Weekly Market Review - 22 June 2026

Global equities moved broadly higher, supported by improving sentiment following the US and Iran agreement. Japan led gains on technology strength, the US advanced despite hawkish signals from the Fed, Europe edged higher, China was mixed on uneven growth, and the UK lagged.

US: Equities rise on improving sentiment, despite the Fed signalling higher for longer rates

Most major U.S. stock indices closed the holiday shortened week higher, supported by improved sentiment after news that the U.S. and Iran had signed a memorandum of understanding, paving the way to reopen the Strait of Hormuz and helping push oil prices lower. The Nasdaq Composite led gains, rising 2.43%, followed by the Russell 2000 and the S&P 500, which added 1.21% and 0.93%, respectively, while markets were closed Friday for Juneteenth. Meanwhile, the Federal Reserve kept its target rate unchanged at 3.50% to 3.75%, but updated projections and Chair Kevin Warsh’s comments were viewed as hawkish, signalling potential rate hikes later in the year and lifting short-term Treasury yields. Retail sales showed strength, increasing 0.9% in May and exceeding expectations, though housing data was mixed, with declines in housing starts and builder sentiment offset by a rise in pending home sales. In bond markets, Treasuries posted negative returns as short-term yields climbed, with the two-year note reaching its highest level in over a year.

 

Japan: Equities surge to record highs on tech strength and geopolitical relief  

Japan’s stock markets surged in the week through Thursday, June 18, with the Nikkei 225 gaining 7.92% to reach all-time highs and the broader TOPIX index rising 4.8%. Gains were driven largely by semiconductor equipment and technology stocks, which benefited from strong investor interest in companies tied to global artificial intelligence-related capital spending. On the geopolitical front, developments also supported sentiment, as President Donald Trump signed an agreement with Iran paving the way for the reopening of the Strait of Hormuz. The move was welcomed by Japanese Prime Minister Sanae Takaichi, who called it a major step toward resolving tensions and expressed optimism that free and secure navigation through the critical shipping route would be maintained.

China: Equities mixed as industrial strength offsets weak domestic demand

Chinese equities were mixed during the holiday-shortened week, as investors weighed resilient industrial activity against continued weakness in domestic demand and the property sector, with mainland China and Hong Kong markets closed Friday for the Dragon Boat Festival. Through Thursday, the CSI 300 Index rose 3.44% while the Shanghai Composite advanced 1.46% in local currency terms, in contrast to the Hang Seng Index, which fell 3.21%, reflecting weaker offshore sentiment toward China-related assets. Sentiment was also supported by lower oil prices following reports of a U.S.-Iran agreement that eased concerns about Middle East supply disruptions and inflation pressures. May activity data highlighted an uneven recovery, with industrial production rising 4.5% year over year, supported by manufacturing and exports, while retail sales declined 0.6%, marking the first annual drop since late 2022. At the same time, the urban unemployment rate edged down slightly to 5.1%.

Europe: Equities edge higher as geopolitics lift sentiment amid mixed data

European markets edged higher over the four days to June 18, with the STOXX Europe 600 Index rising 0.62% as investor sentiment improved following news of a U.S.–Iran agreement. Major indices posted gains, including Germany’s DAX (+1.59%), France’s CAC 40 (+1.40%), and Italy’s FTSE MIB (+2.31%). Economic data was mixed, with the eurozone unexpectedly recording a small trade deficit in April due to a wider energy gap, while Germany saw easing wholesale inflation and a rebound in business confidence. On the monetary policy front, the Bank of England held rates steady at 3.75% amid uncertain inflation outlooks, while the Swiss National Bank and Norway’s Norges Bank also kept rates unchanged, with the latter signalling a potential future hike due to persistent inflation.

UK: Equities slip as uncertainty around inflation weighs on sentiment

In the UK, the FTSE 100 Index declined -1.04% over the holiday shortened week, underperforming its European peers. The Bank of England kept its base rate unchanged at 3.75%, acknowledging uncertainty around the inflation outlook amid geopolitical tensions. Meanwhile, annual inflation held steady at 2.8% in May, its lowest level since March 2025, with easing price pressures in housing and household services offset by rising transport costs driven by higher fuel prices and airfares.

What's Important Next: Week 22 June to 26 June 2026

22 June 2026

Sir Keir Starmer's Resignation

This morning, Keir Starmer resigned from his role as Prime Minister.

Why it's important

From an investment perspective, political developments can create short-term market uncertainty, particularly in areas such as policy direction and investor sentiment. Our team is closely monitoring the situation and will continue to assess any potential implications for portfolios, providing updates as more information becomes available. Whilst there are risks, the early indicators err on the positive side. Early commentary from economists, including Jim O'Neill (an informal adviser to Andy Burnham), suggests the government's economic policy is likely to remain broadly balanced.

Purchasing Managers Index Data

On Tuesday we receive the Manufacturing, Services and Composite Purchasing Managers' Indexes for Germany, the Eurozone, France, the UK and the US.

Why it's important

That familiar phrase "it's the economy..." has evolved into a core principle of what matters, both politically and for financial markets. With ongoing concerns around a potential global slowdown, driven by inflationary pressures from the closure of the Straits of Hormuz, set against the offsetting support from AI driven capital expenditure, timely data on actual economic activity will be critical. Initial surveys suggest that services are proving more resilient than manufacturing. Over the longer term, however, this imbalance is neither desirable nor sustainable. As such, these releases provide an important leading indicator for the underlying health and direction of the economy, and by extension the outlook for equity markets and interest rates.

US Inflation

On Thursday we receive the US PCE Index (Personal Consumption Expenditures), which is expected to rise from 3.8% to 4.1%.

Why it's important

The PCE index is the Federal Reserve's preferred measure of inflation and will be key in assessing whether recent price pressures are becoming more broad based across the economy. This is particularly relevant given the new Fed Chair, Kevin Warsh, who chaired his first Federal Open Market Committee (FOMC) meeting last week and struck a more hawkish tone than expected. This appears notably more hawkish than President Trump may have anticipated when appointing him, especially when compared with his predecessor Jerome Powell. If the data shows inflation to be stronger or more persistent than expected, markets are likely to move quickly to price in earlier and potentially more aggressive rate hikes. This could, in turn, weigh on equity market sentiment.