United States
Inflation data released on Tuesday reminded investors of the impact tariffs can have on prices, with the Consumer Price Index (CPI) rising 0.3% in June—matching economists’ expectations. The core CPI, which excludes food and energy, came in at 2.9% year-on-year. This reading led traders to scale back their expectations for a September rate cut, now seeing the odds as a 50:50 chance.
As a result, bond yields climbed. The US 10-year Treasury yield rose 5 basis points to 4.48%, while the 30-year yield breached the key 5% level, closing at 5.02%. A mix of corporate earnings—particularly from the banking sector—and stock-specific news also contributed to market volatility.
By the close of trading, the Dow Jones Industrial Average had dropped 0.98%, losing 436 points to finish at 44,023. The S&P 500 fell 0.40% or 25 points to 6,243, while the Nasdaq Composite edged higher by 0.18% to 20,677, buoyed by a 4% surge in Nvidia. Overall, ten of the eleven S&P 500 sectors closed lower, with materials, healthcare and financials leading the declines. Technology was the only sector to post gains.
The tech rally was driven by Nvidia, which climbed $6.63 to $170.70 after announcing it would soon resume sales of its H20 AI chips to China, following the receipt of export licences from the US government. Exports had been halted in April due to new licence requirements. The announcement also lifted other semiconductor stocks.
Bank earnings presented a mixed picture. JPMorgan initially rose on stronger-than-expected trading and investment banking revenue but reversed to close 0.74% lower. Wells Fargo beat expectations but fell sharply—down 5.48%—after issuing lower forward guidance. Conversely, Citigroup gained 3.68% after posting better-than-expected earnings.
Asset managers BlackRock and State Street both declined significantly, falling 5.88% and 7.29% respectively, as earnings reports failed to meet investor expectations in key areas.
Materials weighed on the market, falling 2.11% as the sector continued to retreat from recent highs. Gold miner Newmont dropped 5.71% following the surprise resignation of its Chief Financial Officer, who had held the role for just two years. A decline in gold prices added further pressure. Bulk miner Freeport-McMoRan also fell, down 2.99%.
Looking ahead, investors will turn their focus to June’s Producer Price Index (PPI), expected to show a 0.2% increase. Following the CPI release, analysts now expect the Federal Reserve to wait for additional data before moving on rates. Kay Haigh of Goldman Sachs Asset Management summed up the analyst’s mood by commenting, “Price pressures are expected to strengthen over the summer, and the July and August CPI reports will be important hurdles to overcome.” Adding “for the time being, the Fed remains in a wait and see mode”
Europe
European equity markets retreated on Tuesday as investor sentiment was weighed down by renewed concerns over EU–US trade negotiations. Claims from EU officials that the US was resisting efforts to reach a trade agreement pressured major indices across the region, with most bourses closing in negative territory. The Euro Stoxx 600 slipped 0.37% to close at 544.95. In the UK, the FTSE 100 pulled back from its record intraday high, ending the session down 0.66% at 8,938.
The fall in the Euro Stoxx 600 reflected growing uncertainty surrounding the proposed 30% US tariff, which remains a key concern for markets. While many investors had assumed the proposed tariff was a negotiation tactic, the lack of assurance or progress has prompted caution. If the tariffs are implemented as planned, they may have broader implications for global trade and risk sentiment.
On the economic front, German investor morale continued to improve in July, supported by expectations of increased government spending. However, economists warned that this optimism could quickly fade if a trade agreement with the US is not reached.
European banks mirrored the decline seen in US financial stocks, with Societe Generale falling 2.05% and Banco Santander losing 1.20%. Healthcare was the weakest sector in Europe, led lower by GSK, which dropped 1.5% after the US FDA raised concerns about one of its blood cancer treatments. Novo Nordisk also declined, down 2.29%.
In fixed income markets, yields on German government bonds edged lower, with the benchmark 10-year Bund yield falling 2 basis points to 2.71%. Meanwhile, UK 10-year gilt yields rose 2 basis points to 4.62%.
Australia
The ASX200 closed at a record high on Tuesday, gaining 59.9 points or 0.70% to finish at 8,630.30. While the index held onto its overnight gains, it has yet to break through its intraday high of 8,639 set in early June. The advance was broad-based, with ten of the eleven sectors finishing higher. The only sector to decline was materials, while technology and healthcare led the gains.
The materials sector pulled back as iron ore prices retreated from recent highs, prompting some profit-taking. BHP declined 0.86% to $39.39, Fortescue dropped 0.71%, and Rio Tinto fell 1.3% following the announcement that Simon Trott, who currently leads its iron ore division, will become CEO in August. However, gold miners provided support to the sector, buoyed by stronger gold prices. Newmont rose 1.11%, and Evolution gained 1.58%, further supported by broker upgrades.
Healthcare stocks were lifted by CSL, which surged 3.75% to $250.66 on speculation the company is planning to consolidate its research and development division. Pro Medicus also advanced, up 2.44%. Tech shares saw strong buying interest following a positive lead from the US, with WiseTech rising 1.76% and Life360 soaring 7.97% to $35.23—its best day in three months.
Banks were mostly in favour, reflecting a “risk-on” tone. Commonwealth Bank added 0.58%, and Macquarie gained 1.41%. NAB, however, slipped 0.13% to $39.61 after reports in the AFR and Sydney Morning Herald raised concerns about CEO Andrew Irvine’s leadership.
In other financial news, the RBA proposed a ban on credit and debit card surcharges to reduce consumer costs. The proposal will now undergo industry consultation before any implementation. Payment provider Tyro dropped 2.72% in response.
Telstra also posted strong gains, climbing 1.7% to close at $4.86—its highest close since February 2017.
On the economic front, consumer confidence, as measured by Westpac’s latest survey, rose to 93.1 in July from 92.6 in June. Bond yields were steady, with the 10-year yield holding at 4.37%.
Australian shares are expected to open lower on Wednesday, with ASX200 futures down 66 points, or 0.76%, indicating a soft start to the session. Sentiment was weighed down by a sharp decline in BHP’s US-listed shares, which closed in New York at the equivalent of A$38.65, down 1.88% from Tuesday’s local close.
The Australian dollar also weakened overnight, trading at US$0.6515 against the greenback
Commodities
Gold prices slipped on Tuesday, falling 0.57% to close at US$3,324, as traders remained focused on tariff developments and reassessed expectations for interest rate cuts. The marginal decline was attributed to reduced optimism that rates would fall in the near term. Silver also weakened, dropping 1.13% to US$37.71.
Oil prices declined as well, with West Texas Intermediate (WTI) falling 0.69% (down US$0.46), while Brent crude dropped 0.46% to US$68.89. Ongoing concerns over secondary sanctions on Russian oil continue to weigh on sentiment, although the 50-day deadline for Russian action keeps this risk factor on the back burner for now.
In base metals, copper edged higher to close at US$9,646 per tonne on the London Metal Exchange. Meanwhile, iron ore declined 0.65% to US$98.70 for Singapore futures. Traders appeared divided in their outlook for industrial metals following the release of better-than-expected trade data from China. While increased activity typically supports demand for commodities, it has also led to speculation that the Chinese government may now delay or withhold further economic stimulus.
The US dollar continued to strengthen, rising 0.41% on the Bloomberg Dollar Index. The greenback has now recovered 1.85% from its early July low, marking a firm rebound in recent weeks.
Economic Calendar
US:
- Producer Price Index -PPI (Jun) – 10:30pm
- Industrial production (Jun) -11:15pm
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
