MARKETS ADVANCE AMID AI-DRIVEN CORPORATE GAINS, CENTRAL BANK CAUTION, AND RISING GEOPOLITICAL TENSIONS
MONTHLY HIGHLIGHTS
- Asian equity markets have been powering ahead, largely on the back of expectations that the U.S. Federal Reserve will soon begin cutting interest rates. Markets in Japan, South Korea, and Taiwan in particular have risen, helped by optimism around generative AI. The weakening U.S. dollar supported further inflows to Asian equities.
- The European Central Bank opted to hold its key rate at 2%, citing that the eurozone economy is in a “good place” but acknowledging that downside risks persist. Inflation is projected to decline towards 1.9% by 2027, which is slightly below the target but viewed as manageable.
- There has been a shift in expectations for U.S. interest rate policy: Markets have largely priced in a September rate cut, reflecting softer inflation data and market expectations of further policy easing, especially in components relevant to the Fed’s preferred core PCE index.
- U.S. political and regulatory developments have drawn headlines as President Donald Trump has called for the European Union to impose 100% tariffs on goods from China and India, citing concerns around energy purchases from Russia, though the direct market impact remains limited for now.
- In Europe, one of the more interesting corporate stories has been Euronext’s rise: its share price has climbed some 28% this year, and it is slated to enter the CAC 40 index as of 22 September 2025. The exchange operator has significantly expanded its footprint, acquiring stock exchanges in Ireland, Norway, and Italy, while also investing in fintech to diversify beyond pure trading revenues.
EQUITY MARKETS
Global equity markets in the first half of September delivered a broadly positive performance, with most major indices advancing. Gains were particularly strong in the United States, where broad benchmarks as well as more specialised indices posted healthy rises. The technology-heavy segment of the market led the way, propelled by enthusiasm for leading growth names, with investor sentiment buoyed by both earnings resilience and momentum in artificial intelligence themes. Smaller companies also benefited, as risk appetite improved and breadth across the US market expanded.
In Europe, performance was more measured but still constructive. Leading continental benchmarks managed to grind higher, aided by strength in cyclical areas and stabilising economic signals. Southern European indices posted gains, with Italian and Spanish equities delivering solid advances, reflecting a combination of supportive domestic factors and improved investor confidence. In contrast, more mature Northern European markets posted modest gains, while select Eastern European exchanges continued to struggle against idiosyncratic pressures led by a drop in the Budapest stock index which fell by 1.87 per cent.
Asia offered a mixed picture. Japan stood out with a robust upswing, reflecting currency dynamics and ongoing investor confidence in corporate reforms. Taiwan and China also registered respectable gains, with Chinese equities staging a tentative recovery amid signs that policy measures were beginning to shore up sentiment. Elsewhere in the region, progress was more muted, although markets still leaned to the positive side as investors sought exposure to economies positioned to benefit from global supply chain shifts.
Emerging markets more broadly experienced a constructive phase, with Latin America contributing meaningfully. Brazil built on commodity-linked momentum and firmer domestic demand, enabling its stock market to advance further by 1.5 per cent. Africa’s main bourse also posted a strong showing with a periodic return of 3.8 per cent, suggesting that global investors were selectively re-engaging with frontier and emerging exposures after a period of caution.
In the corporate world, Oracle saw its shares rise by roughly 36% following its earnings release, largely on account of pronounced demand for its cloud infrastructure services from AI companies. The firm revealed four major cloud contracts, partly driven by clients like OpenAI, boosting confidence in its AI-backed cloud offering. It also reported a surge in its contracted backlog (or Remaining Performance Obligations), which signalled strong future revenue visibility. This event importantly repositioned Oracle among the top US companies by market capitalisation and emphasised the growing role of AI infrastructure in investor valuations. These earnings results caught investors off guard as it added around $219 billion in one day. Adobe delivered a better-than-expected third-quarter for fiscal 2025, posting adjusted earnings per share above forecasts and revenue slightly outperforming estimates. Key metrics like its Digital Media Annual Recurring Revenue (ARR) rose, with notable strength in its AI-powered product lines: AI related ARR exceeded $5 billion. On the back of this performance, Adobe lifted its full-year guidance for both revenue and EPS. Investors reacted positively, viewing Adobe’s deeper AI monetisation (especially in enterprise segments) as reinforcing its competitive positioning.
Broadcom’s third-quarter results outperformed consensus, thanks to demand in its AI chip business. The revenue from its chip segment rose by about 63% year-over-year, and the company expects this momentum to continue into Q4 with further strong growth in AI chip sales. Broadcom also reported new customer wins and noted that its products are increasingly central to large-scale AI deployments. This places Broadcom in a favourable light among hardware providers benefiting from the AI infrastructure build-out. Alphabet Inc. benefited from a favourable antitrust ruling in this period, alleviating some regulatory risks that had been damping investor sentiment. The relief boosted its stock performance, prompting speculation that Google may soon join Apple, Microsoft and Nvidia in market cap rankings at the very top. It was a reminder to investors that regulatory developments can meaningfully affect valuations even for companies with strong fundamentals in cloud, AI, and advertising.
CREDIT MARKETS
In the first half of September, global investment grade bonds continued to build on recent strength, supported by a broad rally across sovereign and corporate segments. US Treasuries were among the standout performers, particularly at the long end of the curve, where returns exceeded three per cent over the fortnight. This strength was echoed in European government debt, where the 15-year plus segment also gained strongly (+1.49%), underscoring the favourable environment for duration. Corporate credit in the United States posted robust advances with a gain of 2.01 per cent, while global aggregate indices in both hedged and unhedged forms delivered gains of just over one per cent, highlighting the breadth of performance across the quality spectrum.
Emerging market investment grade debt also enjoyed a strong run, with dollar-denominated benchmarks advancing more than one and a half per cent. Indian government bonds posted gains with a periodic return of 0.88 per cent, while European aggregate corporate indices delivered returns in both hedged and unhedged form. The only laggards within the investment grade complex were Chinese government and corporate bonds, which slipped by 0.22 per cent.
High yield markets presented a more mixed picture. US high yield posted respectable gains, with returns just under one per cent, while global high yield indices also moved higher. European high yield was more restrained, with modest advances in the single-B and double-B segments. Notably, the lowest tier of European high yield, including CCC-rated debt, posted negative returns of 0.48 per cent, reflecting some reluctance among investors to chase riskier parts of the credit spectrum. Sterling-denominated high yield was mostly flat over the period.
The period highlighted a strong preference for higher-quality bonds, with long-dated sovereigns and investment grade corporates leading the advance. High yield provided selective opportunities, particularly in the United States, but risk appetite in Europe was more muted, especially towards lower-quality issuers. The divergence between robust performance in global investment grade and the patchier picture in high yield suggests that investors remained more comfortable allocating towards duration and quality rather than stretching further down the credit curve.
CENTRAL BANKING, THE ECONOMY AND GEO-POLITICS
The ECB has opted to hold its key interest rate at 2%, continuing a “pause” after a string of rate cuts since mid-2024. The bank characterises the Eurozone economy as resilient, pointing to solid domestic demand, a stable labour market, and inflation nudging close to its 2% target. ECB President Christine Lagarde has emphasised a “wait-and-watch” approach. Although inflation has edged above target in some measures, the risks are viewed as fairly balanced as domestic strength is tempered by external headwinds (notably trade uncertainties).
In the US, data from early September has painted a picture of a cooling labour market. Job growth has slowed markedly, with August adding only about 22,000 new positions which is well below expectations. Despite inflation still being above its 2% goal (core inflation measures remain sticky, running closer to ~3%), market consensus has shifted toward expecting a rate cut at the Fed’s meeting in mid-September. Political pressure has also intruded. The Trump administration has been vocal in urging quicker easing; there are also developments at the Fed Board (appointments and attempted dismissals) that have raised concerns about the Fed’s institutional independence. That said, key Fed officials continue to assert that decisions will be data-driven.
In Japan, the country is dealing with a somewhat tricky mix of inflation and economic uncertainty. Wholesale or producer-price inflation accelerated in August, largely driven by food and beverage costs. At the same time, certain import prices have declined with a stronger yen. The BoJ’s policy rate has stayed at 0.5%, unchanged since the increase from 0.25% earlier this year. The bank remains cautious: despite inflation running above its target in headline terms, underlying inflation (excluding volatile items) is moving toward the 2% target more gradually.
Trade tensions continue to loom large, especially between the United States, China and Europe. U.S. tariffs (some of them renewed or expanded) have introduced uncertainty for global supply chains. European exporters are under pressure, while China is both a counterpart in trade friction and a participant in redirected trade flows. In Europe, political instability in places like France has also raised concerns, particularly with rising bond yields in those countries. Nonetheless, markets seem to be absorbing these risks relatively well at present. In recent weeks, there has been growing concern over China’s economic performance. Industrial output and retail sales have both underperformed expectations, with August data showing factory production growth at its slowest since mid-2024 and retail spending lagging. Added to this are mounting pressures in the property sector, rising unemployment, and weakening external demand, particularly from trade partners such as the US. Policymakers in Beijing are reportedly weighing further stimulus, through interest rate cuts, easing reserve requirements, or ramping up fiscal outlays to hit their growth target for the year.
On the geopolitical front, tensions around trade and sanctions have intensified. The U.S. has proposed secondary tariffs on China and India over Russian oil purchases, part of a broader strategy to isolate Russia economically over its war in Ukraine. This stance is causing friction among G7 and European partners, some of whom are wary of the blowback such measures may bring. Simultaneously, military signalling is stepping up with the joint Russian-Belarus “Zapad 2025” war games in Belarus have raised alarms among neighbouring NATO states, who see these drills as viewed with heightened concern given the broader regional insecurity stemming from the Ukraine conflict.
This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Aria Capital Management (Europe) or any of its related companies to participate in any of the transactions mentioned herein. This material may contain links to third-party websites or content. These links are provided for your convenience only and do not constitute endorsement or approval by ARIA Capital Management (Europe) and is not responsible for the content of linked third-party websites and does not endorse or guarantee the information, opinions, products, or services offered on these websites. Please review the terms of use and privacy policy of any third-party website you visit. The products managed by ARIA Capital Management (Europe) are typically available via professional advisers rather than individual investors, who should not rely on this information, but contact their financial adviser. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Please refer to the relevant Prospectus and other relevant documents and/or the terms and conditions for any services offered for detailed information. Past performance does not guarantee future results. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. Investors should seek financial advice before making any investment decisions. The products and services here may not be available to residents of all jurisdictions. The investments underlying the company and its sub-funds do not take into account the EU criteria for environmentally sustainable economic activities.
ARIA Capital Management (Europe) Limited is authorised and regulated by the Malta Financial Services Authority, with the Authorised Person ID of FEXS. A Limited Company registered in Malta No: C 26673. ARIA Private Clients is a trading name of ARIA Capital Management (Europe) Limited. Padraig O'Riordan act as tied agent of ARIA Capital Management (Europe) Limited in Ireland.
