Australian shares ended the week on the back foot, with the S&P/ASX 200 falling 82.4 points, or 0.9%, to 8,828.70 as a heavy rotation out of resources and gold dragged the benchmark lower. Six of the 11 sectors finished in the red, though the index still held on to a modest weekly gain of around 0.3%. Our early call on the rotation into the unloved healthcare sector was correct, with the S&PASX 200 healthcare index finishing up 5% over the week (see last weeks article).
BHP was the dominant story, slumping 5.6% to $61.40 its biggest one day fall since April 2025 after warning that costs for its flagship Jansen potash project in Canada had blown out to at least US$6.9 billion, a 42% overrun on the original US$4.9 billion estimate. This move alone stripped roughly 60 points from the index, with questions raised towards management's broader growth pipeline.
The damage extended across the materials sector. Gold retreated 1.7% to about US$4,137 an ounce as a hawkish Federal Reserve outweighed easing Middle East tensions, dragging Newmont down 6.7% and Evolution Mining 5%. Pilbara Minerals fell 5.3% and Mineral Resources 4.3% on softer iron ore and lithium, Rio Tinto eased 3%, and Alcoa lost 7% extending its slide since early June to roughly 30%. Quarterly index rebalancing flows amplified the moves, while the ASX 200 VIX slipped to 11.71, a 3 month low, suggesting smart positioning adjustments rather than panic selling.
Against the resources weakness, investors rotated firmly into defensives. CSL surged 7.6% to $116.32, its biggest one day gain since February 2022, while 4DMedical roared 17.6%, A2 Milk added 8%, Meridian Energy rose 7% and Life360 climbed 6%. Coles ticked up and Woodside firmed 1.4% as Brent steadied near US$80. In company news, Electro Optic Systems jumped 14.3% on a US$124 million UAE counter drone contract, SkyCity Entertainment rose 14.6% after settling anti money laundering breaches for $21 million, and IDP Education gained 6.7% on firmer FY26 earnings guidance and a $50 million buyback.
How did Aussie markets fare over the week?
It was a week of two halves. A strong, optimistic led start gradually gave way to a more cautious, commodity driven finish.
Monday set the tone with a powerful 1.25% rally reaching a one month high of 8,914, as reports of a US/Iran peace agreement sparked a broad risk on move. Resources led, with Vault Minerals up 15% and Regis Resources 14%, while energy names slumped on collapsing oil Santos fell 8%. The momentum carried through midweek - the index edged to a fresh one month high of 8,917.7 on Tuesday and pushed on to 8,966.3 on Wednesday, supported by strong breadth (722 advancers to 435 decliners), a rally in gold miners and technology, and falling bond yields.
The central event was the Reserve Bank's decision on Tuesday to leave the cash rate unchanged at 4.35% - its first pause of 2026 after three earlier hikes, and a unanimous call from the board. Markets initially read the hold as a sign rates may be near their peak, but Governor Michele Bullock's accompanying tone was notably hawkish, stressing that inflation remains too high and that further increases cannot be ruled out.
Sentiment turned from Thursday. A more hawkish than expected Federal Reserve, combined with Bullock's firm rhetoric, repriced rate expectations and pressured gold miners and growth names, sending the index down 0.62%. Friday's resources and iron ore rout completed the pullback, leaving the market at 8,828.70.
For all the intraweek swings, the benchmark finished only marginally higher. Australia's 10 year bond yield held below 4.8% around 15 week lows, while the Australian dollar drifted from above US$0.70 early in the week to below US$0.705, near 10 week lows, as the US dollar strengthened. The overarching theme was rotation without conviction: capital shifting between resources, defensives and growth without any one group establishing sustained leadership.
International markets
Offshore, central banks dominated. The Federal Reserve held rates steady (target around 3.625%) at its first meeting under new Chair Kevin Warsh, but its Summary of Economic Projections delivered a hawkish surprise roughly half of FOMC members now anticipate at least one more hike before year end. Warsh signalled a stronger emphasis on fighting inflation and less reliance on forward guidance, lifting the US dollar index to a one year high.
Wall Street mirrored the local pattern. After a buoyant start the Nasdaq surged more than 3% and the S&P 500 added 1.65% on Monday's geopolitical optimism US equities slipped for two midweek sessions as the Fed's projections landed. Markets then rebounded firmly on Friday, with the S&P 500 up about 1% and the Nasdaq 100 gaining 1.9%, led by semiconductors and AI names. Intel surged 10% on domestic manufacturing agreements, Micron rose 8.5% and Nvidia 3%, while airlines firmed on improved sentiment.
China offered a mixed picture. The Shanghai Composite drifted around the 4,080–4,090 level all week, while the Shenzhen Component pushed to a one-month high near 16,030 on technology strength. Soft May data on contracting retail sales and a 35th consecutive monthly fall in new home prices underscored persistent domestic weakness, even as policymakers at the Lujiazui Forum flagged a shift toward an overnight policy rate benchmark and new anti sanctions measures. Elsewhere, the Bank of Japan lifted its policy rate 25 basis points to 1%, a reminder of the increasingly divergent paths among the world's major central banks.
Commodities
Oil was the week's standout mover. Crude collapsed more than 5% on Monday to around US$80 a barrel after news of the US/Iran agreement, which carried the prospect of sanctions relief and the reopening of the Strait of Hormuz. Prices slid further toward US$74 by Thursday before steadying Brent finished near US$80 and WTI back above US$77 but the week still marked a sharp decline. The International Energy Agency added to the bearish tone, warning of a potential structural surplus as supply growth outpaces demand into 2027. Notably, the formal signing talks scheduled for Switzerland were called off over the weekend after the US delegation withdrew, a timely reminder that implementation risk remains.
Gold travelled in the opposite direction early before reversing late. Bullion held above US$4,300 an ounce through the first half of the week on hopes of easing inflation, then turned lower as rate expectations climbed, ending Friday down 1.7% at roughly US$4,137. The combination of tighter monetary signals and fading geopolitical premium proved a dual headwind for the metal and for local gold producers.
In the bulks and base metals, iron ore softened on weaker seasonal demand from Chinese steel mills and lower freight costs, the trigger for Friday's broad mining selloff. Lithium and base metals were similarly soft, weighing on names such as Pilbara Minerals and Mineral Resources.
Outlook Next Week
All eyes turn to the May Consumer Price Index, due 24 June. It will be the key test of whether the RBA can comfortably stay on hold or retains its tightening bias: a softer print would reinforce the case that the cycle has peaked and support equities, bonds and rate sensitive sectors, while another upside surprise could quickly revive talk of a further hike. Australian employment data later in the week (25 June) will add colour on labour market resilience.
Globally, investors will watch for Fed follow through after its hawkish shift, the path of oil, and whether the US/Iran agreement can be salvaged following the cancelled Switzerland talks. Fresh Chinese activity data, including the NBS manufacturing PMI at month end, will remain important for commodity demand.
Falling bond yields, lower oil and resilient corporate earnings give grounds for optimism, but sticky inflation and the prospect of further tightening suggest volatility will linger against a backdrop of increased uncertainty. With the ASX200 market technically capped near resistance at 9,000 and support around 8,700, we expect a data dependent positioning driven trade and an index whose direction is increasingly set by a narrow band of large cap resource and financial names.
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