Koen Hoorelbeke
Investment and Options Strategist
Markets oscillated between earnings-driven optimism and renewed caution as policy headlines and sector narratives kept dispersion high. By Friday, bond yields had fallen to fresh cycle lows while equity momentum cooled, setting a more fragile tone into March.
Market pulse: confidence returned mid-week, but conviction faded into the weekend.
US equities swung sharply through the week. After an early selloff on AI disruption fears (23 February), the S&P 500 rebounded to 6,946.13 on 25 February before easing back to 6,908.86 by 26 February as Nvidia fell 5.5% despite strong results. Microsoft (+3.0% on 25 February) and Palantir (+4.2%) supported the mid-week recovery, while sharp earnings reactions in Salesforce and Block underscored rising stock dispersion.
Falling Treasury yields provided valuation support, but widening high-yield spreads suggested investors were becoming more selective.
Market pulse: leadership remains tech-heavy, but earnings volatility is increasing.
European equities pushed to fresh highs mid-week, with the Euro STOXX 50 reaching 6,172.36 on 25 February and the FTSE 100 touching a record 10,910.55 on 27 February. Buyback announcements supported select UK names, while parts of continental Europe stayed sensitive to softer sentiment data.
In Asia, Japan and South Korea outperformed on chip strength, while Hong Kong remained more volatile ahead of China’s policy meetings.
Market pulse: Europe shows resilience, but Asia remains policy- and tech-sensitive.
The VIX fell from 21.01 on 23 February to 17.93 on 25 February as equities recovered. By 26 February, it stood at 18.63, signalling that hedging demand had eased but not disappeared. Weekly implied moves narrowed from roughly ±118 points early in the week to ±42 points by expiry.
Elevated skew readings indicate investors still prioritise downside protection.
Market pulse: volatility has eased from stress levels but hasn’t returned to comfort.
Last week’s options activity painted a coherent picture across asset classes: investors largely stayed invested, but with a noticeably stronger emphasis on protection and structure. Broad index and ETF flows showed a clear preference for downside hedges and volatility overlays, signalling that portfolio insurance moved higher up the priority list. Within mega-cap leadership, positioning shifted from straightforward upside participation toward more buffered exposure, suggesting that even in core growth names, risk was being actively managed rather than expanded.
At the same time, metals continued to attract constructive interest as a diversification sleeve, while energy exposure was maintained but increasingly expressed through defined-risk structures. The overall message for investors is not one of panic or capitulation, but of recalibration: capital remains deployed, yet more deliberately hedged.
Market pulse: participation remains intact, but conviction is now expressed through protection rather than leverage.
ETF flows stabilise despite price swings
Bitcoin traded between roughly $63,100 on 23 February and $68,176 on 25 February before easing back below $68,000 into Friday. Ethereum followed a similar pattern. US spot Bitcoin ETFs recorded net inflows of +$254 million on 26 February after earlier outflows, with IBIT leading, while Ethereum ETFs also saw modest inflows.
Institutional participation therefore appears steady, even as prices react to broader macro shifts.
Market pulse: flows are constructive, but digital assets remain tied to macro sentiment.
US Treasuries rallied into week-end. The 10-year yield closed at 3.94% on 27 February, marking the first weekly close below 4.00% since mid-2024, while the 2-year yield touched levels below 3.41%. High-yield spreads widened to 291 basis points by Friday, the widest of the year.
In Europe, softer inflation readings reinforced expectations that tightening cycles are nearing completion.
Market pulse: bond markets are pricing slower growth and more cautious policy expectations.
Gold traded in a tight range near 5,200 per ounce during the week before breaking higher at the start of March. Silver showed sharper swings, briefly clearing 91 before consolidating.
Crude oil remained sensitive to developments around Iran and the Strait of Hormuz, trading near multi-month highs late in the week. Energy markets are now the clearest barometer of geopolitical risk.
Market pulse: commodities are increasingly driven by geopolitics rather than demand alone.
The US dollar fluctuated around 1.1800 in EURUSD through most of the week, while USDJPY reversed sharply on shifting Bank of Japan signals. Sterling weakened after a UK by-election unsettled political expectations, with EURGBP moving above 0.8750.
Commodity-linked currencies stayed sensitive to oil’s move.
Market pulse: FX markets are balancing rate differentials against political risk.
The US-Israeli strikes on Iran over the weekend materially raise geopolitical risk. Markets will focus on three transmission channels: oil supply and shipping through the Strait of Hormuz, insurance and freight costs, and second-round inflation expectations. If higher energy prices persist, they could complicate the recent decline in bond yields and alter expectations for central bank policy paths.
For deeper analysis on the conflict and its market implications, readers can consult our dedicated coverage published this weekend and Monday:
Friday’s US employment report for February is the key macro catalyst. January showed job growth of 130,000, with earlier months revised lower. Markets will assess whether hiring momentum is stabilising or slowing further. ADP employment data mid-week, ISM surveys and the Federal Reserve’s Beige Book will provide additional context on growth and pricing pressures.
If payrolls surprise on either side, rate expectations and equity volatility could reprice quickly.
After Nvidia’s volatile reaction, semiconductor earnings remain central. Broadcom and Marvell will be watched for AI demand commentary, while CrowdStrike provides a read on software resilience. Retail earnings from Target, Costco and Best Buy should offer insight into consumer demand trends as markets await updated retail sales data.
Market pulse: geopolitics sets the tone, but labour data and earnings will determine whether caution deepens or stabilises.
The final week of February highlighted a market still anchored by technology leadership but increasingly sensitive to macro and geopolitical crosscurrents. Falling bond yields and resilient European equities provide some stability, yet widening credit spreads and elevated skew signal cautious positioning beneath the surface.
As March begins, the combination of Middle East escalation, US labour data and heavyweight earnings could quickly reshape risk appetite. Staying diversified and attentive to cross-asset signals remains essential.
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