A global markets summary, for
Australian investors

The RBA interest rate hike to 4.1% this week signalled a clear tightening bias, compounded by a stronger-than-expected labour market and escalating Iran tensions adding further pressure to energy markets and risk sentiment.

Five key developments:

1. RBA raises interest rates to 4.1% with further rate rises to come

The RBA delivered another rate hike and signalled a clear tightening bias, reinforcing its commitment to controlling inflation despite rising growth risks. Forward guidance suggests policy will remain restrictive for longer, with further hikes possible if inflation persists, keeping financial conditions tight as the outlook shifts toward slower but controlled economic activity.

2. US Core input prices rise 0.5% vs 0.3% expected

US input prices surprised to the upside, indicating ongoing cost pressures within the production pipeline. Elevated input costs risk feeding into broader inflation, complicating the disinflation narrative and reducing the scope for near-term easing, leaving policymakers cautious as the outlook for inflation remains sticky.

3. US Federal Reserve keeps interest rates at 3.75%

The Fed held rates steady, reinforcing a wait-and-see approach as inflation moderates but remains above target. Policymakers emphasised data dependency, signalling no urgency to ease while economic activity remains resilient, supporting a higher-for-longer stance as the outlook stays balanced between growth and inflation risks.

4. Australian labour market strengthens by adding 48.9K jobs

Australia’s labour market surprised to the upside, with strong job creation highlighting ongoing economic resilience. Robust employment supports household income and consumption but risks prolonging inflation pressures, reinforcing the RBA’s tightening bias as the outlook points to sustained labour market strength.

5. Trump puts further pressure on Iran with a 48 hour deadline

The escalation in geopolitical tensions added significant uncertainty to global markets, particularly around energy supply risks. A firm US stance increases the likelihood of further conflict or disruption, supporting commodity volatility and safe-haven demand while weighing on broader risk sentiment as the outlook becomes increasingly geopolitically driven.

Australian Focus

The RBA interest rate hike to 4.1% dominated the domestic picture this week, compounded by a stronger-than-expected labour market adding 48.9K jobs that gives the board little reason to pause while inflation remains the priority.

For Australian investors, the RBA interest rate hike combined with escalating Iran tensions keeping energy prices elevated creates a challenging environment for rate-sensitive sectors. Resources and energy retain their tactical appeal, while mortgage-exposed financials and consumer discretionary face headwinds as household borrowing costs rise further.

Futures Market Performance

Markets were dominated by a sharp energy-led rally and risk-off rotation. Heating Oil (+20.65%), Brent (+12.40%) and RBOB Gasoline (+10.87%) surged on escalating Middle East tensions and supply risk, while VIX (+11.10%) spiked, reflecting rising volatility. Agricultural markets were broadly stronger, with Sugar (+9.26%) and Coffee (+8.63%) gaining, while equity indices sold off, with the S&P 500 (-3.22%), Nasdaq (-3.58%) and DAX (-6.16%) under pressure as geopolitical risk drove defensive positioning.

ASX Weekly Heatmap

The ASX saw broad-based weakness driven by heavy losses across banks and large-cap miners. BHP (-11.91%) and RIO (-12.87%) led declines alongside NEM (-25.72%), while financials were sharply lower with NAB (-6.66%), ANZ (-9.47%) and MQG (-11.69%) dragging the index. Defensive and energy-linked names outperformed, including WDS (+27.16%) and STO (+14.93%), highlighting a clear rotation toward energy exposure amid rising geopolitical and commodity risk.

If any of this week’s developments raise questions about your portfolio, please get in touch.