September Monthly Market Review
- Anthony Walters
- Oct 30
- 3 min read
Global markets gained momentum in September 2025, lifted by optimism around central bank policy shifts and strong performance in commodities and China-focused sectors. The Federal Reserve delivered its first rate cut of the year, while the Bank of England and European Central Bank held steady amid lingering inflation concerns. Equities rallied worldwide, led by standout gains in the Netherlands and Peru, as investor sentiment turned more positive.
Commodities, China, and a Global Lift
· Fed delivers first rate cut of 2025; BoE and ECB hold steady
· Global equities rise, led by Netherlands and Peru
· Commodities and China-focused sectors power gains
Markets enjoyed a positive month as the Balanced portfolio Index gained 1.58%, supported by broader gains in global equity markets.
Inflation and Interest Rates.
UK.
In September 2025, the Bank of England held interest rates at 4.00%, citing persistent inflation and a softening labour market. Inflation remained stubbornly high at 3.80% in August, nearly double the BoE’s 2.00% target, driven by elevated food, fuel, and services costs. Policymakers signalled caution, with future rate cuts likely to be gradual and delayed.
U.S. Federal Reserve.
In September 2025, the Federal Reserve cut interest rates by 25 basis points to 4.25%, marking its first rate reduction of the year. The move was driven by a weakening labour market, despite inflation remaining elevated. Core inflation rose 0.30% month-on-month and 3.10% year-on-year in August, underscoring persistent price pressures. The Fed signalled two more cuts may follow, though it acknowledged inflation may not return to its 2.00% target until 2028.
European Central Bank (ECB).
In September 2025, the European Central Bank held interest rates at 2.00%, pausing after eight cuts since mid-2024. Policymakers cited trade uncertainty and stable inflation as reasons for caution. Eurozone inflation rose slightly to 2.20%, above the ECB’s target, driven by services and food prices, while core inflation held at 2.30%, suggesting underlying pressures remain contained.
Market performance.
The Netherlands was the standout performer in September, delivering an impressive 13.56% gain. This surge was fuelled by strong momentum in technology and semiconductor sectors, supported by global optimism following rate cuts and robust corporate earnings. At the other end of the spectrum, MSCI Denmark posted the weakest return at -2.74%, weighed down by healthcare sector underperformance.
MSCI Peru topped the emerging market rankings with a 13.21% gain, driven by strong performance in mining and commodity-linked sectors amid rising global copper prices and improving domestic sentiment. Close behind, MSCI South Africa advanced 12.46%, supported by resource stocks and a rebound in the rand following easing inflation pressures.
On the downside, MSCI Philippines was the weakest performer, falling 4.87%. The decline reflected persistent macro headwinds, including sluggish consumer demand and currency volatility, which weighed on equity valuations.
Sector performance.
UT Commodity/Natural Resources led sector performance with a robust 8.38% gain, supported by rising commodity prices and strong demand for energy and raw materials. Close behind, UT China/Greater China advanced 8.30%, reflecting optimism around policy support and improving economic data from the region.
On the weaker side, UT European Smaller Companies declined 0.73%, as slowing growth and higher funding costs weighed on valuations in the small-cap space.
Source: FE FundInfo, 17/10/25
Summary.
Markets carried their momentum into September, with global equities advancing and the Balanced portfolio Index gaining 1.58%. Optimism was fuelled by the Fed’s first rate cut of the year, while the Bank of England and ECB held steady amid stubborn inflation.
Developed markets saw sharp dispersion — the Netherlands surged over 13%, while Denmark lagged. Emerging markets outperformed, led by Peru’s 13% rally and strong gains in South Africa and Korea. Commodities and China-focused sectors dominated, reflecting confidence in cyclical recovery themes.
Despite inflation staying above targets, signs of stability and policy support kept risk appetite intact. For investors, September rewarded diversification and exposure to resource-driven and growth sectors, setting a constructive tone for the months ahead.
Sources.
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
Bank of England holds interest rates at 4% By Pedro Goncalves, Yahoo Finance UK, 18th September 2025.
Bank of England’s chief economist ‘more comfortable’ with inflation outlook By Pedro Goncalves, Yahoo Finance, 23rd September 2025.
Federal Reserve cuts interest rates for first time this year, sees 2 more cuts in 2025, by Jennifer Schonberger, Yahoo Finance, 18th September 2025.
ECB holds interest rates at 2%, by Lucy Harley-McKeown, Yahoo Finance, 11th September 2025.
Eurozone inflation rises over 2% target, By Latoya Harding, 1st October 2025
