United States
Wall Street closed out August on a weaker note as technology stocks, which have led the market’s recovery since April, sold off heavily. The S&P 500 fell 0.6 per cent, the Nasdaq 100 shed 1.2 per cent, and the Dow slipped 0.2 per cent. Despite Friday’s declines, the S&P 500 still managed its fourth consecutive monthly gain, advancing 1.9 per cent in August. The Dow added 3.2 per cent over the month, while the Nasdaq rose 1.6 per cent.
The pullback came even as the Federal Reserve’s preferred inflation measure, the core personal consumption expenditures index, met forecasts, rising 0.3 per cent in July and 2.9 per cent from a year earlier. Economists suggested this keeps the door open for a September rate cut, with Fed officials including Governor Christopher Waller indicating support for a quarter-point move. Market pricing now implies an almost 90 per cent chance of such an outcome, with some strategists noting the possibility of larger cuts if labour market data deteriorates further.
Corporate earnings continued to drive stock moves. Nvidia fell 3.3 per cent on reports that Alibaba has developed its own chip, potentially threatening demand. Dell slid on slimmer margins, while AI-linked infrastructure names such as Marvell Technology retreated on concern about slowing data-centre spending. In contrast, Ulta Beauty lifted its full-year guidance after results topped expectations, and Petco upgraded its earnings forecast as its turnaround gained momentum.
Bond markets finished the week firmer, with two-year Treasury yields easing to 3.62 per cent and the 10-year yield edging up to 4.23 per cent. The US dollar was little changed across major crosses, though bitcoin retreated 3.3 per cent to just above US$108,000. Traders are now firmly focused on this Friday’s non-farm payrolls report, which will be pivotal in shaping the Fed’s path into year-end.
Europe
European equities mirrored the weaker tone from Wall Street, with the Stoxx 600 slipping 0.6 per cent. Technology stocks led losses, while UK banks such as Barclays, HSBC, Lloyds and NatWest were hit by renewed talk of a potential windfall tax.
German inflation surprised to the upside, adding to concerns about lingering price pressures across the continent, while French inflation eased further below the European Central Bank’s 2 per cent target on the back of softer services prices. Defence names including Rheinmetall and Hensoldt bucked the trend, rising after Chancellor Friedrich Merz downplayed prospects of peace talks between Russia and Ukraine.
Analysts flagged that European equities remain attractively priced relative to peers, but profit forecasts continue to drift lower. State Street’s Marija Veitmane noted that while valuations look cheap, the outlook for earnings growth remains challenging, underscoring caution as investors weigh shifting global monetary policy against weaker domestic fundamentals.
Bond yields tracked higher, with Germany’s 10-year rising to 2.72 per cent and the UK 10-year up to 4.72 per cent, reflecting persistent inflationary concerns despite hopes of looser Fed policy.
Australia
The local market is set for a softer start to the week, with ASX 200 futures pointing 25 points lower, or 0.3 per cent, at the open. The cautious tone comes after Wall Street’s Friday retreat and ahead of the US Labour Day holiday, which will keep offshore markets closed tonight.
Even so, the S&P/ASX 200 has proven remarkably resilient, climbing nearly 3 per cent in August to post a fifth straight monthly gain. The index briefly broke through the 9000-point level for the first time before settling just shy of that milestone. Reporting season drove significant volatility, with results from major corporates regularly surprising expectations.
AMP’s Diana Mousina warned that despite recent strength, risks remain. “Valuations are stretched, and September could bring a correction given uncertainties around tariffs, US debt, and softer profit outlooks,” she said. Still, she expects equities to deliver gains into year-end, underpinned by anticipated rate cuts from both the Fed and the RBA.
Locally, attention will centre this week on June-quarter GDP figures due Wednesday, with NAB forecasting a 0.3 per cent rise. Company profits data today will provide an early signal, with Westpac expecting a 1.5 per cent quarterly lift, led by mining despite commodity headwinds. RBA Governor Michele Bullock will also deliver the Shann Memorial Lecture mid-week, with markets watching closely for policy guidance.
Commodities and currencies
Commodity markets closed mixed. Brent crude slipped 0.7 per cent to US$68.12 a barrel, while West Texas Intermediate settled 1 per cent lower at US$63.97. Gold extended its rally, climbing 0.9 per cent to US$3,448 an ounce, benefiting from safe-haven flows amid equity volatility. Iron ore eased 0.4 per cent to US$103.70 a tonne, reflecting persistent demand uncertainty out of China.
In currencies, the Australian dollar edged up 0.1 per cent to US65.40¢, supported by expectations of further RBA easing later this year. The euro firmed modestly to US$1.17, while the yen and sterling were little moved.
Cryptocurrencies weakened, with bitcoin down 3.8 per cent to US$107,748 and ether off 2.6 per cent to US$4,344.
Economic Calendar
US:
- Personal Income July 22:30
- Personal Spending July 22:30
- Core PCE Price Index 22:30
- Wholesale Inventories MoM 22:30
- MNI Chicago PMI 23:45
AU:
- Private Sector Credit MoM/YoY 11:30
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
