Introduction

April 2025 brought a pause to the first-quarter rally as global markets digested a fresh round of inflation surprises and more hawkish central bank rhetoric. While growth data remained resilient, stickier-than-expected price pressures tempered rate-cut expectations and pushed bond yields higher. Equities declined modestly, and volatility returned to equity and currency markets after months of calm.

United States

U.S. equity markets retreated in April. The S&P 500 declined 2.8%, and the Nasdaq Composite fell 3.4%, marking the first negative monthly performance since October 2024. The retreat was largely driven by hotter inflation readings and fading expectations for a near-term rate cut by the Federal Reserve.

The March CPI came in above forecasts, with headline inflation at 2.9% and core inflation holding steady at 2.8%. The Federal Reserve left interest rates unchanged, but Chair Jerome Powell stated that “recent data has not increased our confidence that inflation is sustainably moving toward 2%.” Markets pushed expectations for the first cut to July. The 10-year Treasury yield rose to 4.18% by month-end.

Europe

European markets also softened. The Euro Stoxx 50 fell 2.3%, with losses concentrated in financials and consumer cyclicals. Inflation in the eurozone ticked up slightly to 1.9% headline and 2.2% core, prompting the European Central Bank to reiterate that while a rate cut in June remains likely, it is conditional on sustained disinflation.

Eurozone growth data remained weak but stable, with Germany showing signs of industrial recovery. Bund yields rose in line with U.S. Treasuries, while the euro was flat versus the dollar. Market breadth narrowed, and risk sentiment turned more defensive across European sectors.

Asia-Pacific

Asia-Pacific equities were mixed. Japan's Nikkei 225 declined 1.4% after its strong Q1 performance, with some profit-taking in technology and exporters. The Bank of Japan reaffirmed its ultra-gradual tightening path and noted that the yen's weakness would be monitored closely.

Chinese markets outperformed. The Hang Seng Index rose 2.9% and the Shanghai Composite added 1.7%, driven by stronger-than-expected Q1 GDP growth of 5.4% and new policy measures supporting property and consumer sectors. Australia's ASX 200 dipped 0.6% amid weaker commodity prices and cautious RBA commentary.

Emerging Markets

Emerging markets were resilient overall. The MSCI Emerging Markets Index rose 0.7%, outperforming developed peers. EM currencies faced pressure from rising U.S. yields, but equities in Latin America and Southeast Asia benefited from stronger commodity exports and dovish domestic policy signals.

India's Nifty 50 slipped 0.5% ahead of national elections, while Brazil's Bovespa rose 1.6% on stable inflation and renewed pension reform discussions. Mexico and Indonesia posted solid gains, supported by firm trade data and strong capital inflows.

Commodities

Oil prices were volatile. Brent crude briefly rose above USD 91 but settled near USD 88/barrel amid fluctuating Middle East tensions and mixed demand signals. Inventory levels in the U.S. and China became a focal point for traders.

Gold touched a new record above USD 2,600/oz before retreating to USD 2,578/oz, driven by geopolitical hedging and strong central bank demand. Copper declined 2.1% after a strong Q1, weighed by profit-taking and softer Chinese import figures.

Fixed Income & Currencies

Bond markets came under pressure. The U.S. 10-year yield climbed to 4.18%, and European yields moved in parallel. Credit spreads widened slightly, particularly in high-yield, as investor appetite turned more selective.

The U.S. dollar strengthened modestly. The yen weakened further, prompting verbal intervention from Japanese officials. The euro was flat, and EM currencies were broadly lower versus the dollar, with notable declines in Turkey and South Africa. The Singapore dollar remained stable following MAS's decision to maintain current FX policy settings.

Outlook

April reminded markets that inflation volatility and data dependency remain central to policy direction. With central banks reluctant to move until more progress is evident, markets may remain choppy heading into mid-year. Growth resilience is a positive offset, but valuations and positioning may be tested further if rate cut timelines extend.

Brightness Capital & Asset Advisory enters May with a moderately cautious stance, maintaining core allocations to quality equities, short-to-intermediate duration bonds, and selective EM exposures. We continue to monitor inflation trends, labour markets, and geopolitical risks as key tactical signals for positioning in Q2.