Following the strong returns recorded last month, equities consolidated during February with most global markets posting flat to slightly negative returns. The Australian market fell 2.4% primarily driven by weakness in mining stocks which fell 7.5% due to weaker commodity prices. The US market also fell by 2.4% with higher real bond yields placing pressure on equity valuations.
European markets fared a little bit better with both the UK and Europe posting modest positive returns for the month while China gave back almost all its COVID reopening driven gains from last month. Despite recent optimism that inflation had passed its peak, inflation data printed stubbornly high in February which resulted in a more hawkish outlook for interest rates. This pushed 10-year government bond yields in both the US and Australia up by over 30 basis points. As expected, the RBA increased cash rates by 25 basis points to take the total increase over the last 12 months to 325 basis points compared to 450 basis points by the more hawkish US Fed which drove the $US 4% higher against the $A.