United State
U.S. Equities Surge as Optimism Builds
U.S. equity markets ended the week on a high note, propelled by several favorable developments. The S&P 500 and Nasdaq Composite each closed at fresh all-time highs—up 3.44% and 4.25%, respectively—boosted by a combination of easing Middle East tensions, dovish rhetoric from Federal Reserve officials, and reports that the U.S. had signed a new trade agreement with China. Broad optimism spilled over into the Dow Jones Industrial Average, S&P MidCap 400, and Russell 2000, which each gained over 2.5%.
Inflation Indicators Edge Higher
May’s personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, showed a modest uptick. Core PCE rose 0.2% month-over-month and 2.7% year-over-year—both slightly above expectations and April’s readings of 0.1% and 2.6%. The headline PCE matched forecasts, rising 0.1% MoM and 2.3% YoY. Notably, personal income and consumer spending both fell short of projections, registering outright declines.
Despite the firmer inflation data, consumers grew less worried about price increases. The University of Michigan’s June Index of Consumer Sentiment showed a sharp drop in one-year inflation expectations—from 6.6% to 5%—and a strong rebound in overall sentiment, which climbed 16% to 60.7.
Business Conditions Show Mixed Signals
S&P Global’s flash PMI data pointed to ongoing expansion in the U.S. economy, albeit at a slightly slower pace. The June composite PMI came in at 52.8 (down from 53.0 in May), with manufacturing showing its first increase in output since February. The services sector cooled modestly, while rising costs—driven in part by tariffs—remained a headwind.
Chris Williamson of S&P Global commented that while economic momentum remains positive, the near-term outlook is clouded by resurgent inflation pressures.
Rebound in Business Investment, but Housing Stalls
Durable goods orders surged 16.4% in May—the strongest monthly increase in over a decade—rebounding sharply from April’s 6.6% decline. The rise was led by a spike in commercial aircraft orders. Core capital goods (excluding defense and aircraft), a proxy for private business investment, rose 1.7%, also reversing April’s decline.
However, housing data remained soft. Existing home sales edged up 0.8% to a seasonally adjusted annual rate of 4.03 million, but the figure still marked the slowest May pace since 2009. Persistently high mortgage rates remained a key obstacle. Meanwhile, new home sales plunged 13.7% in May to 623,000 units—the weakest print since last October.
Treasury Yields Decline as Rate Cut Odds Rise
U.S. Treasuries rallied, with yields falling across the curve. Investor demand rose in response to soft economic data and dovish Fed commentary, which increased market expectations for a near-term rate cut. According to the CME FedWatch Tool, the probability of a rate cut in July climbed from 14.5% to 19% by week’s end.
U.S. Equity Market Summary
U.S. equities posted solid weekly gains, with the S&P 500 and Nasdaq hitting record highs. The Dow rose 3%, while mid- and small-cap indices lagged. Despite a weekly rebound, the Russell 2000 remains down year-to-date, reflecting investor caution toward smaller companies amid mixed economic signals.
| Index | Friday’s Close | Weekly Change | YTD Change |
| DJIA | 43,819.27 | +1,612.45 | +3.00% |
| S&P 500 | 6,173.07 | +205.23 | +4.96% |
| Nasdaq Composite | 20,273.46 | +826.05 | +4.99% |
| S&P MidCap 400 | 3,102.77 | +77.59 | -0.58% |
| Russell 2000 | 2,172.54 | +63.28 | -2.58% |
Source: Reuters, Yahoo! Finance, Bloomberg. Data as of 4 p.m. ET.
Europe
Market Gains on Stimulus Hopes and Ceasefire
The STOXX Europe 600 rose 1.32% in local terms, supported by a temporary ceasefire between Israel and Iran, improved trade sentiment, and potential stimulus in Germany. The DAX outperformed with a 2.92% rise, followed by France’s CAC 40 (+1.34%) and Italy’s FTSE MIB (+1.30%). The UK’s FTSE 100 posted a more modest 0.28% gain.
June PMI readings for the eurozone were flat. The HCOB Eurozone Composite PMI held at 50.2, signaling stagnation. Germany saw a modest recovery in output, while France continued to contract—its composite PMI remained in negative territory for a tenth straight month.
Inflation surprised to the upside: France’s annual EU-harmonized inflation rose to 0.8% from 0.6%, while Spain’s inflation ticked up to 2.2%, fueled by energy prices. Consumer sentiment across the bloc weakened, with the European Commission’s index falling to 94 from 94.8.
In the UK, Bank of England Governor Andrew Bailey noted that domestic economic slack is emerging. He maintained that the rate path is downward, but emphasized a “very gradual” easing approach.
Japan
Stocks Soar as Risks Abate
Japanese equity markets posted strong weekly gains: the Nikkei 225 surged 4.55% and the TOPIX rose 2.50%. Technology shares led the rally, buoyed by reduced trade tensions and stabilizing geopolitical conditions.
The yield on Japan’s 10-year government bond hovered near 1.4%. The yen strengthened to 144 per USD from 146, as the Bank of Japan reiterated its cautious stance on policy normalization.
Inflation in Tokyo slowed to 3.1% in June from 3.6% in May, partly due to renewed subsidies. Still, the rate remains above the BoJ’s 2% target. Meeting notes from the June policy gathering confirmed that further rate hikes are likely, though the bank remains attentive to risks stemming from U.S. trade policies and Middle East instability.
China
Markets Lifted by U.S. Trade Agreement
Chinese stocks rallied following confirmation of a U.S.–China trade framework reached in Geneva. The CSI 300 Index rose 1.95%, and the Shanghai Composite gained 1.91%. Hong Kong’s Hang Seng Index jumped 3.2%.
While details of the trade accord remain limited, Beijing confirmed its participation and reaffirmed commitments such as ensuring rare earth supplies. However, contentious issues like fentanyl trafficking were left unresolved.
The PBOC highlighted rising business confidence in its quarterly policy statement but noted that domestic demand remains underwhelming. The central bank reaffirmed its commitment to a “moderately loose” monetary policy stance.
Latin America: Diverging Central Bank Strategies
Mexico
Headline inflation declined slightly to 4.51%, while core inflation inched up to 4.20%. The central bank cut rates by 50 bps to 8%, marking the eighth straight cut. Policymakers indicated that future adjustments would be cautious and no longer guaranteed to follow the same pace.
Brazil
Brazil’s central bank upgraded its 2025 GDP growth forecast to 2.1%, citing stronger labor and economic activity. Inflation is expected to fall to 3.2% by 2027, within the target range of 3% ±1.5 percentage points.
