June was marked by three factors: the evolution of the conflict between the United States and Iran, the partial normalisation of energy prices and the adjustment of expectations regarding monetary policy.
The reopening of the Strait of Hormuz and the easing of sanctions on Iranian oil allowed crude oil prices to correct from the highs reached during the period of greatest tension, reducing the risk of a more persistent inflationary shock.
However, the normalisation of the energy market will be gradual, as global oil inventories remain low and part of the affected production capacity will take time to recover.
At the same time, markets continued to alternate between episodes of risk appetite and profit-taking in the segments that had appreciated the most, particularly technology, semiconductors and infrastructure linked to artificial intelligence.
United States: Monetary Pause and the Engine of Corporate Earnings
The US economy maintained solid growth during the month.
Leading indicators and the upward revision of first-quarter growth confirmed that activity remained resilient, while the labour market continued to show strength.
However, inflation remained above the Federal Reserve’s target: headline CPI stood at 4.2% and core CPI at 2.9%, with still-relevant pressures in services.
The subsequent fall in oil prices should ease some of that pressure over the coming weeks.
The Federal Reserve kept interest rates unchanged, but the tone of its chair, Kevin Warsh, was less accommodative than expected.
The hawkish message in the statement reflected a Fed more constrained by persistent inflation than by growth.
In this context, markets once again priced in a high probability of a rate hike in 2026.
US equities ended the month in negative territory, mainly penalised by profit-taking in technology and semiconductors.
The S&P 500 and Nasdaq 100 fell by 1% and 0.2% respectively after several months of strong gains.
The artificial intelligence narrative remains structurally positive, but the market is becoming more demanding with regard to valuations and the financing needs of companies linked to data centres, semiconductors and cloud storage.
Looking ahead to July, the earnings season will be key to validating current valuations.
The market expects earnings growth to remain solid.
Even so, after the strong gains accumulated, any disappointment in margins, future growth expectations or capital expenditure could trigger further profit-taking.
Europe: Frankfurt Takes the Initiative Against Persistent Inflation
In Europe, attention focused on the European Central Bank’s decision to raise interest rates for the first time since 2023, taking the remuneration of deposits to 2.25%.
The measure responded to the rebound in eurozone inflation to 3.2% in May and to the increase in producer prices, which reached 4.9%.
However, June data pointed to a moderation of inflationary pressures in the eurozone, with the headline rate falling from 3.2% to 2.8%.
This trend was visible across the main European economies, except in Spain, where inflation picked up slightly.
In Germany, the rate fell to 2.4%, from 2.7% the previous month, while in France the correction was more pronounced, moving from 2.8% in May to 2.0% in June.
Overall, this development partly eases pressure on the ECB to continue raising rates and could favour a more flexible stance if economic activity were to show greater signs of weakness.
On the macroeconomic front, European indicators showed some improvement, although they continue to reflect a fragile environment.
The eurozone composite PMI rose from 48.5 to 49.5 points, still in contraction territory, with the services sector also below the 50 threshold.
This combination of still-elevated inflation, albeit in the process of moderating, and weak growth keeps Europe in a complex position from a monetary policy perspective.
Against this backdrop, European equities closed June with a slightly positive performance.
The MSCI Europe advanced 2.9% and the Euro Stoxx 600 rose 2.5%, supported by the better tone of sectors linked to artificial intelligence, electrification, defence and data centres.
Nevertheless, the improvement in the European market remains selective and concentrated in certain segments with stronger structural growth.
Asia: Selective Growth and Regional Divergences
Asia showed a very uneven performance during the month.
China was once again the main source of weakness: the MSCI China fell by 7.6%, affected by the lack of traction in domestic demand, the persistence of real estate problems and the poor performance of large internet companies such as Alibaba and Tencent.
Activity data confirmed this divergence: industrial production remained supported by exports and technology, but retail sales fell again and residential investment continued to show a sharp contraction.
By contrast, India maintained a more solid relative performance.
The MSCI India rose by 1.2% in June, supported by more contained inflation, still-expansionary activity data and a more favourable environment following the fall in oil prices.
Korea and Taiwan continued to benefit from the semiconductor and artificial intelligence cycle, although volatility remained high.
In Korea, the Kospi corrected after strong accumulated gains, in a context of profit-taking, deleveraging and doubts about the sustainability of technology valuations.
Portfolio Implications
In terms of asset allocation, we consider it appropriate to adopt a more defensive stance over the coming weeks.
Throughout July, we will gradually reduce portfolio risk, particularly through lower exposure to German equities and US technology, segments that have performed strongly in recent months and where we see a greater risk of profit-taking (especially in US technology).
Our view is that the pattern observed in June, marked by high volatility and a virtually sideways movement in the main indices, could continue throughout July and August.
In this environment, we believe it is appropriate to consolidate part of the accumulated gains, reduce exposure to areas most sensitive to demanding valuations and maintain greater flexibility to respond to possible market corrections.