“Consumers continue to spend despite higher energy prices”
- Equities performed very well this quarter. This was mainly because geopolitical tensions decreased and strong company results. Besides AI investments by American providers continued unimpeded.
- Although interest rates changed little over the quarter as a whole, they were volatile. At the beginning of the quarter, interest rates rose due to high oil and gas prices. Later on, they fell again as the conflict in the Middle East became less severe. Oil prices also declined sharply, from around USD 118 per barrel at the beginning of the quarter to approximately USD 73 per barrel at the end.
- At the start of the quarter, there were significant concerns about the conflict between the United States and Iran, which posed risks to shipping through the Strait of Hormuz. During the quarter, the two countries made progress in negotiations. In June, they reached a provisional agreement. Among other things, they agreed to fully reopen the Strait of Hormuz and continue negotiations. These agreements could contribute to a permanent end to the conflict. As a result of the agreement, oil prices fell and inflationary pressures eased.
- Major US cloud service providers increased their projected investment for 2026 to around USD 700 billion. Companies benefiting from strong demand for semiconductors were among the main beneficiaries. The Philadelphia Semiconductor Index rose by approximately 88% during the quarter.
- Macroeconomic growth indicators remained strong. In the United States, labour market data for March, April and May consistently exceeded expectations. In May, the three-month average number of new jobs rose to 188,000, the highest level in two years. Consumers also continued to spend despite higher energy prices. Purchasing managers’ indices (PMIs) in the United States also pointed to solid economic growth, supported by the strength of the services sector. In Europe, the manufacturing sector showed the greatest improvement. The important manufacturing index remained above 50 throughout the quarter, with a score above 50 indicating expansion. The European services sector lagged behind, particularly in Germany and France, while European consumer confidence remained subdued.
- In the United States, the Senate confirmed the appointment of Kevin Warsh as the new Chair of the Federal Reserve (the Fed). Jerome Powell did not leave the central bank; he remained on the Federal Reserve Board of Governors.
- In June, the first meeting of the Federal Open Market Committee (FOMC) under the new chair Kevin Warsh took place. He emphasised the importance of tackling inflation, which changed expectations on the financial markets. Instead of anticipating an interest rate cut, investors began pricing in a rate increase in October. Core inflation remained high, above 3%, mainly due to rising prices in the energy and services sector. The policy rate remained unchanged throughout the quarter at 3.5%–3.75%.
- The European Central Bank (ECB) raised its key policy rate, the deposit facility rate, from 2.0% to 2.25%. The reason was uncertainty about the duration of the conflict between the United States and Iran and its implications for inflation. Several ECB Governing Council members indicated that they expected further rate increases.
This quarterly report has been carefully prepared. The final figures for 2026 will be published in the anual report. You cannot derive any rights from this report.