Introduction

September 2025 marked a turning point for global markets as both the Federal Reserve and European Central Bank delivered long-awaited rate cuts, reinforcing investor confidence in a soft landing scenario. Equities rallied across the U.S., Europe, and Asia on the back of easing inflation, resilient earnings, and improved liquidity conditions, while bond yields fell sharply as investors priced in the beginning of a broader monetary easing cycle. Commodities strengthened, led by energy and industrial metals, and emerging markets benefitted from renewed inflows as the dollar weakened. Overall, sentiment turned decisively positive, setting a supportive backdrop for the final quarter of the year.

United States

U.S. markets rallied strongly in September, with the S&P 500 gaining 4.5% and the Nasdaq Composite surging 5.8% as the Federal Reserve delivered its first rate cut since 2020, lowering the federal funds rate by 25bps to 5.00%. Chair Jerome Powell emphasised that the cut was a “measured adjustment” in response to sustained disinflation, with headline CPI falling to 2.4% and core CPI to 2.5%.

Earnings season brought positive surprises across the technology and healthcare sectors, while consumer discretionary stocks benefitted from resilient household spending. The labour market continued to cool gradually, with payroll growth of 130,000, but wage gains remained moderate. Bond yields fell sharply, with the U.S. 10-year Treasury closing at 3.72%, supporting a broad-based equity and credit rally.

Europe

European equities followed the U.S. higher, with the Euro Stoxx 50 rising 3.6% in September. The European Central Bank also cut rates by 25bps, citing easing inflationary pressures, with eurozone inflation falling to 2.6%. The ECB reiterated its commitment to maintaining a restrictive stance until a clearer path to 2% is secured, but the cut was welcomed by markets as a sign of policy flexibility.

Germany showed tentative signs of industrial recovery, while France and Spain delivered stronger-than-expected service sector growth. UK markets were more muted, with the FTSE 100 rising just 0.8%, weighed down by sterling appreciation and soft consumer data.

Asia-Pacific

Asian markets recorded another strong month, with the MSCI Asia ex-Japan index up 4.2%. China's stimulus programme continued to buoy investor sentiment, with property-sector measures and infrastructure investment leading to a 6.1% year-on-year GDP growth estimate for Q3. The Shanghai Composite rose 4.9% in September.

Japan's Nikkei 225 advanced 3.3%, supported by a weaker yen and strong export data, while the Bank of Japan maintained its accommodative policy. India's Nifty 50 rose 2.7% on the back of sustained domestic demand and continued foreign inflows. Australia's ASX 200 gained 1.9%, led by mining and energy stocks as commodity prices climbed.

Emerging Markets

Emerging markets benefitted from global easing expectations, with the MSCI EM Index rising 3.8% in September. Latin America was a standout, with Brazil's Bovespa surging 5.1% as further rate cuts and higher commodity exports boosted sentiment. Mexico and Chile also delivered strong returns on the back of trade growth and copper demand.

Turkey and South Africa, however, saw more modest performance amid ongoing currency volatility and political uncertainties. Overall, EM debt markets rallied as U.S. yields fell, driving renewed inflows into both sovereign and corporate bonds.

Commodities

Commodities gained across the board in September. Brent crude oil rose to $93 per barrel, supported by OPEC+ supply discipline and robust demand heading into Q4. Gold climbed 2.4% to $2,510/oz as falling yields increased its appeal as a defensive asset.

Industrial metals surged, with copper rising 5.1% and nickel gaining 4.7% on strong Chinese demand and supply-side bottlenecks. Agricultural commodities remained volatile, with wheat and corn prices rising modestly due to weather disruptions in Eastern Europe, while coffee prices corrected after earlier gains.

Fixed Income & Currencies

Bond markets rallied globally following the Fed and ECB rate cuts. U.S. Treasuries posted their strongest monthly performance of 2025, with yields across the curve declining. European sovereigns also benefitted, particularly in Italy and Spain, where spreads narrowed sharply. Credit markets strengthened, with high-yield outperforming investment-grade.

The U.S. dollar weakened further, with the DXY index falling 1.2% as investors adjusted to a lower-rate environment. The euro and yen strengthened, while several emerging market currencies - including the Brazilian real and Indian rupee - appreciated on the back of capital inflows.

Outlook

Markets enter Q4 with strong momentum as monetary policy begins to ease across major economies. While the pace and scale of rate cuts will depend on inflation dynamics, the policy shift provides a supportive backdrop for risk assets.

Brightness Capital & Asset Advisory maintains an overweight stance on global equities, particularly in technology, commodities, and emerging markets, while holding a constructive allocation to investment-grade fixed income. With inflation moderating and growth stabilising, the second half of 2025 is increasingly positioned as a period of opportunity - though geopolitical tensions and currency volatility remain watchpoints.