Markets respond to escalations in the Middle East
Both US and European equity markets opened on a positive note on Monday after reports emerged that Iran wanted to de-escalate conflicts with Israel. However, this sentiment soured throughout the week, and European stocks would ultimately finish in negative territory.
Over the weekend, investors’ worries were realised when the US bombed Iranian nuclear sites. Oil prices spiked in response and reached a five-month high.
There were plenty of monetary policy decisions made across leading economies during the week, albeit with no changes to note. The Bank of Japan kicked off proceedings on Tuesday with a unanimous vote to hold rates at 0.5%, while also stating it would slow its reduction in government bond purchases next year.
On Wednesday, the Federal Reserve decided to keep rates steady for the fourth consecutive time, citing the country’s solid economic position and “unusually elevated” uncertainty.
Keeping with the trend, the Bank of England voted to maintain interest rates on Thursday, however, the vote was split 6-3, exposing the internally divided opinions on the economic outlook.
There was weaker economic data to report from the US last week. Retail sales fell for the second month in a row by -0.9% in May, worse than the -0.7% drop expected. Industrial production also contracted by -0.2% in May, missing forecasts for a 0.1% expansion.
Meanwhile, a US homebuilder sentiment index fell unexpectedly in June and recorded its lowest reading since December 2022. Eurozone consumer confidence declined unexpectedly to -15.3 in June having improved the month previous to -15.1.
In the UK, consumer activity deteriorated in May with retail sales falling by -2.7%, its largest drop since December 2023. UK CPI headline inflation eased to 3.4% from 3.5% in the 12 months to May, as expected, while in Japan, the core CPI rate jumped to 3.7%, a two-year high. Elsewhere, China’s retail sales grew by 6.4% YoY in May, soaring past estimates of 5%.
Equities
Global stocks finished down -1.7% in euro terms and down -0.3% in local terms last week. Year-to-date global markets are down by -4.9% in euro terms and up by 6.0% in local terms. The US market, the largest in the world, finished down -1.8% in euro terms and down -0.4% in local terms.
Fixed Income & FX
The US 10-year yield finished at 4.4% last week. The German equivalent finished at 2.5%. The Irish 10-year bond yield finished at 2.9%. The Euro/US Dollar exchange rate finished at 1.15, whilst Euro/GBP finished at 0.86.
Commodities
Oil finished the week at $75 per barrel and is down -6.1% year-to date in euro terms. Gold finished the week at $3,368 per troy ounce and is up 15.3% year-to-date in euro terms. Copper finished the week at $9,909 per tonne and is up 2.9% year-to-date in euro terms.
The week ahead
Monday 23rd June
US, UK, German, and Japan PMI indices for June are reported.
Tuesday 24th June
US consumer confidence index goes to print.
Friday 27th June
US PCE price index for May is released
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