Global markets in late summer 2025 were shaped by softer U.S. labor data, continued inflationary pressures, and rising geopolitical risks. In the U.S., job growth slowed considerably, unemployment edged up to 4.3%, and inflation rose to 2.9% in August, the highest since January. The Federal Reserve responded with a 0.25% rate cut and signaled two more before year-end, reflecting concerns over weakening employment and persistent tariff uncertainty. Meanwhile, Europe’s inflation stabilized at 2.0%, but diverging trends across member states highlighted underlying fragility. The ECB held rates steady, citing balanced risks but leaving room for data-driven adjustments.
Equity markets painted a mixed picture. U.S. stocks hit record highs, with the S&P 500 up 34% since April, driven largely by AI-linked mega-caps, though valuations appear stretched with the Buffett Indicator at 218% and Shiller P/E near dot-com bubble levels. In contrast, German equities lagged due to a stronger euro’s drag on exports, while France and broader European indices managed modest gains. Asia saw strength, with Japan’s Nikkei reaching a historic high and Hong Kong’s Hang Seng also advancing. Commodities and alternatives reflected risk hedging, as gold surged over 12% to a new all-time high and Bitcoin traded above $112,000, while oil prices remained steady under OPEC+ supply pressures.
Currency markets and bond yields signaled investor caution. U.S. Treasury yields fell on dovish Fed expectations, while European yields were broadly steady. The dollar weakened against the euro but strengthened against the Canadian dollar and yen. Cyprus stood out with inflation dropping to 0.0% and its 10-year bond yield at 3.09%. Banking sector developments also underscored shifting landscapes: Eurobank’s merger with Hellenic Bank reshaped Cyprus’ financial sector, while nine major European banks announced plans for a MiCAR-compliant euro stablecoin, set for 2026, marking a push for digital payment sovereignty in Europe.
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