Monthly Market Commentary
As at 30 June 2026
Economic review
Australia
Pause in the tightening cycle; RBA held cash rate at 4.35%
The RBA held the cash rate at 4.35%, in line with expectations, marking the first pause in the tightening cycle that began in February 2026. After a cumulative 0.75% of hikes across the past three meetings (returning the cash rate to its 2022–23 peak), the RBA noted that financial conditions have tightened and the AUD has strengthened. It also pointed to falling house prices, suggesting the housing market is slowing and momentum has shifted.
Economic growth softened in Q1 2026, with GDP rising 0.3% QoQ and 2.5% YoY, slightly below market expectations (0.4% QoQ) and slightly below the RBA’s latest forecasts. Growth was weighed down by the expiry of the energy subsidy and weather-related disruptions. Business investment remained strong, led by data centre construction.
The Australian unemployment rate in May fell slightly from 4.5% to 4.4%, with an additional 40,300 jobs created.
Australia’s May CPI report showed headline inflation at 4.0% YoY, below market expectations of 4.3%. Monthly CPI fell -0.7% MoM, a larger decline than the -0.4% expected, driven by lower energy prices.
International
Strait of Hormuz reopens and oil tankers begin to transit
The US and Iran have agreed to end months of fighting and reopen the Strait of Hormuz. The US Energy Secretary noted oil flows have returned to roughly pre-conflict levels. Oil prices have fallen to around US$75 following this news.
The ECB increased interest rates by 0.25%, taking the deposit rate to 2.25%. This was the ECB’s first rate hike in three years. The BoJ increased rates by 0.25% to 1.0%, and both the Fed and the BoE held rates steady in June. The Fed meeting was the first with Kevin Warsh as the Fed chair.
US labour market data remained strong for the third consecutive month, with unemployment steady at 4.3%. Non-farm payrolls increased by 172,000.
In China, the manufacturing PMI (RatingDog) eased to 51.8, suggesting slower manufacturing momentum; while input costs stayed high, as firms cited higher raw material and energy prices linked to disruptions in the Middle East. By contrast, the services PMI rose to 54.4, supported by modest gains in employment and new business.
Market Review
Australian shares rose, with consumer staples leading the gains
Australian shares rose 0.6% in June, outperforming international shares due to lower technology exposure which insulated it from the global technology underperformance.
The consumer staples sector was the strongest performer, up 12.6%, as investors moved into more defensive sectors; followed by the healthcare sector, as the sector bounced back from the past 10 months of underperformance.
The energy sector posted the largest decline, down -9%, after news that the US and Iran reached an agreement to end the conflict, which drove energy prices lower.
International shares were flat overall, but sector returns were volatile
International shares (hedged) were flat in June, but this masked significant dispersion across sectors.
Healthcare was the best performing sector, up 5.7%; followed by the financials, up 4.7%. The largest detractor was telecommunications, down -7.7%, likely impacted by the SpaceX IPO.
Emerging market shares (unhedged) rose 2.4% over the month, while Emerging market shares (hedged) declined. The divergence reflects falling emerging market currencies, which lifted unhedged returns into positive territory.
Australian fixed interest markets saw strong returns
Australian government bonds continued to see strong returns in June, up 0.9%, as yields continued to fall over the month.
Australia’s 10-year sovereign bond yields fell 11bps, as the RBA paused its interest rate tightening, following weaker economic data and the fall in confidence post the Federal Budget.
International credit spreads edged slightly wider, broadly in line with the weakness seen in international share markets.
Australian Dollar weakened after the RBA paused its rate hiking cycle
The AUD fell -3.7% against the US Dollar (USD) in June, as the Fed left interest rates unchanged, likely ending their cutting cycle. The RBA also paused, suggesting it is nearing the end of its hiking cycle.
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