The week that was …
Economic round-up
UK GDP slips over April
The UK economy contracted 0.1% in April, as fuel price rises caused by the Iran war hit spending. This was the first monthly fall since August 2025. On a three-monthly basis, from February to April, the economy grew 0.7%, marking the fifth consecutive period of three-monthly growth. Read more from Sky here
US inflation at three-year high
US inflation rose to a three-year high of 4.2% in May – up from 3.8% in April and its highest level since April 2023. Higher oil and gas prices contributed nearly two-thirds of May’s rise in inflation with annual energy inflation running 23.5% over the year. Read more from the Times here
ECB raises interest rates
As widely predicted by markets, the European Central Bank announced a quarter-point interest rate hike last Thursday – up to 2.25% – as the Iran war continues to create inflationary pressures. The central bank also raised its inflation forecasts, saying it now expected headline inflation in the Eurozone to average 3% in 2026, before cooling to 2.3% next year and 2% in 2028. Read more from CNBC here
UK retail sales bounce
Data from the British Retail Consortium showed total retail sales in the UK increased by 3.7% year-on-year in May, against growth of 1.0% in May 2025. This was also above the 12-month average growth of 2.0%. Food sales were particularly strong – growing at 3.9% year-on-year. Read more from InsightDIY here
Petrol price falls boost US consumer
US consumer sentiment bounced off record lows in early June as easing gasoline prices offered households some relief. Lower-income households saw the strongest improvement in sentiment. The University of Michigan’s consumer sentiment index increased to 48.9 this month, up from an all-time low of 44.8 in May. Read more from Reuters here
Raw materials costs push up China inflation
China’s wholesale prices rose at the fastest pace in nearly four years in May, as raw material costs moved higher in response to the Iran war and an artificial intelligence investment boom. The producer price index jumped 3.9% from a year ago – the highest level since July 2022. Read more from CNBC here
Markets round-up
SpaceX shares begin trading
Shares in Elon Musk’s SpaceX began trading on the Nasdaq index on Friday. The group’s shares closed up 19.2% at $160.95 (£119.86), well above the IPO price of $135, putting its market capitalisation at $2.1tn. The wider market also ended higher on hopes of a peace deal in Iran. Read more from Reuters here
Oil prices drop on US/Iran peace hopes
Brent crude oil prices fell to their lowest levels since early March on hopes of a peace agreement between the US and Iran. Brent futures ended the week at $87.33 a barrel – down $3.05, or 3.37%. US West Texas Intermediate crude meanwhile finished at $84.88 – down $2.83, or 3.23%. Read more from Reuters here
Frasers Group bids for Hugo Boss
Frasers Group, which includes Sports Direct and Game, has launched a takeover offer for fashion brand Hugo Boss. Frasers, run by Mike Ashley, is already the German fashion firm’s largest shareholder. The offer is equivalent to €38 (£32.85) per share. Read more from Sky here
Gold’s bull run falters
Expectations for US monetary tightening and a strong dollar have dented the bull run in gold, the price of which is currently sitting at around $4,000 per ounce. Geopolitical risk, fiscal deficits and central bank buying may continue to support the longer-term case for bullion. Read more from Reuters here
Reversal in European defence stocks
The rally in European defence stocks has reversed this year on concerns over how the continent will fund its military spending plans. Investors have favoured drone-makers and companies more focused on modern, high-tech warfare instead. The Stoxx Europe Targeted Defence index has fallen more than 15% since its peak in January. Read more from the FT here
‘Super squeeze’ in industrial metals
The Iran war is creating a ‘super-squeeze’ in industrial metals such as copper and aluminium, with tight market conditions likely to remain for years to come. The price of copper is close to its all-time closing high while aluminium is at its highest level in four years. Data-centre demand is boosting the price for both commodities. Read more from the FT here
“At a time when global financial markets are fragile, the UK’s low valuations leave it with plenty of upside and limited downside. Not a lot needs to go right for the UK stockmarket to do well.
Selected equity and bond markets: 05/06/26 to 12/06/26
| Market | 05/06/26 (Close) |
12/06/26 (Close) |
Gain/loss |
|---|---|---|---|
| FTSE All-Share | 5574 | 5631 | +1.0% |
| S&P500 | 7384 | 7431 | +0.7% |
| MSCI World | 4756 | 4788 | +0.7% |
| CNBC Magnificent Seven | 429 | 418 | -2.5% |
| US 10-year treasury (yield) | 4.52% | 4.49% | |
| UK 10-year gilt (yield) | 4.9% | 4.8% |
Investment round-up
Guinness acquires Foresight division
Guinness Global Investors has acquired Foresight Group’s public markets division, Foresight Capital Management (FCM). The deal comprises 11 strategies across real assets, sustainable and impact funds. Nick Scullion, partner and head of FMC, will remain with Foresight Group.
MPS assets up £50bn in 12 months
MPS assets grew by £50bn to £208bn in the 12 months to the end of the first quarter of 2026, according to the NextWealth 2026 MPS Asset Update report. According to the report, the MPS sector is growing at 9%, compared with 3% for the wider platform market.
Natixis to launch active ETFs
Natixis Investment Managers will launch a series of active ETFs, based on longstanding equity and fixed income strategies, in Europe in the second half of this year. The group said the new range would bring “institutional grade, actively managed strategies into an ETF format”.
UK investor confidence soars
UK investor confidence has reached its highest level this decade, according to a survey from AML and The Nursery Research & Planning. Against a pre-Covid benchmark of 100, UK investor confidence has risen to 115 – up from 103 in 2025. Confidence rose across every age group above 35 in the UK, with the 35-44 cohort up 26 points year-on-year.
Pacific Assets combines with Schroder trust
Struggling investment trust Pacific Assets will combine with Schroder Asian Total Return to create a £1.1bn vehicle later this year. It follows the departure of its long-time fund manager in December. Pacific Assets has seen long-term underperformance.
European ETFs and ETCs see inflows slow
European exchange-traded funds and commodities (ETFs and ETCs) attracted €38bn in inflows in May 2026 – down from €40.2bn in April. This takes total flows to €181.1bn year-to-date, according to data from Morningstar, and total assets to €3.2trn.
Nuveen bring US smallcap strategy to Europe
Nuveen is bringing its US quantitative small-mid cap equity strategy to European investors. The strategy has been running in the US since 2016 and now holds $2.6bn in assets under management. The Ucits-compliant vehicle is launching with seed capital provided by a German single-family office.
BlackRock launches space technology ETF
BlackRock has launched a space technologies ETF, giving European investors targeted exposure to the expanding global space economy. The vehicle tracks the Stoxx Global Space Satellites and Drones Index, including rocket, satellite and drone manufacturing companies and industry supply chains. The underlying index methodology is designed to evolve as the public-market opportunity set broadens.
… and the week that will be
US interest rate decision
Kevin Warsh’s first meeting as chair of the Federal Reserve takes place over Tuesday and Wednesday this week and global stockmarkets will be watching to see how he responds to the problem of rising inflation and a strong labour market. This would appear to make a rate cut vanishingly unlikely – and indeed a rate rise a plausible alternative. The smart money, however, is on the Fed keeping rates on hold – and investors will be especially focused on the messaging. Read more from Reuters here
Makerfield by-election
By-elections are seldom worthy of serious scrutiny but the Makerfield poll on 18 June may well shift the political landscape of the UK. If prime ministerial wannabe Andy Burnham wins, he is likely to launch – and win – a leadership contest for the Labour party. Bond markets will be watching closely for any signs of potential slippage from the UK’s fiscal rules. Read more from Politico here
The week in numbers
UK interest rate decision: Consensus expectations are for the Bank of England to hold interest rates at 3.75% at its meeting on Thursday (18 June).
US interest rate decision: Consensus expectations are for the Federal Reserve to hold US interest rates at 3.75% at its meeting on 16 and 17 June.
Japan interest rate decision: Consensus expectations are that the Bank of Japan will raise interest rates by 25 basis points to 1% after its latest meeting concludes on Tuesday.
UK inflation: Consensus expectations are for UK prices to rise 3.1 % over May, year on year, compared with 2.8% in April
UK retail sales: Consensus forecasts have UK retail sales for May falling 0.2% month-on-month.
UK employment data: Consensus expectations are that the UK unemployment rate in April will rise to 5.1% while average earnings (including bonus) will rise by 3.6%, compared with 4.1% the previous month.
US retail sales: Retail sales for the US over May are expected to see a month-on-month rise of 0.6%.
Japan inflation: Consensus expectations are that prices in Japan over May will rise 1.5%, year on year.
China industry: Industrial production in China over May is forecast to rise to 4.7%.
In focus: Brexit: 10 years on
Were the UK minded to do a little soul-searching 10 years on from the Brexit referendum, there can be little argument the outcome has reshaped the country’s financial markets. According to Morningstar data, in the six years since the country formally exited the European Union, UK equity funds have seen annual net outflows of some £120bn, widespread fund closures and a collapse in the UK’s global benchmark weight. The group’s conclusion? The UK is suffering “a structural loss of relevance”.
Capital looking to leave the UK found a new and comfortable home in the US. The growth of the US technology giants – along with the strong performance they have delivered over the last decade – has left few investors regretting their choice to seek out global alternatives to the UK. In the 10 years since Brexit, the FTSE All-Share is up 143%, while the S&P 500 is up 367%.
In its report, The Brexit Decade: How a Vote Reshaped UK Markets, Morningstar notes: “UK allocations were systematically redeployed to the US, while passive strategies gained share as active UK equity economics deteriorated. The result is a market that is under-owned, under-researched and heavily benchmark-driven.”
For his part, Simon Gergel, manager on the Merchants trust, points out the impact for larger UK companies has been relatively limited, adding: “Most listed companies are multi-national businesses – oil companies, mining companies, pharmaceutical companies – that are not really British.”
This is where the country’s success stories of recent years have been found. Rolls-Royce, for example, is up 1,060% over five years, while HSBC has given some of the US’s ‘Magnificent Seven stocks a run for their money, with a rise of 213.6%. Mining group Fresnillo is up 245.9%, while Babcock International and BAE Systems are up 239.8% and 255.4% respectively. There have certainly been buyers for the right UK stocks.
The real pain, meanwhile, has been felt in the smaller-companies arena, where the impact of outflows has been most acute. Active managers in less liquid parts of the market have struggled – the average UK Smaller Companies fund is down 11.3% over the past five years, while the FTSE Small Cap index is up 30%. It is notable that investment trusts, which do not have to manage inflows and outflows, have delivered stronger performance over the period.
With bargain-basement valuations and a weak currency, international corporate and private equity buyers have been like kids in a sweetshop, picking off the UK’s leading businesses.”
The market has duly shrunk. With bargain-basement valuations and a weak currency, international corporate and private equity buyers have been like kids in a sweetshop, picking off the UK’s leading businesses. In June of last year, investment bank Peel Hunt reported 30 bids valued at £100m-plus for the year to date, with an equity value of £25bn. The pipeline of IPOs has meanwhile dried up.
Today, many fund managers see a gap between perception and reality. “We think the UK market is exceptionally cheap – particularly in the midcap area,” says Merchants’ Gergel. Here stocks are trading “miles below” UK largecaps and their international peers, he continues, adding: “It is highly unusual – midcaps tend to trade above the largecaps because they deliver better growth.”
The UK economy is not notably different to the rest of Europe, argues Gergel. “Economic growth has been 1% to 1.5% over the past few years but that is better than in France, Germany or Japan,” he says. “There is no obvious reason why the UK should trade at a discount. And when you look at UK government debt, it is less than France, the US or Japan. Only Germany has significantly less.”
Gergel believes the benefits of the interest rate cuts the UK has seen to date have not yet fed through to the economy, suggesting that while they started to come through at the beginning of the year, they have since been pushed back by what has been going on in Iran.
For his part, Artemis UK Future Leaders manager Mark Niznik says: “The UK negativity is extremely high, but we think the fundamentals are better than is widely believed. On the consumer side of the economy – which accounts for around 60% – the savings ratio is roughly 10% and household debt to income is on 18-year lows.
“While Iran is an undeniable new negative because it could keep inflation higher for longer, and push up interest rates – or defer cuts – our position would be that when confidence recovers, consumer spending should bounce back. The trouble is, it is difficult to predict the timing of that.”
Valuations are like a coiled spring, waiting for confidence to change. The valuation starting point is now so low, the future does not have to be that good – ‘slightly less bad’ would be good enough for some decent returns.”
While outflows have continued, takeovers and buybacks are supporting the UK market and Niznik argues this says something important about its general health: that companies have spare capital to do them while businesses think their shares are cheap – but, most importantly, “they think the outlook is good enough to spend that permanent capital rather than husband it for a rainy day”.
Businesses have strong balance sheets, he says, with the median company in his portfolio holding no net debt at all, while company trading remains relatively resilient. “Politics has been a negative,” he acknowledges but adds: “Uncertainty is unhelpful for business and investor confidence but it is much less important in actuality than people think.”
The real selling point for the UK is still the valuations. At a time when global stockmarkets are expensive, the UK stands out for its value. “We think smallcap valuations have been compressed by the decade since Brexit,” says Niznik. “Valuations are like a coiled spring, waiting for confidence to change. The valuation starting point is now so low, the future does not have to be that good – ‘slightly less bad’ would be good enough for some decent returns.”
While the impact of Brexit worked its way through the system, James Henderson, manager on the Lowland trust, says he has been “hiding in the FTSE 100” in recent years but has now been starting to look for opportunities in medium and smaller companies.
“We are 10 years on from Brexit, we are getting through to the other side and we have a bit of certainty about our trading relationships with Europe and the rest of the world,” he adds. “Investment might be picking up again – results are starting to show that.”
With pension funds having little left to sell, Henderson argues that selling pressure is inevitably easing and he concludes: “When they start to see the performance coming from UK equities, it might even reverse a bit.” This is the key for the UK market: at a time when global financial markets are fragile, the UK’s low valuations leave it with plenty of upside and limited downside. Not a lot needs to go right for the UK stockmarket to do well.
Read more on this from the BBC here, from the FT here and from Morningstar here
In focus: We have lift-off
SpaceX’s IPO and stockmarket debut last Friday went without a hitch. The company raised its $75bn (£55.9bn), securing a valuation of $2tn and seeing its shares rise 19% on the day, while Elon Musk became the world’s first trillionaire, based on his combined stakes in Tesla and SpaceX. Wall Street will be congratulating itself on a job well done. Success was by no means inevitable.
As the Financial Times has observed, it required investors to “believe in a sci-fi strategy, overlook steep losses, stomach an unprecedented valuation and hand total control to a controversial and mercurial founder”. A great deal was vested in the personality of Musk and his retail investor fanbase.
Some of this fandom is justified. Investors will be hoping that Musk can pull off the same trick he did with Tesla, which has delivered a share price rise of more than 31,000% since its IPO in 2010. A £10,000 investment back then would now be worth more than £3m. Belief in Musk has kept the Tesla share price high even though the company has lost ground to Alphabet’s Waymo and Baidu’s Apollo Go on self-driving cars.
SpaceX faces similar competitive pressures – its AI platform Grok, for example, lags behind both Anthropic and ChatGPT. The lofty valuation assumes Musk will be able to deliver on some of his moonshot promises, such as reaching Mars with reusable rockets, putting data-centres into space and harnessing AI effectively.
The New York Times actually runs an ‘Elon Musk goals tracker’ that analyses the 600-plus goals he has set during investor calls over the last 15 years. It shows a hit rate of around 19% and also that his success rate is slowing. Certainly, his goals are ambitious – and hitting even a fraction of these still pushes the barriers of science forward – yet the SpaceX valuation appears to assume a hit rate somewhat higher than one-in-five.
There is also the question of whether SpaceX cannibalises other industries – for example, there is some suggestion the reason Bitcoin is down 26% over the year to date is because traders have diverted their attention elsewhere. It is also worth noting the CNBC Mag 7 index was down last week even as global stockmarkets rose.
For the time being, as the Strait of Hormuz reopens and other IPOs come to market, few will be inclined to examine SpaceX more carefully and will be happy to play its momentum. That said, on current estimates, all the money in the world totals $662tn. That makes a second 31,000% return for Elon Musk look unlikely.
Read more on this from the FT here and from the New York Times here
