Market update: 27 May 2025
The ASX 200 ended the week slightly higher, rising 0.2% after the Reserve Bank of Australia (RBA) cut interest rates from 4.10% to 3.85%. This decision was expected by most economists, as the RBA noted that global trade tensions — particularly from rising US tariffs — could slow down economic growth. Five of the eleven major sectors finished in positive territory, led by gains in Telecommunications and Technology. While the rate cut may offer some short-term relief, the outlook remains cautious as international uncertainty continues.
In the US, financial markets had a tough week. The big news was a downgrade of the US government’s credit rating by Moody’s, a major ratings agency. This means Moody’s now sees the US as a slightly riskier borrower than before, due to rising national debt and concerns about how the government will manage its finances. On top of this, President Trump announced a new 50% tariff on goods from the European Union, which added to worries about a possible trade war. As a result, US share markets fell, with the S&P 500, Nasdaq, and Dow all down more than 2.5% for the week.
In Europe, markets were mixed. The FTSE rose slightly, but other major indices like the Stoxx Europe 50 and Stoxx Europe 600 fell as investors reacted to the US tariff news. The European Commission also lowered its inflation forecast, which could lead to interest rate cuts later this year. In Greater China, markets and indices had a mixed response too — the Hang Seng rose, while the Shanghai Composite dipped slightly. China also cut interest rates to help boost spending, marking its first move like this in seven months.
Japan’s share market finished the week down 1.6%. Investors were cautious after the US credit downgrade, but Japan’s economy also showed signs of rising inflation, with prices increasing more than expected in April. A weaker yen helped some exporters, but uncertainty remains around future economic policies.
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