European equities outperformed all other regions and surged to new highs in January, driven by the ‘DeepSeek’ event and strong performances in financials.
US equity markets rose in January with the S&P 500 extending record highs supported by positive core inflation data and bank earnings.
Emerging market equities gained, led by Latin America, Eastern Europe, and the Middle East.
In January, European equities hit new highs, driven by the ‘DeepSeek’ event and strong sector performances. UK equities rose, with the FTSE 100 reaching new peaks. US markets saw record highs in the S&P 500. Asia Pacific markets started positively, while emerging markets gained, led by Latin America and the Middle East. In fixed income, US treasuries and UK gilts performed well, with mixed results in eurozone bonds.
European equities outperformed all other regions and surged to new highs in January, driven by the ‘DeepSeek’ event and strong performances in financials, communication services, consumer discretionary, and technology sectors. Eurozone Gross Domestic Product (GDP) was flat in the fourth quarter, with Germany, France, and Italy struggling, while Spain saw growth. Inflation rose to 2.5% in January, but the European Central Bank (ECB) continued lowering interest rates to 2.75%. Unemployment increased to 6.3%, and potential US tariffs on European products pose additional challenges. The Euro weakened against the US Dollar, nearing parity.
The UK equity market rose in January, with the FTSE 100 hitting new highs. UK inflation slowed to 2.5% in December, driven by lower air fares, while core inflation increased slightly to 3.2%. Economic growth was 0.1% in November, below expectations, leading to predictions of a 0.25% interest rate cut by the Bank of England (BoE) in February. Wage growth accelerated, with average total pay rising 5.6% annually. Consumer confidence fell in January, and retail sales dropped by 0.3% in December. The UK government borrowed £17.8bn in December, raising concerns about potential spending cuts or tax increases.
US equity markets rose in January, with the S&P 500 hitting record highs due to cooling core inflation, strong bank earnings, and optimism post-Trump’s inauguration. Volatility arose from Chinese AI company DeepSeek, impacting tech stocks like Nvidia. Consumer discretionary, communication services, and financials led advancements. Consumer Price Index (CPI) rose to 2.9% in December, while core inflation slightly decreased to 3.2%. The US added 256,000 jobs in December, and unemployment fell to 4.1%. In the fourth quarter, GDP growth was 2.3%, driven by consumer spending and government expenditure.
Asia Pacific equity markets started 2025 positively. Korea rebounded with government budget spending and tax exemptions. Australia saw gains from softer inflation data. Chinese markets declined due to weak economic data, prompting state support and a loose monetary policy. Taiwan’s market rose on strong tech and manufacturing performance. Korea’s market rebounded from political turmoil with government and central bank support. Indian equities fell on reduced Federal rate cut expectations but found relief from expected RBI cuts. Japanese equities dropped due to DeepSeek’s impact and the Bank of Japan’s (BoJ) hawkish stance. Australia’s market rose with no new China tariffs and positive inflation data.
Emerging market equities gained, led by Latin America, Eastern Europe, and the Middle East. Brazil’s equities rose with a Selic rate hike, while Mexico’s gains followed stable inflation data. Peruvian equities advanced after a rate cut. MENA markets performed well, with Saudi Arabia, the UAE, and Kuwait leading gains, though Qatar and Egypt lagged. Eastern Europe saw growth despite potential Trump tariffs. Turkey’s market rose with rate cuts amid economic recovery. Indian equities lost ground on diminishing chances of further Federal Reserve (Fed) rate cuts but found relief from expected RBI cuts and liquidity injections.
US treasuries returned 0.55% in January, reversing losses after a softening CPI report. UK gilts had a healthy month, returning 0.84%. Eurozone bonds had mixed results, with German bunds down 0.44%. US employers added over 250,000 jobs in December, with unemployment at 4.1%. The ECB cut rates by 0.25%, while the BoJ raised rates to 0.5%. Corporate bonds performed well, with sterling bonds up 1.15%, dollar bonds up 0.61%, and euro bonds up 0.48%.
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