Global equity markets advanced during July as easing inflation, resilient economic data and improving expectations for interest rates supported risk assets. Against this backdrop, the Australian share market also strengthened, with the S&P/ASX 200 rising 2.26% to close at a fresh record high. Domestic investor sentiment improved following the release of softer-than-expected June quarter inflation data, which significantly reduced expectations of an August interest rate increase. The combination of improving global market conditions and moderating domestic inflation encouraged renewed buying across growth and cyclical sectors.
Sector performance was broadly positive, with Healthcare and Information Technology leading the market higher. CSL gained 7.15%, ResMed rose 3.28% and Sigma Healthcare added 2.76%, while technology stocks benefited from renewed investor demand following strong performances across US technology markets. Consumer Discretionary also outperformed as lower bond yields improved sentiment towards interest rate-sensitive sectors. Resources delivered a mixed performance, with Rio Tinto gaining 3.67% on the day it reported a stronger-than-expected earnings result. Weakness in lithium producers persisted, with Liontown Resources declining 7.92% despite reporting positive operating cash flow. Energy stocks also strengthened as higher oil prices improved the earnings outlook for domestic producers.
The major banks delivered mixed performances with Commonwealth Bank providing meaningful support to the index, while National Australia Bank, Westpac and ANZ also benefited from the sharp reduction in expectations of further monetary tightening. Although the Reserve Bank did not hold a monetary policy meeting during July, the release of the June quarter inflation data materially shifted market expectations. Headline CPI eased to 3.8%, while trimmed mean inflation remained at 3.6%, prompting investors to largely rule out an August rate increase.
Commodity markets produced mixed outcomes with Brent crude oil rising by 24.0%, supported by renewed geopolitical tensions in the Middle East and concerns over supply disruptions through the Strait of Hormuz. In contrast, gold declined 2.5% as improving global risk sentiment reduced demand for safe-haven assets, while iron ore fell 3.8% amid ongoing concerns surrounding Chinese steel production and weaker property market activity, limiting gains across the major diversified miners.
