The Monthly Review
Signals rarely shout. Noise usually does. A read on the month beneath the headlines: the conversation we have been having internally.
Policy tightens into a shock that is already breaking
The central-bank cluster we were watching for landed in mid-June. So did the reversal of the energy shock it was written for.
The tight run of central-bank decisions flagged in May’s edition duly arrived. The ECB raised its three key rates by 25 basis points on 11 June, its first hike since 2023. The Bank of Japan followed on 16 June with a 25 basis point rise to 1.00%, its highest level since 1995. The Federal Reserve held at 3.50%–3.75% on 17 June, unanimously, in new chair Kevin Warsh’s first meeting, but its updated dot plot pushed the median 2026 rate projection up to 3.8% from 3.4% in March, a clearly hawkish signal. The Bank of England held at 3.75% on 18 June, though the hawkish dissent doubled from one member in April to two. The South African Reserve Bank does not meet again until 23 July, so May’s 7.00% repo rate stood unchanged through June.
The complication is timing. Just as this cluster delivered, the shock it was responding to began to unwind. US-Iran talks produced a framework agreement on 15 June to reopen the Strait of Hormuz, and Brent crude, which had held in the low-to-mid $90s through the first half of June, fell sharply on the news and kept falling, ending the month near $73, back to levels last seen before the conflict began in late February. Inflation prints for May, released in June, still carried the shock: US headline CPI rose to 4.2% (from 3.8% in April) and South African headline CPI rose to 4.5% (from 4.0%), both the highest readings in roughly three years. The question we carry into July is whether central banks that tightened into a fading shock now find themselves easing that stance, or whether the fragile truce (clashes flared again near the strait in the final days of June) reopens the same argument.
A month split along technology lines
Measured in local currency, June divided sharply between markets with heavy technology weightings and those without. The Nikkei 225 led with a 5.7% gain (even after the BoJ’s rate hike), followed by the Swiss Market (+4.8%) and the EURO STOXX 50 (+4.7%). The FTSE 100 added a more modest 1.0%, and the MSCI ACWI was roughly flat (−0.8%). The NASDAQ (−2.7%), S&P 500 (−1.0%), JSE All Share (−3.7%) and Hang Seng (−8.5%) all fell, with Hang Seng posting its weakest month of the year as a global selloff in AI-linked stocks hit technology-heavy benchmarks hardest. The year-to-date table still shows the Nikkei clearly ahead at 36.3%, while the Hang Seng remains the sole index in negative territory year-to-date (−9.2%). Over a full year the Nikkei’s 76.0% gain in yen dwarfs the NASDAQ’s 29.5% and the Hang Seng’s marginal decline of 2.1%.
Total return in local currency (each index in its own currency). Returns are reported in local currency, which strips out currency-translation effects but breaks direct comparability with older USD figures. Source: Bloomberg, as at 30 June 2026.
The shock breaks beneath the hikes
Brent crude’s path through June is the clearest illustration of the timing problem central banks now face. Having eased to around $92 by end-May, Brent held in the low-to-mid $90s through the first half of June before falling steadily from 15 June, when a US-Iran framework agreement to reopen the Strait of Hormuz reversed the risk premium built up since the conflict began. Brent fell to around $72 by 26 June and ended the month near $73, back to levels last seen before the conflict began in late February. Yet the ECB and BoJ hikes, and the Fed and BoE’s hawkish holds, were all delivered either just before or in the same week as that reversal crystallised. The truce remains fragile: renewed exchanges near the strait were reported in the final days of June, and Iran has continued to assert a right to oversee transit through the waterway.
Weekly closes, USD per barrel. Source: Bloomberg.
The AI-sentiment reversal that May flagged
Last month’s edition flagged that narrow, AI-led leadership left US indices more exposed to a reversal in sentiment. That reversal arrived in the back half of June. A report that OpenAI was leaning toward delaying its IPO to 2027 rattled AI-linked names globally, compounding pressure from a Federal Reserve that markets now read as more likely to hike than cut. The selloff hit hardest where technology weightings are heaviest: the Hang Seng fell 9.1% for the month, its weakest since the index’s China Enterprises gauge briefly approached a bear market mid-month, while the NASDAQ (−2.7%) and S&P 500 (−1.0%) also gave back ground. By contrast, the EURO STOXX 50, Swiss Market and Nikkei 225, none of which carry the same AI-related concentration, held onto gains through month-end. The dispersion is a reminder that this looks like a sector-specific correction within an otherwise resilient market, not a broad-based pullback across equities, at least so far.
Signals beneath the noise
Signals rarely shout. Noise usually does.
The Long End
The long end told the story of the shock unwinding even as the front end priced in a more hawkish Fed. The 30-year Treasury yield eased to around 4.95% by 30 June, well down from May’s spike near 5.2%, as the retreat in oil pulled the inflation and term-premium argument back out of long bonds. At the same time, the 2-year yield rose to around 4.17% by month-end as markets absorbed the Fed’s hawkish dot plot and a run of commentary from officials, including Minneapolis Fed president Neel Kashkari, floating a possible hike by year-end. The result was a flattening move: long-end relief on a fading energy shock, short-end tightening on a Fed that has stopped talking about cuts.
Credit
Listed credit barely moved. US CDS narrowed marginally from 73.2 to around 72.5 and European CDS from 55.3 to around 54.4, both close to the lows reached earlier in the year and showing none of the stress that characterised the March widening. With the energy shock reversing and equity volatility concentrated in AI-linked names rather than credit markets, public credit spreads look, for now, like the calmest signal on the page.
Source: Bloomberg. European Credit Default Swaps (CDS) represented by the SNRFIN CDSI GEN 5Y Corp. US CDS represented by CDX IG FIN CDSI GEN 5Y Corp.
Volatility
Volatility rose sharply where the AI selloff bit hardest and fell where it did not. 30-day volatility for the S&P 500 jumped from 10.2 to 17.7 and for the NASDAQ from 15.0 to 28.2, while the Nikkei 225, despite its strong monthly gain, saw 30-day volatility nearly double, from 27.1 to 39.4, making it the most volatile index we track on both a 30- and 90-day basis. Hang Seng 30-day volatility rose from 15.3 to 20.3, consistent with its tech-led decline. By contrast, volatility eased across Europe, Switzerland and South Africa: the FTSE 100 (10.1 from 14.6), EURO STOXX 50 (13.8 from 18.7), Swiss Market (9.0 from 13.2) and JSE All Share (19.5 from 20.6) all saw 30-day readings fall. The split lines up closely with the return dispersion in Section 02: where technology and AI exposure is concentrated, both returns and volatility moved together this month.
Hover any point to see its May position and move into June. Source: Bloomberg, end-May and end-June 2026.
The questions we are sitting with into July
Whether the truce holds
Renewed clashes near the Strait of Hormuz in late June show the 15 June agreement has not fully settled the underlying conflict. A breakdown would reverse the fall in Brent, and with it, much of the reasoning behind July’s policy decisions.
The Fed’s dot plot versus its actions
The June statement was unanimous, but the dot plot’s shift to a 3.8% median points toward a possible hike. The next FOMC meeting, 28-29 July, will show whether the hawkish signal becomes an actual move.
The SARB’s next test
South Africa’s May CPI print of 4.5% is the highest since July 2024. Speaking on Bloomberg Television on 1 July, Governor Kganyago said inflation expectations have risen above the SARB’s 3% target and signalled further tightening may be needed when the MPC meets on 23 July, though he declined to confirm the size or timing of any move.
Does the AI selloff deepen or stabilise
The correction has so far been concentrated in AI-linked and technology-heavy names rather than broadening into a market-wide decline. Whether that containment holds is the clearest near-term read on risk appetite.
Q2 earnings, and AI capital spending
The July reporting season, led by banks and then by the major technology names, will be the first hard data point on whether AI-related capital spending is holding up in the face of the June selloff, or whether guidance starts to soften.
Curiosity is a surprisingly effective risk management tool.