Market Update - Month Overview (June 2025)

Summarised by Shara Cox (Report via Zenith)

Australian Market Summary

The Australian share market posted strong gains in June, with the ASX 200 rising 1.4% for the month and 9.5% over the quarter, supported by a rebound in global markets and signs of improvement in the domestic economy. Although March quarter GDP growth was soft at just 0.2%, the labour market remains solid, real wages are increasing, and inflation is continuing to ease. Headline CPI fell to 2.1% in May, while the RBA’s preferred core measure dropped to 2.4%, now sitting below the midpoint of the 2–3% target range. This has strengthened expectations that the RBA will begin cutting interest rates, with markets now pricing in a cash rate below 3% by early 2026. The prospect of lower rates is expected to support consumer spending and the housing market, helping to offset the impact of slower population growth and weak household demand.

Despite subdued earnings growth forecasts, particularly in the banking sector, investor confidence has remained strong. Bank stocks rallied sharply, with the sector up 16.1% for the quarter and 31% for the year, driven by the Commonwealth Bank, which rose 22.4% and 45% over the same periods, respectively. This strength has been attributed to increased global investment flows and risk management strategies among large domestic funds. However, valuations are now stretched, with banks trading at a record-high 20 times forward earnings. Meanwhile, energy and diversified financial stocks also performed well in June, while more defensive sectors such as consumer staples lagged. Overall, the local market appears well-positioned heading into the second half of the year, underpinned by a stable policy environment, easing inflation, and the likelihood of monetary policy support.

International Market Summary:

Internationally, equity markets rallied in June, closing a remarkably strong quarter despite geopolitical tensions and economic uncertainty. The MSCI World ex-Australia Index rose 4.3% for the month and 11.5% for the quarter, while the S&P 500 reached a record high of 6,205 points, driven by strong performance in mega-cap and AI-focused stocks such as Nvidia and Microsoft. The market appeared to take comfort in expectations of expansionary fiscal policy in the US - particularly the passage of the “One Big Beautiful Bill Act,” which extends Trump-era tax cuts and introduces major spending initiatives. Investors also responded positively to speculation of upcoming interest rate cuts, with several US Federal Reserve members signalling a dovish shift in monetary policy. Despite uncertainty over trade tariffs, especially as the July 9 deadline for tariff pauses loomed, equity markets appear to be pricing in the view that fiscal and monetary policy will remain supportive of growth. Growth stocks significantly outperformed value stocks, and the technology and communications sectors led the way globally.

Emerging markets also had an impressive run, rising 6% in June and 12% for the quarter in USD terms. Markets such as South Korea and Taiwan posted particularly strong gains, buoyed by political developments and renewed strength in semiconductor stocks. China’s equity market lagged with only a 2% quarterly gain, but its economy appears to have stabilised, with retail sales up 6.4% in May and steady industrial output, although the property sector remains under pressure. Investors have been pleasantly surprised by the resilience of emerging markets, with lower global interest rates, a softer US dollar, and partial relief from trade tensions helping to drive performance.