Introduction

July 2025 saw global financial markets extend their positive momentum, supported by moderating inflation, resilient corporate earnings, and growing expectations of monetary easing from major central banks. Equity markets across the U.S., Europe, and Asia posted broad-based gains, with technology, commodities, and cyclical sectors leading performance. Bond yields retreated as investors priced in potential rate cuts, while commodity prices firmed on improving demand and supply constraints. Although geopolitical risks and currency volatility persisted in certain regions, overall investor sentiment remained constructive, setting a cautiously optimistic tone for the second half of the year.

United States

U.S. equities posted a robust advance in July, with the S&P 500 gaining 3.2% and the Nasdaq Composite rising 4.1%, driven by strong earnings in the technology and consumer discretionary sectors. The Federal Reserve maintained its benchmark rate at 5.25% for the fourth consecutive meeting, but Chair Powell's press conference struck a more dovish tone, noting "clear and sustained" signs of disinflation. Headline CPI fell to 2.5% year-on-year, the lowest level since early 2021, while core CPI moderated to 2.7%.

The labour market cooled slightly, with nonfarm payrolls adding 145,000 jobs - below expectations - while the unemployment rate ticked up to 4.1%. Markets interpreted this as further justification for a potential rate cut as early as September. The housing sector remained under pressure, but mortgage applications picked up modestly amid falling long-term yields.

Europe

European markets traded higher in July, supported by stabilising inflation and renewed investor appetite for cyclical sectors. The Euro Stoxx 50 rose 2.4% as the European Central Bank held rates at 4.25%, with President Lagarde acknowledging that "policy is now sufficiently restrictive" to bring inflation back to the 2% target. Eurozone inflation slowed to 2.8%, while growth indicators suggested modest improvement in the services sector.

Germany showed tentative signs of recovery, with industrial production rising 0.4% month-on-month, while Spain and Italy reported stronger tourism-driven growth. However, energy prices edged higher in the latter part of the month due to renewed geopolitical tensions in Eastern Europe, prompting some caution among investors.

Asia-Pacific

Asian equities advanced across the board, led by strong gains in China and Japan. Chinese GDP growth for Q2 came in at 5.3% year-on-year, surpassing expectations, with consumer spending and infrastructure investment providing the biggest boosts. The Shanghai Composite rose 5.6%, supported by new fiscal stimulus measures and continued support for the property sector.

Japan's Nikkei 225 reached a fresh multi-decade high, climbing 3.8% in July, as a weaker yen continued to bolster export competitiveness. The Bank of Japan maintained ultra-loose policy, citing the need to ensure a sustained inflation rate above 2%. Australia's ASX 200 also posted gains, led by mining stocks, as iron ore and copper prices firmed.

Emerging Markets

Emerging markets enjoyed another month of strong inflows, with the MSCI EM Index up 4.2% in July. Latin America was a standout, particularly Brazil, where equities surged on continued monetary easing and rising commodity prices. India's Nifty 50 index gained 3.5% as corporate earnings surprised to the upside, while Southeast Asian markets benefited from strong export growth and resilient domestic demand.

However, currency volatility persisted in certain frontier markets, and political uncertainty in parts of Africa and the Middle East kept investor sentiment uneven across regions.

Commodities

Commodities strengthened in July, with Brent crude oil climbing to $88 per barrel, driven by tighter supply conditions and seasonal demand. Gold rose 2% to $2,410/oz as falling bond yields boosted demand for non-yielding assets. Industrial metals saw broad-based gains, with copper prices up 3.5% on improved Chinese demand and supply concerns in South America.

Agricultural commodities were mixed, with wheat prices rebounding after weather-related crop damage in Eastern Europe, while coffee and cocoa extended gains due to supply shortages in key producing regions.

Fixed Income & Currencies

Global bond markets rallied as investors priced in rate cuts from major central banks. The U.S. 10-year Treasury yield fell to 3.92%, its lowest since January 2024, while German Bund yields dropped to 2.14%. Credit spreads narrowed across both investment-grade and high-yield segments, reflecting improved risk sentiment.

The U.S. dollar weakened, with the DXY index falling 1.7% as rate differentials narrowed. The euro strengthened modestly, while the Japanese yen saw a partial recovery after months of depreciation. Emerging market currencies generally appreciated against the dollar, supported by capital inflows and higher commodity revenues.

Outlook

As Q3 progresses, markets are increasingly focused on the timing and scale of monetary policy easing in the U.S. and Europe. The combination of moderating inflation, stabilising global growth, and strong earnings momentum provides a supportive backdrop for risk assets.

GNXT continues to favour a balanced allocation-overweight quality equities in technology, industrials, and commodities, while maintaining meaningful exposure to investment-grade fixed income to capture potential yield compression in a lower-rate environment.