The Australian sharemarket finished the week lower, with the ASX 200 down -1.8% as volatility picked up and investor sentiment remained cautious amid heightened geopolitical uncertainty and earnings‑related weakness. Defensive positioning supported pockets of the market, with the Consumer Staples Sector (2.7%) the standout performer, backed by strength in supermarket stocks. The Utilities Sector (1.9%) also posted solid gains as investors sought stability. In contrast, the Health Care Sector (-6.5%) underperformed sharply following a major earnings downgrade from Cochlear. The Financials (-2.9%) and Materials (-2.1%) sectors also weighed on overall market performance as softer updates and risk aversion persisted.
US sharemarkets edged higher over the week, with the S&P 500 up 0.6% and the NASDAQ rising 1.5%. Sentiment was supported by a strong Q1 earnings season and continued strength in AI-related names, which helped push major indices to fresh record highs. The Information Technology sector (3.1%) led the rally, followed by the Energy sector (3.2%), driven by a sharp rebound in oil prices. In contrast, the Healthcare sector (-3.1%) lagged, weighed down by weakness across pharma and MedTech, while softer performance in Financials also reflected pressure from rising bond yields and mixed earnings outcomes.
European sharemarkets ended the week lower, with the STOXX Europe 600 down -2.3% as escalating Middle East tensions and surging energy prices weighed on risk sentiment. The Energy sector (6.5%) was the clear outperformer, supported by higher crude prices following continued Strait of Hormuz disruptions and supply concerns. The Utilities sector (2.1%) also gained on defensive flows, while the Technology sector (0.3%) held up relatively well on resilient AI-related earnings momentum. In contrast, the Travel & Leisure sector (-6.3%) was the weakest sector, pressured by higher fuel costs and demand destruction fears, while the Banks sector (-5.3%) and the Automobile & Parts sector (-5.4%) also lagged amid rising input costs and softer macro data.
Stock & sector movements
What caught our eye
The Australian consumer: a slowdown looks increasingly likely
Households are under pressure
If there is one part of the economy facing a tougher stretch ahead, it is the Australian consumer. Our view is that consumer spending is likely to slow over the next six to 12 months as households remain under pressure from high interest rates, still-elevated inflation and higher petrol prices.
The first headwind is interest rates. The Reserve Bank lifted the cash rate to 4.10% in March and made clear that further tightening may still be needed. That means policy is already restrictive, and households cannot count on rate relief arriving soon. Mortgage repayments are taking up a larger share of income, and even if rates do not rise again, they are high enough to keep consumers cautious.
Inflation is the second pressure point. While it has eased from its peak, it is still above the RBA’s 2–3% target range. Headline CPI at 3.7% and trimmed mean inflation at 3.3% show that price pressures remain too strong for the central bank to relax and too persistent for households to feel comfortable. Housing and food costs continue to rise, leaving households with less flexibility in their budgets. When essentials keep getting more expensive, discretionary spending is usually where consumers pull back.
Petrol prices and weak confidence
Petrol prices have added another layer of strain. The jump in oil prices following the Middle East conflict pushed fuel costs sharply higher, and while petrol prices have come off their peak, they remain elevated enough to weigh on household budgets. Petrol is one of those costs consumers notice immediately. It affects not only weekly cash flow, but also confidence. For many households, especially in outer suburban and regional areas, higher fuel prices leave less room for spending elsewhere.
That pressure is already showing up in sentiment. Consumer confidence remains at historically weak levels, suggesting households are feeling stretched and uncertain about the outlook. When confidence is this low, spending behaviour usually changes. Consumers delay non-essential purchases, become more selective and think harder about major expenses. That suggests consumer spending is likely to slow in the months ahead.
The labour market may be less supportive than it looks
The labour market has held up on the surface, with unemployment at 4.3% and full-time employment rising in March. But we would be cautious about treating that as a strong offset to the pressures facing households. Public spending has played an important role in supporting employment growth for some time, with public-sector jobs growth outpacing private-sector jobs growth.
That matters in the context of the May Federal Budget. The government appears to be leaning more towards restraint and savings, with the proposed NDIS overhaul reinforcing that direction. If public spending becomes less supportive, employment growth is likely to weaken, particularly across government-related roles and service providers. Over time, that could remove one of the few remaining supports for households and add to the slowdown in consumer spending.
What it means for investors
For investors, this points to a more cautious outlook, with the Australian consumer looking increasingly vulnerable. Higher rates, stubborn inflation and elevated petrol prices are already weighing on spending, and a more restrained fiscal backdrop could add to the slowdown. The consumer is not collapsing, but the outlook is weakening, and discretionary spending looks particularly exposed.
In Australia, focus will be on March CPI and trimmed mean inflation alongside private-sector credit and producer prices, providing key signals for RBA policy outlook.
Overseas, attention will be on the US Federal Reserve rate decision, with rates expected to be remain at a target range of 3.5%-3.75%.