TWD Monthly Market Update – February 2026
Broader Market Moves1
Macro Commentary
The Australian share market delivered a generally positive performance through February, with the S&P/ASX 200 climbing steadily despite periods of volatility driven by inflation data, interest rate expectations, and offshore market movements. The index moved from 8,778.60 points at the start of the month to close at 9,198.60 points, reflecting consistent gains. The month of February marks half year reporting season in Australia, with around 127 companies reporting results during the month. The major banks delivered strong earnings results as costs were lower than expected and the economy remained strong. Utilities also outperformed following solid earnings outcomes and constructive guidance. In contrast, resources stocks were mixed given elevated investor expectations given strong price growth in base metals. Healthcare and parts of the technology sector also traded unevenly as investors remained sensitive to valuation levels and offshore earnings commentary.
Domestic economic data remained a key driver of sentiment. Inflation proved persistent, with headline inflation holding at 3.8% year-on-year and underlying inflation rising to 3.4%, driven largely by housing, food, and discretionary spending pressures. The result reinforced expectations that monetary policy may remain restrictive for longer. In response to higher inflation, the Reserve Bank of Australia raised the cash rate by 25 basis points to 3.85%, the first increase since 2023. Labour market conditions remained resilient, with employment increasing by approximately 17,800 jobs in January and unemployment holding at 4.1%. Participation remained elevated at 66.7%. Business activity remained expansionary, with PMI data showing continued strength in services activity and stable manufacturing conditions, supporting the view that economic momentum remains positive despite higher borrowing costs.
Global equity markets were more volatile through February, with the S&P 500 finishing the month modestly lower overall. After beginning February near late-January highs around the 6,930 level, the index traded in a broad range before closing near 6,878.88, equating to a decline of approximately 1% for the month. Performance was weighed down primarily by weakness in large-capitalisation technology and communication services stocks, as investors reassessed valuation levels and earnings visibility across artificial intelligence-linked companies. Energy and Materials performed well, supported by firmer oil prices and a climb in base metals prices, though this was insufficient to prevent a modest negative monthly result. Overall, February reflected consolidation following January strength rather than a material deterioration in broader market conditions.
US economic data showed moderating growth rather than a sharp slowdown. GDP expanded at an annualised rate of 1.4% in the December quarter, down from the prior quarter, reflecting softer government spending and tighter financial conditions. Consumer spending remained the main growth driver, rising 2.4%. Inflation data also remained in focus, with headline CPI easing to 2.4% year-on-year while core CPI remained at 2.5%. The persistence of core inflation reinforced expectations that the Federal Reserve will maintain a cautious and gradual approach to policy easing.
Commodity markets were broadly supportive of risk sentiment during February. Gold prices traded near record highs, finishing around USD 5,278 per ounce, supported by safe-haven demand, lower bond yields, and central bank purchasing activity. Gains were periodically limited by a firmer US dollar and profit-taking following strong prior performance. Crude oil also rose, with WTI finishing around USD 67 per barrel, supported by geopolitical risks and supply discipline among major producers, although concerns about global demand growth and rising US inventories limited price momentum.
Looking forward, markets remain driven more by shifting policy expectations than by earnings or fundamentals, though the narrative is beginning to stabilise. Global fiscal expansion continues, with defence and infrastructure spending sustaining growth despite tariff headwinds, while AI-related capital expenditure supports elevated equity valuations. Geopolitical risk has re-emerged as a meaningful variable following US and Israeli strikes on Iranian military infrastructure and the death of Supreme Leader Khamenei. The primary portfolio concern is energy: further disruption to shipping through the Strait of Hormuz would push oil prices higher, complicating the path for central banks already navigating sticky inflation. Our base case remains containment, but the tail risk warrants monitoring. The US dollar looks set to weaken as global growth broadens, favouring international and Asian equities, while in Australia stretched valuations and fragile household demand point to more subdued equity performance. Diversified portfolios remain well placed to balance these risks and capture opportunities across regions and asset classes.
1ASX 200 refers to SPDR S&P ASX 200 Fund (STW), S&P 500 refers to iShares S&P 500 (AUD Hedged) ETF, MSCI World refers to Vanguard MSCI Index International Shares (Hedged) ETF, NASDAQ 100 refers Nasdaq 100 Currency Hedged ETF, AU Comp refers to the Vanguard Australian Fixed Interest Index ETF, Global Agg refers to Vanguard Global Aggregate Bond Index (Hedged) ETF, Gold (USD) refers to the LSEG Gold Spot Price (USD)
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