United States
Wall Street bounced back on Friday after a three-day slide, with investors seizing on dip-buying opportunities following key inflation data that matched expectations. The S&P 500 rose 0.6%, the Nasdaq 100 gained 0.4%, and the Dow Jones Industrial Average climbed 0.8%.
The personal consumption expenditures price index excluding food and energy rose 0.2% in August, compared with 0.3% in July, giving the Federal Reserve breathing room as it navigates between cooling labour markets and persistent inflation pressures. The core measure remained at 2.9% annually, above the Fed’s 2% target but in line with forecasts.
Technology stocks showed signs of fatigue, with analysts noting that the recent tech rally appears to be losing momentum. The relative performance and valuation of tech stocks compared to the broader market have reached levels where a shift in leadership may be warranted, though this doesn’t necessarily require a significant correction.
Pharmaceutical companies rallied after President Trump’s announcement of 100% tariffs on branded and patented drug imports included exemptions for companies with US manufacturing facilities. Drugmakers, including Eli Lilly and Merck advanced as investors viewed the exemptions as softening any potential blow.
Europe
European markets gained ground, with the Stoxx 600 advancing 0.8% as better-than-expected US personal spending data overshadowed Trump’s tariff announcements on patented drugs. Energy and mining stocks led weekly gains after metal prices hit fresh records and oil surged on increased tensions between Russia and NATO.
The banking sector outperformed with a 1.5% gain, while the insurance sector jumped 2.1%. Construction stocks also performed well, rising 1.0%. Healthcare stocks underperformed amid uncertainty over the US tariff implications, with the sector finishing little changed.
Energy stocks gained 1.2% as Russia indicated that NATO’s readiness to potentially shoot down Russian jets represented an escalation. This geopolitical tension supported oil prices throughout the session.
The automotive sector struggled, with truckmakers particularly pressured by Trump’s fresh tariff plans. The sector managed only a 0.3% gain despite some individual bright spots, as investors weighed the implications of potential trade restrictions.
Australia
Australian markets are set to open higher, with ASX 200 futures indicating a 21-point or 0.2% gain to 8,805.5. This follows the positive lead from Wall Street, where all three major US indices advanced on Friday.
The Reserve Bank of Australia takes centre stage this week, with economists widely expecting the cash rate to remain on hold at 3.6% on Tuesday. However, strategists anticipate Governor Michele Bullock’s communication to be less dovish than previous meetings, signalling that rate cuts may be further away than traders had anticipated.
This shift reflects more adverse inflation developments since the August meeting, when inflation rose to 3% in August from 2.8% in July – its highest level in a year. The central bank is expected to signal that near-term rate relief remains unlikely.
Several Australian companies are in focus following Friday’s developments. CSL, Telix and Mesoblast will be watched closely after confusion dominated Friday’s trading regarding the impact of Trump’s pharmaceutical tariffs. These healthcare stocks ended Friday’s session lower amid the uncertainty.
Synlait Milk announced the sale of its North Island assets to Abbott for $271 million, with completion targeted for April 2026. The company’s majority shareholder has voted in favour of the transaction.
Commodities and currencies
Oil prices posted their biggest weekly gain since June, with Brent crude trading above $70 per barrel in early Monday trade after jumping more than 5% last week. Support came from continuing Ukrainian strikes against Russian oil infrastructure and prospects of additional sanctions that could disrupt supply.
Gold continued its strong run, rising 0.3% to near $3,760 per ounce, heading for a sixth consecutive weekly gain amid risk-off sentiment and continued ETF flows.
The Australian dollar recovered from three-week lows, trading at US65.49¢ early Monday after hitting US65.18¢ on Friday. The currency shed 0.7% last week – its second consecutive week of losses – as strong US economic data lifted the greenback.
Currency markets showed broader US dollar weakness, with the euro rising 0.3% to $1.1703 and the British pound gaining 0.5% to $1.3410. The Japanese yen strengthened 0.2% to 149.43 per dollar.
Economic Calendar
US:
- Pending Home Sales MoM Aug 00:00
- Dallas Federal Manufacturing Activity 00:30
EU:
- Consumer Confidence Sep 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.
