United States
Wall Street closed marginally lower overnight as markets digested the latest Federal Reserve decision and commentary from Chair Jerome Powell, who pushed back against expectations for a September rate cut. The S&P 500 slipped 0.1%, the Dow Jones Industrial Average shed 0.4%, while the tech-heavy Nasdaq 100 edged up 0.2% thanks to strong after-hours earnings from Microsoft and Meta Platforms.
Investors had initially responded calmly to the Federal Open Market Committee’s decision to hold the federal funds rate steady at 4.25%–4.50%, but Powell’s post-meeting comments shifted the mood. Emphasising that the labour market remains solid and inflation is still above target, Powell indicated that no decision had been made on future easing, sending two-year Treasury yields up seven basis points to 3.93% and sparking the biggest bond sell-off in two weeks.
The market’s disappointment was clear in futures pricing. Odds of a September cut fell below 50%, and October is now only 85% priced in—down from 100% pre-meeting.
Despite the hawkish undertone, corporate earnings were a bright spot. Microsoft surged more than 7% in extended trading after reporting a 39% rise in Azure cloud revenue, underpinned by record capital expenditure on AI infrastructure. Meta jumped 9% post-close as advertising revenue exceeded forecasts and the company upgraded its capital expenditure outlook, underscoring its aggressive AI investments.
Still, not all earnings impressed. Ford warned that Trump’s proposed tariffs would hit 2025 profits by up to USD 2 billion. Qualcomm disappointed on smartphone chip sales, and Harley-Davidson flagged weaker demand due to high borrowing costs.
Economic data remained mixed. ADP private payrolls rose 104,000 in July—stronger than expected—but attention now turns to Friday’s official employment data. Meanwhile, Q2 GDP came in at 3% annualised, down from a 4.25% average in 2024, suggesting some moderation in growth.
Europe
European equities traded broadly flat as investors awaited the Fed’s announcement and digested a flurry of corporate earnings. The Stoxx Europe 600 was unchanged at the close, with gains in consumer goods offset by weakness in autos and financials.
L’Oréal led gainers, rising 4% after reporting strong sales in North America and renewed growth in China. Danone surged 7.4% on better-than-expected sales across most of its product lines. In contrast, Adidas plunged 12% after reporting disappointing revenues.
Banking stocks were mixed. HSBC dropped 4.5% on weak profit numbers, while UBS climbed 1.1% after beating earnings expectations. Auto manufacturers weighed on the broader index as Mercedes-Benz and Aston Martin both downgraded their outlooks amid weakening demand.
Seasonal trends may weigh on sentiment in the coming weeks. August and September have historically been challenging months for European equities, and with the Stoxx 600 just 2% shy of its March peak, investors may begin trimming positions ahead of further central bank signals and macro data.
In economic data, the Eurozone economy expanded more than forecast in Q2, coming in at 1.4% year-on-year vs 1.2% estimated, and 0.1% over the quarter vs expectations for no change.
Australia
Australian shares came within a whisker of a record high on Wednesday, buoyed by a cooler-than-expected inflation report that locked in expectations for a Reserve Bank rate cut in August. The S&P/ASX 200 rose 0.6% to 8756.40, just below its all-time high of 8757.20. Rate-sensitive real estate stocks led gains, while financials also strengthened in afternoon trade.
June quarter CPI data showed annual headline inflation slowing to 2.1% from 2.4%, with core inflation easing to 2.7%. Money markets are now fully pricing in a 25-basis-point cut in August and see room for up to three more cuts by early 2026.
Mirvac (+2.7%), Scentre Group (+1.9%), and Vicinity Centres (+1.7%) all rallied as falling bond yields boosted property valuations. The 3-year bond yield dropped 7 basis points to 3.35%. Major banks also rebounded, with Commonwealth Bank climbing 1.6% to $176.99.
Materials were more mixed. Iron ore held steady around USD 102/t, but BHP (-0.5%) and Rio Tinto (-1%) slipped, the latter posting a five-year low in half-year earnings. Fortescue rose 0.6%. Lithium miner IGO fell 7.2% after flagging production issues at its Kwinana refinery. Appen slumped 12.8% on soft guidance due to US AI market uncertainty.
On the upside, Pilbara Minerals jumped 3% after forecasting lower costs and higher output in FY26. PointsBet added 4.2% after a revised takeover bid from Betr, and PolyNovo surged 7.8% on strong FY25 earnings guidance.
With rate cut expectations rising, analysts believe Australia’s AAA rating and relatively disciplined fiscal policy could attract foreign capital, particularly to the local bond market. RBA Deputy Governor Andrew Hauser will speak this morning at the Barrenjoey Economic Forum, which could provide further clarity on the central bank’s forward path.
Commodities
Oil prices pushed higher as geopolitical tensions remained elevated. Brent crude rose 1.4% to USD 73.49 per barrel, while West Texas Intermediate gained 1.7% to USD 70.40. Gold fell sharply, down 1.7% to USD 3,270.81 per ounce, reflecting the stronger US dollar and shifting rate expectations.
Copper prices slumped following news that Donald Trump would exempt the most commonly imported form of the metal from his proposed tariffs, easing immediate supply concerns. Comex copper dropped 18% to USD 4.6055 per pound.
The Australian dollar weakened 1.1% to US64.37¢, reflecting the dovish shift in local interest rate expectations. The US dollar continued its rally, with the Bloomberg Dollar Spot Index up 0.8%. The euro fell 1.1% to USD 1.1424, and the yen slipped to 149.40 per US dollar.
Cryptocurrencies saw modest losses. Bitcoin fell 0.5% to USD 116,905, while Ether edged down 0.1% to USD 3,760.
Economic Calendar
AU:
- Building Approvals (Jun) 11:30am
- Retail Sales (Jun) 11:30am
EU:
- Unemployment (Jun) 7:00pm
US:
- PCE Inflation (jun) 10:30pm
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
