasts downward, projecting growth of 0.8% for 2024 and 1.3% for 2025, while slightly increasing core inflation expectations.

In the U.K., July’s GDP figures indicated stagnation, with declines in both industrial and manufacturing production. Wage growth also slowed, which may pave the way for future Bank of England rate cuts, although current wage growth levels remain elevated. The U.K. economy recorded its second consecutive month of 0.0% growth in July. Industrial production surprised on the downside, falling 0.8%, while manufacturing production dropped 1.0%, nearly reversing June’s gains.

The September PMIs in the U.K. also showed a decline, signalling a more orderly moderation in economic activity. The manufacturing PMI decreased to 51.5, and the services PMI fell to 52.8, remaining in expansion territory for the 11th consecutive month. While new orders and business components saw only slight declines, price trends were mixed, with service providers’ prices softening and manufacturers’ prices rising. This suggests a continued gradual approach to rate cuts by the Bank of England.

Global stock markets saw gains in September, with the MSCI World Index up 1.7%, the S&P 500 rising by 2.3%, and the Nasdaq increasing 2.7%. In the U.K., the FTSE 100 fell by 1.7% while smaller companies struggled with the AIM All-Share Index down by 4.2%, the Fledgling index down by 5.0% and the Small Cap Index down slightly, by 0.04%, Our portfolio declined by 0.5% during the month and after accounting for expenses and paying our interim dividend of 2.3p per share, the NAV decreased by 1.9%. Key contributors to performance included AEW, Gama, Rightmove and Games Workshop. We sold our position XP Power and increased our holding in Alpha Group during the month with cash comprising 1.3% at month end.