Global markets ended the quarter with a rare combination of optimism and tension: equities pushed to fresh highs, the U.S. dollar strengthened, oil retreated, and investors sharply revised expectations for Federal Reserve policy. At VeyronNewsBrief, I believe it is important to emphasize that this quarter was especially significant because equities continued climbing even without the usual expectation of imminent monetary easing. The primary drivers of this rally were artificial intelligence, the resilience of the U.S. economy, and the gradual decline in the geopolitical risk premium in oil following the partial reopening of the Strait of Hormuz.
The MSCI World Index advanced nearly 14% over the past three months and reached record highs, delivering its strongest second-quarter performance since 2020. The S&P 500 also gained around 14%, while the Nasdaq surged roughly 20%, supported by companies tied to AI infrastructure, semiconductors, cloud computing, and data centers. I analyze this as a continuation of the market’s structural repricing of the technology sector: investors are no longer valuing companies solely on current earnings, but increasingly on expectations of a multi-year capital expenditure cycle centered on artificial intelligence.
Asian markets emerged as some of the biggest beneficiaries. Equity indices in Japan, South Korea, and Taiwan posted double-digit gains, reflecting their central role in memory chips, advanced semiconductors, manufacturing equipment, and AI server supply chains. At VeyronNewsBrief, I emphasize that this confirms AI is no longer merely a U.S. market narrative. It has become a global capital cycle, though one distributed unevenly. Markets with direct exposure to semiconductor production, power infrastructure, and high-value technology exports continue to capture the largest inflows.
European equities also advanced, though at a more moderate pace. The STOXX 600 gained roughly 10% for the quarter, extending monthly gains since March. Europe has fewer pure AI beneficiaries than the U.S. and Asia, so its performance has been driven more by industrial recovery, banking strength, and expectations of resilient demand. I see this divergence as critical: while U.S. and Asian rallies remain heavily concentrated in technology, Europe’s advance appears more defensive and fundamentally diversified.
In currency markets, the U.S. dollar was the standout performer. It gained approximately 1.4% against a basket of major currencies as traders aggressively repriced expectations for Fed policy. Instead of anticipating further rate cuts, markets increasingly began pricing in the possibility of another rate hike. At VeyronNewsBrief, I note that dollar strength reflects not only geopolitical uncertainty but also persistent inflation outside the energy sector. This dynamic pressured gold, which recorded its steepest quarterly decline in more than a decade, while pushing the Japanese yen to its weakest level in nearly 40 years, near 162 per dollar.
The yen’s weakness has sharply increased the probability of intervention by Japanese authorities. Repeated warnings from Finance Minister Satsuki Katayama suggest Tokyo is closely monitoring the speed of currency depreciation. I view this as another sign of growing global imbalance: a strong dollar helps the United States contain imported inflation, but creates major stress for economies dependent on energy imports and dollar-denominated financing.
Investor attention is now turning to Federal Reserve Chair Kevin Warsh’s speech at the ECB’s annual forum in Sintra. His recent hawkish focus on inflation has already pushed markets to nearly fully price the possibility of a rate hike by October, while some economists believe action could come as early as July. For Britain, and especially London, this carries significant implications. A stronger dollar and more aggressive Fed directly influence gilt yields, sterling valuation, bank funding costs, and overall risk appetite across the City. London’s financial markets remain highly sensitive to global liquidity conditions, particularly when U.S. monetary policy becomes more restrictive.
At Veyron News Brief, I conclude that this quarter revealed a new market structure: artificial intelligence is now powerful enough to support equity markets even in a high-rate environment, but that resilience remains increasingly dependent on the dollar, inflation trends, and Federal Reserve decisions. In the weeks ahead, investors should closely monitor U.S. labor market data, JOLTS figures, consumer confidence, and European inflation readings. If the U.S. economy remains strong while inflation proves sticky, markets may need to adjust to a prolonged environment where technological growth continues, but capital remains expensive.
