Global share markets experienced strong gains over the past week, buoyed by declining oil prices, subsiding inflation fears, and slower US payroll growth, easing pressure for a US interest rate hike. This positive international sentiment propelled Australian shares up approximately 0.9 per cent, with significant advances in health, mining, information technology, and financial sectors, largely offsetting softness in utilities and property shares. In the US, market dynamics showed a healthy rotation from technology into non-tech shares, with the equal-weighted S&P 500 index achieving new highs.
Despite reduced inflation concerns, bond yields unexpectedly rose. Commodity markets were mixed, with metal and iron ore prices falling, while gold and Bitcoin gained. The US dollar’s decline strengthened the Australian dollar, rising above US$0.69. Bitcoin appears to be holding technical support around US$60,000, potentially signalling a more mature market trajectory. Geopolitically, the interim US/Iran peace deal holds, enabling oil prices to recede to pre-conflict levels, though the Strait of Hormuz flow remains constrained amidst ongoing fragility. Domestically, the halving of the fuel tax cut saw average capital city petrol prices rise to around $1.62 per litre, still well below pre-war highs.
Looking ahead, financial markets anticipate reasonable returns from shares over the coming year, albeit with significant volatility driven by persistent inflation, central bank rate adjustments, AI bubble concerns, and geopolitical risks. Mixed messages emerged on global interest rates; the US Fed Chair indicated reduced inflation risks, while the Eurozone saw core inflation fall. In Australia, the RBA noted “somewhat restrictive” financial conditions but also “widespread inflationary pressures,” suggesting a potential August rate hike remains a close call. However, the absence of a recession, solid profit growth, and expected rate cuts by the Fed and RBA next year are factors likely to support overall market performance.
