Market Commentary

February 2026

Global share markets were mixed in February. The continued strength of the Australian dollar led to the MSCI World Index ‒ Net returning -1.0% in unhedged AUD terms. In hedged AUD terms the index returned 1.0%.

Global equities experienced significant volatility through February, with the market vacillating between gains and pullbacks. Asia Pacific markets led the way; the MSCI Asia-Pacific index posted one of its best Februarys on record, riding a wave of tech and AI supply-chain shares. Emerging markets including South Korea have rallied significantly to start the year; South Korean equities are up around 50% year-to-date while broader emerging market indices are also up. European shares performed well, with the UK’s FTSE 100 setting new record highs on strong tech and industrial earnings.

In the United States, shares experienced volatility through February due to concerns about AI valuations, AI-driven industry disruption and an update on the legality of US President Donald Trump’s signature tariff policy. Tech-centred indexes were particularly susceptible to the volatility. Software and high-beta growth shares saw a broad global sell-off to start the month. There was particular focus on companies whose underlying business would be disrupted by AI. Nvidia, which has been a bellwether for AI equities, saw a significant decline in its share price despite solid earnings.

The joint US-Israel attacks on Iran and subsequent retaliatory strikes did not have an impact on global share markets in February as airstrikes commenced after markets had closed for most regions. The tensions between the two nations did weigh on markets late in the month, driving oil prices higher and boosting energy stock prices. Gold also rose through the end of the month though was still below all-time highs set in January.  

Private credit market anxieties weighed on markets. UK mortgage firm Market Financial Solutions collapsed, dragging global financial shares lower with it. The KBW Nasdaq Bank Index, which includes JPMorgan, Citi and Bank of America fell nearly 5% on the last trading day of the month. Market Financial Solutions was declared insolvent amid allegations it had pledged its collateral twice to secure AU$3.8 billion in financing from different traditional lenders. Earlier, US-based Blue Owl Capital announced it was freezing redemptions on a US$1.7 billion unlisted private credit fund that was marketed to retail investors. The sell-off comes amid larger concerns that private credit is overexposed to the software sector which is seeing significant valuation dips due to concerns about disruption from artificial intelligence.

Emerging Markets performed well in the month though trading was limited in some regions due to Lunar New Year holiday celebrations. Over the first two months of the year, emerging market nations have been the best performers. South Korean shares have rising on the strength of chipmakers including Samsung Electronics and SK Hynix, which are taking advantage of significant demand. Peru and Brazil have also seen growth due to a combination of a softer US dollar and surging commodity prices including oil and iron ore, drawing in global investors.

Central bank activity

Interest rates were relatively stable through the month with few central banks making movements. Australia was a notable exception as high inflation and relatively low unemployment figures led to a widely expected rate hike from the Reserve Bank of Australia (RBA). The Federal Reserve (Fed) held rates stable at its meeting at the end of January and the European Central Bank (ECB) also took no action in early February. The Bank of Japan (BoJ), which raised rates in December, kept rates stable at its first meeting of the year, one which followed the landslide election victory of Prime Minister Sanae Takaichi. Takaichi’s election promises include fiscal stimulus measures which have led to a weakened Japanese yen that may require another rate rise from the BoJ in the near term. It was a split decision by the Bank of England (BoE) on what to do with interest rates after a December reduction. The vote was 5-4 in favour of holding rates stable but comments after the meeting indicate that there will likely be a reduction in rates later in the year on the back of predicted economic growth and higher unemployment. 

In an interview, a top Fed official says he would back a March rate cut in the US if there are further signs of a weakening labour market. The January jobs report came in stronger than most forecasts and underlying inflation is running at close to 2%, however the year-long view of 2025 saw weak job creation. Fed Governor Chrisopher Waller says that a confluence of factors, including a low-hire and low-fire marketplace, including low layoff numbers, mean that slow hiring isn’t as bad as it seems. US CPI figures for February will be released about a week before the next monetary policy meeting in March; Waller says that will help firm up the Fed’s view of the current economic environment and will influence its next rate decision.

Australian activity

The Australian share market continued its strong start to 2026 with the S&P/ASX 300 Accumulation Index closing the month up 3.9%. 

Energy and materials shares significantly influenced performance in the Australian share market in February. Oil prices climbed to their highest levels since August on supply risk including the US threatening military action in Iran over a nuclear deal – which benefitted domestic energy stocks. Materials, which had driven significant value through the end of 2025 and early 2026, were a bit of a drag as gold and other precious metals retreated from their late-January record highs. 

AI has been a significant influence in the tech and software space, particularly in companies where the technology is seen as a significant disruptor to the business model. February was the month where several high-profile companies embraced the technology. Logistics software group WiseTech Global had its share price hammered during the last six months, dropping almost 60%. Late in the month the company announced that about 2,000 staff members – predominantly from its product development team in customer services – will be replaced over the course of the next two years with AI. The company was rewarded with a 4.5% boost in its share price the day of the announcement; the company had also experienced drops of more than 10% in a day two days in the past month so it isn’t quite as much optimism as expected.

Commonwealth Bank’s (CBA) earnings are generally regarded as a bellwether for the health of the larger Australian economy. In its half-year results, CBA provided a robust update due to low loan losses, robust consumer spending and business borrowing. Later in the month the bank announced a $90 million workplace retraining program to transition staff to heavy usage of AI.

Generally, wage growth has lagged inflation. Australian Bureau of Statistics (ABS) numbers show wage growth at 3.4% year-on-year which is lower than CPI growth, which was up 3.8% in the same period. The January inflation figures came in higher than expected, with the trimmed mean gauge of consumer prices rising 3.4% year-on-year, exceeding expectations of 3.3% and falling outside the RBA’s target 2-3%. The nation’s unemployment rate also remained low, at 4.1%. The Reserve Bank of Australia holds its next meeting in mid-March; most estimates show them holding rates stable with another rate rise possible in May.

Fixed income performance

Global bonds rose in February, with the Bloomberg Global Aggregate Bond Index – $A Hedged closing the month up 1.4%.

Interest rates were relatively stable through the month with few central banks making movements. Australia was a notable exception as high inflation and relatively low unemployment figures led to a widely expected rate hike from the Reserve Bank of Australia (RBA). 

The Australian bond market was up in February, with the Bloomberg AusBond Composite 0+ Year Index ahead by 0.9%.

The Australian cash market returned 0.3% over the period, as measured by the Bloomberg AusBond Bank Bill Index. The Australian Dollar retained its value through February, rising slightly from US$0.70 to US$0.71. 

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