A relief rally was seen across global markets as speculation about a US rate rise faded, which lifted shares and commodities prices.

The benchmark S&P/ASX 200 index returned 0.5% for the month – most of this return (0.4%) came from the payment of dividends and only 0.1% came from an increase in prices.  The flat overall performance masked some significant moves between and within sectors. For example, resources rose more than 5%, with BHP gaining 10.6%, while listed property trusts fell 4.4%, led by a decline for Scentre (Westfield Group’s Australian business) of 5.4%.

Bank stocks rose 1.2%, with ANZ leading the way with a 2.8% rise, while Westpac edged up 0.2%. Since the start of the new financial year, Australian shares as measured by the ASX 200 index have delivered total returns of 5.1% to 30 September.

The US Federal Reserve ultimately left rates unchanged at its meeting on 22 September, although the decision was split with some members voting for higher rates. The central bank says it still expects to raise rates soon, but investors remain somewhat sceptical of a US rate rise in 2016. The probability of a 2016 rate increase in the US now sits at around 60%, according to futures markets.

US economic data was reasonable, though in general fell short of hoped for improvement, giving the Fed room to stay on hold. For example, employment grew by 151,000 positions against consensus expectations closer to 180,000. Unemployment in the US remained at 4.9% against expectations of a modest reduction and a key manufacturing index declined.

International shares posted minimal returns for the month. Modest exceptions were the UK market, which gained 1.7% and the Japanese market which lost 2.6%, the latter reflecting the market’s disappointment that the Bank of Japan did not produce a larger dose of economic stimulus.

Australian bonds drifted down slightly, with government bonds performing poorly.

The Australian dollar increased in value by 2.0% in September against the US dollar, buoyed by the Reserve Bank’s decision to leave rates on hold at the last meeting of the retiring RBA Governor, Glenn Stevens. The official cash rate remains at a record low of 1.5% and while most economists expect rates to stay on hold this year, inflation data out in late October could change market expectations.