United States
Wall Street lost momentum overnight, with a rally that had carried major indices to the brink of record highs fading as investors reassessed the outlook for Federal Reserve policy. The S&P 500 fell 0.4%, the Dow Jones Industrial Average dropped 0.8%, and the Nasdaq 100 slipped 0.3%. Around 400 companies in the S&P 500 traded lower, with small caps under pressure as the Russell 2000 slid 1%. Still, megacap technology names provided some support, with Alphabet reaching a fresh all-time high and Nvidia edging higher ahead of its closely watched results mid-week.
The shift came as doubts emerged over the pace of expected rate cuts. While Jerome Powell signalled on Friday that a September reduction was likely in light of softening jobs data, markets are bracing for a firmer inflation read later this week. Consensus expects the Fed’s preferred core PCE index to rise 2.9% from a year earlier, its fastest increase in five months. That outcome would underscore the tension between inflation that remains above target and a labour market showing cracks. US 10-year Treasury yields climbed three basis points to 4.28% and the dollar firmed, adding to risk-off sentiment.
Money markets are still pricing in an 80% chance of a September cut, with two reductions in total this year, but the conversation has shifted. Analysts are now asking whether the first move will be a dovish cut signalling more to come, or a hawkish one-off recalibration. Powell’s Jackson Hole remarks were seen as measured, with Evercore noting that the repricing of odds was “not excessive.” UBS expects Powell to advocate for easing unless incoming data surprises to the upside, while strategists at Glenmede flagged that Fed leadership changes next year could tilt policy in a more dovish direction.
For equities, Nvidia’s results loom large. The stock, up 90% since April, carries the heaviest weight in the S&P 500 at almost 8% and sits at the centre of the artificial intelligence boom. Traders are looking for its earnings and guidance to validate elevated valuations and ease concerns that AI enthusiasm has run too far. With its chips powering platforms at Meta, Microsoft, Alphabet, and Amazon, Nvidia has become a bellwether for broader sentiment. Yet expectations are high, and as analysts caution, the margin for error is shrinking.
Europe
European shares mirrored Wall Street’s cautious tone, weighed down by political and sector-specific headwinds. The Stoxx 600 index slipped 0.4% as weakness in renewables overshadowed isolated corporate strength. Ørsted plunged as much as 19% to a record low after US authorities halted construction on an almost-finished offshore wind farm, while Vestas fell 3.5%. The setback came as investors were already nervous about the political climate: France’s CAC 40 lost 1.6% late in the session after Prime Minister François Bayrou announced plans to call a confidence vote on 8 September. French banks and insurers were hardest hit, with BNP Paribas down 3.5% and AXA sliding 3.8%.
There were pockets of resilience. JDE Peet’s surged 17% after Keurig Dr Pepper unveiled a €15.7 billion takeover deal aimed at revitalising its coffee business. By contrast, biotech firm Valneva collapsed 22% after the suspension of its mosquito-borne disease vaccine trial in the US. On the fixed income side, German 10-year bund yields rose four basis points to 2.76%, while UK 10-year gilts held near 4.69%. The moves underline persistent uncertainty as Europe grapples with political risk and diverging inflation pressures heading into September.
Australia
The ASX 200 briefly pushed to a record intraday high of 9,054 before losing steam, closing just five points higher at 8,972.40. Optimism early in the session, driven by Powell’s remarks and firmer iron ore prices, gave way to caution as bank weakness and disappointing earnings dominated. Six of the 11 sectors ended in the red, with financials leading the pullback. The big four banks all fell between 1.4% and 1.8%, reflecting cautious sentiment after earnings updates.
Resources helped cushion the index. Iron ore futures in Singapore rose 2.3% to USD 102.85 a tonne, supporting BHP (+2.7%), Fortescue (+2.6%) and Rio Tinto (+2.4%). Energy stocks also added to gains, with Santos up 0.6% after extending due diligence with a Middle Eastern suitor until mid-September and delivering in-line first-half results. Outside of resources, earnings season delivered sharp moves. Reece tumbled 16.4% after flagging a 20% profit drop, while Endeavour fell 1.4% on a weaker alcohol demand backdrop. By contrast, Ansell jumped 10.3% after EPS exceeded upgraded guidance, and PLS rose 2.4% after an EBITDA beat. NIB added 2.7% on stronger profit and investment returns. Smaller caps posted outsized gains, with Southern Cross Media soaring 26.5% on a turnaround plan and Aussie Broadband rallying 20.2% on upbeat FY26 guidance and a divestment deal.
Looking ahead, futures indicate a softer open, with SPI contracts down 24 points to 8,925 in line with Wall Street. Investors will digest results from G8 Education and Coles today, followed by Woolworths on Wednesday. RBA minutes from the August meeting will also be released this morning but are not expected to shift the policy outlook.
Commodities and Currencies
Commodity markets delivered a mixed session. Oil extended gains, with Brent up 1.6% to USD 68.78 and WTI up 1.8% to USD 64.78, supported by supply-side factors. Iron ore rose 2.6% to USD 103.25, reinforcing miners’ strength on the ASX. Gold softened 0.2% to USD 3,365.38 an ounce, as investors rotated away from safe havens on rate cut expectations.
In currencies, the US dollar advanced broadly, pushing the Bloomberg Dollar Spot Index up 0.5%. The euro fell 0.9% to USD 1.1610, sterling dropped 0.5% to USD 1.3454 and the yen weakened 0.6% to 147.82 per dollar. The Australian dollar was little changed at USD 0.6481, reflecting both firmer commodity prices and global caution.
Cryptocurrencies were weaker, with Bitcoin down 2% to USD 110,537 and Ether tumbling 7.6% to USD 4,421. In bond markets, US yields moved higher across the curve, with the two-year up three basis points to 3.73% and the 30-year up two basis points to 4.89%. German bund yields also rose, while UK gilts were steady, underscoring diverging views across major economies as investors await key data later this week.
Economic Calendar
AU:
- Reserve Bank of Australia Policy Minutes 11:30
US:
- Durable Goods Orders (Jul) 22:30
- Conference Board Consumer Confidence (Aug) 00:00
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
