Market Roundup - September 2026
Geopolitics Fuels Market Expectations
The escalation of events in the Middle East disrupted energy supplies from the Gulf region over September and pushed oil prices sharply higher, with Brent crude oil surpassing US$100/bbl before easing. The ongoing inflationary risk surrounding energy prices proved to be a material consideration in markets expectations of Central Bank actions.
Chinese economic indicators such as manufacturing activity showed some improvement over the month, however subdued domestic demand and a challenging property environment remained economic headwinds. Expectations of further fiscal and monetary support from Beijing were influential for commodities and emerging markets.
September saw trade relations between China and the US continue to generate uncertainty around global growth and supply chain resilience. While both Washington and Beijing both agreed to extend their trade truce and reduce tariffs on some goods, markets remained cautious about the possibility of renewed escalation between the two economies.
Higher-for-Longer
September saw most developed market Central Banks move towards a more cautious stance as inflation pressures remained persistent. Banks such as the Reserve Bank of Australia, the Bank of Japan and the European Central Bank all tightened monetary policy, a trend which reinforced markets expectations of a “higher-for-longer” interest rate environment.
New Zealand was no different. Annual inflation data for the June quarter reached 4.1%, driven partly by steep increases to the cost of fuel. RBNZ Governor, Anna Breman, delivered a 0.25% increase to the OCR, judging that a gradual removal of stimulus now would help prevent entrenched inflation and avoid a sharper economic slowdown later on.
Similarly, the Federal Reserve raised interest rates by 25bps to 3.75% (their first increase since July 2023) demonstrating the stubborn nature of inflation in the US, which has been persistently above the Bank’s target. Data showing strong consumer spending kept underlying inflation concerns front of mind and the door open for further tightening.
However, there were some differences across the major Central Banks, with the Bank of England leaving monetary policy settings unchanged. Despite growing economic pressures in the UK, policymakers saw little evidence that temporary energy price increases were spreading into broader wage and price inflation.
The combination of higher inflation, tighter monetary policy conditions and increased government borrowing requirements, resulted in global government bond yields rising significantly over the month, with 10-year US Treasury yields reaching multi-year highs that were last seen in the GFC.
The divergence between key Central Bank trajectories as well as expectations of a changing monetary policy stance from the Federal Reserve contributed towards an uptick in volatility across currency markets. Simultaneously, higher treasury yields worked to provide support for the US dollar, which rose roughly 2% over the month.
The bond market sell-off dragged on equity valuations, while strong AI-related investment and earnings expectations provided a partial counterweight. This generally resulted in sharemarkets finishing September lower than they started, but there were some exceptions, with Asian and tech-heavy markets proving more resilient.