Introduction

August 2025 was marked by steady gains across most global markets as investors grew increasingly confident that major central banks are preparing to ease monetary policy. Equities in the U.S. and Europe posted modest advances, supported by cooling inflation and dovish signals from the Federal Reserve and European Central Bank, while Asia saw stronger momentum driven by stimulus measures in China and robust growth in India. Commodities rallied on firmer demand and supply constraints, bond yields eased further as rate cut expectations solidified, and emerging market assets benefited from renewed inflows. Overall, sentiment improved, setting the stage for a potentially pivotal September as policy shifts come into focus.

United States

U.S. equity markets posted mixed results in August, with the S&P 500 edging up 0.8% while the Nasdaq Composite slipped 0.5% as technology shares paused after a strong rally earlier in the summer. Investor focus was on the Federal Reserve's annual Jackson Hole symposium, where Chair Jerome Powell signaled that the first rate cut could come as early as September if disinflation trends persist. Headline CPI held at 2.5% year-on-year, while core inflation moderated further to 2.6%.

The labor market continued to cool, with job gains slowing to 120,000 and unemployment steady at 4.1%. Bond yields fell modestly, with the U.S. 10-year Treasury closing the month at 3.89%, reflecting growing confidence that monetary policy easing is imminent.

Europe

European markets outperformed their U.S. counterparts, with the Euro Stoxx 50 rising 2.1% in August. Investor sentiment was supported by confirmation from the European Central Bank that it will deliver a widely expected 25bps rate cut in September, its first in over three years. Inflation in the eurozone eased to 2.7%, while growth indicators showed modest improvement in southern Europe, led by strong tourism revenues.

Germany remained the laggard, with manufacturing output contracting for the seventh consecutive month, though forward-looking surveys suggest stabilisation ahead. Energy prices remained volatile amid renewed supply concerns from Eastern Europe.

Asia-Pacific

Asian equities advanced for a fourth consecutive month, led by strong performance in China and India. China's Shanghai Composite gained 4.3% in August as policymakers unveiled additional fiscal stimulus measures targeted at the property sector and renewable energy projects. Industrial profits rose 3.9% year-on-year, underscoring a gradual recovery.

Japan's Nikkei 225 rose 2.0%, supported by continued yen weakness, which boosted export earnings, while the Bank of Japan reiterated its accommodative stance. India's Nifty 50 gained 3.2% after Q2 GDP came in at 6.9%, driven by robust domestic consumption and services growth. Australia's ASX 200 finished flat, with gains in miners offset by weakness in the financial sector.

Emerging Markets

Emerging market performance was mixed in August. The MSCI EM Index rose 1.5%, with gains in Latin America offset by weakness in parts of Africa and Eastern Europe. Brazil's Bovespa rose 3.8% as the central bank cut its benchmark rate by 50bps, while Mexico posted solid gains on stronger-than-expected export data.

However, Turkey and South Africa experienced currency volatility, with political uncertainty weighing on investor sentiment. Overall, EM debt markets remained supported by falling U.S. yields, which helped attract fresh inflows into hard-currency bonds.

Commodities

Commodities delivered a strong performance in August. Brent crude oil climbed to $91 per barrel, its highest level since April, amid tighter OPEC+ supply and robust summer demand. Gold rose 1.8% to $2,455/oz, buoyed by lower real yields and continued central bank buying.

Industrial metals saw broad gains, with copper rising 4.6% on improved Chinese demand and nickel climbing 3.2% on supply disruptions in Indonesia. Agricultural commodities were mixed, with wheat prices recovering from July lows, while cocoa remained elevated due to supply shortages.

Fixed Income & Currencies

Global bond markets strengthened further in August as rate cut expectations became more firmly priced in. U.S. Treasuries rallied, with yields across the curve moving lower, while European sovereign debt also benefitted from ECB guidance. Credit markets were stable, with spreads tightening modestly.

The U.S. dollar weakened slightly, with the DXY index down 0.9% for the month. The euro appreciated, while the yen gained modestly as intervention concerns grew. Emerging market currencies showed resilience overall, supported by falling U.S. yields and strong commodity-linked revenues.

Outlook

Looking ahead, September is shaping up to be a pivotal month as both the Federal Reserve and European Central Bank prepare for potential policy shifts. Markets are increasingly confident that rate cuts will materialise in the coming quarter, providing support for risk assets.

Brightness Capital & Asset Advisory maintains a moderately risk-on stance, favouring quality global equities, particularly in technology, infrastructure, and commodities, while continuing to build exposure to investment-grade fixed income ahead of an easing cycle. Currencies and geopolitical risks remain areas for close monitoring.