US markets surged, with the S&P 500 and Nasdaq Composite hitting all-time highs, fueled by easing Middle East tensions, positive US-China trade developments, and dovish comments from Fed officials. The S&P 500 gained 3.4%, and the Nasdaq rose 4.3%, while other indexes, including the Dow and Russell 2000, also saw strong gains. Inflation data showed a slight uptick in May, as core PCE rose 2.7% y/y. Despite the increase, consumer inflation expectations for the year ahead fell sharply, reflecting reduced concerns over tariffs. Business activity continued growing moderately, with the S&P Global Flash PMI registering 52.8, supported by a rebound in manufacturing. Business investment rebounded in May, highlighted by a 16.4% jump in durable goods orders, while the housing sector stayed sluggish – new home sales dropped to their lowest level since October.
European equities advanced, driven by easing geopolitical risks, optimism around German stimulus, and increased NATO spending. The STOXX Europe 600 Index rose 1.3%, with Germany’s DAX up 2.9% and other major markets showing moderate gains. Economic data, however, remained tepid. The eurozone’s composite PMI held steady at 50.2, indicating stagnation, with Germany posting modest growth while France stayed in contraction for the tenth consecutive month. Inflation accelerated unexpectedly in both France and Spain due to higher service and fuel costs. Sentiment weakened across the Euro area, as business and consumer confidence dipped in June.
