Financial markets commentary
May 2025
Developed markets
After a bruising first quarter, global equities managed to post modest gains in April. The MSCI World Index ended 0.74% higher, reflecting a market cautiously navigating shifting policies, persistent geopolitical risks, and mixed economic signals. While softer headline inflation in the U.S. and U.K. offered some relief, concerns lingered. Core inflation remained sticky and long-term expectations continued to rise, leaving investors a bit uneasy, even with retaliatory tariffs temporarily on hold. Regionally, Europe led gains with the MSCI Europe ex-UK gaining 4.25% in dollar terms, while the MSCI USA fell 0.59%, marking its third consecutive monthly decline.
From a style perspective, Growth stocks (+3.18%) outperformed, buoyed by rebounds in technology and consumer discretionary names on the back of strong earnings reports from some firms, while quality stocks (+0.65%) tracked behind. Value stocks (-1.59%) underperformed, weighed down by a sharp decline in the energy sector (-11.19%). The sector struggled as Brent crude prices fell to an average of $63.11 (from $74.98 last quarter), amid concerns over rising OPEC supply and weaker buyback signals from majors like Chevron and ExxonMobil. Sector performance was mixed: defensives such as utilities (+3.42%) and consumer staples (+3.34%) were resilient, while energy (-11.19%) and healthcare (-1.98%) weighed on broader market returns. April ultimately underscored a market treading carefully between fragile progress and the risk of renewed volatility.
Global bonds extended their winning streak in April, notching a fourth consecutive month of gains as investors continued to seek stability in a volatile macro backdrop. The Bloomberg Global Aggregate Bond Index rose by 2.94%, marking its strongest monthly return in nine months and outperforming the combined 2.64% return from the first quarter of the year. This resurgence in fixed income was largely underpinned by retreating global yields, as concerns over trade tensions, inflation stickiness, and softening growth drove demand for high-quality, duration-sensitive assets.
In the U.S., the 10-year Treasury yield held steady at 4.23%, reflecting cautious optimism after the Fed kept rates unchanged and inflation data showed modest cooling. The UK gilts eased to 4.49% from 4.69%, helped by the Bank of England’s shift toward shorter-maturity bond sales and softening inflation outlooks. Meanwhile, German 10-year bund yields slipped to 2.50% from 2.72%, as investors sought shelter in Europe’s perceived safe-haven assets. The growing yield premium between U.S. Treasuries and German bunds also made European bonds more attractive to global capital.
Jump
Domestic markets
The local bourse had a good month, with the JSE All Share Index gaining 4.23, supported by solid gains in defensive consumer stocks. Clicks (+15.88%) and Woolworths (+11.78%) led the rally, as investors favoured quality, dividend-paying stocks over more volatile, resource-linked stocks amid persistent economic uncertainty. Capitec (+15.16%) also surged, driven by investor confidence in its strong earnings trajectory, customer growth, and resilience in a high-interestrate environment. On the downside, resource-heavy stocks struggled as weaker global demand and falling commodity prices weighed on sentiment: Sasol (-17.22%) and Impala Platinum (-8.36%) were among the hardest hit. Aspen emerged as the worst performer, plunging 26.46%, likely due to disappointing results or growing concerns about profitability and future growth.
Despite these headwinds, all major sectors closed in the positive territory: industrials rose 5.25%, financials advanced 4.75%, and resources posted a modest 2.44% gain. The standout performer was the All-Property Index, which surged 7.65%, driven by strong demand for income assets and lower yields—Sirius Real Estate (+12.07%) led the charge. In fixed income, bonds also moved higher, with the All-Bond Index rising 0.76% amid yield compression. Meanwhile, CILI dipped 0.19% due to softer inflation, and the STeFI added 0.61%.
Other emerging markets
Indian equities outperformed in April, with the MSCI India Index rising 3.59%, as investors anticipated the country would be relatively insulated from the fallout of the U.S. trade war. Foreign investor sentiment improved notably, with net purchases of Indian equities reaching $679.9 million as of April 25th. This marked a turnaround from earlier in the year, though year-to-date flows remain negative, with a cumulative outflow of $12.9 billion. Positive sentiment was further supported by comments from U.S. Treasury Secretary Scott Bessent, who told CNBC that he “wouldn’t be surprised” if a trade deal with India were the first to be finalized. However, concerns persist over India’s high market valuations and rising geopolitical tensions with Pakistan, following last week’s militant attacks in Kashmir that left 26 people dead.
Elsewhere, Latin American stocks saw a strong rally. The MSCI Latin America Index rose 6.26% in April, driven by attractive valuations and the region’s limited direct exposure to U.S. trade actions. In contrast, Chinese and Taiwanese equities struggled amid renewed trade tensions. The MSCI China Index declined 4.86%, while MSCI Taiwan dropped 1.32%, although the latter was cushioned slightly by the temporary suspension of a planned 32% U.S. tariff. President Trump announced a 90-day pause on the measure earlier this month. Overall MSCI Emerging Markets had modest positive month up 1.31% on the back of mixed performance.
Macro highlights
Trade policies and geopolitical pulse: April 2025
The first few months of President Trump’s second term have been marked by a whirlwind of aggressive policymaking, with sweeping executive actions reshaping the U.S. economic landscape. One of the most significant developments has been the administration’s expansive use of tariffs, targeting nearly all major trading partners. This escalation culminated on April 2nd with the introduction of the socalled “Liberation Day” reciprocal tariff regime. While these measures are central to Trump’s agenda of reducing the trade deficit and reindustrialising the U.S. economy, they have also cast a shadow over the outlook for growth, inflation, and corporate earnings. US sentiment indicators reflect mounting concern. The NFIB Small Business Optimism Index recorded its steepest drop since 2022, while the Conference Board’s Consumer Confidence Index has fallen for four consecutive months, hitting its lowest level since January 2021.
Europe found itself caught in the crosscurrents. Investor sentiment soured sharply, with the Sentix index for the eurozone plunging to -19.5, its lowest since October 2023, reflecting anxiety over U.S. protectionist measures. In a sign of shifting priorities, European nations responded not just economically but militarily boosting defense spending by 17% to $693 million, the highest level since the Cold War’s end. The continent appeared to be awakening to a new era where economic resilience and security readiness must go hand in hand.
Meanwhile, the United Kingdom continued its delicate dance between old allies and new realities. PostBrexit, the prospect of a U.S.-U.K. trade deal grew dimmer, clouded by tariff tensions and job security fears. Instead, London turned its gaze back toward Europe, with preparations underway for a summit that could reshape the Trade and Cooperation Agreement in 2026. It’s a careful balancing act for Britain, one that reflects the complexity of navigating a world where economic and political loyalties are increasingly tested. In the Middle East, hopes for Israeli-Saudi normalization was dimmed by the ongoing conflict in Gaza. Even as violence persisted, diplomatic channels remained open.
China - geopolitical tensions added to the uncertainty, with China conducting live-fire drills in the Taiwan Strait, heightening regional concerns. Meanwhile, the U.S. imposed additional tariffs amounting to 145% since Trump took office, with a list of electronic goods being exempt from the additional tariffs (at this stage), and China retaliated with its own duties amounting to 125%, leading to a further escalation of the trade war. As a result, China is pushing to strengthen alliances with other countries, particularly the EU, particularly in the electric vehicle sector and has filed a WTO complaint against the U.S. over trade rule violations.
Fitch Ratings downgraded China’s long-term credit rating from A+ to A, marking the first downgrade in 18 years. The outlook was changed from negative to stable. Fitch pointed to rising public debt, weak public finances, and slow economic
growth as key factors behind the downgrade, along with challenges like low demand, deflation, and higher trade tariffs. However, it acknowledged China’s strong economic foundations. Fitch also lowered its global growth forecast, predicting the weakest global expansion since 2009, with growth expected to fall below 2% this year due to rising global trade tensions. The International Monetary Fund (IMF) also reduced its 2025 GDP forecast for China to 4%.
Inflation cools but outlook remains clouded
Annual inflation across most developed markets came in softer than expected in March. While monthly figures aligned with forecasts, the full impact of recent tariff hikes has yet to surface. The Eurozone and U.K. showed signs of moderation, but in the U.S., inflationary pressure lingered, fuelled by policy uncertainty and fading consumer confidence. Central banks remained alert, weighing their next moves in a still-fragile economic landscape.
In the United States, annual headline inflation ticked down to 2.4% in March (February: 2.8%), slightly below the 2.5% consensus, marking the lowest reading since September 2024. Core inflation also moderated to a 3-year low of 2.8%, down from 3.1%. Energy prices dropped sharply, but shelter and food costs stayed elevated. While recent figures provided near-term comfort, escalating tariffs under the Trump administration weighed heavily on sentiment, with the University of Michigan Index falling to 50.8 and inflation expectations jumping to 6.7%, a four-decade high. Rising trade tensions, including 125% tariffs on Chinese goods, led the IMF to cut the U.S. growth forecast to 1.8% for 2025.
In Europe, the Eurozone’s annual inflation softened to 2.2% (February: 2.3%), with core inflation easing to 2.7% (February: 2.9%). A weaker business climate, moderate wage pressures, and limited spillover from U.S. tariffs support expectations of a potential ECB rate cut by June. Meanwhile, in the U.K., annual inflation eased to 2.6% in March from 2.8%, slightly below the Bank of England’s 2.7% forecast, but is expected to rebound to 3.5%–3.7% by Q3 2025, driven by rising council taxes, utilities, and household costs. While lower fuel prices offered some relief, clothing costs rose, and consumer confidence sank to a five-month low (GfK: -23). Strong wage growth and savings continue to support spending, though wage pressures and higher national insurance remain key inflation risks.
Domestically, South African headline inflation fell to 2.7% in March 2025, down from 3.2% in February, dipping below the South African Reserve Bank’s (SARB) target range of 3% to 6%. The decline was primarily driven by an 8.8% drop in the fuel index in March. The core inflation rate dropped to 3.1% in March 2025 from 3.4% in February. The interest rate remains unchanged at 7.5%, with the next Monetary Policy Committee (MPC) meeting scheduled for May 2025. We do not anticipate any interest rate hikes in the near term, and the SARB is expected to remain cautious for the time being.
In China, despite the positive trade data, several challenges persist. Inflation remains subdued, with consumer prices falling by 0.1% year-on-year (y-o-y) in March and producer prices dropping by 2.5%, indicating continued deflationary pressure. The property market also remains weak, with new home prices in 70 cities falling by 4.5% in March, marking the 21st consecutive month of declines, although the pace of decline has slowed.
Slowing economic growth momentum amid global uncertainty
April painted a picture of growing economic fragility across the U.S., Eurozone, and U.K., as early-year optimism gave way to softening growth signals and rising geopolitical stress. Though labour markets remained surprisingly resilient, other indicators pointed to mounting pressure, raising red flags for investors and policymakers alike.
In the United States., growth concerns intensified. The S&P Global Composite Purchasing Managers’ Index (PMI) slipped to 51.2 (March: 53.5), signalling softer business activity, and while manufacturing PMI slightly edged up to 50.7, it wasn’t enough to offset broader concerns. The Atlanta Fed’s GDPNow model projected a deeper Q1 2025 contraction of 2.5%, compared to -2.2% earlier. Despite these headwinds, the labour market offered a silver lining, with 228,000 jobs added in March and unemployment steady at 4.2%. However, confidence took a hit as U.S.-China tariffs surged to 125%, prompting the IMF to downgrade 2025 U.S. growth to 1.8%.
Across the Atlantic, the Eurozone economy hovered at the edge of stagnation. The HCOB Flash Composite PMI eased to 50.1 in April (March: 50.9), with services slipping into contraction, while manufacturing remained subdued at 48.7. The IMF trimmed its growth forecast for the region to 0.8%, though labour market resilient, supported by improving employment rates, provided some cushion.
Meanwhile, the United Kingdom faced mounting economic challenges. The S&P Global Flash Composite PMI dropped sharply to 48.2 in April (March: 51.5), reflecting a contraction in overall activity. Manufacturing was particularly hard-hit, with the PMI tumbling to 44.0, its lowest level in 20 months. Adding to the pressure, the IMF downgraded the U.K.’s growth outlook to 1.1% for 2025, down from a previous forecast of 1.6%, pointing to the combined effects of U.S. tariffs and rising domestic costs, including higher energy prices. Labour market data confirmed the strain, with payroll employment slipping by 8,000 between January and February.
In South Africa, the PMI declined to 48.3 in March 2025 from 49.0 in February, remaining in contractionary territory since December 2024. The continued decline in PMI reflects persistent weak demand, which has led to reduced output and a drop in new orders amid ongoing economic and political uncertainty. Mining production fell by 9.6% y-o-y in February 2025, following a 1.5% decline in January, despite a recent rally in commodity prices. The sharp drop in mining output was largely driven by declines in platinum group metals (PGMs), iron ore, gold, and coal, which fell by 23.9%, 10.5%, 7.6%, and 4.3%, respectively. Retail sales also declined by 1.3% in February 2025, reversing a 0.7% increase recorded in January. The slow start to economic activity in the early part of the year is expected to weigh on first-quarter GDP growth, prompting the National Treasury to consider revising its growth forecast for 2025.
In China, China’s economy grew 5.4% y-o-y in the first quarter of 2025, maintaining the same pace as the previous quarter and surpassing market expectations of 5.1%. This steady growth was largely driven by ongoing government stimulus measures. March saw a particularly strong performance across key economic indicators: industrial output surged by 7.7%, marking its fastest pace since June 2021, retail sales increased by 5.9%, the largest jump in over a year, and the unemployment rate eased to 5.2%, down from a two-year high of 5.4%. Fixed asset investment also slightly exceeded expectations, growing by 4.2% in the first quarter. Trade played a major role in boosting China’s economic performance. Exports surged 12.4% in March, the
fastest growth since October 2024, driven by companies rushing to ship goods ahead of the new U.S. tariffs. However, imports fell 4.3%, reflecting ongoing weakness in domestic demand. This led to a trade surplus of $102.64bn in March and a $273bn surplus for the first quarter of 2025. The trade surplus with the U.S. also rose significantly, reaching $27.58bn in March and $76.65bn for the quarter.
Foreign direct investment (FDI) into China continued its downward trend, falling 10.8% in the first quarter of 2025, after a sharp 27.1% drop in 2024. This decline reflects growing concerns over the country’s economic outlook amid escalating trade tensions and risks of deflation. Additionally, high-frequency data showed that China’s manufacturing activity reached a four-month high in March, and the services sector also saw strong growth, although business sentiment was somewhat dampened by geopolitical risks.
Central banks watch: A balancing act in April 2025
Central banks around the world walked a tightrope in April, caught between stubborn inflation, rising trade tensions, and slowing growth. Across the globe, monetary policymakers faced a delicate task: deciding whether to hold firm, pivot, or prepare for what lies ahead.
In the U.S., the Federal Reserve held rates steady at 4.25%–4.50%, standing firm against political pressure from President Trump, who openly called for cuts. True to its data-driven mandate, the Fed prioritized stability over short-term political noise. Meanwhile, the European Central Bank (ECB) took a bolder approach, cutting its deposit rate by 25 basis points to 2.25%; its seventh straight cut as rising U.S. tariffs worsened the Eurozone’s fragile economic outlook. ECB President Christine Lagarde warned of mounting risks but signalled a cautious readiness to ease further if needed.
In the United Kingdom, the Bank of England chose to stay put, keeping its benchmark rate at 4.50%, but market expectations for a rate cut in May grew louder. With inflation easing to 2.6% and economic forecasts downgraded amid global trade disruptions, some policymakers even suggested the trade war might ironically ease inflationary pressures in Britain.
China - In response to mounting pressures, the Chinese government increased budget spending at the fastest pace since 2022, focusing on infrastructure, technology, and social welfare to support domestic demand. The People’s Bank of China (PBoC) kept key lending rates unchanged for the sixth consecutive month in April but signalled potential rate cuts or easing of bank reserve requirements if needed. Chinese banks also increased lending significantly in March, both household and business lending rose strongly, and overall credit in the economy (measured by total social financing) also jumped.
Responsible Investing Corner: April Highlights
Driving inclusive growth and sustainability: transformation and finance across Africa
Africa’s economic transformation is gaining momentum, driven by a dual imperative: addressing persistent historical inequalities while positioning the continent for a low-carbon, inclusive future. Across sectors and countries, innovative approaches to transformation and sustainable finance are reshaping how development is funded and delivered, reflecting a growing commitment to equity, resilience, and environmental stewardship.
Strides in transformation: spotlight on South Africa’s mining sector
In South Africa, the legacy of apartheid still casts a long shadow over economic participation and ownership. While sectors such as finance, agriculture, and manufacturing have made headway in implementing transformation policies, deep structural challenges remain. The Department of Trade, Industry and Competition has recently published a concept document for public comment on the establishment of the R100-billion Transformation Fund. The South African government believes the fund will help improve the effectiveness of broad-based black economic empowerment (BBBEE) spending.
A recent media roundtable hosted by the Minerals Council South Africa has once again placed the spotlight on the mining sector, as it grapples with the need to go beyond compliance and deliver real, impactful change. The roundtable focused on the industry’s adherence to the 2018 Mining Charter and coincided with the anticipated amendment to the Mineral and Petroleum Resources Development Act (MPRDA). Inclusive Procurement and Enterprise and Supplier Development (ESD) were key areas of discussion, with data revealing a R271.5 billion procurement spend among 29 mining companies. While this underscores the sector’s economic contribution, the Minerals Council acknowledged the continued need to enhance support for women-owned businesses and ensure the sector contributes meaningfully to sustainable development. These efforts signal growing alignment between transformation agendas and broader Environmental, Social, and Governance (ESG) objectives.
Innovative approaches to sustainable finance: spotlight on Africa
At the continental level, innovative sustainable finance mechanisms are unlocking new development pathways. The African Development Bank (AfDB) has played a central role in this transformation, with two landmark projects earning top honours at the 2025 Bonds, Loans & ESG Capital Markets Africa Awards. Senegal’s $500 million sustainable term loan facility and Rwanda’s €200 million ESG loan were recognised for their trailblazing approaches to financing climate resilience, renewable energy, green urbanisation, and social infrastructure. Both projects leveraged AfDB’s support through partial credit guarantees and advisory services, demonstrating how blended finance can attract diverse investment while addressing urgent developmental needs.
South Africa’s leadership in this space is also evident through its 2025 G20 presidency, where it has prioritised climate finance and just transitions for developing economies. President Cyril Ramaphosa has called on global partners to scale up and equitably distribute funding to meet the goals of the Paris Agreement, highlighting the urgent need for collective action and ambition.
These developments signal a pivotal shift: African countries are not only driving transformation within their borders but are also pioneering innovative approaches to finance that transformation. By aligning inclusive development goals with sustainable finance frameworks, the continent is laying the foundation for longterm, resilient, and shared prosperity. This evolution reflects a deepening integration of ESG principles, governance reform as a cornerstone of economic redress, social transformation through inclusive ownership and participation, and environmental responsibility as a central driver of both public and private investment strategies.
Financial markets tables
As at 30 April 2025
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