Monthly Market Review - February 2025
In February 2025, global markets reacted negatively to President Trump’s executive orders, including tariffs on Canada, Mexico, and China, fueling market volatility. Amid this turmoil, the MSCI World Islamic Index fell 2.7% in February, bringing its year-to-date (YTD) performance to -0.3%, while the Dow Jones Sukuk Index gained 1.1% in the month, pushing its YTD return to 1.7%. Gold also continues to do well, rising to a record high above $2,950, up 8.9% YTD, amid mounting trade tensions and market uncertainty.
The U.S. economy exhibited signs of resilience amid ongoing challenges. The Consumer Price Index (CPI) increased to 3.0% Year-on-year (YoY), up from 2.9% in December. The unemployment rate decreased to 4.0% in January, down from 4.1% the previous month. The US Manufacturing PMI rose to 52.7 in February, indicating an acceleration in manufacturing activity, slightly up from 50.9% in January. The United States imposed a 25% tariff on imports from Mexico and Canada and a 10% tariff on Chinese goods, aiming to address concerns over trade imbalances, illegal immigration and drug trafficking. These measures led to market volatility and raised concerns about future growth, leading to declines in major indices. 1
The UK economy faced ongoing headwinds. Inflation ticked up once more, with the CPI hitting 3.0% year-over-year, marking a slight acceleration from January’s 2.5%. Persistent price pressures have further squeezed real incomes and raised concerns for policymakers. Manufacturing activity also showed further weakness, with the PMI declining from 48.3 in January to 46.9 in February, moving deeper into contraction territory. In response, the Bank of England followed through on expectations, cutting its benchmark interest rate by 25 basis points to bolster a stagnant economy. 2
In the Eurozone, industrial activity showed some signs of improvement in February, with the Manufacturing PMI rising from 46.6 in January to 47.6, though it remained in contraction territory. Meanwhile, inflation edged down to 2.4% YoY in February, slightly lower than 2.5% in January, as base effects and energy costs exerted a moderate influence. The European Central Bank (ECB), having cut rates by 25 basis points in January and indicated another potential cut at its March meeting, now sees improved chances of easing further following the better-than-expected inflation data. 3
In February, China’s economy showed tentative signs of stabilization as the Manufacturing PMI climbed to 50.2, marking a return to expansion after a month of contraction. Consumer prices also rebounded, with CPI rising to 0.5% YoY in January from 0.1% in the previous month. However, structural challenges persist, particularly in the property sector, where weak sentiment continues to weigh on investment. With external pressures from tariffs and global trade uncertainties, expectations are growing for the People’s Bank of China (PBOC) to introduce further monetary easing to support growth. 4
Global markets will stay reactive to central bank policies, trade shifts, and economic trends. While inflation remains a concern, signs of industrial recovery in the U.S. and China offer optimism. However, geopolitical risks and sector disruptions may drive volatility, underscoring the need for diversification in 2025.
Sources
1 (Whitehouse, 2025)
2 (BOE, 2025)
3 (Koranyi, 2025)
4 (Reuters, 2025)
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