Financial markets faced competing forces in February, with encouraging economic data and easing inflation pressures offset by rising geopolitical risks and growing questions around the scale of AI-related investment. US equities lost momentum, with the S&P 500 and Nasdaq falling by 0.8% and 3.3%, respectively, as technology stocks came under renewed pressure amid easing earnings expectations and stretched valuations, while concerns over future AI driven unemployment resurfaced. In contrast, European markets outperformed meaningfully, supported by attractive valuations and capital allocation. The Euro STOXX 50 and FTSE 100 rose by 3.3% and 7.0%, respectively, benefiting from strength in energy, financials and value-oriented sectors as investors rotated away from US growth stocks. Fixed income markets told a powerful story of shifting expectations as bond prices rallied, bringing down yields as investors sought higher-quality assets amid months of growing geopolitical uncertainty and AI-related concerns. US 10-year Treasury yields fell nearly 30 basis points while UK gilt yields dropped by a similar 29 basis points. Commodities remained in focus as geopolitical risk and uncertainty persisted. Brent crude oil advanced by 6.5%, supported by risks to supply and ongoing tensions in energy producing regions, while gold climbed 10.9%, reclaiming its role as a preferred hedge against falling yields, currency weakness and geopolitical uncertainty. Currency markets saw sterling depreciate by 1.5% and 1.2% against the US dollar and euro, respectively.

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