Market overview – Richard Carter, Head of Fixed Interest Research
The welcome de-escalation in Middle East tensions and upbeat economic data boosted investor sentiment last week, sending US stock benchmarks to record highs. Stock futures began last week lower after US strikes on Iranian nuclear facilities over the weekend, but a measured retaliation involving forewarned strikes on an American airbase in the region signalled an end to the recent hostilities.
Wall Street received a further boost with the week’s economic data sending some positive signs on US businesses and consumer spending. The US composite output purchasing managers’ index (PMI) came in at 52.8, down from the prior month but containing the first rise in manufacturing output since February.
US durable goods orders surged 16.4% in May, the fastest increase in 11 years after a 6.6% decline in April. A sharp rise in commercial aircraft bookings contributed to the bounce back, along with a possible timing consequence of US trade tariffs.
Weekly economic announcements:
Last week the MSCI All Country World Index (MSCI ACWI) gained 3.3% (9.9% YTD).
United States:
Positive comments on US trade deals, along with easing geopolitical tensions and promising economic data drove US stocks higher last week, gaining 3.5% (5.6% YTD). Tech-based indices rose 4.3% (5.4%), with both moving up into uncharted territory on a closing basis.
There was a notable outperformance of growth shares over value shares, as a risk-on mood prevailed. US Treasury yields declined, with the 10-year yield falling 10 basis points (0.10%) on the week (down 29 basis points YTD), ending at 4.28%. The reaction of US Treasuries to the recent fighting in the Middle East is intriguing, with bond yields actually falling once the ceasefire was announced. This is perhaps due to easing inflationary concerns because of the pullback in the oil price outweighing any safe-haven flows.
United Kingdom:
UK stocks edged higher on the week, adding 0.3% (9.9% YTD). Mid-caps outperformed, rising 2.8% (7.3% YTD). Gilt yields moved marginally lower, with the 10-year gilt yield falling 4 basis points to end at 4.50% (down 6 basis points YTD). The pound appreciated against the US dollar, hitting a post-Brexit high of US$1.37.
Europe (ex UK):
Continental European stocks performed somewhere in between UK and US counterparts last week, rising 1.6% (10.0% YTD). German equities gained 2.9% (20.7% YTD) French stocks rose 1.3% (7.2% YTD) and Italian bourses added 1.6% (20.2% YTD). The euro continued its rise against the US dollar, moving up to US$1.17.
Approver: Quilter Cheviot, 3 July 2025
