The US and Iran finally agreed a ceasefire in June, allowing the Strait of Hormuz to reopen, and the oil price subsided to pre-war levels. However, June proved to be a volatile month for technology stocks around the world as investors considered whether some AI-related companies could be overvalued.
- Central banks in Europe and Japan raised interest rates
- US inflation hit 4.2% YoY
- SpaceX’s IPO raised US$75 billion
Middle East ceasefire: The US and Iran finally agreed a ceasefire in June, allowing the Strait of Hormuz to reopen, and the oil price subsided to pre-war levels. However, June proved to be a volatile month for technology stocks around the world as investors considered whether some AI-related companies could be overvalued. While the technology-heavy Nasdaq Index fell by 2.8% over June, the Dow Jones Industrial Average Index rose by 2.5%. The much-trailed IPO of SpaceX took place during the month, raising US$75 billion.
‘‘I love the inflation’‘ (President Donald Trump)
US rates set to rise: the US economy expanded by 2.1% year on year during the first quarter, compared with an earlier estimate of 1.6%. Higher energy prices drove up the annualised rate of US inflation from 3.8% in April to 4.2% in May; in response, President Donald Trump controversially commented: “I love the inflation”. Meanwhile, the core personal consumption expenditures (PCE) index rose to its highest level since October 2023. As Kevin Warsh’s first meeting as Chair, Federal Reserve policymakers opted to maintain interest rates at a range of 3.5% and 3.75%; nevertheless, they expect to tighten rates this year. The price of gold fell below US$4,000 per ounce for the first time in since November.
ECB tightens: the European Central Bank (ECB) raised its key interest rate from 2% to 2.25% in June; however, ECB President Christine Lagarde subsequently commented that the central bank “no longer need(s) to act with the same force” to combat inflation. Germany’s rate of inflation eased from 2.6% in May to 2.3% in June, while French inflation fell from 2.4% to 1.8%, fuelling hopes that the ECB may be able to hold off on further tightening. The Dax Index fell by 0.4% over the month.
Inflationary headache for Japan’s policymakers: the Bank of Japan (BoJ) raised its key interest rate from 0.75% to 1% in a bid to curb inflationary pressures. While the annual rate of consumer price inflation was 1.5% in May, wholesale price inflation reached 6.3%, and the BoJ warned: “There is a risk of underlying CPI inflation deviating … above the price stabilty target of 2%.” Meanwhile, the yen fell to its lowest level against the US dollar since 1986, providing a boost for blue-chip stocks and fuelling inflationary pressures. The Nikkei 225 Index rose by 5.6% over the month.
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