Macro Point
The financial market performance in February 2025 was marked by volatility and mixed outcomes, driven by geopolitical tensions, economic indicators, and corporate earnings. The month began positively, with European quarterly results exceeding expectations, while US tech giants faced sanctions. AI-related stocks maintained a positive bias on Wall Street, but confusion over US employment data and monetary policy persisted. Mid-February saw significant market progress due to good corporate releases and hopes of a ceasefire in Ukraine, leading many indices to set new records. However, fears of a trade war and uncertainties surrounding Ukraine resurfaced, causing major indices to interrupt their upward trajectory. The S&P 500 added only 1.3% for the year by the end of February, reflecting struggles with AI hysteria and election-related uncertainties. The materials sector was the best-performing sector, benefiting from potential protectionist US trade policies, while the information technology sector declined. Economic growth was projected at around 2%, supported by rising household incomes and a rebounding housing market, but inflation concerns and geopolitical tensions added to investor uncertainty. The five-year inflation outlook was 3.5%, the highest since 1995, and existing home sales fell more than expected. The University of Michigan consumer sentiment index dropped to 64.7 in February, reflecting concerns about higher inflation from possible new tariffs.
The oil market was marked by significant volatility due to geopolitical tensions and trade policies. The month began with oil prices under pressure from rising US-China tariffs and US sanctions against Iran, which threatened to reduce Iranian oil exports by up to one million barrels per day. Weekly EIA data showed a substantial increase in US crude oil inventories, further contributing to the decline in prices, with Brent at $74.70 per barrel and WTI at $71. Mid-February saw OPEC maintain its projections for global oil demand growth, expecting an increase of 1.45 million barrels per day in 2025. However, price volatility returned as Brent and WTI fell more than 2% due to rising US inflation and talks between the US and Russia on the Ukraine war. In the latter half of February, oil prices rebounded amidst supply uncertainties, with Brent trading at $76.10 and WTI at $72.10. The market closely monitored discussions between major oil-producing nations regarding the Ukrainian conflict and its potential impact on oil trade strategies. OPEC+ considered delaying its planned production increase for April, while geopolitical tensions remained high. By the end of February, oil prices declined, with Brent losing 2.60% and WTI falling below $70 per barrel. This downturn was attributed to ongoing tariff risks and declining consumer confidence. Discussions between Russia and the US suggested a possible easing of sanctions, which could reduce global supply uncertainty. Natural gas prices in Europe also fell sharply, influenced by agreements between the US and Ukraine on minerals. In early March, oil prices remained under pressure, with Brent falling to a three-year low below $70 per barrel. OPEC+ announced plans to increase supply by around 140,000 barrels per day from April, while uncertainty over new US tariffs on China, Canada, and Mexico clouded the outlook for oil demand. This confluence of factors, including growing supply and global economic slowdown, continued to dominate market sentiment, keeping oil prices under pressure.
The metals market experienced significant volatility, driven by geopolitical tensions, trade policies, and economic uncertainty. The month began with gold prices rallying to a record high of USD 2,875 per ounce, as trade uncertainty and geopolitical tensions made it a popular safe haven. Central bank purchases, totaling 1,045 tons the previous year, supported gold demand, although the strength of the US dollar limited its upside potential. Copper prices also rose sharply to USD 9,276 per ton in London due to the easing of US trade threats against neighboring countries. However, tariffs continued to worry markets, and Chile, the main copper exporter, recorded increased exports and maintained a robust trade surplus. Mid-February saw copper prices hit a three-month high of USD 9,511 per ton, driven by tighter supply and sustained demand from China. Aluminum prices remained strong at USD 2,603 per ton despite tariff tensions, while gold prices peaked at USD 2,940 per ounce, supported by economic uncertainty. Silver, platinum, and palladium prices also rose due to similar market dynamics. In the latter half of February, aluminum prices reached a one-month high of USD 2,727 per ton in London after the EU agreed to phase out imports of Russian primary aluminum. Copper advanced to USD 9,563 per ton, and gold continued its upward trajectory, trading at USD 2,932 per ounce and approaching the USD 3,000 threshold. By the end of February, copper prices stabilized at USD 9,389 per ton in London, up 8% since January 1. However, gold prices fell sharply by about 3% to USD 2,835 per ounce due to the strength of the US dollar and cautious Federal Reserve policies. In early March, copper benefited from a temporary exemption on metal tariffs for automakers, climbing 3.5% to USD 9,734 per ton on the London Metal Exchange. Other industrial metals, including aluminum, zinc, and nickel, also saw gains. The economic context in China, with expectations of additional fiscal stimulus, supported this positive trend. Gold prices recovered to USD 2,920 per ounce, driven by a weakening US dollar and rising risk aversion.
The grain market experienced significant volatility due to weather conditions, geopolitical tensions, and trade policies. Chicago wheat prices reached 590 cents per bushel, driven by cold weather in the Black Sea region and new regulations limiting Russian exports. Corn and soybean prices also advanced modestly, supported by drought in Argentina. Mid-February saw coffee prices surge nearly 33% for the year due to reduced supplies from Brazil and weather conditions. Corn prices hit an 18-month high of 512 cents per bushel, while wheat rose to 610 cents per bushel, supported by strong demand and tight inventories. Later in February, corn prices stabilized around 512 cents per bushel, and wheat advanced to 610 cents per bushel. However, grain prices corrected as the USDA anticipated increased plantings, leading wheat to fall to 560 cents per bushel. Trade tensions and U.S. tariffs weighed on the market. By early March, wheat traded at 548 cents and corn at 465 cents per bushel, with tariff barriers limiting price declines. Concerns about a potential trade war persisted, affecting demand for U.S. agricultural products.
More generally,
The financial market performance in February 2025 was marked by a series of economic indicators and geopolitical events that influenced investor sentiment and market movements. The month began with the U.S. employment report revealing that only 143,000 jobs were created in January, falling short of the expected 175,000. The unemployment rate decreased to 4.0%, while wages continued to rise at a monthly rate of +0.5%. However, the report was complex to interpret due to revisions made to previous months. The preliminary consumer sentiment index from the University of Michigan dropped to 67.8 in February, below expectations, with respondents estimating one-year inflation expectations at 4.3%, up from 3.3% in January. Following these publications, bond yields tightened, with the 10-year yield rebounding from its support at 4.40%. Mid-February saw President Trump threaten reciprocal customs duties on imports from trading partners, aiming to force negotiations. Despite an initial negative reaction, bond yields eased significantly.
The February PMI activity indicators showed a decline in services in both Europe and the United States, adding to economic concerns. Bond yields moved within a narrow range, with the U.S. 10-year oscillating between 4.40% and 4.65%, while the German 10-year remained above 2.32%. The spread between U.S. and German bonds was stable at around 200 basis points, and the American curve continued to steepen, benefiting financial stocks. By the end of February, fears of an economic slowdown in the U.S. led to a sharp decline in bond yields and equity markets. Growth stocks were particularly affected, while defensive sectors gained favor. The latest inflation figures were in line with expectations, with consumer spending (Core PCE) up +2.6% year-on-year but down 0.3 points compared to the previous month. The U.S. 10-year yield tested its 200-day moving average around 4.23%, which could provide support and reduce downward pressure on equity indices. In early March, February inflation in Europe was slightly higher than expected, but the European Central Bank (ECB) cut rates for the sixth time in a row. The ECB warned of future uncertainty due to U.S. politics and rising public spending in Germany. The price of the Bund collapsed, propelling its yield from 2.4% to 2.8% in a week. The euro strengthened to $1.0880, benefiting from renewed confidence and the weakness of the U.S. dollar. The VIX volatility index rose to the 24 to 25 range, indicating heightened market uncertainty. The February U.S. jobs report showed a slight increase in the unemployment rate and slower job creation, aligning with market expectations.