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June 2025

INVESTMENT MARKET UPDATE

Welcome to our latest global investment market update

A warm welcome to the latest look at the global economy and what recent news means for investments. We are grateful to our friends at Charles Stanley for their input into this update.

 

The highlights

After global equities, as measured by the MSCI All-Country World Index, hit a record the previous week, the FTSE 100 index closed at an all-time high last Thursday. This milestone confirmed its recovery from the slump that followed Donald Trump’s ‘Liberation Day’ tariff announcement two months earlier.

 

The UK blue-chip index reached a record closing high of 8,884 as investors continued to seek alternatives to US equities. In a related move, the US dollar fell to a three-year low. The FTSE 100 was up 0.2% over the week by mid-session on Friday.

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Trump impact on markets

After a tense call with Chinese President Xi Jinping, both sides agreed to resume trade negotiations in London. The resulting “framework” deal largely reiterated previous commitments made in Geneva. The US pledged to ease restrictions on sensitive exports and student visas, while China agreed to lift its blockade on rare earth shipments – a critical issue due to its dominance in global supply. The Trump tariff doctrine had effectively been rewritten.​

 

President Trump escalated his feud with Federal Reserve Chair Jerome Powell, calling him a “numbskull” during a White House address. The comment followed renewed pressure on the central bank to slash interest rates by two percentage points – a move Trump claimed could save the US government up to $600bn annually in debt payments. He expressed frustration that Mr Powell had not acted despite “incredible” inflation data showing price stability and lower energy costs. While Mr Powell maintained the Fed’s independence, Mr Trump hinted he might “force something” if no action followed.

 

Investors remained wary of the impact of further tariffs on global supply chains and economic growth. These concerns raised fears of a US recession, prompting a shift towards markets seen as more stable or offering stronger prospects.

 

Investor concern wasn’t limited to tariffs. Many questioned the sustainability of rising US debt and fiscal policy direction. On Thursday, however, a successful bond auction provided some reassurance. The Treasury sold $22bn worth of 30-year bonds, which attracted healthy demand and settled at a yield of 4.84%.

 

European and emerging markets continued to outperform Wall Street in 2025. For example, the MSCI Europe index rose around 20% year-to-date, compared to just 2.7% for the MSCI US index. Lower interest rates and stimulus programmes – including Germany’s €1 trillion loan initiative – helped lift investor confidence across Europe.

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Economics

US inflation data painted a mixed picture ahead of this week’s Federal Reserve policy meeting. May’s CPI report showed headline inflation easing to 2.2% year-over-year, supporting calls for a rate cut. However, core inflation remained stubborn at 2.8%, with a 0.3% monthly increase driven by services and housing costs. This left the Fed facing a delicate balancing act between supporting growth and keeping inflation in check.

 

Signs of tariff-related inflation also began to emerge, with modest price rises in goods like electronics and apparel. Analysts warned the full impact of renewed US-China trade barriers could build over the summer, complicating the Fed’s outlook.

 

The UK economy contracted by 0.3% in April as higher taxes and tariff uncertainty prompted firms to cut jobs and cancel investments. After growth of 0.2% in March and 0.5% in February, the decline surprised economists, who had forecast a 0.1% drop. New stamp duty rates contributed to a sharp slowdown in property activity, weighing on related services and dragging the overall sector down by 0.4%.

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UK Spending Review

Chancellor Rachel Reeves presented the UK’s 2025 Spending Review last week, acknowledging limited fiscal room due to sluggish growth and high borrowing costs.

 

The Chancellor announced £113bn in infrastructure investment but warned of difficult choices ahead. The review prioritised healthcare, defence and housing. The NHS is set to receive a record £202bn in 2025/26 – nearly 40% of all day-to-day departmental spending.

 

Despite this investment, several departments will face real-terms cuts under current inflation and spending rules. Ms Reeves reaffirmed her focus on fiscal discipline, confirming no new tax rises or borrowing beyond the £40bn package announced in autumn 2024. Other confirmed commitments included £39bn for social and affordable housing and an extension of the £3 bus fare cap in England through 2027.

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Company News

Tesco delivered a robust performance in the first quarter, reporting group sales of £16.38bn, buoyed by continued market share gains. Like-for-like sales in the UK rose 4.7%, while customer satisfaction and brand perception also saw notable improvements. Despite economic headwinds and fierce competition, Tesco’s performance outpaced the broader UK retail sector, reinforcing its position as a market leader and boosted investor confidence in the group.

 

Inditex, the parent company of Zara, reported a modest yet steady performance in the first quarter of 2025, with revenues rising 1.5% year-over-year to €8.3bn. This was slightly below analyst expectations. Management flagged a slower start to summer sales, growing just 6% compared to 12% in the same period last year, and warned of a 3% currency headwind for the full year. Still, Inditex continued to expand its global footprint, opening stores in 26 markets and rolling out digital innovations like a new “travel mode” for online shoppers. While the results reflect resilience, they also underscore the mounting pressure from fast-fashion rivals and macroeconomic headwinds.

 

Halma delivered another record-breaking performance in full-year results, marking its 22nd consecutive year of profit growth and 46th straight year of dividend increases. The safety equipment group reported an 11% rise in revenue to £2.25bn and a 16% jump in adjusted pre-tax profit to £459.4m, driven by strong performances across all sectors. Chief executive Marc Ronchetti credited the results to Halma’s diversified portfolio, agile business model, and long-term growth drivers, for positioning the company for continued expansion.

 

House builder Crest Nicholson reported a sharp turnaround in its interim results, posting an adjusted pre-tax profit of £7.9m, more than triple the £2.6m recorded a year earlier. This was despite a slight dip in revenue to £249.5m. The return to profitability was driven by improved sales rates, tighter cost controls, and a strategic focus on the mid-premium housing segment. Chief executive Martyn Clark highlighted rising consumer confidence, easing mortgage rates, and a more supportive planning environment as key tailwinds. The results signal a broader stabilisation in the UK housing market.

 

Shares in Warner Bros Discovery rose following a series of strategic announcements and a strong box office performance. The rally was fuelled by news that the company plans to split into two publicly traded entities – one focused on streaming and TV networks, the other on film and studio operations – sparking optimism about unlocking shareholder value through a more focused operational structure. Additionally, a record-breaking Memorial Day weekend at the box office bolstered revenue expectations.

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