The Iran conflict eased over the course of the month as diplomatic signals became more concrete. The focus was on the signing of a Memorandum of Understanding (MoU), which provided political backing for the de-escalation process that had begun and gave the markets a solid basis for expecting further talks.
Stock markets generally proved resilient over the course of the month. Price movements were mixed and characterized by rotation. At the beginning of the month, the U.S. stock market in particular held up well initially, though technology stocks—which had performed strongly—showed increased vulnerability.
The U.S. Federal Reserve (Fed) left key interest rates unchanged in June but signaled that, given the elevated price level, it currently sees no room for rapid easing and is leaning more toward inflation hedging in the short term. In May, inflation stood at 4.2% (previous month: 3.8%). However, the latest labor market data came in weaker, and inflation expectations have recently eased again. Looking ahead to the rest of the year, there is therefore a possibility that the Fed will refocus its attention on economic developments and could cut key interest rates in a single move by the end of the year.
The ECB Governing Council, on the other hand, raised key interest rates by 25 basis points to 2.25% (deposit facility), as expected by the market, in response to broader inflationary pressures and higher inflation projections. The inflation forecast for 2026 was raised to 3.0%, and the growth forecast was lowered to 0.8%. Monetary policy is thus prioritizing price stability, even as the real economy loses momentum. For European risk assets, this tends to create headwinds through valuation and financing channels.
In the U.S. and German government bond markets, yields showed mixed performance compared to the previous month. Yields on 10-year U.S. Treasury bonds rose by 3 basis points at the end of the month, closing at 4.46%. By contrast, yields on 10-year German Bunds fell by 8 basis points from 2.94% to 2.86%. The yield on 10-year Italian government bonds fell by 2 basis points to 3.63%.
The picture was also mixed for corporate bonds. The yield on investment-grade euro-denominated bonds fell from 3.48% to 3.46%, while the yield on investment-grade U.S. dollar-denominated corporate bonds rose from 5.13% to 5.20%. In the high-yield segment, yields on U.S. dollar-denominated corporate bonds rose by 20 basis points to 7.16%, and yields on euro-denominated bonds rose by 5 basis points to 5.86%.
The price of gold weakened significantly in June, falling 11.6% to $4,007 per ounce. The U.S. dollar strengthened by 2.0% against the euro to 1.142.
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