Last week: Key US decisions set for early July (possibly strike Iran & new tariffs) while some CBs continued to cut rates
WEEKLY TRENDS
WEEKLY TRENDS
- Geopolitical tensions (Israel-Iran) continue to impact markets as Trump’s administration should decide within 2 weeks whether or not to strike Iran. Soon after we should also have its decision on a new set of tariffs (9th July)
- Meanwhile, last week some central banks continued to cut their reference rates, -25bps for the SNB (base rate at 0%) for the Swedish RIKSBANK and for the Norwegian Norges Bank, while some others stayed put (FED, BOJ and BOE)
- Crude oil price continued to rise (+1%) under the potential threat of the Hormuz strait’s closure while Gold price lowered (-2%) due to a stronger USD and the FED’s decision not to cut rates
- Next week we will have the release of the US inflation for June (PCE indicator, mostly watched by the FED) and a few late releasers of their quarterly earnings (Nike, Micron and FedEx). J. Powell will answer to the US Congress questions on Tuesday and Wednesday.
MARKETS
Equities
Important weekly performances:
Stora Enso (+16%), AMD (+10%), Marvell Tech (+9%), Saab (+7%)
Eutelsat (+60%) while Renault (-10%), Teleperformance (-17%)
Analysts:
Hiscox (Barclays ‘o/w’ target £14), Burberry (BNP ‘o/w’ target £13.7)
Galderma (BNP ‘o/w’ target CHF130), UBS (MS ‘u/w’ target CHF26)
Rates
US curve (2-10 years) steepening stable at 45bps (Bond yields mildly lower across the board)
HY corporate spreads stable at 315-320 bps (US/EU)
Commodities
Oil price higher (+1%) among Middle East tensions affecting Iran oil production and Persian Gulf disorder
Gold price lower (-2%) on a stronger USD and FED’s decision not to cut
UK/EU
UK May inflation at 3.4% vs 3.5% in April
EU May inflation at 2.7% vs 2.6% in April
Under the watch
Platinum price broke 2021 high and now at testing the 2014 levels
March/June 2026 US rates Futures show large interests in dovish Fed
Nota Bene
Odds for a Sep FED rate cut have risen to 70%
SNB may return to negative interest rates as early as this autumn (inflation turned negative in May -0.1% YoY, mostly due to a stronger CHF)
Central Banks’ Gold reserves are expected to rise in 2026 according to the latest World Gold Council’s survey (43% of them plan to boost their Gold holdings)
CALENDAR
Corporate earnings releases:
US FedEx (24 June), Micron Tech (25), Nike (26)
Macro Data releases:
US June PCE inflation (27 June)
WHAT ANALYSTS SAY
UBP, 20 June 2025
Author: Norman Villamin, Group Chief Strategist
Key takeaways:
Israel’s ongoing battle against primarily Iranian proxies has now shifted towards a direct confrontation between the two powers in the Middle East
The recent airstrikes pose risks to the new energy market landscape; however, further fallout for global energy prices seems, for now at least, limited
Geopolitical risks are rising, but financial markets are currently not pricing in a worst-case scenario
First, Israel could strike Iran’s primary energy export terminals on Kharg Island, much like Russia’s response to European efforts to limit Russian energy exports in the aftermath of Russia’s 2022 Ukraine invasion. In this case, Iran may seek to weaponise global energy prices by moving to shut off the movement of supplies through the Persian Gulf bottleneck in the Strait of Hormuz, likely forcing the United States into a decision about whether to strike Iran directly in order to re-open the flow of oil and potentially crossing the latest ‘red line’ since the US–Iran engagement in 1979.
Second, having struck Iran’s nuclear facilities with more traditional ‘bunker-busting’ munitions, the International Atomic Energy Agency has confirmed damage at Iran’s Natanz facility. However, strikes at Iran’s Fordow facility, deeper underground and thought to be resistant to all but the largest American non- nuclear munitions (and only deliverable via US B-2 bombers), have not resulted in any comparable damage. Should Iran fear its nuclear programme is under serious threat, once again, they may turn to Russia’s 2022 approach; this means that they may seek to impose 2022-style costs on global and, in particular, Western, economies in the hope that the US and European countries can rein in what currently appears to be unconstrained Israeli efforts.
The recent rise in energy prices probably poses only limited risks to current global inflation trajectories. However, current levels of global crude prices could mean we have seen the trough in US inflation momentum which we have been anticipating since early 2025.
The realisation of these risk scenarios could lead to a 2022-style supply move through global energy markets. This assumption would imply an inflationary trajectory for the US economy driven not only by higher oil prices but also by potentially higher US tariffs and would curb US economic growth. Although the recent escalations in the Israel–Iran conflict are worrisome in and of themselves, the events of 13 June have crossed red lines that have previously constrained both sides. This means that they probably only represent one event in the new, heightened geopolitical volatility regime that is unfolding.
Moreover, Ukraine’s strikes against Russia’s strategic bomber forces have potentially changed the landscape of the Russia–Ukraine conflict as well, expanding the battlefield from Ukraine and linking supply lines to now extend to Russia’s strategic weapons stock, raising the risk of a commensurate Russian retaliation against Ukraine’s backers in Europe and the United States.
The combination of all these events in recent weeks is a concern and may indicate that the global powers, namely the United States and Russia (and the Soviet Union before) are either no longer willing, or – more troublingly – no longer able to constrain their surrogates in maintaining the historical status quos in these regional conflicts. If correct, the parties involved would seek to establish a new equilibrium in these conflicts.
US regime-change efforts have shifted significantly since the Cold War era, when the focus was on preventing ‘dominoes’ from falling in Asia, Africa, and South America in its struggle against the Soviet Union. Today, the emphasis is disproportionately on the Middle East and North Africa.
Markets tend not to price in geopolitical risks until there is a conflagration, and they are currently showing little sign of factoring in a worst-case outcome. However, such tensions typically lead to increased volatility in risk assets.
We maintain our convictions across asset classes, favouring equities over bonds and maintain a positive stance on gold, which remains a key hedge in the event of an extreme geopolitical shock.
DWS Investment, 17 June 2025
Author: Stephan Matthaei, Portfolio Manager
Yields on Japanese government bonds (JGBs) have risen sharply since the beginning of the year. The increase observed in the ultra-long maturity segment – 30-year maturities peaked at nearly 3.20% at the end of May, 90 basis points above their end-2019 level, before recovering – has particularly worried investors, who see this as an early sign of greater turbulence in the global government bond market. Japanese government bonds have been considered one of the most stable segments of this asset class for decades.
This is partly because the Bank of Japan (BOJ) has long been the largest holder of Japanese government bonds. Until recently, the country was caught in a cycle of deflation that had lasted since the 1990s, known as the ‘lost decades’. The purchase of bonds, which allowed the government to borrow more and, consequently, invest more, was part of the BOJ's strategy to revive the national economy. Today, Japan seems to have emerged from deflation, and the purchase of bonds to stimulate the economy is therefore losing its appeal. The BOJ can now focus on gradually reducing some of its assets.
Japanese government bonds have reacted to this development across all maturities. All yields are significantly higher than last year, with the increase being most pronounced in the long segment. While 30yr JGBs are yielding nearly 73bps higher, the rise in yields is only around 43bps for 10yr maturities. Very long-term securities are generally the most sensitive to changes in the fundamental or structural environment.
Auctions of very long-term JGBs, which generated much lower demand than in recent years, have contributed to investor concerns in recent weeks. Japanese insurers and other institutional investors are generally very interested in very long-term bonds offering attractive yields, but the latest auctions fell well short of expectations. Fears of increased volatility due to the trade war triggered by the Trump administration and some uncertainty about the future direction of the BOJ's monetary policy have had an impact in this regard.
In our view, rate hikes that are larger than those anticipated by the market should lead to a continued rise in JGB yields.
However, even though JGB yields have already risen significantly across the curve and are likely to continue doing so, we believe that this development should not be overinterpreted. This rise is largely due to internal factors, and as long as the movement remains orderly, particularly according to the BOJ, it should be seen as a move closer to fundamental reality rather than a warning sign for the global government bond segment.
Amundi Investment Institute, 17 June 2025
Author: Didier Borowski, Head of Macro Political Research
We believe that there is an opportunity for Europe. In the short term, Europe will suffer from trade uncertainty linked to tariff barriers. However, measures are gradually being implemented in Europe to increase competitiveness and mobilise savings, with an emphasis on combining savings and investment, for example through the possibility of introducing tax incentives to channel savings towards financing investment in Europe. The external pressure exerted by the US administration is an opportunity for Europe to launch initiatives that have been conceived and proposed for more than 10 years in some cases. These projects include defence programmes, including resilience spending. The defence spending target of 5% of GDP extends to resilience spending such as infrastructure. These are positive factors for Europe in the medium and long term.
Any measures taken at European level can only have an impact in the medium term. They will therefore not alter the economic outlook for the next two years. In the short term, the economy is being affected by uncertainty, trade barriers and a lack of visibility. Growth will therefore be lower than Europe's fundamentals would allow. In the short term, a recession cannot be ruled out in Germany, which is highly sensitive to exports to the United States. Since the beginning of the year, the outlook has deteriorated in some European countries. European growth will be weaker in 2025 than was expected at the beginning of the year. By the end of 2026, the engine of growth will be more operational and efficient in Germany, enabling a recovery in investment, not only across the Rhine but throughout the EU.
Since the beginning of the year, there has been a rotation of portfolios in favour of Europe, especially as European investments were relatively more attractively valued. This is in fact a rebalancing. Small and mid-caps should benefit from this, as they are heavily discounted, less sensitive to global trade and should ultimately benefit from rising real wages, a labour market that remains solid overall, credit conditions that will continue to ease and high savings surpluses. Europeans have a real treasure in their savings, which they must learn to mobilise to finance projects that are essential for their future.
The idea is not to be overly bullish on Europe, but to say that there was excessive pessimism in Europe due to the gloomy medium-term outlook. However, it is precisely this outlook that is gradually improving. The United States is certainly showing resilience in the short term, but unlike Europe, the medium-term outlook is darkening. We need to take advantage of the changes that we can anticipate over the next 5 to 10 years to rebalance portfolios, taking valuations into account, of course. The trade shock is an opportunity for Europe to reform and increase its investments.
Tactically, investors need to consider the two-year outlook. Credit conditions are easing, and the cyclical momentum should eventually pick up again, which will automatically make these stocks attractive again. The risks are asymmetrical in this segment because these stocks are already heavily discounted. Investors should not focus solely on the very short term. They need to be patient. We clearly do not recommend adding risk to portfolios but rather diversifying them more effectively. Portfolio rebalancing is a factor supporting rotation in favour of European assets.
We are not saying that US equities should be sold, but we are very sceptical about the astonishing rebound in US indices following the pause in tariffs. This is because trade tensions will persist, and fiscal drift will increase in the United States with the budget plan.
Equities
Important weekly performances:
Stora Enso (+16%), AMD (+10%), Marvell Tech (+9%), Saab (+7%)
Eutelsat (+60%) while Renault (-10%), Teleperformance (-17%)
Analysts:
Hiscox (Barclays ‘o/w’ target £14), Burberry (BNP ‘o/w’ target £13.7)
Galderma (BNP ‘o/w’ target CHF130), UBS (MS ‘u/w’ target CHF26)
Rates
US curve (2-10 years) steepening stable at 45bps (Bond yields mildly lower across the board)
HY corporate spreads stable at 315-320 bps (US/EU)
Commodities
Oil price higher (+1%) among Middle East tensions affecting Iran oil production and Persian Gulf disorder
Gold price lower (-2%) on a stronger USD and FED’s decision not to cut
UK/EU
UK May inflation at 3.4% vs 3.5% in April
EU May inflation at 2.7% vs 2.6% in April
Under the watch
Platinum price broke 2021 high and now at testing the 2014 levels
March/June 2026 US rates Futures show large interests in dovish Fed
Nota Bene
Odds for a Sep FED rate cut have risen to 70%
SNB may return to negative interest rates as early as this autumn (inflation turned negative in May -0.1% YoY, mostly due to a stronger CHF)
Central Banks’ Gold reserves are expected to rise in 2026 according to the latest World Gold Council’s survey (43% of them plan to boost their Gold holdings)
CALENDAR
Corporate earnings releases:
US FedEx (24 June), Micron Tech (25), Nike (26)
Macro Data releases:
US June PCE inflation (27 June)
WHAT ANALYSTS SAY
- UBP: Israel-Iran: the dawn of a new global risk regime?
- DWS: Japanese Bond yields have risen sharply
- Amundi: Don't add risk, but diversify better by investing more in European small and mid caps
UBP, 20 June 2025
Author: Norman Villamin, Group Chief Strategist
Key takeaways:
Israel’s ongoing battle against primarily Iranian proxies has now shifted towards a direct confrontation between the two powers in the Middle East
The recent airstrikes pose risks to the new energy market landscape; however, further fallout for global energy prices seems, for now at least, limited
Geopolitical risks are rising, but financial markets are currently not pricing in a worst-case scenario
First, Israel could strike Iran’s primary energy export terminals on Kharg Island, much like Russia’s response to European efforts to limit Russian energy exports in the aftermath of Russia’s 2022 Ukraine invasion. In this case, Iran may seek to weaponise global energy prices by moving to shut off the movement of supplies through the Persian Gulf bottleneck in the Strait of Hormuz, likely forcing the United States into a decision about whether to strike Iran directly in order to re-open the flow of oil and potentially crossing the latest ‘red line’ since the US–Iran engagement in 1979.
Second, having struck Iran’s nuclear facilities with more traditional ‘bunker-busting’ munitions, the International Atomic Energy Agency has confirmed damage at Iran’s Natanz facility. However, strikes at Iran’s Fordow facility, deeper underground and thought to be resistant to all but the largest American non- nuclear munitions (and only deliverable via US B-2 bombers), have not resulted in any comparable damage. Should Iran fear its nuclear programme is under serious threat, once again, they may turn to Russia’s 2022 approach; this means that they may seek to impose 2022-style costs on global and, in particular, Western, economies in the hope that the US and European countries can rein in what currently appears to be unconstrained Israeli efforts.
The recent rise in energy prices probably poses only limited risks to current global inflation trajectories. However, current levels of global crude prices could mean we have seen the trough in US inflation momentum which we have been anticipating since early 2025.
The realisation of these risk scenarios could lead to a 2022-style supply move through global energy markets. This assumption would imply an inflationary trajectory for the US economy driven not only by higher oil prices but also by potentially higher US tariffs and would curb US economic growth. Although the recent escalations in the Israel–Iran conflict are worrisome in and of themselves, the events of 13 June have crossed red lines that have previously constrained both sides. This means that they probably only represent one event in the new, heightened geopolitical volatility regime that is unfolding.
Moreover, Ukraine’s strikes against Russia’s strategic bomber forces have potentially changed the landscape of the Russia–Ukraine conflict as well, expanding the battlefield from Ukraine and linking supply lines to now extend to Russia’s strategic weapons stock, raising the risk of a commensurate Russian retaliation against Ukraine’s backers in Europe and the United States.
The combination of all these events in recent weeks is a concern and may indicate that the global powers, namely the United States and Russia (and the Soviet Union before) are either no longer willing, or – more troublingly – no longer able to constrain their surrogates in maintaining the historical status quos in these regional conflicts. If correct, the parties involved would seek to establish a new equilibrium in these conflicts.
US regime-change efforts have shifted significantly since the Cold War era, when the focus was on preventing ‘dominoes’ from falling in Asia, Africa, and South America in its struggle against the Soviet Union. Today, the emphasis is disproportionately on the Middle East and North Africa.
Markets tend not to price in geopolitical risks until there is a conflagration, and they are currently showing little sign of factoring in a worst-case outcome. However, such tensions typically lead to increased volatility in risk assets.
We maintain our convictions across asset classes, favouring equities over bonds and maintain a positive stance on gold, which remains a key hedge in the event of an extreme geopolitical shock.
DWS Investment, 17 June 2025
Author: Stephan Matthaei, Portfolio Manager
Yields on Japanese government bonds (JGBs) have risen sharply since the beginning of the year. The increase observed in the ultra-long maturity segment – 30-year maturities peaked at nearly 3.20% at the end of May, 90 basis points above their end-2019 level, before recovering – has particularly worried investors, who see this as an early sign of greater turbulence in the global government bond market. Japanese government bonds have been considered one of the most stable segments of this asset class for decades.
This is partly because the Bank of Japan (BOJ) has long been the largest holder of Japanese government bonds. Until recently, the country was caught in a cycle of deflation that had lasted since the 1990s, known as the ‘lost decades’. The purchase of bonds, which allowed the government to borrow more and, consequently, invest more, was part of the BOJ's strategy to revive the national economy. Today, Japan seems to have emerged from deflation, and the purchase of bonds to stimulate the economy is therefore losing its appeal. The BOJ can now focus on gradually reducing some of its assets.
Japanese government bonds have reacted to this development across all maturities. All yields are significantly higher than last year, with the increase being most pronounced in the long segment. While 30yr JGBs are yielding nearly 73bps higher, the rise in yields is only around 43bps for 10yr maturities. Very long-term securities are generally the most sensitive to changes in the fundamental or structural environment.
Auctions of very long-term JGBs, which generated much lower demand than in recent years, have contributed to investor concerns in recent weeks. Japanese insurers and other institutional investors are generally very interested in very long-term bonds offering attractive yields, but the latest auctions fell well short of expectations. Fears of increased volatility due to the trade war triggered by the Trump administration and some uncertainty about the future direction of the BOJ's monetary policy have had an impact in this regard.
In our view, rate hikes that are larger than those anticipated by the market should lead to a continued rise in JGB yields.
However, even though JGB yields have already risen significantly across the curve and are likely to continue doing so, we believe that this development should not be overinterpreted. This rise is largely due to internal factors, and as long as the movement remains orderly, particularly according to the BOJ, it should be seen as a move closer to fundamental reality rather than a warning sign for the global government bond segment.
Amundi Investment Institute, 17 June 2025
Author: Didier Borowski, Head of Macro Political Research
We believe that there is an opportunity for Europe. In the short term, Europe will suffer from trade uncertainty linked to tariff barriers. However, measures are gradually being implemented in Europe to increase competitiveness and mobilise savings, with an emphasis on combining savings and investment, for example through the possibility of introducing tax incentives to channel savings towards financing investment in Europe. The external pressure exerted by the US administration is an opportunity for Europe to launch initiatives that have been conceived and proposed for more than 10 years in some cases. These projects include defence programmes, including resilience spending. The defence spending target of 5% of GDP extends to resilience spending such as infrastructure. These are positive factors for Europe in the medium and long term.
Any measures taken at European level can only have an impact in the medium term. They will therefore not alter the economic outlook for the next two years. In the short term, the economy is being affected by uncertainty, trade barriers and a lack of visibility. Growth will therefore be lower than Europe's fundamentals would allow. In the short term, a recession cannot be ruled out in Germany, which is highly sensitive to exports to the United States. Since the beginning of the year, the outlook has deteriorated in some European countries. European growth will be weaker in 2025 than was expected at the beginning of the year. By the end of 2026, the engine of growth will be more operational and efficient in Germany, enabling a recovery in investment, not only across the Rhine but throughout the EU.
Since the beginning of the year, there has been a rotation of portfolios in favour of Europe, especially as European investments were relatively more attractively valued. This is in fact a rebalancing. Small and mid-caps should benefit from this, as they are heavily discounted, less sensitive to global trade and should ultimately benefit from rising real wages, a labour market that remains solid overall, credit conditions that will continue to ease and high savings surpluses. Europeans have a real treasure in their savings, which they must learn to mobilise to finance projects that are essential for their future.
The idea is not to be overly bullish on Europe, but to say that there was excessive pessimism in Europe due to the gloomy medium-term outlook. However, it is precisely this outlook that is gradually improving. The United States is certainly showing resilience in the short term, but unlike Europe, the medium-term outlook is darkening. We need to take advantage of the changes that we can anticipate over the next 5 to 10 years to rebalance portfolios, taking valuations into account, of course. The trade shock is an opportunity for Europe to reform and increase its investments.
Tactically, investors need to consider the two-year outlook. Credit conditions are easing, and the cyclical momentum should eventually pick up again, which will automatically make these stocks attractive again. The risks are asymmetrical in this segment because these stocks are already heavily discounted. Investors should not focus solely on the very short term. They need to be patient. We clearly do not recommend adding risk to portfolios but rather diversifying them more effectively. Portfolio rebalancing is a factor supporting rotation in favour of European assets.
We are not saying that US equities should be sold, but we are very sceptical about the astonishing rebound in US indices following the pause in tariffs. This is because trade tensions will persist, and fiscal drift will increase in the United States with the budget plan.
Contacts
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