United States
The pre-Fed nerves finally caught up with Wall Street on Monday, snapping a four-day winning streak as investors grew anxious about the pace of rate cuts heading into 2026.
The S&P 500 slipped 0.3 per cent after closing within touching distance of an all-time high on Friday. The Nasdaq 100 shed 0.2 per cent while the Dow Jones Industrial Average dropped 0.4 per cent. US Treasuries joined a global bond sell-off, with the 10-year yield climbing around three basis points to 4.17 per cent.
While a quarter-point rate cut at Thursday’s Fed meeting appears all but locked in, traders are scaling back expectations for how much further easing might come next year. Money markets are now leaning toward just two more cuts by the end of 2026, down from three barely a week ago. The looming decision could prove one of the most contentious in recent memory, with dissent expected from both hawks and doves on the Federal Open Market Committee.
Kevin Hassett, the White House National Economic Council Director and a front-runner to replace Jerome Powell as Fed chair when his term ends in May, told CNBC it would be irresponsible for the central bank to commit to a specific rate path over the coming six months.
A flurry of merger activity failed to lift spirits. Warner Bros. Discovery jumped 7.2 per cent after Paramount Skydance launched a hostile $US108.4 billion bid for the Hollywood studio, trumping Netflix’s earlier offer with a $US30-per-share cash proposal. President Donald Trump raised potential antitrust concerns about Netflix’s planned $US72 billion takeover, noting the combined entity’s market share could pose problems. Netflix shares fell 2.8 per cent.
In other deal news, IBM announced plans to acquire enterprise software firm Confluent for about $US9.3 billion in a major bet on artificial intelligence tools. JPMorgan made headlines by luring away Berkshire Hathaway’s Todd Combs, one of Warren Buffett’s two investment managers, for a broad strategic advisory role.
Europe
European stocks traded in a holding pattern as investors waited for clarity from the Fed while digesting hawkish signals from the European Central Bank.
The Stoxx 600 finished marginally lower, with ECB board member Isabel Schnabel becoming the first senior official to suggest European rates may have reached a floor.
Defence stocks were the standout performers as US-brokered peace negotiations over Ukraine remained deadlocked on territorial questions. Rheinmetall surged 3.6 per cent after earning a new buy rating, while Rolls-Royce climbed 2.1 per cent on an order for more than 300 Leopard-2 tank engines.
Banks also outperformed, with BNP Paribas up 1 per cent after selling its stake in AG Insurance for €1.9 billion. Belgian insurer Ageas struck a €1.9 billion deal to take full control of AG Insurance.
The automotive sector retreated from three-month highs, with Ferrari dropping 3.5 per cent after its plans to limit volume growth triggered a downgrade. Volkswagen slipped 0.5 per cent as it outlined €160 billion in investments through to 2030.
In healthcare, JPMorgan reshuffled its views on big pharma, upgrading Bayer (which jumped 4.7 per cent) and Roche (up 2.2 per cent) while cutting Sanofi (down 1.6 per cent). L’Oréal fell 2 per cent despite doubling its stake in injectable fillers company Galderma. Unilever’s ice cream spinoff, The Magnum Ice Cream Company, began trading following its demerger.
Real estate was the day’s worst-performing sector, with Vonovia tumbling 4.9 per cent.
Australia
The local market faces a cautious open, with S&P/ASX 200 futures pointing to a 0.3 per cent decline. All attention today turns to the RBA’s 2.30pm interest rate decision, where the cash rate is widely expected to remain on hold at 3.6 per cent.
The bigger question is whether Governor Michele Bullock strikes a hawkish tone in her post-decision commentary. Bond markets are now pricing in at least one rate increase next year – a dramatic shift from expectations of cuts just weeks ago. Stronger economic data and persistent inflationary pressures have fuelled speculation the next move could be up rather than down.
According to Morningstar, the recent market pullback has dragged Australian equities back to fair value, creating opportunities across several sectors. The equal-weighted market is now trading just 2 per cent above fair value, compared with a near-10 per cent premium at August’s peak. More than a third of Morningstar-covered stocks are now undervalued, with energy names such as Woodside Energy and Santos trading at almost half their fair value estimates.
Among stocks to watch, Bapcor cut its first-half earnings guidance and warned of soft October and November trading, with price cuts in its Trade division hitting margins. National Storage could see action with Brookfield and GIC reportedly nearing a binding offer. Aristocrat was upgraded to BBB by Fitch, while Immutep announced Dr Reddy’s secured a licence for its cancer drug for $20 million upfront.
ASIC has filed civil penalty proceedings against Diversa Trustees over alleged failures in overseeing the First Guardian Master Fund, where around $300 million was invested between 2020 and 2024.
Commodities and currencies
Copper continued its blistering rally, hitting a fresh record of US$11,705 per tonne before settling 1.5 per cent higher at US$11,620.50 on the London Metal Exchange. Citi analysts are forecasting prices could average US$13,000 in the second quarter as US stockpiling drains inventories elsewhere. The metal has gained more than 30 per cent this year.
Iron ore retreated as China’s steel sector showed seasonal fatigue, with port stockpiles jumping 2.4 per cent to 142.4 million tonnes.
WTI crude steadied around US$60 per barrel, while Brent settled at US$63.75. Gold eased 0.2 per cent to US$4,197.78 an ounce, and silver hit fresh records on strong ETF inflows.
The Australian dollar firmed 0.4 per cent to US66.38 cents, while the euro held steady at US$1.1641.
Economic Calendar
AU:
- RBA Cash Rate Target 14:30
US:
- Leading Index Sep 02:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
