European and UK Equity Capital Markets Review June 2025

• For much of 2025 European equity indices have strongly outperformed their US peers, and whilst were solid over the course of June, it was US indices that have been the outperformers over the month with both the Nasdaq and S&P500 above their 200 day moving average and making new all time record highs as the month drew to a close. The durability of that outperformance will be tested by the 9th of July deadline for US tariff negotiations. No additional deals aside the UK’s are yet announced although market levels suggest investors are pricing in a further time extension.
  
  
• Year-to-date, European market performance remains ahead of US counterparts with the the FTSE 100 +7.2%, FTSE 250 4.9+%, FTSE AIM +7.3% and Stoxx 600 +6.6%. Meanwhile, as of the 30th June the S&P500 is up +5.2%, S&P500 Equal Weighted +3.5%, and Nasdaq +5.2% but the smaller cap Russell 2000 is still down 2.6% YTD. US performance over June was helped by confidence in the “TACO” trade, some hope that companies will be able to absorb the higher costs from tariffs in their profit margins, and the potential for a more dovish head of the Fed. However, US performance was quite concentrated, largely driven by Mag 7 (ex Tesla) performance.
  
  
• European stocks continue to perform well, benefitting from strong economic data, a strengthening EUR against the USD, and continued inflows to the region as investors seek to diversify away from the US. The interest rate outlook remains supportive in Europe. The ECB cut 25bps in June taking the key Deposit rate to 2% and the BoE is expected to cut UK rates a further 2 times (25bps each) before the year end. The US rate outlook will depend on the impact of tariffs, with the full impact on prices and crucially inflation expectations, as well as activity, not yet clear.
  
  
• Escalating tensions in the Middle East saw a brief spike in volatility on 19 June with the VIX rising to 22.8 but the market reaction was muted relative to more recent turbulence immediately post ‘Liberation Day’. The VIX averaged 18.3 for the month of June and closed the month at 16.3, which should be supportive of Equity Capital Markets activity as we move into H225.
  
  
• The latest BAML survey shows fund managers continuing to be overweight Europe and underweight the US, with less than a quarter of those surveyed expecting the US to dominate returns over the next 5 years. Overall, investor sentiment continues to improve from recent lows, albeit the survey views were taken prior to the surge in geopolitical risk in the Middle East. Recession expectations have fallen significantly, growth expectations have recovered, and inflation expectations have pared back.
  
  
• European ECM activity recovered significantly in June as companies grew more confident in the strengthening markets. Total European ECM volumes picked up from $9.2bn in May to $13.8bn for June 2025 albeit lower than $19.5bn in June 2024, and for the UK, total UK ECM volumes rose from $53m in May to $1.8bn for June 2025 vs $10.2bn in June 2024. However, removing the $9.2bn rights issue for National Grid in June 2024 this gap reduces significantly for Europe and the UK. In H1 2025, Europe lags last year’s figures with $64.5bn raised so far this year vs $74.7bn in 2024 over the comparative period, however, comparing number of deals the differential is far smaller – 169 vs 171 respectively.
  
  
• For the UK, the ABB for Rosebank of £1.14bn demonstrated that the UK markets are open and strongly supportive and willing to back ambitious management teams. The transaction was the largest M&A related ABB on the UK in a decade and in the context of IPOs would rank as the largest in UK markets since 2021. Investec acted as Joint Global Coordinator, Joint Advisor and Nomad on the transaction.
  
  
• H1 2025 has been more turbulent than Economists and Strategists expected at the beginning of the year, with US politics and escalation in the Middle East increasing market volatility. However, equity markets have continued to perform well with investors navigating (relatively short) periods of very high volatility and by the end of the half most indices were firmly in the green. Whilst still well below 10-year averages, and disappointment for Autodoc and Brainlab which postponed IPO plans, European ECM volumes continue to gradually recover with secondary market performances YTD helping to provide support.

• European equity markets continue to outperform their US counterparts YTD, with most markets rallying over the course of June, and investors seemingly moving on from Liberation Day tariff uncertainty as US officials and the US Administration allowed for more time for negotiations with trading partners. US equity markets closed some of the performance gap with their European peers over June despite an escalation of tensions in the Middle East, and commentary from many Fed officials that the impact of tariffs may not be in the data yet. Fiscal stimulus in Europe and relative political stability vs the US continues to see outperformance of Europe YTD.
• Whilst headlines continue to be dominated by President Trump’s policy agenda, volatility has continued to subside since the peak in the days following Liberation Day, with a small tick up on escalating tensions in the Middle East. The VIX moved from 18.6 to 16.3 over the course of the month, with an intraday peak of 22.75 – far below that seen in April following Liberation Day.
• In the UK over June, the FTSE 250 outperformed its larger cap counterpart finishing the month up 2.8%, vs the FTSE 100 which finished flat -0.1%, partly due to the FTSE’s larger exposure to the dollar and US earnings. The blue chip index remains ahead YTD. For the month of June, the FTSE was little changed at -0.1%, FTSE 250 up 2.8%, Stoxx600 down -1.3%, S&P 500 up 4.6%, Nasdaq up 6.3% and Russell 2000 up 5.1%. US performance was driven by the Magnificent 7, evidenced by the outperformance of the S&P500 vs its equal weighted counterpart, up 4.6% and 2.9% respectively.

• The recent rally in the US has seen equity valuations recover, widening the gap with Europe. The headline valuation differential between US and UK / EU equity markets remains significant, however after adjusting for growth (and sector skew therefore...) that differential significantly reduces.
• Following the fallout from ‘Liberation Day’, global investors’ views and exposure to the US continue to evolve, with some reducing overall exposure to US equities. However, given US index performance over June some investors clearly returned to a ‘buy the dip’ mentality – we note that in the recent BAML survey, May’s trends continued with a net 36% of investors underweight the US.
• The solid performance of the FTSE over 2025 has started to close the valuation gap to US markets, but there is still a long way to go particularly for the FTSE250. Despite this improvement, as at the end of June, the FTSE All-Share still sits at a 42.6% discount to the S&P, and a 24.5% discount on an equal weighted basis (at a headline level).

• UK inflation for May fell to 3.4% y/y from 3.5% in April in line with consensus estimates. Service sector inflation fully unwound its April jump, falling back to 4.7%. Core fell to 3.5% from 3.8%, in line with consensus. The ONS flagged an error in the April data, which had overstated the impact of the rise in vehicle excise duty, leading to an overestimate in the headline and core inflation.
• Eurozone CPI data fell more than expected in May to 1.9% from 2.2% (consensus 2.0%). In the US, CPI rose to 2.4% y/y in May from 2.3% in April, due to base effects, and was below consensus for 2.5%.
• Following benign inflation data (so far) and dovish comments by some FOMC members, markets have reassessed the rate outlook within the US now looking for 2-3 rate cuts by the end of 2025. Following cuts by both the ECB in June and BoE in May, the market is currently pricing in one more rate cut in the Eurozone and two additional cuts in the UK. Fears remain of a US slowdown and weaker activity due to tariffs, balanced in the case of the US by concerns about potentially higher price pressures.

• Tariffs have increased uncertainty globally, although investors have pared back from their peak bearish views in April. The latest BAML survey showed 46% of investors were bracing for a global slowdown, improved from 82% in April, and 13% expected global CPI to be higher in 12 months’ time, down 30ppt from April. It is evident that investors remain unclear on the outlook given the wide range of possible outcomes.
• However, it is evident European equities have continued to be net beneficiaries of improving fundamentals and a growing view amongst investors that US exceptionalism has peaked. German fiscal stimulus and budgetary reform continue to be viewed as a core catalyst for an improving growth outlook for the European economy. The latest BAML fund manager survey indicates that a net 34% of global investors are overweight European equities, and a net 36% underweight US equities.
• Whilst the UK continues to be viewed favourably, particularly given the country’s exposure to the banking, insurance and utilities sector – the sectors most overweight by investors – the recent weak GDP figures highlight the challenge for the UK Government as it strives to stimulate growth whilst operating close to the limits of its fiscal rules.

IPO issuance in Europe

• US$603m raised from eight IPOs in June 2025 across Europe, with an average deal size of US$75m. There were four IPOs greater than US$50m
• The June IPOs greater than $50m were Polish apparel manufacturer Arlen ($54m), Norwegian construction group Sentia ($117m), Swedish mortgage provider Entity Holding ($130m) and Swedish iGaming technology firm Hacksaw ($258m)
• There were four IPOs over US$1bn in 2024, with Asker Healthcare the largest IPO of 2025 at US$886m, surpassing HBX Group’s IPO of US$772m
• Recent volatility has pushed a number of potential IPO launches from H125 into H225
• In the UK IPO volumes are expected to be second half weighted; the two UK IPOs that have priced so far in 2025 have both traded well in the aftermarket, with MHA up 27.5% from issue price. We continue to think that the FCA Listing Rule reforms will be helpful tailwinds for UK IPOs
• Changes to the FTSE UK Index Series will heighten the attraction of a UK listing, allowing non-sterling denominated securities index inclusion, and a faster entry threshold for larger companies (market capitalisation greater than £1bn and market position greater than 225th)

^{Source: Dealogic. Analysis and commentary only includes transactions greater or equal to $US50m. References to European ECM include the UK and exclude Middle East and Africa. Includes Investment Funds. Charts show year-to-date activity levels. Note: Last rate rise occurred in 3Q23, the market narrative for rate cuts beginning in 4Q23, rate cuts only began in 3Q24.}

Selected Deals

^{Source: Company announcements; FactSet; Practical Law
Note: Scorecard includes competing offers and withdrawn of companies subject to the Takeover Code quoted on AIM or the Main Market. Formal sales processes are not included unless a buyer has been identified. Only newly announced offers in the month are included in the count (i.e. possible offers announced in December 2025 will be included in that month even if it becomes a firm offer in January 2025)}