Global investment market review: February 2026

In February, the MSCI ACWI Index, a representative measure of global equities across developed and emerging markets, rose 3.4% in sterling terms and 1.4% in local currency terms. Japan, the UK, Asia Pacific and emerging markets were among the strongest regions. Europe also performed well, while the US trailed as news of further capital expenditure (capex) plans among some of its larger AI-related companies negatively impacted sentiment. The US Supreme Court’s ruling against the powers the US government used to introduce tariffs last year, was among the other main issues that markets focused on as it added further uncertainty. In fixed income, the ICE BofA Global Government Index added 3.3% in sterling terms and 1.7% in local terms. Sterling weakened against the US dollar.

During February, crude oil futures prices edged higher, despite higher US inventory levels, while European gas futures declined.

However, just before month-end, when markets were closed for the weekend, the US and Israel launched airstrikes on Iran. When markets reopened in early March, equity prices dropped globally, and oil and European gas prices surged sharply higher on supply concerns.

The FTSE 100 Index, a commonly used representative benchmark of the UK’s largest equities, added 7.0%. The FTSE All Share Index rose 6.5%, as mid- and small-cap stocks trailed the price moves of the larger companies. The UK market benefited from broadening out from the AI- and growth-related strength of recent years. In a close vote, the Bank of England’s Monetary Policy Committee left rates unchanged, but four of the nine members voted for a 25 basis point (bps) rate reduction. The UK’s annual inflation slowed from 3.4% in December to 3.0% in January, amid a softening of transport prices. Meanwhile, unemployment edged up from 5.1% to 5.2%% in the three months to December. The flash UK manufacturing Purchasing Managers’ Index (PMI) surpassed expectations by inching up to 52 in February, helped by rising exports. The UK services sector PMI broadly matched the pace of the previous month in initial figures.

In US equities, the S&P 500 Index gained 1.3% in sterling terms but fell back 0.8% in US-dollar terms. The Nasdaq Composite Index, which has a growth focus, was down 1.3% in sterling terms and 3.3% in dollar terms. There was further volatility in growth stocks, particularly in AI-related companies amid high capex and worries about the potential for the technology to disrupt markets. The software sector struggled on worries about AI’s ability to hit the business models of some companies. Minutes of January’s Federal Open Markets Committee meeting highlighted a split between members looking to support the jobs market and those wanting to limit inflation. The non-farm payrolls report revealed a stronger-than-expected 130K jobs were added in the US during January, which surpassed December’s revised 48K figure, amid hires in health care and construction. Unemployment reduced for the second successive month, to reach 4.3% from 4.4%. The first estimate of US annualised fourth-quarter gross domestic product (GDP) growth missed forecasts to come in at 1.4%, compared with expectations for 3.0% expansion and the previous quarter’s 4.4% pace. However, inflation came in at a lower-than-predicted level of 2.4% in January, having sat at 2.7% in the previous two months, as the pace of energy price rises softened. The preliminary US manufacturing PMI for February softened on the previous month’s reading. The early services PMI reading was also slightly lower.

The MSCI Europe ex UK Index increased 4.9% in sterling terms. France, Switzerland and Germany led returns in local currency terms. Nascent hopes of improved growth helped push shares higher. The European Central Bank (ECB) kept rates on hold, as annual inflation slowed to 1.7% in January from 2.0% in December. The ECB expects price rises to stabilise at its 2% target over a medium-term timeframe. February’s flash eurozone manufacturing PMI moved into expansionary territory and beat expectations. The preliminary services PMI improved slightly in February.

Japan, the UK, Asia Pacific and emerging markets were among the strongest-performing regions.

Japan’s equities, as measured by the MSCI Japan Index, jumped 10.8% in sterling terms. Sanae Takaichi, the country’s Prime Minister consolidated her position with a solid election win at the start of the month, which boosted investors’ hopes for growth-focused policies. Inflation softened from 2.1% in December to 1.5% in January, in part due to slower price rises in transport. The manufacturing PMI rose further into expansionary territory in an initial reading for February. The flash services PMI remained in expansionary territory.

The MSCI Emerging Markets Index added 7.7% in sterling terms and 5.0% in local terms. Korea, Taiwan and South Africa advanced strongly, while Saudi Arabia and China weakened in local currency terms. India reached a trade deal with the US, which provided something of a market fillip. The Reserve Bank of India (RBI), meanwhile, kept rates on hold, as it had confidence in the country’s growth levels and on keeping inflation contained. However, India’s annual inflation bounced for the third successive month, hitting 2.75%, bringing it above the RBI’s lower inflation threshold target of 2%. The country saw 7.8% year-on-year (y/y) GDP growth for the fourth calendar quarter of 2025, which was below the previous period’s upwardly revised 8.4% y/y expansion but above market expectations. Shares in China were weak on worries about growth levels. China’s industrial production, export and import figures, for example, were not released, as combined figures will be published in the coming weeks to cover a two-month period to smooth out the impact of Chinese New Year.

In February, the MSCI AC Pacific ex Japan Index jumped 9.0% in sterling terms and 6.2% in local terms. At the country level, Korea, Taiwan and Australia gained ground, while China and Malaysia lagged in local terms. Korea and Taiwan’s technology hardware sectors performed well. In Korea, The Bank of Korea held its benchmark rate at 2.5% as it monitored the current global and local backdrop, including the pace of inflation and weakness in the won. Once again, Bank Indonesia held rates steady in February as the central bank aimed to bolster the rupiah. Australia’s central bank upped its benchmark rate against a backdrop of labour shortages potentially impacting inflation. Meanwhile, the country’s inflation rate remained at 3.8% in January, keeping it above the central bank’s target range of 2-3%.

Fixed income markets broadly stepped higher. The 10-year US Treasury yield moved from 4.24% at the start of the month to 3.96% at month-end, in part due to a search for relative ‘safe havens’ on concerns about the future strength of AI stocks and amid geopolitical tensions and job market softening. The UK’s 10-year gilt yield fell as inflation waned, which bolstered expectations for a further rate cut in the coming months. This sentiment was also strengthened by the close monetary policy vote in February. In Germany, 10-year bund yields declined as the ECB expected inflation to be limited in the coming years. Emerging market debt was up slightly in US-dollar terms. In credit, spreads over investment grade and high yield widened.

The FTSE EPRA Nareit Developed Index, a measure of the performance of Real Estate Investment Trusts (REITs), jumped 9.2% in sterling terms and 7.8% in local currency terms. Note that REITs tend to be sensitive to interest rate expectations. During the month to end-January – the latest period with available figures – the MSCI UK Monthly Property Index was up 0.5%. Office space in London remains a sought after segment, as the ongoing shift in balance away from home working continued. Supply of top-quality office space is limited, with low vacancy rates. Lower-quality office space has seen better availability.

All index data are shown in total return sterling, unless otherwise stated.
Source: FE Analytics