Contents
Market review
Against the backdrop of the World Cup, markets this week were shaped by a clear push-pull between geopolitics and monetary policy. On the positive side, the US–Iran agreement to reopen the Strait of Hormuz marked a meaningful deescalation, reducing a key inflation tail risk and driving a sharp decline in energy prices, with oil prices down around 8.6% on the week, supporting risk sentiment. However, recent news of delays in follow-through talks has introduced some uncertainty about the durability of this improvement. Equity performance was constructive but uneven, with gains in the US and Europe and stronger outperformance across EM and Asia, while the UK lagged due to weaker energy stocks and China underperformed amid ongoing domestic growth concerns. Flows were further supported by the record SpaceX IPO, sustaining demand for innovation-led exposures, although early volatility highlighted continued sensitivity to valuations. At the same time, rates and credit delivered more modest returns, as investor focus shifted back to central bank signalling and a still restrictive policy backdrop, with a stronger USD adding a headwind for non US assets.
Central banks returned firmly to the forefront, with the Fed’s first meeting under Chair Warsh delivering a distinctly hawkish signal. While rates were held at 3.50–3.75%, the tone shifted meaningfully, with forward guidance scaled back, the easing bias removed, and a renewed emphasis on price stability, reinforcing expectations that policy may remain restrictive for longer. In the UK, the Bank of England maintained a cautious stance, holding rates at 3.75% as it balances persistent inflation against weakening domestic momentum. Meanwhile, the Bank of Japan continued its gradual normalisation, raising rates to 1.0% - a 31-year high while maintaining cautious guidance.
In China, the recovery remains uneven, with resilient industrial production and exports offset by weakening domestic demand, as retail sales contract and fixed asset investment remain under pressure.
Outlook
The broader backdrop remains constructive, but near-term dynamics are increasingly driven by central bank policy, incoming data, and the resilience of corporate fundamentals. Geopolitical easing has reduced a key inflation tail risk, but the shift to a more hawkish policy stance — particularly from the Fed — is tightening financial conditions and may drive intermittent volatility. Encouragingly, structural growth drivers remain intact, with AI investment supporting earnings resilience and corporate balance sheets holding up.
Movers table
Equities |
1 Week |
YTD |
1 Year |
|---|---|---|---|
S&P 500 |
0.96% |
10.20% |
26.93% |
FTSE 100 |
-0.64% |
6.56% |
22.10% |
Euro Stoxx 50 |
2.19% |
10.96% |
24.31% |
MSCI Asia Pacific ex Japan |
4.34% |
28.50% |
51.07% |
MSCI China |
-2.76% |
-11.38% |
2.04% |
Source: Bloomberg as at 8:07am on 19.06.2026
This content has been prepared by M&G Life Investment Office (LIO) for information purposes only and does not contain or constitute investment advice. Information provided herein has been obtained from sources that LIO believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. Neither LIO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this document. The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.
‘M&G Life Investment Office (LIO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG), Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.
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