While markets moved higher, February reminded investors that leadership can shift quickly.
UK
- The Bank of England (BoE) kept interest rates at 3.75%, though a closer than expected 5-4 vote was interpreted as increasingly dovish for the next meeting.
- Business surveys showed improvement. The UK flash Composite PMI (a survey of 100 companies) showed a rise to 53.9 (above 50 is expansion), a 22-month high.
- UK equities (FTSE 100 Index) posted strong gains (+7%), supported by improving business activity and shifting expectations around monetary policy.
- Unemployment rose to a near five-year high, while wage growth cooled, alongside the BoE cutting the UK economic growth forecast for the next two years.
- Economic growth increased by just 0.1% year-on-year in Q4 2025, as provided by the Office for National Statistics (ONS).
- Inflation slowed to 3% in January after a 3.4% reading in December.
Global
- Global equities advanced in February, though performance diverged sharply by region as U.S. markets lagged while Asia Pacific and European markets extended.
- A positive narrative formed around sectors viewed as more insulated from technological disruption, the so‑called “HALO” trade (hard‑asset, low‑obsolescence).
- Private credit markets faced renewed scrutiny following a handful of idiosyncratic developments e.g., Blue Owl halting withdrawals and Blackstone’s vast redemptions.
- The Federal Reserve (Fed) held policy steady, with communication reinforcing a data-dependent stance as markets continued to price in two rate cuts later in the year.
- The European Central Bank (ECB) left policy rates unchanged as inflation came in below target (1.7% year-on-year) and growth remains uneven, reiterating a cautious stance.
- Japanese equities rallied sharply in February, buoyed by Prime Minister Takaichi’s landslide victory in the general election. The TOPIX rose +9.3% in yen terms
- South Korea (+23%) and Taiwan (+12%) extended year-to-date gains, led by technology stocks amid a strong rise in demand for semiconductors.
Fixed interest
- Global government bonds posted positive returns across major markets given shifting rate expectations and a flight to safety amid volatile geopolitical headlines.
- UK gilts outperformed, due to cooling inflation pressures increased the likelihood of near–term rate cuts. The 10-year yield fell (prices rose) 30 basis points.
- Global corporate bonds also advanced, though high yield underperformed investment grade as credit spreads widened.
Other
- Sterling fell -1.5% against the dollar, its biggest monthly decline since October 2025, pressured by political uncertainty and expectations of further BoE rate cuts.
- Gold continued its strong advance, rising more than +10% and ending higher for a seventh straight month.
- Oil prices rose, building on January’s strong gains, as volatile headlines around U.S.-Iran negotiations and broader Middle East tensions kept markets on edge.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
