Market Key Points
- Global equities rebounded strongly, looking through the geopolitical and oil price pressures.
- Inflationary pressures continue to cause markets to reassess the monetary policy paths of many central banks.
- Australian equities lagged global markets, with the Health Care and Consumer Staples sectors the main detractors.
Australian equities
The S&P/ASX 200 Accumulation Index rose 2.2% in April, with seven of the 11 sectors closing higher. Information Technology (+13.2%), REITs (+8.6%) and Materials (+4.3%) led the gains, whilst Health Care ( 8.7%), Consumer Staples (-4.1%) and Energy (-2.7%) underperformed. The S&P/ASX Small Ordinaries Index rose 3.3% in April, with a twelve-month return of 15.3%, compared with the 10.1% rise in the S&P/ASX 200 Accumulation, as smaller companies continued to outperform large caps.
Zip Co Limited (ZIP) was the month's top performer, rising 56.8% after a better-than-expected trading update, with US credit losses controlled and strong top-line momentum. Other technology names, including Codan Limited (+33.3%), NEXTDC Limited (+27.8%) and Megaport Limited (+26.3%), also performed strongly in April.
Cochlear Limited (COH) was the worst performer for the month, down 44.4% after a material downgrade to its FY26 earnings guidance due to a wide range of issues across its business. Whilst some were seen as short term, management guided to more structural issues, which have caused a de-rating in the share price.
The annual inflation rate rose from 3.7% in February to 4.6% in March, below expectations of a rise to 4.8% and well above the RBA’s 2-3% target. Goods inflation rose as fuel prices surged due to the conflict in the Middle East, whilst services inflation eased. The RBA’s trimmed mean CPI held steady at 3.3%, as expected. Whilst some of the pickup in inflationary pressure is seen as temporary, inflation is expected to remain above target for some time, with risks skewed to the upside.
The unemployment rate held steady at 4.3% in March, in line with expectations, and remains at its highest level since last November. Total employment grew by 17,900, broadly in line with forecasts, with a 34,600 decline in part-time jobs offset by a 52,500 increase in full-time employment. The participation rate fell slightly to 66.8%, down from 66.9%. Given inflationary pressures, a tight labour market and capacity constraints, RBA monetary policy is expected to remain restrictive, with two more rate hikes tipped before year-end.
Global Equities
Global equities rebounded in April, with developed market equities up 4.4% (MSCI World NR Index (AUD)). US equities outperformed, with the S&P 500 Index rising 10.4% in April, after being down 5.1% the previous month, as the market navigated the ongoing conflict in Iran. Returns were driven by a strong earnings season from the Financials and Technology sectors, with a rotation back into artificial intelligence (AI) stocks leading both the S&P 500 and Nasdaq indices to hit all-time highs.
Across developed markets, Momentum (+15.6%) and Growth (11.6%) outperformed Quality (+8.3%) and Value (+6.4%). Global small caps slightly underperformed large caps in March, returning 3.9%.
European equity markets recovered, but the UK’s FTSE 100 Index lagged with a 2.0% rise due to its exposure to energy and defensive stocks. Germany’s DAX Index performed strongly, increasing by 7.1%, while Japan’s Nikkei 225 rebounded from a 13.2% decline in March to gain 16.1% in April.
On the economic front, the US Federal Reserve kept interest rates unchanged again in April at 3.50-3.75%, marking the third consecutive meeting. Policymakers voted 8-4 on the decision, marking the first time since 1992 that four officials dissented. The central bank remains data-dependent for future interest rate moves, noting that the war in the Middle East is creating high levels of uncertainty about the outlook for the economy. Attention now turns to first-quarter GDP growth numbers and PCE inflation data as key data points.
March inflation data showed headline CPI rising from 2.4% to 3.3%, in line with expectations and marking the highest level since May 2024. The rise was driven largely by higher energy costs, particularly gasoline and fuel oil, due to the war in the Middle East. The core inflation rate, which excludes food and energy, increased slightly from 2.5% to 2.6%, below the expected increase to 2.7%. 1Q26 GDP growth came in at 2.0%, up from 0.5% in the previous quarter, but below expectations of 2.3% growth, with government spending rebounding significantly following the shutdown in the previous quarter.
Commodity prices kept climbing in April, with the S&P Goldman Sachs Commodity Index (USD) rising by 3.1%. Oil prices went up by 3.6%, reaching USD$105.10 per barrel, a 61.1% increase over the last three months, mainly due to the closure of the Strait of Hormuz in the Middle East. Iron ore and gold both declined slightly by 1.0%, while copper gained 5.3%.
Emerging Market Equities
Emerging market equities outperformed developed markets in April, erasing March losses and finishing up 9.3% (MSCI Emerging Markets Index (AUD)). Gains were led by Taiwan and South Korea, up 14.7% and 26.2%, respectively, as a large share of their markets is tied to the global AI supply chain.
In China, the CSI 300 rose 8.0% in April, rebounding from the 5.5% fall in March, as economic data continued to point to improving conditions. The NBS Manufacturing PMI fell slightly from 50.4 to 50.3 but came in above expectations of a fall to 50.1 and, more importantly, marked the second consecutive month of expansion. 1Q26 GDP growth came in at 5.0% year over-year, up from 4.5% and above expectations of 4.8%, the fastest annual growth in the last three quarters, supported by strength in exports. However, the impact of the war in the Middle East is yet to be captured in the data.
Property & Infrastructure
The S&P/ASX 300 A-REIT Accumulation Index rose 8.5% in April, rebounding from the 11.2% fall in March. Global real estate equities were also strong, gaining 7.4% for the month, as shown by the FTSE EPRA/NAREIT Developed NR Index (AUD Hedged). Global infrastructure underperformed, rising 1.6% in April, as measured by the S&P Global Infrastructure TR Index (AUD Hedged).
Fixed Income
Fixed-income performance was muted in April, lagging the strong global risk-on rally. Government bond performance was mixed in April, heavily dependent on exposure to rising energy prices and renewed inflation fears.
The U.S. 10-year Treasury yield rose 5bps to 4.37%, while the Federal Reserve held rates steady at 3.50% to 3.75% as it continues to balance persistent inflation and ongoing uncertainty.
Japanese government bond yields rose again, closing the month at 2.50%, near their highest level since 1997, as surging oil prices fuelled inflation concerns and expectations that the Bank of Japan may need to raise rates. The Bank held its short-term rate unchanged at 0.75% during the month; however, several members supported a rate hike. UK government bond yields also rose, now above 5.0% and at the highest level since mid 2008, as the market prices in interest rate hikes by the Bank of England to help control inflation.
Australian 10-year yields increased by 9 basis points to 5.06% by month-end, as markets continue to anticipate additional interest rate hikes this year to combat inflation. In March, the annual inflation rate rose sharply to 4.6%, driven by higher fuel prices linked to the Middle East conflict, which added to existing consumer price pressures. The RBA's decision-making remains data-dependent, but ongoing uncertainty in the Middle East makes it difficult to gauge precise impacts.
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