Global equities pushed on in the second quarter, rising by 5.7% in euro terms to bring the year-to-date return to +11.8%, an impressive result given three bank failures in the US (the second and third largest bank failures ever), the failure of Credit Suisse, a protracted debate over the US debt ceiling, a disappointing reopening in China, and continued hawkishness from western central banks.  While the debt ceiling issue turned out to be little more than political theatre in Washington, the ending of student loan relief and various other measures agreed to will, at the margin, create something of a headwind for consumers.

Economic data has been mixed.  In the euro area, the weakness in “soft” data such as Purchasing Managers Indices has been backed up by the “hard” data, euro are GDP having seen two consecutive quarters of contraction.  Inflation has started to fall, but only slightly, and ECB officials are growing concerned that higher wage settlements of late are indicative of embedded or “sticky” inflation, leading to concerns that the ECB will simply be forced to continue to tighten policy despite a weakening economy.