Market sentiment remains buoyant as investor confidence rises
Global equity markets continued their ascent in recent weeks, with the S&P 500 and Nasdaq Composite achieving new all-time highs. This rally has been driven by a combination of diminishing geopolitical risks, resilient corporate earnings, and heightened expectations of interest rate cuts from the U.S. Federal Reserve.
Investors appeared unfazed by a brief escalation in Middle East tensions, which quickly subsided. As a result, crude oil prices recorded their sharpest weekly drop in two years, helping to ease inflationary pressures. The resulting drop in energy costs, alongside weakening consumer indicators and dovish comments from the Fed, has bolstered market optimism, especially in the tech and growth sectors, which saw renewed enthusiasm around artificial intelligence and robust Q1 earnings.
Global trade landscape and economic indicators
Trade negotiations and international relations have become central to market dynamics.
Developments in global trade
The U.S. recently confirmed a key agreement with China to facilitate rare-earth exports, and other trade agreements are reportedly nearing completion. However, President Trump’s announcement to halt trade talks with Canada over a proposed digital services tax introduced some short-term uncertainty. Despite this, the overall trade outlook remains positive.
Inflation trends and monetary policy outlook
While recent inflation data slightly exceeded forecasts, the core PCE index remains controlled. Market participants are now pricing in two to three interest rate cuts by the Federal Reserve this year. This outlook supports a continued positive trajectory for equities, particularly U.S. large caps and intermediate-duration bonds, with room for selective international exposure.
Regional market overview
Asian markets
Asian equities generally advanced on Monday, supported by positive trade sentiment. Japan’s Nikkei hit a one-year high, while South Korea’s KOSPI surged over 14% for the month. Gains in China and Australia were more modest, and Hong Kong slipped slightly due to mixed factory data influenced by ongoing U.S. tariffs.
U.S. market momentum
U.S. equity futures rose in early trading as Wall Street looks to end June on a strong note. Monthly performance figures are robust: the S&P 500 gained 4.42%, the Nasdaq advanced 6.07%, and the Dow rose 3.67%. Easing tariff concerns and progress in U.S.-China relations have helped fuel this strength.
European equities
European stocks closed higher last Friday, buoyed by favorable signals from the U.S. on tariffs and optimism over trade deals. The STOXX 50 climbed 1.5%, while the STOXX 600 increased by 1.1%. Industrial and automotive sectors led the charge, with major gains for companies like Siemens, Schneider, BMW, and Stellantis.
Currency and commodities update
The U.S. Dollar Index dipped to its lowest level since February 2022, trading around 97.2. This decline reflects a more dovish Fed outlook, concerns over U.S. fiscal policy, and a reduction in demand for safe-haven assets. In contrast, the euro strengthened further, with EUR/USD reaching 1.1718.
Oil market trends
Oil prices continued to fall, with Brent crude trading at $67.20 and WTI at $64.77, as tensions between Israel and Iran de-escalated. Despite this pullback, oil prices remain over 5% higher for the month of June. Market focus has shifted to the upcoming OPEC+ meeting on 6 July, where a potential production hike will be discussed.
China’s Economic Snapshot
China’s manufacturing PMI improved slightly to 49.7 in June, indicating a third consecutive month of contraction but showing signs of stabilization. Meanwhile, the non-manufacturing PMI exceeded forecasts at 50.5, boosting the composite reading to 50.7, driven by strong services activity and continued government support.
Key corporate developments
- TikTok: President Trump revealed that a group of investors is poised to acquire TikTok, with a decision expected within two weeks. Oracle, Microsoft, and Blackstone are among the potential buyers.
- Meta Platforms: The company is reportedly raising $29 billion to expand its U.S.-based AI infrastructure. The capital will fund data centre projects with contributions from Morgan Stanley, Apollo, and KKR.
- Tesla: CEO Elon Musk announced the first fully autonomous delivery of a Model Y vehicle, a notable step forward in self-driving tech.
- U.S. Banks: Shares rose after the Federal Reserve’s stress test showed that 22 major institutions are well-capitalized, with Goldman Sachs rising 3.1%.
Analyst updates and stock ratings
- Meta: Piper Sandler upgraded Meta to a top large-cap pick with a new price target of $808, citing strong ad performance and AI capabilities.
- Uber: Canaccord Genuity downgraded Uber to “hold” with a reduced target of $84, citing competition from autonomous vehicles.
- Disney: Guggenheim increased its target to $140, highlighting strength in theme parks, sports advertising, and digital growth.
- Boeing: Redburn upgraded the aerospace giant to “Buy” with a revised target of $275, forecasting stronger free cash flow through 2029.
- Estée Lauder: HSBC lifted its rating to “Buy,” projecting doubled earnings by 2027, supported by restructuring efforts and market stabilization.
Upcoming economic events
Markets will be closely watching this week’s U.S. trade discussions ahead of the 9 July tariff deadline. Other key events include:
- Fed Chair Jerome Powell’s remarks at the ECB Central Bank Forum
- U.S. jobs report and ISM PMI data
- U.S. and Eurozone trade figures
- Germany’s factory orders
- Japan’s Tankan survey
- Australia’s trade balance
- China’s updated PMI readings
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