Market Commentary

Encouraging signs of de-escalation between the United States and Iran meant geopolitics remained a key focus in June. Vessels resumed transit through the Strait of Hormuz, easing concerns about potential disruption to global oil supplies and prompting oil prices to retreat towards pre-conflict levels. While lower oil prices weighed on energy companies, they also helped ease inflation expectations and stabilise already elevated bond yields.

Investor attention was drawn to Elon Musk's SpaceX, which completed the largest public listing in history. The company raised US$75 billion at a valuation of around US$1.8 trillion. Investor demand was strong, with the share price rising from US$150 to more than US$210 before settling around US$170 by month end, illustrating both the excitement and volatility that can accompany high-profile listings.

This successful debut has also strengthened expectations that other large private companies, such as AI firms Anthropic and OpenAI, may eventually pursue public listings.

Investors also focused on Kevin Warsh's first meeting as Chair of the US Federal Reserve, where the central bank left interest rates unchanged. Markets increasingly priced in the prospect of higher rates later in the year, as inflation remained elevated and the labour market continued to show resilience. Strong productivity growth remained a key offset, supporting the broader US economic outlook.

The Reserve Bank of New Zealand, Reserve Bank of Australia, and Bank of England all faced similar policy challenges during June. While lower energy prices provided some relief, resilient labour markets continued to support underlying inflationary pressures. As a result, inflation remained above target across all three economies, although it came in below expectations in some cases. Central banks remained cautious as they balanced the need to return inflation to target against supporting economic growth.

UK political developments remained a focus in June following Keir Starmer’s resignation, with Andy Burnham emerging as a leading contender to succeed him. Markets reacted in a relatively muted fashion, as the potential for political change had been broadly anticipated. However, uncertainty remained around the future direction of fiscal and economic policy.

The New Zealand economy received the March quarter GDP release, with activity growing 0.8% over the quarter. However, the International Monetary Fund (IMF) released updated forecasts expecting a likely contraction in GDP over the June quarter, and downgraded its longer-term growth outlook. The IMF noted that inflation could rise towards 4% and suggested further interest rate increases.

Equity markets diverged over the month. US equities came under pressure, driven largely by weakness in the technology sector, with the S&P 500 falling 1.06% and the Nasdaq Composite declining 2.81%. UK and Australian equities were higher, with the FTSE 100 rising 0.84% and the ASX 200 up 0.54%. New Zealand led performance, gaining 2.85% over the month, supported by its lower weighting to both technology and energy sectors.