Zero Equilibrium February Financial Markets Review

- By Chinedu Okoye 

Summary:

We continue our monthly series on the broad range of assets and markets we are exposed to as two-thirds of the quarter elapses, with a view of recent moves in comparison to our earlier predictions in our Global Financial Markets Outlook Q1 2025

Equities stayed fairly stable with US Major Indexes taking a hit in contrast to their European counterparts who all recorded gains on the month.

Asian equities slid on the month save for Hong Kong's Hang Seng Index adding 14.71% making it the highest performing index on our watchlist.

Oil slid further from January's highs and Gold maintained gains holding above $2,800.

Crypto was the most volatile and worst performing asset class in the month with Bitcoin, Ripple and Bitcoin Cash recording double digit dips.

1.0 Equities:

The US Major Indexes ranked in the bottom half of the Indexes on our watchlist negative on a week-on-week and month-on-month basis.

Index         w-o-w  | m-o-m  | y-o-y

DJIA:         +0.80% | -2.74%. |+12%

S&P:         -1.34%. | -1.86%. |+16.92%

NASDAQ: -3.80% | -4.44%   |+17.69%

European and UK Indexes closed out the month stronger than their US counterparts but lower than than last month wth the FTSE 100, CAC, EuroStoxx 50, and DAX recording positive gains in the month and  EuroStoxx and CAC recording milder losses on the week compared to NASDAQ and S&P500.

Monetary conditions are less hawkish (or more dovish) in the Eurozone compared to the US.

 Index            w-o-w  | m-o-m  | y-o-y

EuroStoxx: -0.43% | +4.88% | +12.35%

CAC:           -0.35%. |+2.35%.| +2.03%

FTSE100:   -1.71%. | +3.06% | +14.32%

DAX:          +0.17%. | +5.13% | +29.63%

Asian equity indexes were down the most —in the last week of February —on aggregate, with the Nifty and Niikke leading the decline. On a month-on-month basis only Hang Seng and Shanghai Index recorded gains in the month pairing back losses from January end.

The Shanghai Index recovered from January's -4% monthly decline to record a +1.55% gain month-on-month Friday. Shenzhen Component (SZSE)was the second best performing Asian market below.

Index           w-o-w | m-o-m. | y-o-y

Shenzhen: -3.49    | +3.65     |+16.99%

Shanghai:  -1.58% | +1.55%. |+10.62%

Hang Seng: -1.91%| +14.71%| +37.50%

Nifty:           -2.14% | -3.43%.  |-9.20%

Nikkei:        -3.07% | -4.86%.  |-5.51%

KOSPI.        -3.29%. |  -0.06%. | -4.69%

The Korean Composite Stock Price Index which was the best m-o-m performer in January, closed the month weaker down +0.06%, unfairly changed from last month, making it the most stable and less volatile of the group in February.

2.0 Commodities: Oil, Gold

Crude prices extended declines on the week breaching the $70 and $73 levels for BRENT and WTI respectively.

 

Bears took charge of the month, subduing prices to levels below last months range as WTI closed at $69.76 and BRENT $72.81, with both benchmarks just below the prior resitance levels into the last quate of the year, it's seems plausible that crude finds support at or around $70 and $73.

The price targets of $75 and $81 still holds for the end of Q2 (H1 2025) as fundamentals continue to support crude. Though US supply is expected to increase the price effect could be offset by a sticky OPEC supply.

China and by extension Asian industrial activity could make or mar Oil bulls but a better than expected outcome of US trade relations would be bullish for Oil.and we could see prices rose and spreads tighten

Persistent inflation in the US is also a major headwind.

Gold futures added +3.41%,  to close at $2,858.60/oz, with Gold spot also holding above $2,800 level to close at $2,862.20, as safe haven bets and inflationary hedges fuel the yellow metal.

 

3.0 Crypto:

As predicted in our Q1 2025 Outlook, crypto saw volatile mmswimgs in the week declining all round as Bitcoin breached the $82,000 key support levels to $85,907, a decline if 15.23% m-o-m. Ripple (XRP) also recorded a massive decline, down -23.15% to $2.248.

PAX Gold (PAXG) traded sideways on the month gaining +0.71% and Tether Gold (XAUT) faired better m-o-m gaining +2.27% to end at $2,862. Both coins mirror Gold's spot +2.24% gain in the month of February.

 

4.0 Fixed Income:

 DM Sovereigns:

 

(US 2 Yr Yields)

US 2yr and 10yr declined from 4.295% and 4.542% respectively to, 3.985% and 4.202% respectively. European Sovereigns also saw declining yields (rising prices), with the GR 10yr dropping -6.87% to 2.3865; FR 10yr -4.38% to 3.140.

(US 10 Yr Yields)

UK Gilts, Bunds, and US Ten Year Notes are all up, manifesting the price appreciation opportunities we alluded in last months report for Bond traders and higher rates locked in for bond investors.

EM Soverigns:

The SPDR® Bloomberg Emerging Market ETF climbed +1.61% to $24.56 l, this is from last months close of $24.09 —a 0.96% increase for the EM Soverigns proxy asset.

 

 

Remarks:

- Equities remain the best performing and most stable asset class, as predicted in our Q1 2025 outlook, as is crypto self fulfilling the prophecies of being the most volatile.

- Crypto volatility will remain high with swings in either direction possible depending on market sentiments, uncertainty would present headwinds in a risk off scenario, whilst clarity on trade and economic policies, would present tailwinds.

- In any case we expect Bitcoin to lead the charge, and XRP to benefit the most. However we advice a reallocation to PAXG and XAUT, to the time of 60% of the overall crypto portfolio.

- Inflation would have a lot of bearing on the directional movements of oil and gold lrices, as higher prices and rates mean lesser disposable income in the US, weakening the American consumer.

- This could lead to more inflationary bets and safe haven demand for Gold with silver carried along on the upside.

- This is in line with our Financial Markets Outlook calls as well, were we said that commodity price movements would be dependent on consumer patterns (Crude) and rate and inflationary expectations (Gold).