Investment market update: September 2026

In September 2026, markets experienced somevolatility due to conflict in the Middle East and the impact it had on energyprices. Discover other factors that may have affected the performance of yourportfolio.

Markets got off to a weak start on 1September. A global government bond sell-off, caused by concerns aboutinflation and government debt, led to markets falling. Among the indicesaffected by the dip were London’s FTSE 100 and Germany’s DAX, both of whichwere down by 1.1%.

Asian markets were also impacted by thesell-off when they opened. On 2 September, it was reported that Japan’s Nikkei225 index was down 2.7%, while South Korea’s KOSPI (-3.3%) and China’s CSI 300(-1.4%) also fell.

Concerns about rising energy prices led toEuropean markets falling on 8 September. Unsurprisingly, energy companiesbucked this trend, with FTSE 100 firms BP (0.9%) and Shell (0.35%) openinghigher.

This continued on 9 September, when it wasreported that UK and European gas prices had surged to multi-year highs as oilreached $100 per barrel. British gas prices were reportedly at their highestlevel since late December 2022. While the FTSE 100 was down 0.6%, energy firmsonce again were among the only businesses to see share prices rise.

For several months, worries about AI companiesbeing overvalued have affected markets, and this concern reared its head againon 14 September.

AI-linked stocks slowed down, which affectedshare prices across the globe. For example, in Tokyo, SoftBank, a major AIinvestor, saw its share price fall by 13%, and chipmaker SK Hynix, which islisted in South Korea, fell 5.75%.

The STOXX Europe 600 technology index fell2.3% on 14 September following calls for the AI industry to slow down forsafety reasons.

Trade tensions between the US and China have contributedto volatility throughout 2026. However, on 21 September, trade talks betweenthe two nations, coupled with oil prices declining, led to investor optimismthat provided a welcome boost to Asian markets.

UK

UK GDP beat forecasts with 0.4% growth inJuly, putting the economy on track for a stronger-than-expected third quarterof 2026. The boost was supported by AI activity, high temperatures throughoutthe summer, and the FIFA World Cup. The figure represents the fastest pace ofgrowth since February 2025.

However, inflation remained high. In the 12months to August 2026, inflation was 3.1%. Despite inflation being above theBank of England’s (BoE) 2% target for months, the central bank opted to holdinterest rates where they were.

However, market experts at ING state that theBoE could increase interest rates four times by July 2027, including a risethis year, if energy prices remain high.

Purchasing Managers’ Indices (PMI), whichprovide an economic indicator of business activity, were above the 50 mark thatindicates growth for the manufacturing and service sectors. Nevertheless, bothsectors face challenges as inflation will affect input costs.

Indeed, 31% of service sector businesses saidcosts were rising, compared to just 1% that noted a fall.

Europe

Eurozone inflation hit a three-year high of3.2% in the 12 months to August. The increase was linked to rising energy costsand put it well above the European Central Bank’s (ECB) target of 2%. Inresponse to the inflation data, the ECB increased interest rates for the secondtime this year in a bid to bring inflation under control.

There was good news from other economic data.

The eurozone private sector growth hit analmost three-and-a-half-year high, helped by AI activity and defence spending. ThePMI reading was 53.1.

Manufacturing PMI was also positive at 52.7.The reading was the highest in more than four years, with the bloc’s largesteconomies, Germany and France, both enjoying strong growth. Export sales werealso up for only the second time in four and a half years, with particularlystrong performances in Austria, Germany, and the Netherlands.

US

Core US inflation fell slightly to 2.4% in the12 months to August 2026, though it remains above the 2% target.

Despite pressure from President Donald Trumpto slash interest rates, the Federal Reserve raised interest rates for thefirst time in three years. The hike will see interest rates of 3.75% – 4% aftera quarter of a percentage point increase.

Asia

Japan’s central bank was among those hikinginterest rates in September. The quarter-percentage-point increase to 1.25%means the country’s interest rates are at the highest level since 1995.

China’s economic indicators suggest that the country’sgrowth is slowing down. For example, consumption and investment are bothunderperforming, though notably exports and industrial production are strongerthan expected. Policymakers are facing renewed pressure to increase stimulusspending as a result.

The long-awaited initial public offering fromfast fashion giant Shein may be a disappointment to investors. The company’sshares listed in Hong Kong tumbled at the start of the month. The company hasbeen affected by regulatory changes in the US and the EU, which could removereduced import duties on small packages.

Please note:This article is for general information only and does not constitute advice.The information is aimed at individuals only.

All information is correct at the time ofwriting and is subject to change in the future.

The value of yourinvestments (and any income from them) can go down as well as up and you maynot get back the full amount you invested. Past performance is not a reliableindicator of future performance.

Investmentsshould be considered over the longer term and should fit in with your overallattitude to risk and financial circumstances.

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