The Australian sharemarket gave up 3.0% last week to a five-week low, attributed to mixed economic data and earnings reports, namely from the banking sector. Key contributors to the market’s fall were the Financials (-7.5%) and Energy (-4.0%) sectors. A large sell-off in banks came after a slew of weak earnings announcements, including Bendigo Bank (-18.5%), NAB (-14.4%) and Westpac (-10.6%), which reported contracting net interest margins. In addition, employment data released on Thursday, which came in higher than expected, put pressure on the market after 44,000 jobs were added over the month. On the other hand, Telstra provided a bright spot to the market, advancing 6.7%, after reporting interim net profit rose 6.5%.
US sharemarkets touched new highs at the start of the week, however, gave up gains later in the week, as the S&P 500 closed 1.7% lower. Key themes over the week included concerns over Washington’s fiscal policies and Trump’s trade proposals, which resulted in investors rotating to more defensive sectors, along with mixed earnings announcements and economic data, which impacted market sentiment. Manufacturing data showed that businesses remain resilient, while services data showed growth may be slowing. Key earnings report last week came from Walmart (-8.9%), who reported revenue slightly better than expected, however, guidance for FY26 disappointed.
European markets continued to trend upwards last week, with the STOXX Europe 600 touching a new record high for the ninth consecutive week. Ongoing peace talks between US-Russia helped market sentiment, particularly in the more defensive sectors. As a result, the Health Care (2.3%) and Food & Beverage (1.7%) sectors were among the best performers. In economic news, Eurozone manufacturing and services data pointed to stagnation, after coming in at 50.2 (50 being neutral), slightly below estimates.
Much to the relief of mortgage holders and politicians alike, the Reserve Bank of Australia (RBA) cut interest rates for the first time since November 2020, lowering the cash rate by 0.25% to 4.10% following its meeting last week. The decision came as inflation fell faster than expected, giving the Board greater confidence in easing rates.
The big four banks swiftly passed the full 0.25% cut on to mortgage holders. However, Governor Michele Bullock was quick to rule out another pre-election rate cut, leaving Prime Minister Anthony Albanese with a narrow window to decide whether to call a snap election and capitalise on the decision, or delay and court voters with further cost-of-living relief. Time is running out, with 12 April or the first three Saturdays in May the most likely election dates.
Looking ahead, the big four banks are taking a cautious stance on further rate cuts, with forecasts suggesting the cash rate could fall to between 3.10% and 3.85% by the end of 2025. Given the RBA’s statement that it remains “cautious on prospects for further policy easing”, we expect the next potential rate cut of 0.25% could come at the 19–20 May meeting, following the release of quarterly inflation data on 30 April.
In Australia this week the key data point will be the monthly Consumer Price Index indicator, while we will also get a look at private sector credit and business investment.
Overseas, US home prices, new home sales and manufacturing data is all due early in the week, while all attention will then be on US GDP data and the Personal Consumption Price Index released later in the week.
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