United States
Wall Street ended a subdued session overnight as investors adopted a cautious stance in the lead-up to the Federal Reserve’s highly anticipated policy announcement due early Thursday morning AEST. The S&P 500 edged 0.1% lower, holding just above 6,600 points, while the Dow slipped 0.3% and the Nasdaq broke a nine-day winning streak with a fractional 0.07% decline.
Market participants are widely expecting the Fed to cut rates by 25 basis points, which would mark the first reduction of the year. The bigger question lies in the accompanying economic projections and the tone struck by Chair Jerome Powell. Investors will be looking for clarity on whether policymakers see scope for one or two more rate cuts before the year is out. Bond markets are already signalling increased hedging for larger moves, with some traders positioning for the possibility of a half-point cut by December.
Recent economic data did little to shift the mood. US retail sales rose 0.6% in August, marking a third consecutive month of strong gains, with control-group sales — which feed into GDP — climbing 0.7%. The numbers suggest American consumers remain resilient despite signs of weakening in the jobs market and higher costs from tariffs. While such results are encouraging for growth, they also complicate the Fed’s efforts to balance inflation risks with supporting employment.
Treasury yields eased slightly, with the benchmark 10-year yield slipping to 4.03% and the two-year note at 3.51%. The US dollar softened to its lowest level in more than 10 weeks, providing a lift to commodities. Gold briefly surged through USD 3,700 an ounce for the first time, underscoring continued investor appetite for havens. Bitcoin traded steadily around USD 116,000, while ether also posted small gains.
Europe
European equities finished broadly lower, with the Stoxx 600 down 1.1% as investors grappled with central bank uncertainty and renewed tariff tensions. Reports that the US is weighing new levies on imported auto parts weighed on sentiment, though the automotive sector proved relatively resilient. Renault rose 0.6% while Volkswagen and BMW slipped modestly.
Industrial stocks underperformed, led by declines in Siemens, Schneider Electric and Rheinmetall. Thyssenkrupp bucked the trend with a 4.4% surge after receiving an offer from India’s Jindal for its steel division, reviving hopes for long-awaited consolidation in Europe’s steel industry. In the consumer space, Puma gained nearly 3% amid speculation of potential takeover interest from Adidas, while luxury goods group Kering climbed after an analyst upgrade.
Financials were the heaviest drag on the market. Adecco dropped 5% after a broker downgrade, while Deutsche Bank, Santander and HSBC all traded lower as investors digested reports of additional tax measures being prepared by Italy. Insurance stocks also struggled, with Allianz, Zurich Insurance and Munich Re each falling more than 2%.
Elsewhere, miners and basic resource firms outperformed, buoyed by record gold prices and firmer iron ore. Rio Tinto and Glencore both advanced, while Anglo American struck a significant deal with Codelco to expand copper output. Energy companies were steadier, with BP, Shell and Neste rising modestly as oil prices benefited from mounting geopolitical tensions in the Middle East and renewed pressure on Russian supply.
Australia
Australian shares are set for a weaker open, with ASX 200 futures pointing 0.4% lower at 8,881. The tone follows Wall Street’s caution and European softness, despite strength in commodities.
BHP will dominate domestic headlines after confirming it will cut 750 jobs across its Queensland coal operations, citing weak coal prices and high state royalty rates. The miner will mothball its Saraji South mine in November and is reviewing the future of its FutureFit training academy, which has been a pathway for women and newcomers into the sector. The decision is expected to spark political debate given the tensions between resource companies and state authorities over royalty policy.
On the corporate side, Paladin Energy announced it had successfully raised A$300 million in equity, providing additional capital to support growth plans. Macquarie Asset Management committed USD 350 million to renewable energy group Nexamp, underscoring the continued momentum behind green investment strategies. Westpac reported weaker consumer sentiment in New Zealand, highlighting the strain on households even after recent rate cuts.
Today’s domestic calendar features a speech from Reserve Bank of Australia assistant governor Brad Jones at the Intersekt 2025 Conference in Melbourne. Investors will be paying close attention for any additional commentary following remarks earlier this week from RBA chief economist Sarah Hunter, who said the central bank is “pretty close” to achieving its twin targets of low inflation and strong employment. That message has reinforced the expectation that the RBA is nearing the end of its tightening cycle and could hold steady for an extended period.
Commodities and currencies
Commodities delivered a mixed but generally supportive picture. Gold continued to trade near record highs at USD 3,690 an ounce, bolstered by a weaker dollar and mounting speculation of global monetary easing. Brent crude added 1.6% to USD 68.50 a barrel, while iron ore advanced 0.7% to USD 106.30 a tonne as Chinese steel production showed tentative signs of stabilisation.
In currencies, the euro climbed to its highest level since 2021 at USD 1.1867, supported by broad dollar weakness. The Australian dollar firmed 0.2% to US66.85¢, while the New Zealand dollar gained 0.3% to US59.88¢. Both currencies benefited from commodity strength and a more positive regional growth outlook.
Bond markets reflected steady demand for safe assets. The US 10-year yield eased to 4.03%, while in Australia the 10-year yield fell to 4.22%. Shorter-dated bonds also rallied, with the three-year yield dropping nearly four basis points to 3.42%.
Economic Calendar
US:
- MBA Mortgage Applications Sep 21:00
- Housing Starts Aug 22:30
- Building Permits Aug 22:30
- FOMC Rate Decision 04:00
AU:
- Westpac Leading Index MoM 10:30
EU:
- CPI YoY 19:00
- CPI MoM 19:00
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
