Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.
Key market events
- Spending splurge – Rachel Reeves announced extra funding for the NHS, defence and infrastructure projects, but concerns about affordability remain.
- UK unemployment jumps – the unemployment rate rose to 4.6% in the three months to April, as employers faced higher National insurance payments and a rising minimum wage.
- Suprise fall in UK GDP – the economy shrank 0.3% in April, as the country was battered by Trump tariffs, higher energy bills and rising employer taxes.
- US inflation stays sticky – despite a small monthly rise to 2.4%, inflation stayed below expectations as higher food and transport costs offset lower shelter and fuel prices.
- US-China trade deal close – the US plans to keep reduced tariffs and allow Chinese students, while China will continue to provide rare earth supplies, but Beijing is yet to formally agree.
What this means for financial advisers and clients
While defence, energy infrastructure and public services were big winners in the UK spending review - with money being piled into military tech and nuclear power - such spending makes it harder for the Chancellor to stick to her own fiscal rules, raising the possibility of upcoming tax rises or welfare cuts ahead.
Rising unemployment and shrinking GDP have further highlighted the challenges facing the UK economy, both domestically and abroad, prompting markets to up their bets around interest rate cuts in 2025.
Chart of the week - inflation divergence
Source: Apollo, Bloomberg,
Why this matters
The chart above shows historic and forecasted inflation rates (CPI) for the US and Eurozone.
Eurozone CPI hit 1.9% in May, dipping below the central bank’s 2% target, prompting another rate cut. While part of the drop reflects a rebound from Easter-related spending, inflation may finally be settling around target levels.
On the other hand, US inflation remains sticky, and while May’s numbers were below expectations, the impact of tariffs may not have fully worked their way through the system, leaving Fed officials likely to take a cautious stance on interest rates.
As rate differentials widen, European bond holdings are starting to look more appealing than their US counterparts - especially as worries about US debt sustainability intensify.
Market recap
US markets flat
US markets saw only marginal rises as optimism over China trade talks and strong tech earnings fought broader tariff concerns and interest rate uncertainties.
UK rises on spending boost
Despite geopolitical tensions, UK markets rose on increased interest rate cut expectations and an anticipated rise in public sector spending following the spending review.
Asia buoyed by US trade hopes
The Hang Seng gained on US trade talk optimism but lost some ground as its tech rally started to fade. In Japan, the Nikkei also benefited from trade optimism, although a strengthening Yen - making exporting more expensive - caused losses in sectors such as autos.
Oil surges
Oil prices climbed on rising tensions in the Middle East and the partial evacuation of the US embassy in Iraq, before jumping again after Thursday’s close amid escalating conflict between Iran and Israel.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.55% | 10.91% |
| FTSE 250 | 1.13% | 5.50% |
| S&P 500 | 0.25% | -4.91% |
| NASDAQ | 0.20% | -3.59% |
| MSCI Europe ex UK | 0.40% | 14.55% |
| Hang Seng | 0.81% | 11.60% |
| Nikkei 225 | 1.46% | -3.71% |
| Brent Crude | 6.15% | -7.07% |
| Gold Spot | 0.99% | 30.60% |
| UK 10yr Gilt yield | -11bps | -9bps |
| US 10yr Treasury yield | -5bps | -21bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 12th June 2025.
Stay tuned for next week’s market insights
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