February was marked by strong nervousness in financial markets. This was mainly driven by uncertainty surrounding artificial intelligence, geopolitical tensions over a new hotspot in Iran, and persistent unknowns about monetary policy.
In the United States, the S&P 500 fell 0.8% as U.S. large-cap growth stocks, particularly in the technology sector, came under pressure from weakening sentiment around AI-related spending.
Diverging equity performance across regions
In contrast, markets outside the United States delivered strong gains. The Eurozone advanced roughly 3%, supported by a rotation into value-oriented and asset-heavy sectors that are less exposed to technological disruption.
China experienced one of the strongest rebounds globally, with equities rising about 5%. The recovery was supported by improved policy signals, stabilising investor inflows, and momentum driven by AI-driven industrial upgrades.
Emerging markets also outperformed major regions. The MSCI Emerging Markets Index gained more than 5%. Among the strongest performers was Brazil, where improving economic fundamentals supported market performance.
The Istanbul stock exchange was another emerging market favoured by investors. The gradual decline in inflation is opening the door to further interest-rate cuts, which could support economic activity and the financial sector, which accounts for around 30% of the stock market. Industry, accounting for roughly 32% of the market (particularly the defence sector), is also benefiting from the current international environment.
A kind month for bonds and harsh for currency market developments
The month was also positive for bond prices, as interest rates declined sharply. This reflected both easing inflation and investor demand for safe-haven assets.
In foreign-exchange markets, the dollar continued to weaken amid reduced investor appetite for U.S. assets and uncertainty about the Federal Reserve. By contrast, the Swiss franc remained a safe-haven currency.
Rise of energy prices concerns markets
Overall, looking ahead, markets remain highly sensitive to geopolitical developments, particularly the conflict in the Middle East and its potential implications for energy prices and inflation. Currency markets continue to reflect uncertainty regarding the future path of global monetary policy.
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