Market Commentary

Volatility and uncertainty were the watchwords for February, keeping investors on edge and driving many parts of the market. Major developments – particularly in the US - as well as headline-driven moves continued to shape sentiment this month.

While US / Iran tensions had been simmering away due to Washington’s opposition to Tehran’s nuclear and missile programs, they are simmering no more. On 28 February, the US and Israel coordinated an attack on Iran, killing Iran’s Supreme Leader. Market reactions were sharp, with oil pushing higher, the US dollar strengthening, and gold climbing above $5,300 an ounce on safe-haven demand.

Another notable development came from the US Supreme Court, which ruled that President Trump’s ‘Liberation Day’ tariffs were illegal. However, tariffs are likely here to stay, as the administration pivoted to apply duties through alternative legal means. This intensified existing trade tensions, particularly because many agreements had been negotiated around those tariffs that were now ruled unlawful.

In markets, tech remained volatile as investors showed growing signs of caution. The sector continues to balance heavy AI‑related capital expenditure and elevated valuations against expectations for future earnings and productivity gains. Concerns about AI‑driven disruption also rippled through parts of the market, particularly within financials. Meanwhile, US / Iran tensions supported energy and defence names. On the acquisition front, in a turn of events, Paramount has won the bid for Warner Bros. Discovery, overtaking the Netflix offer. Interestingly, both Netflix and Paramount traded higher on the news.

Back home, the Reserve Bank of New Zealand kept the Official Cash Rate on hold at 2.25%, with the tone leaning on the dovish side. Fourth-quarter labour figures showed unemployment rising to 5.4%, the highest level since 2015, underscoring a labour market with spare capacity. Although other data remains mixed, investors noted ‘green shoots’ in some minor data, such as above-consensus retail spending.

In Australia, the story remained largely unchanged. After the Reserve Bank of Australia lifted rates in early February, incoming data broadly supported the move, and further hikes remain likely. Consumer price inflation printed above the target range at 3.8%, and unemployment held tight at 4.1%. Strong earnings and firm performance from miners, energy producers, and the major banks helped buoy equities through the month.

Given the factors mentioned, equity performance diverged over February. US equities lagged other markets with the S&P 500 slipping -0.87%, and the tech-heavy NASDAQ wobbling to end -3.38% lower. In contrast, the NZX 50 and ASX 200 returned solid gains of 2.23% and 3.71%, respectively. The standout performer was the UK’s FTSE 100, which surged 6.72% after inflation eased and the Bank of England held rates steady in a close 5–4 vote that signalled cuts may not be far off.