Market review
A summary of how financial markets performed during the second quarter of 2025.
Global financial markets experienced heightened volatility in the second quarter, largely driven by trade policy developments in the US. Equity markets began the quarter under pressure following President Donald Trump’s surprise “Liberation Day” tariff announcement. However, sentiment improved as the administration softened its stance, allowing markets to recover and, in some cases, reach record highs.
Global markets
The quarter was marked by sharp swings in global equity markets. US indices rebounded strongly after an initial sell-off in April, with the S&P 500 Index gaining 10.9% and the Nasdaq 100 Index surging 18.0%.
European equities also recovered, supported by strong industrial earnings and export optimism. The UK’s FTSE 100 reached a new high, while Germany’s DAX posted solid gains. The European Central Bank’s supportive policy helped anchor investor sentiment amid subdued inflation.
Global bond markets were similarly volatile. On one hand, bond prices fell following a US credit rating downgrade, while fears of a pickup in inflation on the back of tariffs also weighed on bonds. On the other hand, bonds found support amid the uptick in volatility as investors sought these more defensive assets.
During the quarter, the US Federal Reserve left interest rates unchanged at its May and June meetings. In June, the Fed indicated a more cautious outlook, citing slower growth and rising inflation risks, partly due to the impact of tariffs.
Local markets
Australasian markets mirrored global trends, although the New Zealand’s NZX 50 Index posted a modest 2.7% gain for the quarter. Domestic data was mixed, with inflation holding steady and unemployment unchanged, but signs of economic stability supported investor confidence.
The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) twice during the quarter, taking it to 3.25%. Notably, one member of the Committee voted to leave interest rates unchanged at the May meeting, which meant the decision went to a vote, which resulted in a 5-1 ruling to cut the OCR.
Meanwhile, in Australia, the ASX 200 Index delivered an impressive 9.5% return, which took the share market to a record high. Its gain was helped by an interest rate cut by the Reserve Bank of Australia (RBA), while further signs that inflation was easing saw the interest-rate-sensitive sectors perform well.
Important information
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Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.
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