Tariff Uncertainty and Geopolitical Tensions Raised Volatility in the Market

In the week gone by, global equity markets exhibited volatility, with major indices responding to a combination of ongoing tariff uncertainty and geopolitical tensions in the Middle East and economic data releases. In this blog, we’ll know in detail what happened last week (June 16, 2025 to June 20, 2025) all across the globe.

Fed Rates Remain Unchanged

In the United States, the major indices showed resilience despite ongoing concerns about inflation and monetary policy direction. The Federal Reserve’s cautious stance on interest rate adjustments continued to influence market sentiment, with investors closely monitoring employment data and consumer spending patterns.

In its June meeting, the Fed kept the interest rate unchanged and highlighted the risk of higher inflation in the coming months due to tariffs. However, it continued to maintain the forecast of two rates this year.

Middle Ease Tension Rises

In the Middle East, tensions persisted, with no de-escalation in sight as Iran responded to Israeli airstrikes and rejected unconditional surrender. European markets experienced volatility, reacting to global uncertainty and encouraging economic indicators.

The eurozone’s inflation trajectory showed signs of moderation, with annual inflation falling to 1.9% in May, below the ECB’s 2% target. However, the European Central Bank signaled a pause in rate cuts despite bearish growth forecasts, contributing to market caution. German manufacturing data exceeded expectations, while French consumer confidence improved marginally.

Bank of England’s Interest Rate Scenario

The UK markets faced a more complex environment, with the FTSE indices showing mixed performance amid ongoing concerns about domestic economic growth and the Bank of England’s policy direction.

The Bank of England kept the interest rate unchanged at 4.25% as global uncertainty remains elevated and energy prices have risen owing to an escalation of the conflict in the Middle East.

Asian Markets Saw Headwinds

In Asia, Japanese markets benefited from a weaker yen, which supported export-oriented companies, particularly in the automotive and electronics sectors. Meanwhile, core CPI in Japan rose to 3.3% in May, pointing to broadening inflationary pressures and giving the BoJ more impetus to hike interest rates in the coming months.

Chinese markets faced headwinds from mixed economic data, with property sector concerns and regulatory uncertainties weighing on investor sentiment. However, government stimulus measures and improving manufacturing PMI data provided some support to key sectors.

The People’s Bank of China’s monetary policy remained accommodative, with targeted support for key industries helping to stabilize market conditions.

India’s CPI Inflation Dipped

Back at home, the Indian stock market concluded the week with modest gains, supported by favorable domestic macroeconomic fundamentals. A significant catalyst for this positive performance was the decline in global crude oil prices, with Brent crude retreating toward $77 per barrel amid signs of potential de-escalation in the Israel-Iran conflict.

This development provided substantial relief to India’s inflation outlook and current account balance, given the country’s significant dependence on oil imports. May’s Consumer Price Index inflation moderated to 2.82%, positioning comfortably within the Reserve Bank of India’s target range and strengthening market expectations of a continued accommodative monetary policy by the RBI.

Conclusion

In its June meeting RBI had cut the repo rate and CRR but had shifted its stance from accommodative to neutral. Easing inflation trajectory, combined with robust Goods and Services Tax collections and improving industrial production metrics, painted a picture of an economy successfully balancing growth momentum with price stability.

So, open Demat account with SMC Global Securities and invest as per your investment objective and risk profile.

Reference:
SMC Global Securities’ Research Team

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