U.S. Markets Tentatively Stabilize in September

U.S. financial markets have been more stable in September, following a marked deterioration in August. However, investor risk appetite appears to be weaker than before the sell-offs and underlying concerns persist about emerging market growth.

Developments during the last month

• Equity markets in the United States and other advanced economies have been more stable in September, though they have drifted lower since mid-month.
• Oil and corporate bond markets have also been more stable; oil prices and corporate spreads remain near their weakest levels in years.
• Chinese data confirmed a further economic slowdown and accelerating capital outflows in August.
• Emerging market currencies and equities deteriorated further, with a severe sell-off in Brazil after Standard and Poor’s cut its sovereign credit rating below investment grade.
• The Federal Reserve left interest rates unchanged, citing concerns about recent global economic and financial developments. Market participants viewed the decision as more accommodative than expected, leading market-implied expectations for an interest rate increase in 2015 to fall below 50 percent.