A MONUMENTAL MONTH FOR GLOBAL GEOPOLITICS AND THE WORLD
EQUITY MARKETS
Global stock markets advanced to new highs in June, with notable strength in the United States where the S&P 500 breached the 6,170 mark. This was underpinned by an improving geopolitical backdrop and encouraging economic signals, particularly from consumer spending data. Investor sentiment was further buoyed by retreating oil prices and a marginal uptick in the US dollar. Although inflation data showed a modest acceleration, market participants continue to anticipate interest rate reductions later this year—especially if employment data begins to soften. Nevertheless, rising valuations are giving cause for concern, with some analysts warning that the scale of capital inflows into US equities could signal an increase in speculative activity.
Institutional investors are becoming more circumspect, with several risks on the horizon casting a shadow over the second-half outlook. These include unresolved tariff negotiations, fragile corporate earnings projections, ongoing geopolitical tensions, ambiguity around US fiscal policy and central bank leadership, and elevated asset prices. Investor anxiety is also being fuelled by the fast-approaching 9 July deadline for a potential trade agreement. The sudden breakdown in US-Canada talks has added to market jitters. Although company results have remained reasonably robust, many firms have tempered their forward guidance, citing mounting input costs and tepid consumer sentiment. Meanwhile, doubts persist regarding the sustainability of President Trump’s economic strategy. The MSCI World Index gained 3.89 per cent in June, bringing its year-to-date return to 8.95 per cent. This was largely attributed to strong US market performance, with the S&P 500 contributing a monthly return of 4.54 per cent, lifting its performance since the beginning of the year to 5.20 per cent. Across Europe, equity returns were less impressive. The Eurozone’s leading indices, the Euro Stoxx and Euro Stoxx 50, declined slightly in June by -0.29 per cent and -0.68 per cent, respectively. Despite this muted performance, Germany’s DAX index continues to lead the region year-to-date, having delivered a remarkable 20.71 per cent return.
In Asia, the performance of equity indices was more mixed, though generally positive. China’s CSI 300 Index returned 2.84 per cent in June, lagging behind other regional markets. The subdued performance points to investor caution amid ongoing concerns about China’s economic trajectory. India’s Nifty 50 Index posted a healthy 3.90 per cent total return, reflecting continued investor optimism and confidence in India’s macroeconomic prospects. The index’s steady gains underline its standing as one of the region’s more resilient markets this year.
Hong Kong’s Hang Seng Index outperformed its Asian counterparts, rising by 4.98 per cent in June. This standout performance likely stemmed from attractive valuations and improving sentiment around the region’s economic stability and policy outlook. Investor appetite for Asian assets improved markedly, supported by a recovery in risk-taking following the volatility experienced in April. Activity across equity, currency, and credit markets picked up significantly, encouraged by solid fundamentals and a weakening US dollar. Corporates also made use of this renewed momentum to raise capital through both equity and debt issuance. Despite lingering geopolitical tensions, appetite for Asian investments remained strong, bolstered by improved macroeconomic indicators and easing monetary policies. Resilient regional dynamics and increasing inflows into government bonds suggest investors are positioning for continued strength across Asia heading into the second half of the year.
In company news, Xiaomi’s YU7 SUV drew nearly 290,000 orders within its first hour, fuelling concerns over Tesla’s waning foothold in China’s EV space. Analysts say the newcomer’s aggressive pricing and feature set could accelerate Tesla’s decline in the region. Nvidia executives have offloaded over $1 billion in shares over the past year, with over half sold in June as the stock hit record highs. The surge comes amid renewed AI-driven market enthusiasm, propelling Nvidia back to the top as the world’s most valuable company. Stellantis is recalling over 250,000 Pacifica and Voyager models in the U.S. due to a fault inside curtain air bag sealing that could heighten injury risk in a crash. The company says no injuries have been reported and affected airbags will be replaced free of charge. HSBC Continental Europe has agreed to sell its German securities custody operations to BNP Paribas, aligning with its broader streamlining efforts. The transfer, set to begin in 2026, includes staff, assets, and clients, pending regulatory and internal approvals. Microsoft's next-gen Maia AI chip, code-named Braga, is now expected to enter mass production in 2026 delayed by at least six months due to design changes and staffing issues. Even once launched, it’s likely to underperform Nvidia’s Blackwell chip, highlighting Microsoft’s uphill battle in reducing its reliance on third-party processors. Shein is preparing a confidential IPO filing in Hong Kong, marking its third listing attempt after setbacks in New York and London. If approved, the move could test the city’s flexibility on disclosure rules while giving Shein more control over sensitive financial details. Porsche is exploring a potential divestment of its MHP consulting and IT arm, with sources suggesting the unit could fetch over €1 billion, though the process remains in early stages. The news lifted Porsche shares by 7.6%, topping Frankfurt’s blue-chip index. Toyota posted a record May for global sales, rising nearly 7% year-on-year to over 898,000 vehicles, fuelled by solid demand in the U.S., China, and Japan despite ongoing tariff pressures. Meanwhile, production dipped slightly for the first time in five months due to fewer working days in Japan.
SECTOR PERFORMANCE
The performance of equity sectors in June displayed a notable contrast between the United States and Europe, with American stocks delivering broader and stronger gains. US sectors were generally buoyant, with technology shares taking the spotlight. The technology space surged ahead, registering gains approaching 9 per cent, while communications-related companies followed closely, climbing nearly 7 per cent. Energy stocks also fared well, benefiting from higher commodity prices, advancing by more than 5 per cent. Other cyclical sectors, including consumer discretionary, industrials, and financials, posted moderate yet positive results, reflecting improving investor sentiment towards economically sensitive areas. On the other hand, defensive names such as utilities, real estate, and staples saw muted or negative returns, with the latter retreating by over 2 per cent.
Across the Atlantic, European equities presented a more subdued and uneven picture. While there were pockets of resilience—most notably in the energy space, which saw a near 5 per cent uplift, and industrials with a modest gain—overall sector returns were mixed. Consumer-related sectors fared poorly, with staples and discretionary shares both suffering sizeable declines. Healthcare equities also edged lower, while materials and property-related sectors closed the month with slight losses. The divergence in performance signals a more cautious tone among European investors, particularly in segments considered vulnerable to shifting consumption patterns and regulatory risks.
On a comparative basis, standout sectors such as technology and energy delivered outperformance in both geographies, though the US once again showed stronger momentum. The American tech sector far outshone its European counterpart, underscoring the dominance of US-based innovators and the growing valuation gap between the two markets. Energy stocks delivered robust results on both sides of the Atlantic, yet the incremental edge still favoured US firms. Defensive sectors lagged across the board, but the pullback was noticeably more pronounced in Europe, pointing to region-specific headwinds and potentially softer fundamentals in traditionally stable industries.
CENTRAL BANKING, THE ECONOMY AND GEO-POLITICS
Hostilities between Israel and Iran erupted in mid-June, triggered by Israeli airstrikes targeting Iran’s nuclear infrastructure amid suspicions of weaponisation. Tehran retaliated with missile attacks, and the United States entered the fray by bombing additional nuclear sites, citing strategic necessity and stalled diplomatic progress. Over 900 casualties have been reported in Iran, with dozens killed in Israel, escalating both regional and global concerns. While Israel defended its actions as pre-emptive, critics argue it may have breached international norms by acting without definitive proof of an imminent threat.
Strikes by the US and Israel have significantly disrupted Iran's ability to develop nuclear weapons by targeting its uranium metal production facilities in Isfahan. This phase of bomb-making – converting enriched gas into solid metal – was a critical step Iran began pursuing after the US withdrew from the 2015 nuclear deal. Analysts argue that, had the deal remained intact, such facilities might never have been constructed, and the recent attacks have now severely delayed Iran’s weaponisation timeline. Despite the destruction, concerns remain over Iran’s undisclosed infrastructure and enriched uranium stockpiles, leaving open the possibility of recovery over time. Officials on both sides acknowledge that while enrichment activities continue, the weaponisation programme has suffered a significant setback.
The US Supreme Court has consistently supported Donald Trump’s administration, curtailing judges’ power to block presidential policies at a national level. This development has enabled Trump to advance controversial measures, such as restricting military service and expediting deportations. The ruling on nationwide injunctions has drawn criticism for potentially diminishing judicial oversight of the executive. Justice Barrett defended the shift as nonpartisan, noting that similar concerns were raised under the Biden administration. Legal scholars anticipate a rise in class actions as challengers seek alternative routes to contest federal policies.
Chancellor Rachel Reeves faces mounting pressure following recent policy reversals on welfare and pension benefits, which have eliminated billions in anticipated savings and put her fiscal targets at risk. With public support faltering and internal party criticism intensifying, questions are being raised about her future in the role. Analysts warn that growing spending commitments and downgraded economic forecasts may leave Reeves with little choice but to introduce tax increases in the upcoming autumn budget.
COMMODITIES
Geopolitical developments throughout June played a defining role in commodity market dynamics, particularly following the escalation of conflict in the Middle East. The United States launched a targeted assault on Iranian nuclear infrastructure, prompting sharp reactions and countermeasures. Although the scale of destruction remains under scrutiny, a ceasefire was eventually brokered, calming global tensions and curbing further escalation.
Oil markets were notably reactive, with WTI crude oscillating within a wide range before settling lower in response to diplomatic progress. The month concluded with a 2.9% gain in broader commodity prices, driven largely by a near 8% jump in energy markets. Industrial goods also saw renewed momentum as geopolitical risks faded, while precious metals advanced moderately.
The energy complex experienced heightened volatility, spurred by shifting political rhetoric and the sudden reversal from confrontation to diplomacy. US natural gas prices jumped by over 8%, partly due to warmer weather forecasts expected to boost cooling demand. While LNG reserves remain high, potential drawdowns amid summer heatwaves have supported a firmer outlook for prices moving forward.
Industrial metals, particularly copper, staged a sharp rally in late June as supply bottlenecks intensified. Spot prices rose considerably as immediate-delivery contracts traded at steep premiums, reflecting tightening inventories and increasing shipments to the US ahead of potential tariff measures. A combination of logistical constraints and aggressive restocking has left producers scrambling to meet demand, pushing copper prices 6% higher month-on-month.
June saw a divergence in precious metal performance. Platinum, palladium and silver outperformed, driven by supply squeezes and speculative flows. Platinum, in particular, reached decade-highs as inventory depletion accelerated, with demand rising from both industrial applications and jewellery in Asia. The narrowing price spread between platinum and palladium may prompt substitution trends to reverse in favour of the latter.
Meanwhile, gold remained under pressure. As risk appetite returned and trade prospects improved, investors rotated away from safe havens. Gold ended the month slightly lower, although it remains substantially higher year-to-date due to strong central bank demand and anticipated policy easing from the US Federal Reserve.
CURRENCIES
The US dollar continued to soften throughout June, with the greenback retreating nearly 2% as global investors diversified away from dollar-denominated assets. The shift reflected a broader move towards alternative foreign exchange strategies and growing caution around US policy direction. Investor confidence in American assets showed signs of erosion, fuelled by ongoing concerns about protectionist sentiment in Washington. Heightened rhetoric around prioritising domestic interests has led overseas stakeholders to reassess their exposure to the US, citing uncertainties over policy transparency and investment safeguards.
The euro strengthened significantly over the month, rising more than 3% against the dollar. Renewed optimism surrounding the eurozone economy, coupled with subdued expectations for further ECB policy tightening, supported the rally. Meanwhile, speculation around potential changes to the Federal Reserve’s leadership and policy stance has added further downward pressure on the dollar, with market participants increasingly favouring the euro. In Switzerland, expectations for additional monetary easing appear to be fading. The Swiss franc may soon find a floor, as policymakers have grown more cautious about pursuing negative rates, citing the risks of long-term imbalances and market distortions.
Sterling also edged higher, touching levels last seen in 2021. However, this upward momentum contrasts with the UK’s muted economic backdrop. Rather than domestic strength, the rally in the pound appears to have been driven by dollar weakness. With the Bank of England signalling a more accommodative approach and growth indicators remaining sluggish, the sustainability of sterling’s current valuation is being called into question.
OVERALL
June 2025 proved to be a pivotal month for global financial markets, characterised by strong equity gains, heightened geopolitical developments, and significant shifts in commodity and currency valuations. Investor sentiment was buoyed by easing Middle Eastern tensions, robust consumer data in the US, and broad expectations for monetary easing in the coming quarters. The S&P 500 led global equity benchmarks to new highs, while performance across Europe and Asia was more nuanced, with Germany and Hong Kong standing out regionally.
Despite strong headline returns, caution remains warranted heading into the second half of the year. Persistent risks (ranging from unresolved trade negotiations and inflation uncertainties to central bank transitions and fragile consumer sentiment) could introduce renewed volatility. Markets will be closely watching upcoming macro data, central bank signals, and geopolitical developments for cues on the sustainability of the current momentum. For now, June closed on a high note, but the road ahead appears increasingly complex.
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