August 2025 Market Summary

Global equity markets have delivered solid returns over the 12 months to 29 August 2025, supported by robust corporate earnings, continued technological innovation and pockets of economic resilience. Despite these gains, underlying economic conditions, geopolitical developments and inflationary pressures continue to influence market sentiment across regions.

Global Indices

Here’s how some of the global stock markets performed in the 12 months up to 29 August 2025:

• FTSE 100 – 9.60%
• S&P 500 – 16.27%
• Stoxx 600 – 4.95%
• Nikkei 225 – 11.35%

United Kingdom

UK inflation rose to 3.8% in July, up from 3.6% in June and marking its highest level since January 2024. The increase was driven by sharp rises in air fares, partly linked to the timing of school holidays, alongside continued growth in food and fuel prices. This stronger-than-expected figure means inflation in the UK is running well above its peers, with the Eurozone at 2% and the US at 2.7% over the same period.

The data has raised questions over the pace of monetary easing. While , markets are now less confident about further cuts in the near term. The higher reading suggests policymakers will need to be more cautious, balancing the need to bring inflation down against the challenge of supporting a sluggish economy. As a result, the pound weakened, and inflation-sensitive bonds slipped following the release.

At the same time, UK government borrowing costs have continued to rise. Thirty-year gilt yields climbed to 5.61% in August, their highest since 1998, while 10-year yields also moved higher. The sharp rise reflects both reduced expectations of rate cuts and wider concerns over the state of the UK’s public finances. Analysts have warned that significant fiscal reform may be needed to restore confidence.

Overall, the combination of stubborn inflation and rising gilt yields underlines the difficult balancing act facing policymakers ahead of the Autumn Budget. The Bank of England must tread carefully on interest rates, while the Government faces mounting pressure to demonstrate credible plans to manage borrowing and finances.

United States

As of late August, the S&P 500 is up roughly 10% year-to-date, driven largely by mega-cap tech giants such as Nvidia, Microsoft, and Meta (Barron’s). Economic growth has also been strong, with Q2 GDP revised up to 3.3%, supported by AI-related investment and robust consumer spending.

Meanwhile, President Trump has doubled tariffs on Indian imports to 50%, escalating trade tensions with one of America’s key partners. The move, intended to penalise India for purchasing Russian oil, risks pushing up consumer prices in the U.S. and adding to economic pressures. India has signalled it will retaliate, emphasising that its priority remains energy security despite U.S. pressure.

The U.S. labour market remains resilient, leaving the Federal Reserve limited room to manoeuvre amid ongoing political and economic uncertainties.

Asia 

In July 2025, China’s economic activity showed signs of slowing more than anticipated. Retail sales grew by 3.7% year-on-year, down from 4.8% in June and marking the slowest pace since December 2024. Industrial output also decelerated, expanding 5.7% year-on-year compared to 6.8% in June. These figures reflect weakening domestic demand, exacerbated by factors such as extreme weather, a protracted property downturn, and ongoing trade tensions with the United States. Consequently, economists project that China’s GDP growth may fall short of the official 5% target for 2025.

Japan’s economy expanded faster than anticipated over Q2, boosting hopes of further rate hikes from the Bank of Japan. Japan’s real Gross Domestic Product increased by 0.3% quarter-on-quarter in Q2, after having gained by 0.1% in Q1.

Inflation in India dropped below the 2% lower limit of the central bank’s target range in July due to base effects and weakening core price pressures. Consumer prices increased by 1.6% year-on-year, a decrease from 2.1% in June, reaching an eight-year low.

Europe

Annual inflation in the euro area remained steady at 2.0% in July, unchanged from June. Core inflation, which excludes energy, food, alcohol and tobacco, also held steady at 2.3%, marking its lowest level since January 2022.

Eurozone business activity accelerated in August, with the composite PMI reaching its highest level since May 2024. The manufacturing sector expanded for the first time in over three years, driven by increased new orders.

In more positive news, June’s inflation data showed an annual rate of 2.0%, up from 1.9% in May, meeting the ECB’s long-term target.

In summary

Looking ahead, investors remain cautious as central banks balance inflation control with economic growth, trade tensions persist and regional disparities in activity and policy emerge. While global markets have shown resilience, challenges such as elevated UK inflation, slowing Chinese growth and ongoing geopolitical risks highlight the need for a measured approach. Market participants will be closely monitoring corporate earnings, inflation data, and policy signals in the coming months to assess whether the momentum seen so far in 2025 can be sustained.

References

Google Finance. (2025) Global market index performance. Available at: https://www.google.com/finance [Accessed 29 August 2025].

BBC News. (2025) UK inflation rises to 3.8% in July. Available at: https://www.bbc.co.uk/news/articles/c741wkngndqo#:~:text=Prices%20in%20the%20UK%20rose,National%20Statistics%20(ONS)%20data [Accessed 29 August 2025].

Investment Week. (2025) UK borrowing costs rise as gilt yields surge near 27-year high. Available at: https://www.investmentweek.co.uk/news/4517850/uk-borrowing-costs-rise-gilt-yields-surge-near-27 [Accessed 29 August 2025].

CNN. (2025) Trump doubles tariffs on Indian imports to 50%. Available at: https://edition.cnn.com/2025/08/27/economy/trump-india-tariff [Accessed 29 August 2025].

Reuters. (2025) Global markets trading day graphic. Available at: https://www.reuters.com/world/china/global-markets-trading-day-graphic-2025-08-28/ [Accessed 29 August 2025].

South China Morning Post. (2025) China’s economy shows signs of strain as retail sales and industrial output lose momentum. Available at: https://www.scmp.com/economy/economic-indicators/article/3321925/chinas-economy-shows-signs-strain-retail-sales-industrial-output-lose-momentum [Accessed 29 August 2025].

Reuters. (2025) China’s factory output and retail sales growth slump. Available at: https://www.reuters.com/world/china/chinas-factory-output-retail-sales-growth-slump-blow-economy-2025-08-15/ [Accessed 29 August 2025].

FastBull. (2025) Japan’s Q2 GDP beats forecasts but tariff shadow remains. Available at: https://www.fastbull.com/news-detail/japans-q2-gdp-beats-forecasts-but-tariff-shadow-4339820_0 [Accessed 29 August 2025].

AXA Investment Managers. (2025) Take Two: Fed minutes signal caution as Eurozone inflation holds steady. Available at: https://core.axa-im.com/investment-institute/market-views/market-updates/take-two-fed-minutes-signal-caution-eurozone-inflation-holds-steady [Accessed 29 August 2025].

Reuters. (2025) Eurozone business activity accelerates in August as new orders grow. Available at: https://www.reuters.com/world/europe/euro-zone-business-activity-accelerates-august-new-orders-grow-pmi-shows-2025-08-21/ [Accessed 29 August 2025].

This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you are
unsure whether an investment is right for you, please seek independent financial advice. If you choose to invest, please remember the value of
investments and any income derived from them can fall as well as rise and you may get back less than you put in.