Global share markets were volatile in the first quarter of 2026. There was a deterioration in sentiment toward the end of the quarter. At the start of 2026, markets were lifted by good growth conditions and strength in AI adoption. The conflict in Iran, which began at the end of February, meant share markets dropped. The MSCI World Index (hedged to AUD) returned -3.2% for the quarter.
USA
US share markets underperformed broader developed markets (the S&P 500 was ‑4.3%). US shares rose in January, but were still behind other developed markets, in part due to AI-related competition.
In March, shares fell sharply due to the conflict in Iran. It is generally expected that the US Federal Reserve will stay with their current policy settings, due to rising concerns on higher energy prices and the concerns that this will drive inflation.
Asia
South Korean and Taiwanese share markets were much stronger earlier in the quarter, due to semiconductor, memory and other AI‑exposed technology stocks. In March, though, Asian markets dropped, especially across energy‑importing economies. Korean equities experienced a severe drawdown, ending the month down 20.6%.
Europe
European share markets were slightly lower at the end of the March quarter (the MSCI Europe Index (in EUR) down -0.8%). There was good growth in some areas in January, particularly Financials, Industrials and Technology. However, in March, European share markets underperformed broader developed markets, as a result of the conflict in Iran. The European Central Bank held rates steady throughout the quarter, but did acknowledge increased uncertainty around inflation and growth.
Australia
Australian equities fell ‑2.0% over the March quarter. Performance varied across sectors. Energy was the strongest performer (+36.1%), while Information Technology was weak (‑27.2%). While Energy performed well, it is only a small portion of the ASX 300 and so had only minor impact on market performance. The Reserve Bank of Australia raised the cash rate at its ‑February and March meetings, taking the cash rate to 4.10%. Markets have considered the potential for further interest rate rises later in the year.
Currency and bonds
Inflation and changing monetary policy influenced bond markets. Global bonds (AUD‑hedged) returned ‑3.2%. Australian bonds declined by ‑0.3%.
The Australian dollar rose 2.7% against the U.S. dollar over the March quarter.