Market Opinion - April 2025

Market Opinion - April 2025

April 2025 saw global financial markets grappling with a mixed set of economic indicators, shifting central bank rhetoric, and persistent geopolitical uncertainties. While investor sentiment remained broadly cautious, selective optimism emerged in key sectors and regions, reflecting divergent recovery paths and varying inflationary pressures. Overall, equity markets were uneven, commodities experienced renewed volatility, and bond markets continued to respond to evolving rate expectations.

In the United States, equity markets saw modest gains, led by a strong earnings season that buoyed technology and consumer discretionary stocks. The S&P 500 posted a 1.8% rise for the month, while the Nasdaq outperformed with a 2.4% increase, supported by robust results from several major tech firms. However, macroeconomic data painted a mixed picture: while consumer spending remained resilient, the labour market showed signs of softening, and inflation ticked up slightly, complicating the Federal Reserve's path forward on interest rates.

European markets struggled to maintain momentum in April, weighed down by weak industrial output in Germany and ongoing inflationary pressures in the eurozone's services sector. The Euro Stoxx 50 finished the month essentially flat, as gains in luxury and energy stocks were offset by declines in financials and manufacturing. The European Central Bank struck a cautious tone, signalling a potential rate cut in the summer, though policymakers remained wary of loosening too soon amid persistent price pressures.

Asian markets reflected regional disparities. Japanese equities extended their gains as a weak yen continued to benefit export-driven industries, while the Bank of Japan held firm on its accommodative stance. In contrast, Chinese markets faced downward pressure despite government pledges of further stimulus. Investor concerns about the property sector and sluggish domestic demand kept the Shanghai Composite under pressure, ending the month down slightly. India's markets fared better, supported by strong corporate earnings and a steady macroeconomic backdrop ahead of national elections.

In commodities, oil prices were volatile throughout the month, initially surging on supply concerns related to Middle East tensions, before pulling back sharply as US inventory data and OPEC+ commentary tempered expectations. Brent crude ended April near $86 per barrel. Gold continued its upward trend, climbing to fresh highs above $2,400/oz as demand for safe-haven assets remained strong amid geopolitical risk and central bank gold purchases.

Bond markets saw a return of volatility as shifting inflation data reignited debate over the timing of central bank rate cuts. In the US, the yield on the 10-year Treasury briefly climbed above 4.5% before retreating in the final week of April. European yields followed a similar trajectory, though remained more subdued due to softer economic growth indicators across the bloc. Credit markets remained stable, with spreads tightening modestly as risk appetite returned to select segments of the corporate bond space.

In currency markets, the dollar maintained its strength against most major peers, buoyed by continued economic outperformance and expectations that the Fed would delay any easing until later in the year. The euro weakened slightly, hampered by sluggish growth in the eurozone, while the yen saw renewed pressure as the Bank of Japan reiterated its commitment to a doveish policy framework. Emerging market currencies were mixed, with strength in Latin America offset by weakness in parts of Asia.

Looking ahead, markets appear poised for continued near-term volatility as investors parse incoming data and central banks reassess their stances. While equity valuations remain elevated in some sectors, corporate earnings resilience and signs of stabilisation in global trade flows could provide a constructive backdrop if inflation expectations remain anchored. However, persistent geopolitical risks and uncertain monetary policy trajectories will likely keep markets on edge into the second quarter.