Investment environment overview, 08/2025

Global equity markets maintained their momentum in August, marking a fourth consecutive month of gains amid low volatility environment. U.S. equities continued to lead the charge, with the S&P 500 and Nasdaq Composite climbing 3.6% and 3.9% to fresh all-time highs, as the earnings season ends on a good note and expectations of Fed rate cuts rise following Powell’s Jackson Hole remarks and week labor data. European markets advanced as well, with the STOXX 600 and DAX rising 2.7% and 2.0%, supported by positive economic signals and easing trade concerns, while defense stocks softened on hopes for peace in Ukraine. In China, the CSI 300 and Shanghai Composite surged 10.9% and 8.4%, reaching their highest levels since 2021, driven by major institutional buying and supportive measures from the country’s securities regulator. Bitcoin declined by 6% to about BTC/USD 108,000, pulling back from July highs.

Tariff update

Over the month, the White House continued to modify reciprocal tariff rates. Tariffs on Indian goods were raised from 25% to 50% over Russian oil purchases, impacting textiles, gems, leather, machinery, and seafood. As a result, for the second consecutive month the Nifty 50 declined, falling 0.5% in August. India denounced the move as “unfair” and responded with tax reforms and central bank support. Earlier, on 21 August, the U.S. and EU reached a trade framework setting a 15% tariff on most EU exports, 0% on select U.S. exports, and capping EU pharma, semiconductors, and lumber at 15%, while metals remained at 50%, beyond quotas.

European and US equity markets

Source: Bloomberg and Signet Bank

Trump vs. the Fed

On 25 August, President Trump moved to dismiss Fed Governor Lisa Cook, alleging she committed mortgage fraud in 2021 and referring the accusations to the Department of Justice. Cook, appointed to the Board in 2022, has rejected the claims and filed a lawsuit, stating that the president has no legal authority to remove her under the Federal Reserve Act. The move follows Trump’s earlier conflicts with the Fed, including repeated public attacks on Fed Chair Jerome Powell, whom he once called a “stupid person” and threatened to fire over interest rate policy. ECB chief Lagarde has warned that Trump’s ongoing attempts to interfere in the Fed’s independence threaten to pose a “very serious risk” to global economic stability.

Benchmark 10-year bond yields

Source: Bloomberg and Signet Bank

In pursuit of bipolarity

The 2025 Shanghai Cooperation Organization (SCO) summit, with participating countries representing roughly 43% of the global population and around 30% of world nominal GDP, brought together leaders from key Eurasian economies in Tianjin, including China, Russia, India, and Iran, to strengthen regional cooperation amid a shifting geopolitical environment. Discussions also focused on reducing reliance on Western financial systems by promoting alternative payment mechanisms and local currency trade settlements.

A highlight was the India-China agreement to boost bilateral trade, ease travel restrictions, and explore new economic opportunities, signaling a potential thaw in their historically complex relationship. Over 20 strategic documents on trade, energy, security, and technology had been signed during the summit.

Additionally, President Xi called for the creation of a new SCO development bank, describing it as a major step toward an alternative payment system bypassing the U.S. dollar. Beijing will provide RMB 2b (USD 280m) in aid to member states this year, alongside RMB 10b (USD 1.4b) in loans to an SCO banking consortium.

High Yield bond Indexes

Source: Bloomberg and Signet Bank

Bad U.S. labor numbers spoil otherwise good eco data

Economic indicators in August painted a largely positive picture on both sides of the Atlantic, though weak U.S. labor data tempered the outlook. In the Eurozone, inflation stayed near the ECB’s 2% target at 2.1% YoY, Q2 GDP expanded 1.4% YoY, and unemployment held at a record-low 6.2%. Manufacturing momentum also improved, with the PMI rising back above 50 for the first time since mid-2022. In the U.S., Q2 GDP was revised up to 3.3%, prompting the Atlanta Fed to raise its Q3 forecast to 3.5%, while inflation remained steady at 2.7%. Fed Chair Powell signaled rate cuts could come as soon as the next meeting. However, the labor market disappointed sharply, with only 22K jobs added in August versus 75K expected, a steep slowdown from July’s revised 79K that raised concerns about cooling employment.

Gold price, USD/oz

Source: Bloomberg and Signet Bank

Regional Highlights

The OMX Baltic Benchmark Index has fallen by 2.5% since the end of Q2. The banking sector has been a significant driver of the decline – although the growth of credit portfolios remains positive, lower credit rates have had a negative impact on profit indicators. In contrast, non-bank consumer lenders are showing relative resilience, as they mainly have fixed rates – as a result, interest income continues to grow, while their own financing remains cheaper.

Consumer sector companies (Tallink, TKM Group, Apranga) indicate that domestic demand remains stagnant. At the same time, operating cost pressures remain high, particularly due to wage revisions, which in most cases affect corporate profitability.