Are we out of the woods yet?

Tech stocks fuelled the push in US equities last week as tensions simmered between Israel and Iran.   Meanwhile, tariffs were still occupying the news as trade negotiations hit rough waters.

On Wednesday, European stocks moved lower as reports emerged that the EU would consider retaliatory tariffs if a trade agreement with the US cannot be reached.

On Friday, US President Donald Trump said that he had ended trade negotiations with Canada after they announced a new digital service tax. The tax will charge a levy on the revenue that international tech firms make in Canada. Trump called it “a direct and blatant attack on our country” and promised to issue a new tariff on Canada within the next week. Trump also threatened Spain with additional tariffs after they rejected the new NATO defence spending target.

While equities were positive, economic indicators showed some weakness. Recurring US jobless claims rose to its highest level since November 2021, signalling a higher unemployment rate.

The US trade deficit grew 11.1% in May as exports fell by -5.2%, the largest drop since 2020. The Conference Board’s consumer confidence index (which focuses on labour market conditions) unexpectedly fell from 98.4 to 93.0 in June, while the Michigan consumer sentiment index (which has a broader economic focus) rose in June for the first time in six months by 16.3%, marking the largest monthly increase in over 30 years. Finally, the US PCE annual inflation rate rose from 2.2% to 2.3% in May.

There were also a number of PMI releases to report. Manufacturing activity expanded in June across Germany, UK and Japan, while holding firm in the US.

Meantime, EUR/USD recorded a new YTD high above 1.17. Following the ceasefire in the Middle East, gold and oil prices fell. The latter experienced its largest two-day fall in three years, finishing the week down -14% in euro terms.

Equities

Global stocks finished up 1.5% in euro terms and up 3.3% in local terms last week. Year-to-date global markets are down by -3.7% in euro terms and up by 9.0% in local terms. The US market, the largest in the world, finished up 1.7% in euro terms and up 3.5% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.3% last week. The German equivalent finished at 2.6%. The Irish 10-year bond yield finished at 2.9%. The Euro/US Dollar exchange rate finished at 1.17, whilst Euro/GBP finished at 0.85.

Commodities

Oil finished the week at $66 per barrel and is down -19.3% year to-date in euro terms.  Gold finished the week at $3,274 per troy ounce and is up 10.2% year-to-date in euro terms. Copper finished the week at $10,119 per tonne and is up 3.3% year-to-date in euro terms.

The week ahead

Monday 30^th June

China PMI report goes to print.

Tuesday 1^st July

Eurozone CPI inflation for June is reported.

Thursday 3^rd July

US non-farm payrolls report for June is released.