Markets moved higher in June, capping off a volatile first half of 2025. Sentiment was buoyed by progress in global trade negotiations, fuelling hopes of a breakthrough ahead of the 9 July deadline. In the U.S. and Europe, cooling inflation and resilient labour markets added to investor optimism. That said, uncertainty over the future path of interest rates – particularly from the U.S. Federal Reserve – tempered enthusiasm. Meanwhile, mixed signals from China continued to cloud the global outlook, weighing on commodities and emerging market performance.
UK
- The FTSE 100 index closed June on 8,761, a small loss of -0.1%, reflecting investors caution to add to risk plus strength in sterling.
- The mid-cap focused FTSE 250 closed the month up +2.6% on 21,626, helped by limited exposure to the dollar and improving rate expectations.
- FTSE AIM All-Share added +3.2% to finish at 771, bringingyear-to-date gains of +9%.
- The S&P UK Purchasing Managers’ Index (PMI), rose to 50.7 in June, above the 50.0 threshold, indicating modest growth.
- On 18 June, the BoE voted to leave the bank rate on hold at 4.25% with a 6-3 majority.
- Headline CPI for May was unchanged at 3.4%. Above the Bank’s 2% target at its highest level in more than a year.
- UK house prices were flat in June after a 0.3% fall in May. The average price in June was £296,665, +2.5% higher than a year earlier.
Global
- The S&P 500 posted a new all-time high on 27 June, completing its fastest-ever rebound from a 15% drawdown, driven by improved trade sentiment and resilient data.
- The Federal Reserve left rates unchanged at 4.25%-4.50%, maintaining its cautious tone.
- The OECD trimmed its global growth forecasts to 2.9% for both 2025 and 2026, down from 3.1% and 3%, citing prolonged tariff risks.
- The European Central Bank cut rates by 25bps to 2.0% in June, with the BoE expected to follow with two further 25bps cuts by year-end.
- European equities remained supported by firm macro data, fiscal stimulus, and a strengthening euro.
- A brief volatility spike mid-month (VIX to 22.8) followed renewed Middle East tensions, though markets quickly stabilised.
Fixed Interest
- Bond markets rallied for the month, helped by falling yields and tighter credit spreads.
- 10-year UK gilt yields rose modestly by 17bps to 4.49%, as sticky inflation delayed rate cut expectations.
- U.S. Treasury yields moved lower across the curve, with the 10-year falling to 4.25%, the lowest in two months, amid signs of slowing growth.
- BofA index returns in June: US Corporates +1.8%, European Corporates +0.2%, Euro Governments -0.2%.
- Comments from Fed officials brought forward expectations for the first U.S. rate cut to September.
- Rate cut expectations (as priced in):
- US: -68bps in 2025 (vs. -55bps in May) and -68bps in 2026
- Europe: -27bps additional cuts priced in by end-2025, post the ECB’s June cut
Other
- The U.S. dollar posted its worst H1 performance in 52 years, boosting returns for international assets in sterling terms.
- Oil rallied briefly (Brent touched $79) after Israeli strikes on Iranian sites, but fell back as a ceasefire was agreed. Closing the month on $67 per barrel.
- Gold gained +0.5% to close June at $3,306/oz, supported by dollar weakness and rate cut expectations.
- Bitcoin hit a new record above $107,000, fuelled by strong ETF inflows, while Ethereum fell sharply, down 24%, reflecting risk-off sentiment in altcoins.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
