Monthly Market Commentary
As at 28 February 2026
Economic review
Australia
RBA increased the cash rate for the first time since 2023
The RBA voted unanimously to increase the cash rate by 0.25% to 3.85%. This is the RBA’s first hike since 2023 and comes just six months after its most recent rate cut. The RBA noted that inflationary pressures picked up materially in the second half of 2025. Markets are pricing in another 0.25% hike in 2026, which appears likely given the RBA expects inflation to peak at 4.2% by mid-year before easing back to its target of 2-3% in 2027.
The Australian ANZ-Indeed Job Ads series posted its strongest gain in four years, rising 4.4% in January. The rise was broad-based across states. This data suggests the Australian labour market will likely remain robust in early 2026.
Recent labour market data reinforced this picture, with employment up by 17,800 in January, driven by strong growth in full-time roles. The unemployment rate held at 4.1%, defying expectations for an uptick to 4.2%. Overall, this data is unlikely to alter the current expected path for interest rates.
International
Military strikes on Iran pose risk to oil supplies
On 28 February, the United States and Israel launched military strikes on Iran, resulting in the death of Iranian Leader, Ayatollah Ali Khamenei. While these events are geopolitically significant, financial markets will focus on whether oil supplies are disrupted; particularly if shipments through the Strait of Hormuz – which carries around 20% of global seaborne oil – face prolonged disruption.
The US Supreme Court ruled that the US reciprocal tariffs were illegal under the International Emergency Economic Powers Act. President Trump, however, kept tariffs in place and immediately raised the base rate from 10% to 15%, with the Administration planning to use alternative legal mechanisms.
Key Central Banks left interest rates unchanged: the BoE at 3.75%, the ECB at 2.0%, and the RBNZ at 2.25%.
US real GDP figures for Q4 2025 came in below expectations at 1.4%, largely reflecting the prolonged government shutdown.
Market Review
Strong month for Australian shares, outperforming international markets
Australian shares rose by 3.9% in February, outperforming international markets, with 7 of 11 sectors advancing. The financials sector was the strongest performer, up 9%; followed by the materials sector, which ended the month up 8.9%. Rising commodity prices pushed mining shares higher while banking shares benefited from rising interest rates.
Healthcare was the largest detractor, down -13%. The information technology sector also continued to fall, down -8.1% over the month, bringing its total decline over the past five months to -38.4%, amid valuation concerns and AI disruption fears amongst software companies.
International share markets marginally higher in February
International shares (hedged) rose 0.9% in February as the Q4 2025 corporate reporting season concluded; with S&P 500 companies having reported 14.2% earnings growth for 2025, ahead of market expectations.
The best performing sector was materials, up 10.8% over the month, as commodity prices climbed; closely followed by the utilities sector, which was higher by 9.4%. The largest detractor was the telecommunication sector, which fell -4.0%.
Emerging market shares (unhedged) rose 3.7% in February, supported by their attractive valuations compared with other international share markets.
International real assets surge on lower interest rate expectations
International listed property gained 7.2% in February, while international listed infrastructure rose 8.3%. These markets were supported by expectations of lower international interest rates and bond yields, as well as attractive earnings yields.
Fixed interest market returns were largely positive
Australian government bonds returned 1% over the month, as yields fell -16bps. While the economic data did not justify the risk-off move in bond markets, the decline in yields likely reflects a partial reversal of the sharp rise seen in previous months.
International credit spreads widened moderately while international credit returned 1.1% in February as the fall in international bond yields contributed positively to total returns.
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