May 2025 delivered a broad recovery across global markets as inflation moderated, central banks reaffirmed their easing bias, and investor sentiment turned constructive once more. After a volatile April, equities bounced back, bond yields fell slightly, and risk appetite returned across asset classes. Markets responded positively to stronger corporate earnings, stable macro data, and greater clarity around monetary policy trajectories.
United States
U.S. equities rebounded strongly in May. The S&P 500 rose 4.2%, while the Nasdaq Composite gained 4.9%, reaching new all-time highs. Technology, healthcare, and consumer discretionary led the rally, supported by solid earnings and a more dovish tone from the Federal Reserve.
The April CPI showed headline inflation easing to 2.7% and core inflation to 2.6%, both below expectations. The Federal Reserve kept rates on hold but reiterated that "conditions for a first rate cut are falling into place." Market pricing moved back toward a likely cut in July. The 10-year Treasury yield declined to 4.03% by month-end.
Europe
European markets rallied as inflation softened and growth indicators stabilized. The Euro Stoxx 50 rose 3.8%, with strong performance in autos, industrials, and banks. The European Central Bank kept rates unchanged but signaled a near-certain cut in June, noting that eurozone inflation had declined to 1.8% - below its 2% target.
Economic data remained mixed but improved marginally in Germany and Italy. Yields across the region fell, led by bunds and OATs. The euro strengthened modestly versus the dollar, helped by a shift in rate differentials and easing political concerns in Spain and the Netherlands.
Asia-Pacific
Asia-Pacific equities advanced across the board. Japan's Nikkei 225 rose 3.6%, driven by continued foreign inflows, a weaker yen, and robust corporate guidance. The Bank of Japan reiterated a cautious approach to further tightening and held policy steady.
Chinese equities rebounded strongly. The Hang Seng Index gained 6.1%, and the Shanghai Composite rose 3.9% on fresh fiscal measures, tax relief for manufacturers, and upbeat trade data. Australia's ASX 200 advanced 2.4%, supported by higher iron ore prices and resilient services sector growth.
Emerging Markets
Emerging markets outperformed developed markets in May. The MSCI Emerging Markets Index rose 5.4%, with gains led by Asia, Latin America, and Eastern Europe. Improving global liquidity and declining U.S. yields drove capital inflows into EM equities and debt.
India's Nifty 50 rose 2.8%, buoyed by election stability and robust earnings. Brazil's Bovespa surged 5.6%, helped by falling interest rates and strong commodity exports. Indonesia, Mexico, and South Africa also delivered positive returns on supportive monetary policy and improving trade balances.
Commodities
Oil prices rebounded. Brent crude ended the month at USD 90/barrel, up from USD 88, as summer demand forecasts were revised higher and OPEC+ signaled ongoing production restraint. Energy equities rallied globally on the price recovery.
Gold climbed to USD 2,612/oz, setting a new monthly closing high, supported by strong central bank demand and a weaker dollar. Copper gained 5.0% on supply tightness and rising demand from electric vehicle and green infrastructure sectors.
Fixed Income & Currencies
Bond markets stabilized in May. The U.S. 10-year Treasury yield fell to 4.03% as inflation data supported easing expectations. European yields also declined, and credit spreads narrowed across investment-grade and high-yield segments.
The U.S. dollar weakened modestly. The euro, yen, and EM currencies gained as rate differentials narrowed and risk sentiment improved. The Singapore dollar appreciated slightly, supported by firm MAS policy and continued export strength.
Outlook
May confirmed that the global disinflation trend remains intact, and central banks appear increasingly comfortable preparing for easing. While volatility may return around major data releases or policy surprises, the broader macro backdrop is supportive of risk assets into midyear.
Brightness Capital & Asset Advisory remains moderately overweight equities and credit, with a preference for quality large caps, EM opportunities, and moderate duration in bonds. We are closely monitoring the pace of disinflation, fiscal policy signals, and geopolitical developments heading into Q3.