Market review April 2025

Crude oil price futures slumped amid production increases and predictions of weaker demand as trade tensions escalated. European natural gas futures declined, in part on the potential for increased supply from rerouted Chinese liquified natural gas.

UK equities

The FTSE 100 Index, a commonly used representative benchmark of the largest UK-listed stocks, saw a retrenchment of 0.7%. However, the FTSE All Share Index dipped 0.3%, as weakness among the large caps was partly offset by share price strength in mid- and small-cap stocks. The Bank of England’s (BoE) Monetary Policy Committee (MPC) did not hold a policy meeting in April, but consensus expectations at the end of April were for a rate cut at its next meeting, in early May. The UK’s annual inflation rate slowed to 2.6% in March, from 2.8% in February, amid a softening in recreation and culture costs. Unemployment held steady at 4.4% for the fourth successive month. The preliminary UK manufacturing Purchasing Managers’ Index (PMI) figure for April remained in contraction. The UK services sector PMI dropped into contractionary territory, hitting 48.9 in April, compared with 52.5 in March, as new orders declined. (Note that a PMI figure under 50 indicates contraction.)

April started turbulently as the US president announced a broad set of global trade tariffs.

US equities

US equities, in common with other regions, saw heavy volatility as sentiment was influenced by global tariffs news from the US government. The FTSE North America Index fell back 3.7% in sterling terms and 0.5% in local terms. The technology- and growth-focused Nasdaq Composite Index dropped 2.7% in sterling terms but gained 1.0% in local terms. Minutes of the Federal Reserve’s (Fed) interest rate meeting in March showed that inflation could rise as a result of tariff increases. Annual inflation eased to 2.4% in March, from 2.8% in February, as fuel prices retreated. In the immediate aftermath of the US tariffs announcement in early April, consensus expectations for reductions in the fed funds rate shifted from two to four cuts during the remainder of the year. Annualised GDP for the first quarter of 2025 declined 0.3%, compared with 2.4% growth in the fourth quarter of 2024, as imports surged. The closely monitored non-farm payrolls saw an extra 228K jobs added in March, beating expectations and surpassing the downwardly revised 117K figure for February. Meanwhile, the preliminary US manufacturing PMI was better than predicted and remained in positive territory, following an upward revision to the prior month’s figure. However, the flash services PMI stayed in expansionary territory, but weakened somewhat.

Europe equities

The FTSE Developed Europe ex UK Index increased 1.4% in sterling terms, but declined 0.6% in local terms, as the euro made gains against sterling. At the country level, Germany advanced in local-currency terms, while Switzerland and France declined. The European Central Bank (ECB) reduced its key interest rates by another 25 bps in April, amid an ongoing slowdown in inflation, which softened to 2.2% in March from 2.3% in February. The ECB continued to signal that it would be led by the data in determining its monetary policy stance. In an early estimate, the eurozone’s first-quarter GDP growth hit 0.4% quarter-on-quarter (q/q), up from 0.2% in the previous period. At the country level, GDP in Germany and France grew marginally on a q/q basis, following slight contractions in the previous quarter. Preliminary figures for March’s eurozone manufacturing PMI remained in contraction but improved on the previous month. The flash services PMI figure, however, dipped into contraction in early figures for April, as new orders slowed.

Japan equities

The yen continued to strengthen against the US dollar during April. The FTSE Japan Index rose 1.7% in sterling terms and 0.4% in yen terms. The Bank of Japan (BoJ) did not have a policy meeting in April, but rhetoric from policymakers signalled a potential readiness to respond to tariff-related economic weakness with monetary policy measures if required. Meanwhile inflation eased for the second successive month, dipping from 3.7% in February to hit 3.6% in March, despite the price of rice surging on supply shortages. Manufacturing remained in contraction according to preliminary PMI figures.

Emerging market equities

The FTSE Emerging Index contracted 2.5% in sterling terms but gained 0.9% in local currency terms. Mexico, Brazil, India and South Africa gained ground, while China, Taiwan and Saudi Arabia declined in local terms. China was negatively impacted by the US tariff proposals, which were hiked several times during the month. The US then decided to roll back tariffs on certain electric goods imported from China. Annual GDP in China grew 5.4% year-on-year (y/y) in the first quarter of 2025, matching the pace of the fourth quarter of 2024, helped by continued stimulus measures. Industrial production for March reached 7.7% y/y, which was ahead of expectations and up from 5.9% y/y in the January-February period, as most sectors saw an acceleration. Export growth jumped to 12.4% y/y, versus 2.3% in the previous period and the 4.4% y/y expected in the market, on the back of frontloading of orders amid US-China trade tensions. Meanwhile, the drop in imports of 4.3% y/y was less severe than the 8.4% y/y fall in the January-February period. In Mexico, GDP returned to positive territory as it hit 0.2% q/q growth, following a decline in the previous period. Brazil’s unemployment rate grew for the fourth successive month, to reach 7.0% in March. The Central Bank of Brazil did not have a policy meeting but had been raising rates in recent months to try to hinder rising inflation. However, there was a jump in inflation during March as it reached 5.48%, compared with 5.06% during February. South Africa’s equity market partly benefited from rising gold prices.

Asia Pacific equities

The FTSE Asia Pacific ex Japan Index slid 1.9% in sterling terms and edged just 0.3% lower in local terms. At the country level, India and Australia advanced, while China and Taiwan declined in local currency terms. India’s annual inflation softened to 3.34% from 2.61%, its fifth successive month of slowing prices. Given this deceleration of prices. and amid worries about the pace of economic growth, the Reserve Bank of India reduced its key interest rate by another 25 bps in April – taking it to 6.0%. The rupee strengthened against the US dollar. The Bank of Korea maintained its base rate at 2.75%, while it revised down its economic growth prediction for this year. Korea’s inflation rate nudged higher, reaching 2.1% y/y from 2.0% y/y.

Stocks recovered some ground as the US announced a pause in tariffs for countries that had not implemented retaliatory trade measures.

Bonds

In fixed income markets, government bonds increased, particularly in local terms. In the US, the 10-year Treasury yield dropped from 4.21% to 4.17% but peaked above 4.5% in the first half of the month as tariff concerns and economic growth worries took hold. German 10-year bund yields dropped amid further easing in ECB monetary policy, helpful inflation data, and as investors sought defensive assets amid market volatility. UK 10-year gilt yields also eased back in April as inflation softened and the market continued to expect further rate cuts from the Bank of England. Emerging market local currency government debt advanced in local terms over the month. It was also a volatile month for credit, but overall, it ultimately gained ground in local currency terms, with investment grade outpacing high yield. Within this, European high yield outperformed US high yield.

Property

The FTSE EPRA Nareit Developed Index, a measure of the performance of Real Estate Investment Trusts (REITs), declined 2.5% in sterling terms and 4.1% in local terms. Note that REITs tend to be sensitive to interest rate expectations. During the month to end-March – the latest period with available figures – the MSCI UK Monthly Property Index 0.7%. In the UK commercial property market, the lower interest rate environment has generally helped to bolster sentiment. High-quality offices and industrial property, particularly logistics-related sites, have been among the more robust segments.

*All index data are shown in total return sterling.
Source: FE Analytic