Market Opinion - February 2025

Market Opinion - February 2025

In February 2025, global financial markets experienced heightened volatility, influenced by a confluence of economic indicators, geopolitical developments, and investor sentiment. The U.S. stock market, particularly the S&P 500, faced significant pressure, with the index entering negative territory for the year. This downturn was exacerbated by a notable selloff in technology stocks, especially companies like Nvidia, which saw substantial declines following earnings reports that failed to meet market expectations.​

Concurrently, President Donald Trump's announcement of impending tariffs—25% on imports from Canada and Mexico, and an additional 10% on Chinese goods - fuelled concerns about a potential global trade war. These protectionist measures led to a sharp appreciation of the U.S. dollar, while currencies such as the Canadian dollar, Mexican peso, and euro depreciated. Global equity markets reacted negatively, with both Asian and European indices registering declines.​

In Europe, the STOXX Europe 600 index fell by 0.8% following the tariff announcements, reflecting investor apprehension about escalating trade tensions. The European Union estimated that the proposed U.S. tariffs could have a fourfold greater impact than those imposed in 2018, potentially affecting €28 billion worth of trade. This development underscored the fragility of international trade relations and their direct influence on market stability.

Meanwhile, India's stock markets faced their own challenges. After a robust performance in 2024, February 2025 saw sharp declines in key indices such as the Sensex and Nifty. Factors contributing to this downturn included global trade uncertainties, foreign investor withdrawals, and domestic economic issues like rising inflation and unemployment. The Reserve Bank of India intervened to stabilize the rupee, and regulatory bodies implemented measures to curb excessive market volatility.​

In the foreign exchange markets, trading volumes surged despite the shorter trading month. Major trading centres reported increased average daily volumes, with platforms like Tokyo Financial Exchange's Click 365 experiencing a monthly volume increase of over 5% to 1.8 million contracts. This uptick was attributed to the heightened volatility and shifting monetary policies across major economies.

Overall, February 2025 highlighted the interconnectedness of global financial systems, where policy decisions, economic indicators, and investor sentiments collectively influenced market dynamics. The period served as a reminder of the delicate balance markets must navigate amidst geopolitical shifts and economic policy changes.