Overview
In June 2025, global financial markets navigated a volatile landscape shaped by the interplay of macroeconomic uncertainty, shifting tariff policies, and escalating geopolitical tensions. While moderating inflation and resilient labour markets in the U.S. and Europe offered some support to investor sentiment, ambiguity around central bank rate trajectories, especially from the U.S. Federal Reserve, kept markets on edge. Meanwhile, mixed economic indicators from China raised concerns over a patchy global recovery, shaking risk appetite and weighing on commodities and emerging markets.
At the same time, trade dynamics remained a dominant market driver, particularly following the 90-day tariff pause between the U.S. and China in May. Although the temporary truce boosted short-term optimism, lingering doubts about enforcement and future policy escalations kept volatility elevated. Geopolitical risks flared further with the Iran-Israel conflict intensifying in mid-June, prompting a flight to safe-haven assets like gold and U.S. Treasuries. Despite these pressures, equity markets posted solid gains, fuelled by encouraging signs of trade deals, strong corporate earnings, and optimism around AI-driven growth in tech sectors.
Looking at the performance of major asset classes in June 2025, global equity markets delivered strong monthly gains as investor confidence returned amid easing trade tensions and robust earnings. The US S&P 500 index climbed approximately +5.0%, closing the month at new all-time highs. Meanwhile, the US Nasdaq Composite index surged around +6.6%, fuelled by rallies in big-tech and AI-related stocks. The DJ Islamic markets index also returned +5%. In Europe, after delivering a strong performance in the previous month the key indices remained flat, with indices like the FTSE 100 and Euronext 100 ended the month with +0.05% and -0.66%, respectively. In Asia, China’s Shanghai index increased 2.9% while Japan’s Nikkei index gained 6.64% in June as these markets benefiting from a weaker dollar and shifting global markets outlook. Key contributing factors supporting risk assets included the trade deals, upbeat corporate earnings, and hopes for future rate cuts, though geopolitical and macro risks remain on investors’ radars. On the fixed income side, DJ sukuk index returned 1% as yields fell in the month amid easing investor concerns. Additionally, the U.S. dollar further weakened, where GBP appreciated 1.97% against USD, and gold prices saw further gains (+0.69%) as market participants sought stability amid the uncertainty. However, DJ commodity index appreciated 2.69% after rise in crude oil prices (+6.4%) amid Iran-Israel war. The following snapshot provides a detailed breakdown of the performance of different asset classes in June 2025 and year-to-date.
Market Snapshot
News & Key Events in June
UK
• The annual inflation rate in the UK edged down to 3.4% in May 2025 from 3.5% in April, matching expectations.
• The Bank of England voted 6-3 to keep the Bank Rate steady at 4.25% at its June meeting, navigating a challenging backdrop of heightened global uncertainty and persistent inflationary pressure. Three members favored a 0.25 percentage point cut to 4%, though investors had expected a 7-2 split.
• The United Kingdom’s unemployment rate edged up to 4.6% in the three months to April 2025 from 4.5% in the previous period, matching market expectations.
• The UK Spending Review 2025 was delivered in June, unveiled by Chancellor Rachel Reeves, which marks the first multi-year budget under the new Labour government and introduces a “zero-based” approach to public finance—requiring departments to justify every pound of spending. Set against a backdrop of economic caution and tight fiscal rules, the review outlines modest real-terms growth in departmental budgets, while prioritising key areas such as the NHS, defence, clean energy, education, and housing. With a strong emphasis on economic growth, public service reform, and national security, the review reflects the government’s attempt to balance fiscal responsibility with ambitious investment in Britain’s future.
US
• The annual inflation rate in the US rose for the first time in four months to 2.4% in May 2025 from April’s 2.3%, the lowest since 2021, but came in below expectations of 2.5%.
• The Federal Reserve left the federal funds rate unchanged at 4.25%–4.50% for a fourth consecutive meeting in June 2025, in line with expectations, as policymakers take a cautious stance to fully evaluate the economic impact of President Trump’s policies, particularly those related to tariffs, immigration, and taxation.
• The US economy contracted at an annualized rate of 0.5% in Q1 2025, a sharper decline than the second estimate of a 0.2% drop and the first quarterly contraction in three years. The weaker GDP figure was largely driven by significant downward revisions to consumer spending and exports.
• The University of Michigan’s consumer sentiment index for the US was revised higher to 60.7 in June 2025 from a preliminary of 60.5, compared to 52.2 in May.
Europe
• Eurozone consumer price inflation rose slightly to 2.0% year-on-year in June 2025, up from May’s eight-month low of 1.9% and in line with market expectations, according to a preliminary estimate.
• The ECB cut key interest rates by 25 bps at its June meeting, based on updated inflation and economic forecasts.
• The Eurozone economy grew by 0.6% in the first quarter of 2025, doubling the earlier estimate of 0.3% and marking the strongest expansion since Q3 2022, driven by Ireland’s exceptional 9.7% surge and a stronger-than-initially-reported performance from Germany.
• The unemployment rate in the Euro Area rose to 6.3% in May 2025 from a record low of 6.2% in April, above market expectations of 6.2%.
China
• China’s consumer prices dropped by 0.1% yoy in May 2025, matching the declines seen in the previous two months and slightly outperforming expectations of a 0.2% decrease.
• The People’s Bank of China (PBoC) kept key lending rates at record lows during the June fixing, in line with market expectations. The move came after the central bank reduced borrowing costs by 10 basis points last month to help cushion the economy from the impact of new US tariffs, and was followed by recent deposit rate cuts by major state-owned banks.
• The Chinese GDP grew by a seasonally adjusted 1.2% in Q1 of 2025, slowing from a 1.6% rise in Q4 and falling short of the market consensus of 1.4%.
• Unemployment Rate in China decreased to 5 percent in May from 5.10 percent in April of 2025.
Others
• Japan’s annual inflation rate edged down to 3.5% in May 2025 from 3.6% in the previous two months, marking the lowest level since November.
• The Bank of Japan kept its key short-term interest rate unchanged at 0.5% during its June meeting, maintaining the highest level since 2008 and aligning with market expectations.
• The annual inflation rate in Canada was at 1.7% in May of 2025, remaining unchanged from the previous month, and aligned with market expectations.
• The annual inflation rate in Russia moderated for the second month to 9.9% in May 2025, the softest in four months, from 10.2% in April.
• In mid June 2025, tensions between Iran and Israel escalated dramatically into an intense 12 day conflict. Israel conducted airstrikes supported by drone operations on Iranian Military and nuclear infrastructure. Iran retaliated with hundreds of ballistic missiles and drones targeting Israel and U.S. bases in the region. By late June, a tentative ceasefire emerged, brokered by the U.S.
• Bitcoin’s value increased in June, closing the month at $107,500 per token, consistent with a broader rally in risk markets. However, it remains below its highest price level of $108,786 reached in January 2025.
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