Monthly Market Commentary
As at 30 June 2025
Economic Overview
Australia
Economic growth remains weak
Australian economic growth remains subdued, with Q1’25 GDP holding steady at 1.3%, a result which was weaker than expected and below its longer-term trend. While the impact of Cyclone Alfred was expected to impact growth this quarter, household spending has also continued to remain weak.
Australian CPI dropped to 2.1% in May, from 2.4% in April and was below the market expectation of 2.3%. With inflation near the lower end of the RBA’s 2-3% target band, the chance of a July interest rate cut of 0.25% has increased.
The Australian S&P Global Purchasing Managers’ Index (PMIs) for June continued to indicate a slowdown in economic growth. The manufacturing PMI held steady at 51.0, while the services PMI rose slightly to 51.3, from 50.6. New export orders declined due to weaker foreign demand.
The Australian labour market remains resilient, with May unemployment remaining at 4.1%. Full-time jobs increased while part-time jobs declined, and the participation rate also fell.
International
Israel and US launch military strikes against Iran
Geopolitical tensions in the Middle East escalated in June, with Israel and the US launching military strikes on Iran’s nuclear and missile sites following failed negotiations over Iran’s nuclear program. A ceasefire was announced by the US in late June, which currently remains active.
Last month, the Court of International Trade blocked Trump’s tariffs. However, the US Court of Appeals put that decision on hold while the case is appealed, so the tariffs are still in effect for now.
The Fed left interest rates unchanged at 4.25-4.5%, while lowering the GDP growth forecast to 1.4% and the inflation forecast to 3.1%. The ECB cut rates for the eighth time, lowering the deposit rate by 25bps to 2%, in line with expectations.
In the UK, wage growth slowed considerably to 5.3% and unemployment climbed to the highest level in four years, during the three months to April. The unemployment rate rose to 4.6%, as job vacancies fell below their pre-Covid average.
Market Review
Another strong month for International shares
Despite geopolitical tensions, International shares (hedged) rose by 3.8% in June. Emerging market shares (unhedged) posted solid gains, up 4.1%, outperforming International shares, as the Korean share market notably outperformed other emerging markets. Australian shares were up 1.4% in June, with most sectors posting gains.
Fixed interest markets performed well
International government bonds rose 0.7% in June, as most international government bond yields fell over the month.
International credit also gained, up 1.3% in June, assisted by falling bond yields and credit spreads narrowing.
US Dollar recorded its worst half-year performance since 1991
The USD recorded its worst half-year performance since 1991, falling a further - 2.5% (vs trade weighted currencies) in June. All other major currencies strengthened against the USD over the month.
Oil prices rose in June
Crude oil prices jumped 23.4% to US$79 a barrel after military strikes on Iran, but dropped back to about US$67 following a ceasefire, ending the month up just 5.8%.
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