Introduction

January 2025 opened the new year on a cautiously optimistic note. Global markets traded with a consolidation bias as investors balanced expectations for synchronized rate cuts with mixed macro data and lingering geopolitical risks. While equity indices paused after a strong Q4 2024 rally, bond markets held their gains, inflation continued to moderate, and central banks reaffirmed their pivot toward easing later this year.

United States

U.S. equity markets were flat to slightly higher in January. The S&P 500 gained 0.9% and the Nasdaq Composite rose 1.2%, supported by upbeat Q4 earnings from major tech and financial firms. However, investor sentiment was tempered by cautious guidance and a still-elevated rate environment.

The December CPI showed inflation holding at 2.9% headline and 3.0% core, slightly above expectations but still trending lower. The Federal Reserve kept rates unchanged at its January meeting and reiterated that cuts could begin “as early as spring,” contingent on further inflation progress. The 10-year Treasury yield ended the month near 3.94%, remaining anchored by forward guidance.

Europe

European equity markets softened modestly. The Euro Stoxx 50 fell 0.6%, dragged down by weakness in industrials and renewed concerns about Germany's economic outlook. Eurozone inflation continued to decline, with headline CPI at 2.1% and core CPI at 2.4%, keeping the European Central Bank on track to begin cutting rates mid-year.

ECB President Christine Lagarde struck a balanced tone, noting that the bank remains “prepared to act” but is awaiting confirmation that wage growth is moderating. European bond yields were stable, and the euro traded in a tight range against the U.S. dollar.

Asia-Pacific

Asian markets diverged. Japan's Nikkei 225 rose 2.5% as the yen weakened and large-cap exporters outperformed. The Bank of Japan maintained ultra-loose policy and signalled it would tolerate further yen softness in the near term while continuing to monitor inflation dynamics.

Chinese markets underperformed. The Hang Seng Index fell 5.2% and the Shanghai Composite lost 3.1%, hit by lingering concerns over property market stress, weak consumer confidence, and tepid policy support. Beijing announced additional liquidity injections ahead of Lunar New Year, but markets remained unimpressed. Australia's ASX 200 rose 1.6%, led by resources and healthcare.

Emerging Markets

Emerging markets saw mixed performance. The MSCI Emerging Markets Index declined 1.7%, dragged lower by Asia ex-Japan, though Latin America and parts of EMEA outperformed. Currency weakness and portfolio outflows weighed on risk sentiment, particularly in China, Korea, and Thailand.

India's Nifty 50 gained 2.2%, supported by strong FII inflows, robust macro data, and expectations for a business-friendly federal budget. Brazil's Bovespa rose 3.0% on soft inflation prints and dovish central bank rhetoric. Mexico and South Africa were broadly flat.

Commodities

Oil prices were range-bound. Brent crude traded between USD 81 and USD 84/barrel, as geopolitical risks in the Middle East were offset by comfortable global inventories and mild winter demand. Energy equities underperformed broader indices as a result.

Gold held firm at USD 2,505/oz, supported by steady demand from central banks and inflation-hedging flows. Copper declined 1.9%, as weaker-than-expected Chinese PMI data weighed on short-term demand expectations.

Fixed Income & Currencies

Global bond markets remained stable. The U.S. 10-year yield hovered just below 4%, while the front-end remained anchored by expectations of 75–100 bps of cuts in 2025. Credit spreads remained tight, and January issuance was strong across investment-grade and sovereign debt markets.

The U.S. dollar was broadly unchanged. The yen depreciated slightly, while the euro and pound gained on stronger-than-expected inflation relief. The Singapore dollar remained stable, supported by MAS's currency-based policy and firm domestic data.

Outlook

January served as a consolidation phase after the fourth-quarter rally. While the direction of monetary policy is increasingly clear, the timing of easing remains uncertain and will depend on near-term inflation data and labour market conditions. Earnings resilience and liquidity conditions will shape risk appetite as the first quarter progresses.

Brightness Capital & Asset Advisory enters February with a neutral-to-positive bias. We favour large-cap quality stocks, moderate duration in fixed income, and selective exposure to Asia-Pacific and EM ex-China. As the rate-cut cycle draws closer, relative positioning, valuation discipline, and macro vigilance remain our priorities.