Introduction

February 2025 was defined by renewed optimism across global markets, as central banks reinforced their dovish guidance and key inflation indicators continued to move lower. Equities advanced broadly, bond yields softened, and cyclical sectors led performance. Risk appetite returned, aided by resilient consumer data, stabilising global growth forecasts, and further signals of policy easing ahead.

United States

U.S. equity markets gained momentum. The S&P 500 rose 3.9%, while the Nasdaq Composite added 4.6%, setting new all-time highs. Optimism was driven by strong retail earnings, cooling inflation, and Federal Reserve comments confirming that the rate-hiking cycle has definitively ended.

The January CPI showed headline inflation at 2.7% and core inflation at 2.9%, both down from prior months. The Federal Reserve kept rates unchanged, with Chair Jerome Powell stating that |conditions for easing are falling into place." Markets fully priced in a 25 bp rate cut for the May meeting. The 10-year Treasury yield declined to 3.82% by month-end.

Europe

European equities rallied. The Euro Stoxx 50 advanced 4.1%, buoyed by falling inflation, stronger-than-expected earnings, and signs of economic stabilisation in France and Spain. Eurozone inflation eased to 1.9%, the first time in three years that it fell below the ECB's 2% target.

The European Central Bank maintained its key rates but signaled that a cut in April or June is increasingly likely. German bund yields fell, and peripheral spreads narrowed further. The euro strengthened slightly against the dollar on improved investor sentiment.

Asia-Pacific

Asia-Pacific markets saw broad gains. Japan's Nikkei 225 surged 6.7% to new record highs, led by chipmakers and exporters benefiting from yen weakness. The Bank of Japan reiterated its accommodative stance but hinted that a small policy shift may occur in the second half of 2025 if wage inflation persists.

Chinese equities rebounded. The Hang Seng Index rose 4.5%, and the Shanghai Composite gained 2.9% after Lunar New Year consumption data beat expectations. Beijing unveiled additional tax incentives and credit support for households and SMEs. Australia's ASX 200 climbed 3.2%, aided by commodity strength and improved business confidence.

Emerging Markets

Emerging markets outperformed in February. The MSCI Emerging Markets Index rose 5.3%, supported by a weaker dollar, lower global bond yields, and improving capital flows. Asia and Latin America led gains, with local currency debt and equities both benefiting.

India's Nifty 50 gained 3.1%, driven by a pro-growth national budget, continued strong macro data, and FII inflows. Brazil's Bovespa advanced 4.7% as interest rate cuts resumed and inflation remained contained. Mexico and Indonesia also saw strong performance, while Turkey and Egypt lagged on currency pressures.

Commodities

Oil prices climbed. Brent crude ended the month at USD 87/barrel, up from USD 83, as Middle East tensions persisted and global demand forecasts were revised higher. U.S. and OPEC+ production discipline further supported pricing.

Gold continued to rally, reaching USD 2,548/oz, supported by falling real yields and safe-haven demand. Copper rose 3.5% as inventories tightened and expectations for infrastructure investment in China and the U.S. picked up.

Fixed Income & Currencies

Bond markets remained strong. The U.S. 10-year yield declined to 3.82%, and global sovereign yields followed suit. Credit spreads remained tight, and corporate issuance remained active amid declining volatility.

The U.S. dollar weakened slightly. The euro, yen, and EM currencies strengthened as monetary policy divergence narrowed. The Singapore dollar appreciated modestly on firm inflation and improving regional flows.

Outlook

February confirmed that a global rate-cutting cycle is within sight. While central banks remain cautious, inflation progress and stable growth have created room for monetary easing. With financial conditions loosening and corporate fundamentals improving, risk assets are well-supported entering the second quarter.

Brightness Capital & Asset Advisory maintains a positive risk stance, overweighting high-quality equities, investment-grade credit, and select EM assets. We continue to monitor inflation data, earnings revisions, and geopolitical dynamics as key tactical drivers in a gradually easing global environment.