U.S.
In February 2025, U.S. equity markets exhibited mixed performance amid economic uncertainties and policy developments. The S&P 500 experienced fluctuations, influenced by investor concerns over potential tariffs and economic growth. The Conference Board reported a significant decline in consumer confidence, with the index dropping 7 points to 98.3, marking an eight-month low. This decline reflects apprehensions regarding President Donald Trump’s trade policies and recent federal workforce reductions.
The technology sector faced volatility, particularly surrounding Nvidia’s anticipated earnings report. Investors closely monitored the company’s performance, as it was expected to influence sentiment toward AI-related stocks and the wider equity market. Nvidia’s results surpassed forecasts, with revenues jumping nearly 80% year-on-year to $39.3 billion in the quarter ending January, driven by strong demand for their latest-generation Blackwell chips amid the AI boom. However, Nvidia released guidance that stated it expects its first-quarter gross margin to fall 2% to 71% in the first quarter of 2025, a forecast that led to the stock falling in its first market session following earnings.
In the bond market, U.S. Treasury yields experienced fluctuations. The benchmark 10-year yield rose to 4.3289% following the House of Representatives’ advancement of President Trump’s tax-cut plan. However, concerns about economic growth and consumer confidence led to increased expectations of further Federal Reserve rate cuts, influencing yield movements.
Eurozone
The Eurozone’s economic activity stagnated in February, with the HCOB Flash Eurozone Composite PMI Output Index remaining flat at 50.2, just above the threshold indicating growth. Inflationary pressures persisted, presenting challenges for the European Central Bank (ECB) as it balanced rate cuts with rising prices. Germany experienced modest growth, while France faced significant declines in business activity.
Geopolitical tensions escalated as President Trump took a more conciliatory stance toward Russia on the Ukraine conflict, straining the longstanding U.S.-Europe alliance and disrupting traditional diplomatic ties. Despite these heightened tensions, European markets demonstrated resilience, with investors shifting focus toward European assets and gold as safe havens. However, a Reuters poll found that 54% of investors expect a correction of at least 10% in European stocks over the next three months, up from 50% in November, citing valuation concerns and geopolitical risks.
The STOXX 600 index has outperformed Wall Street in early 2025 and is forecasted to reach a lifetime high of 610 points in 2026 according to a Reuters poll of market analysts. However, investor sentiment will remain affected by growing uncertainty in the macroeconomic environment, particularly with the ongoing risk of U.S. tariffs on the European market.
UK
The UK’s FTSE 100 index experienced gains in February, supported by strong performances in the energy and financial sectors. Banks and mining stocks were notable contributors, with Lloyds Banking Group shares rising 3.2% following increased price targets by brokerages. Metro Bank also saw a 1.3% gain after announcing the sale of a portfolio of unsecured personal loans worth £584 million. Mining stocks benefited from stable copper prices, despite potential new tariffs from the U.S.
However, concerns over fiscal stability have intensified, as government bond yields reach their highest levels since 1998, while Rachel Reeves pushes forward with efforts to revive economic growth in the UK. Inflation rates have shown slight moderation, yet the Bank of England remains cautious, balancing inflation management with the need to support economic growth.
China
China’s economy faced ongoing pressures in February due to trade tensions and domestic challenges. The yuan depreciated by 2.2% against the U.S. dollar since November, influenced by rising U.S.-China trade tensions due to President Trump’s tariff threats. In response, Beijing has introduced additional fiscal stimulus measures, including plans to inject at least 400 billion yuan ($55.13 billion) into its biggest banks in the coming months to revive growth.
Producer price deflation deepened, reflecting weak industrial output, while consumer price inflation remained sluggish. Despite these challenges, the technology sector provided a bright spot, as Chinese AI startup DeepSeek continued to gain international attention for its cost-efficient AI models, which are seen as a potential challenge to U.S. tech dominance.
Japan
Japan’s economy demonstrated resilience in February 2025. The Nikkei 225 Index is projected to rise by 4.6% by the end of June, reaching 40,000, driven by an anticipated stronger corporate outlook once uncertainties related to U.S. tariff policies are resolved.
In the fourth quarter of 2024, Japan’s GDP expanded at an annualised rate of 2.8%, surpassing market expectations. This growth was underpinned by robust business investment and a surprising uptick in consumption, despite rising living costs.
Inflationary pressures remained strong, with core consumer prices rising by 3.2% year-on-year in January, marking the fastest pace in 19 months. This trend has reinforced expectations of potential interest rate hikes by the Bank of Japan in the latter half of 2025.
The manufacturing sector faced challenges, as factory activity contracted for the eighth consecutive month in February, contracting for the eighth straight month, with PMI at 48.9. Conversely, the services sector experienced modest growth, contributing to an overall composite PMI increase to 51.6 from 51.1 in January.
Currency dynamics also played a role, with the yen appreciating over 5% against the dollar, influenced by rising inflation and expectations of monetary policy adjustments. Despite these developments, real, inflation-adjusted interest rates remained deeply negative at -3.5%, highlighting the ongoing challenges in balancing economic growth with price stability.
Get in touch
Contact GSB today if you would like to discuss any of these matters with our in-house team.
Disclaimer
The views and opinions expressed should not be construed as investment or financial advice. The information contained is for educational purposes only.