Stocks end quarter with big gains as oil tumbles the most in years; gold, yen also fall

Written by: Rodrigo Campos and Amanda Cooper

NEW YORK/LONDON, June 30 (Reuters) – Stocks around the world posted their biggest quarterly gain in six years on Tuesday, while Brent oil suffered its biggest quarterly decline since 2020 as traders monitored the fragile ceasefire between the United States and Iran.

On the last day of the second quarter, the US dollar rose for the fourth consecutive quarter against many currencies, while the yen fell to its lowest level in 40 years as expectations for a US interest rate hike changed significantly. Emerging market currencies as a bloc gained more than 1% against the dollar during the quarter.

In energy markets, the Strait of Hormuz has gradually and haphazardly reopened as hostilities between the US and Iran have deteriorated into a fragile truce, sending the Brent oil price down almost 40% in the past three months.

A seemingly unstoppable rise in AI stocks allowed stocks to continue their rise throughout the quarter; South Korea’s KOSPI rose 68% and Taiwan’s benchmark index rose 45%. The Nasdaq Composite is up more than 21%. The MSCI All-World index rose 14.5% in the quarter and hit a record high earlier this month, its best quarterly performance since 2020. Emerging market stocks increased by 23% during this period.

Europe’s STOXX 600 index, which does not have as many AI beneficiaries as Asian or US indices, ended the quarter with a 10% gain.

“Despite all the geopolitical issues, the U.S. economy is performing well and corporate earnings are strong,” said Oliver Pursche, senior vice president and advisor at Wealthspire Advisors in Westport, Connecticut. “”We’ve had a great first half of the year, certainly better than most expected.”

During the day, the Dow Jones Industrial Average rose 136.46 points, or 0.26%, to 52,319.20 points, reaching a record closing high. The S&P 500 index increased by 58.93 points or 0.79% to 7,499.36 points, and the Nasdaq Composite increased by 393.58 points or 1.52% to 26,213.72 points.

MSCI’s gauge of worldwide stocks rose 8.32 points, or 0.75%, to 1,120.37. The pan-European STOXX 600 index rose 0.88%, while Europe’s broader FTSEurofirst 300 index rose 23.73 points, or 0.93%. While developing country stock markets increased by 16.86 points or 0.99% to 1,723.79 points, Japan’s Nikkei index increased by 594.21 points or 0.86% to 70,062.32 points.

DOLLAR UP

The dollar was this quarter’s standout winner among advanced currencies, gaining 1.3% against its peers. However, emerging market currencies also strengthened by 1.3% against the dollar this quarter.

The dollar found support as markets increasingly priced in the possibility of a Fed rate hike. U.S. inflation remains well above target, the economy continues to grow, and the Fed’s latest quarterly forecasts show nine out of 19 policymakers expect a rate hike by the end of the year.

“The dollar has strengthened further since the (Fed) meeting, supported by the widening growth gaps we are starting to see between the U.S. and other major economies, fueled by higher oil prices,” said James Lord, head of EM strategy at Morgan Stanley FX.

“The latest economic data point to a stronger performance by the US, especially against the eurozone, where growth indicators are relatively softer.”

The world’s most influential central bankers are in the Portuguese town of Sintra this week for the European Central Bank’s annual meeting, and no one will be more in the spotlight than new Federal Reserve Governor Kevin Warsh, who is scheduled to address the meeting on Wednesday.

The dollar’s rise partly led to gold falling 14% quarterly, its biggest drop since 2013, while the yen fell to its weakest point in 40 years, trading around 162.57 per dollar late Tuesday. Traders were nervous about a possible Japanese intervention after Finance Minister Satsuki Katayama issued another warning.

Karl Schamotta, chief market strategist at Corpay, said Katayama’s comments “avoided the verbal tension that often precedes a buying effort, instead reiterating that officials are ready to respond at any time.”

August Brent crude oil futures settled at $72.92 per barrel, down 0.3% on the day. The contract posted its third consecutive monthly decline, falling more than 20% in June and more than 38% in the quarter. US crude oil is down 31% this quarter, but both Brent and WTI are up almost 20% year-to-date.

“I wouldn’t say the market is pricing in a risk premium, but with the increase in ships coming out of the Gulf, previously stranded ships have become available, creating a temporary wave of new supply,” said UBS analyst Giovanni Staunovo.

Morgan Stanley said they are currently modeling an implied global oil market surplus of 4.8 million barrels per day in 2027.

(Reporting by Rodrigo Campos in New York and Amanda Cooper in London; Additional reporting by Karen Brettell, Alun John, Anushree Mukherjee, Caroline Valetkevitch, Niket ​Nishant, Dhara Ranasinghe and Tom Westbrook; Editing by Alexander Smith, Matthew Lewis, Nick Zieminski and Cynthia Osterman)