Global markets were mixed in February with European indices gaining while US indices struggled. Investors moved away from large cap technology stocks amid worries over the returns to be made from the significant spending on AI. The US Supreme Court ruled that President Trump could not use emergency powers to impose trade tariffs. Conflict between the US and Iran began on the final day of the month when markets were closed, causing the oil price to soar and index futures to turn heavily in red for the first day of March.

The month saw considerable divergence across styles and sectors of the market. Value stocks rose 2.9% for the month, while growth stocks fell 1.6%. This gap pointed to a shift away from higher-valuation companies towards businesses with steadier earnings, stronger cash flow and more moderate valuations. Utilities, materials and consumer staples ranked among the stronger performers, supported by stable demand and relative resilience during slower economic periods. In contrast, consumer discretionary, communication services and information technology lagged. In many cases, even companies that reported solid results struggled to see their share prices advance, as investors focused more on starting valuation levels than on incremental earnings surprises. The S&P500 dropped 0,87%, the Dow Jones managed as modest 0,17% gain and tech-heavy Nasdaq Composite dropped 3,38%. The dollar gained a modest 0,30% against the Euro, closing at 1,1814$/EUR.

Eurozone shares delivered a positive performance in February, benefitting from signs of an economic pick-up in the region and ongoing rotation away from US shares. Gains were led by the energy, communication services and real estate sectors. The European Central Bank (ECB) maintained interest rates on hold at 2% and ECB President Christine Lagarde repeated the view that inflation is “in a good place”. Annual inflation fell to 1.7% in January from 2% in December 2025. The HCOB flash eurozone composite index indicating an improving rate of economic expansion, with a reading of 51.9 in February, up from 51.3 in January. France adopted a budget for 2026, ending months of deadlock. The budget aims to increase defence spending and reduce the deficit to 5% of GDP by the end of 2026 from 5.4% at the end of 2025. The overall Eurostoxx 50 gained 3,20%, the German DAX 3,04 and the French CAC an impressive 5,59%. The Slovenian SBITOP index shone once again, adding  6,88%.

Also in the UK the FTSE index gained a solid 6,72% although the pound sterling lost 1,20% against the Euro. The Bank of England (BoE) kept interest rates steady at 3.75% but signalled that a reduction could come in March. The BoE cuts its UK economic growth forecast for the next two years and raised its unemployment forecast. Meanwhile, data from the Office for National Statistics showed that the UK economy grew by just 0.1% year-on-year in Q4 2025. Inflation slowed to 3% in January after a 3.4% reading in December.

Japanese equities rose strongly in February, with the Nikkei 225 up 10.37%. A landslide victory for the Liberal Democratic Party in the House of Representatives election boosted expectations for political stability and pro-growth policies.

Rudy Marchant

Fund manager Primorski skladi

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