Market Update - Month Overview (August 2025)

Summarised by Shara Cox (Report via Zenith)

Australian Market Summary

Australian equities outperformed global peers in August, with the ASX200 rising 3.1% to reach record highs and bringing year-to-date gains to 12.3%. Strong performance came from the materials, consumer discretionary, and property sectors, while small and mid-cap companies significantly outpaced large caps. Several large-cap names, including CSL, James Hardie, and Woolworths, reported disappointing results, weighing on their performance. The banking sector gained overall despite a fall in CBA’s share price, as investors rotated into other banks. Volatility during reporting season reflected mixed earnings, though the outlook is improving on the back of lower interest rates and stronger consumer confidence. Inflation rose sharply in July, driven by electricity price hikes, with headline CPI climbing to 2.8% and core inflation to 2.7%. Despite this, the RBA cut the cash rate to 3.6% in August and markets expect further easing toward 3% by mid-2026, supporting both equities and property markets.

International Markets

Global equities also advanced in August, supported by robust U.S. corporate earnings and the growing likelihood of Federal Reserve rate cuts. The MSCI World ex-Australia Index rose 2.6% in local currency terms, although gains were dampened for Australian investors due to the stronger AUD. U.S. earnings were revised sharply higher, with the "Magnificent 7" technology giants posting annual EPS growth of more than 26%, while broader market earnings grew around 8%. European markets, particularly Italy and Spain, delivered strong results, though French equities lagged due to political instability. Japan also surged nearly 7%. Emerging markets added modest gains, led by Brazil’s rally on optimism around rate cuts and political stability, while China benefited from stimulus measures such as consumer loan subsidies. However, India, Korea, and Taiwan struggled due to trade tensions and foreign investor outflows. Broader global sentiment was shaped by weaker U.S. labour data, which increased expectations for Fed cuts, though concerns about Fed independence and fiscal credibility pushed U.S. long bond yields toward 5% and weakened the U.S. dollar. Commodities had a mixed month: gold surged on safe-haven demand, iron ore and copper strengthened, while oil eased due to higher OPEC output.