US markets closed mixed last week amid geopolitical tensions and weak economic data, but weekend developments have sharply raised stakes. President Trump’s comments on Thursday about a “substantial chance” of negotiations with Iran offered short-lived relief. However, on Saturday night, the US launched coordinated strikes on Iran’s nuclear facilities at Fordow, Natanz, and Isfahan, escalating tensions significantly. Meanwhile, the Fed held rates steady at 4.25%–4.50%, projecting two cuts later this year, though inflation and unemployment expectations rose. A Fed governor’s suggestion of a possible July cut helped buoy sentiment on Friday. Still, economic data disappointed: May retail sales declined for a 2nd straight month, dragged by falling auto sales post-tariffs, and housing starts dropped nearly 10% to a 5-year low. Builder sentiment also weakened, reflecting concerns about high mortgage rates and economic uncertainty.
European markets also fell last week and began Monday under renewed pressure following US military strikes in the Middle East. The pan-European STOXX 600 dropped 1.6% last week, as geopolitical anxiety and soft economic indicators weighed on sentiment. The Bank of England held rates at 4.25%, with inflation easing slightly but policymakers remaining divided. In the Eurozone, Switzerland and Norway both cut rates to address declining inflation and currency pressures. German investor sentiment improved sharply following tax relief announcements, but France’s manufacturing confidence fell further.
