United States
Wall Street delivered another strong session overnight as easing inflation pressures bolstered expectations for imminent Federal Reserve rate cuts. The S&P 500 climbed 0.3% to fresh record highs, supported by a rally in technology shares and a blockbuster performance from Oracle. The software giant surged 36% after presenting an upbeat outlook for its cloud computing business, sparking gains across the broader semiconductor sector, with Nvidia advancing 3.9%.
The rally was underpinned by data showing the US Producer Price Index (PPI) unexpectedly fell 0.1% in August, its first decline in four months. July’s reading was revised lower as well, easing concerns that tariffs were flowing through to consumers. Year-on-year, producer prices rose 2.6%, still moderate by recent standards. Analysts noted that while trade services margins drove much of the fall, the numbers reinforced the view that the Fed is set to cut rates when it meets next week.
Traders have now priced in three rate reductions for 2025, and speculation of a 50-basis-point cut next week has gained traction, though consensus remains around a quarter-point move. Fed Chair Jerome Powell recently signalled willingness to respond to labour market weakness, with the latest jobs data pointing to slowing momentum. President Trump added to the pressure, publicly urging the Fed to make a “big” rate cut. The 10-year Treasury yield slipped five basis points to 4.04%, while two-year yields eased to 3.54%.
Market strategists highlighted the balance between falling producer prices and weakening labour demand. While the inflation relief is welcome, some economists cautioned that softer producer pricing could also hint at a cooling economy. Nevertheless, equities continue to ride the artificial intelligence wave, with investors using volatility to build exposure to the sector. The Nasdaq finished little changed, while the Dow Jones slipped 0.5% as industrial names lagged.
Europe
European equities held broadly steady, with the Stoxx 600 index slipping just 0.02%. Investor sentiment was caught between optimism over US monetary easing and renewed geopolitical tensions. Polish forces shot down Russian drones that crossed into its airspace, pushing defence stocks higher but weighing on airlines. Industrials led gains, with Schneider Electric up 2.5% and Rheinmetall climbing 3.3% after reaffirming profit goals.
Retail stocks outperformed as Zara-owner Inditex jumped 6.5% following a strong start to its third quarter, lifting peers H&M and Zalando. In contrast, Associated British Foods sank 13.2% after revealing weakness in both its Primark clothing business and sugar unit, dragging the broader food sector lower. Novo Nordisk was another standout, rising 3.7% as the drugmaker announced plans to cut 9,000 jobs, a move seen by investors as a sign of management discipline.
Energy stocks also gained, with the sector up 0.6% as oil prices extended a three-session climb. Siemens Energy rallied 4.6% and Vestas added 1.1%. The geopolitical backdrop, combined with President Trump’s tariff threats on Russian crude buyers, provided support for crude-linked names.
European technology stocks fell, as Oracle’s upbeat cloud outlook drew attention to weak demand for older software products. SAP fell 2.9%, dragging the broader tech sector down 1.6%. Overall, the picture across Europe was one of divergence: strength in retail, industrials, and energy offset by softness in food, chemicals, and technology.
Australia
The local market looks set to open lower despite Wall Street’s gains. Futures for the S&P/ASX 200 were down 0.2%, pointing to an opening fall of around 20 points. The benchmark closed yesterday at 8,830.40 after a modest 0.3% rise.
A raft of company-specific news will be in focus. ANZ Group remains under the spotlight following the exit of its markets chief as the bank pushes ahead with a major overhaul. Woodside Energy announced a significant 15-year LNG supply pact with Malaysia’s Petronas, underscoring the long-term demand for Australian gas. Meanwhile, Spark New Zealand unveiled plans to introduce satellite-to-mobile services in the second half of FY26.
In broker calls, Amcor was reinstated as a buy at Goldman Sachs with a price target of A$16.50, while Suncorp received a boost from UBS, which upgraded the insurer to buy with a A$23.15 target. Centuria Industrial and Garda Property Group were also upgraded, reflecting selective optimism in the real estate and packaging sectors.
On the economic front, Canberra announced plans to spend $1.1 billion on underwater strike drones, highlighting continued investment in defence capability. This comes as geopolitical risks remain heightened globally. Australian bond yields were mixed, with the 10-year edging up to 4.27%. The three-year rose slightly to 3.44%.
Commodities and currencies
Commodity markets were buoyant. Brent crude climbed 1.8% to $US67.57 a barrel, extending gains as traders weighed the fallout from Middle East tensions and the potential impact of new US tariffs on Russian crude buyers. West Texas Intermediate also advanced 1.8% to $US63.78 a barrel.
Gold added 0.4% to trade near record levels at $US3,641 an ounce, supported by expectations of Fed rate cuts and ongoing geopolitical unease. Iron ore slipped 0.3% to $US107 a tonne, highlighting a more cautious tone in bulk commodities despite strength elsewhere.
In currency markets, the Australian dollar firmed 0.4% to US66.13¢, reflecting higher commodity prices and a softer US dollar. The euro and pound were broadly steady, while the Japanese yen hovered at 147.40 per dollar. Bitcoin added nearly 2% to trade at $US113,641, continuing its march higher alongside broader risk sentiment.
Economic Calendar
US:
- CPI (MoM and YoY) 22:30
- Initial Jobless Claims 22:30
EU:
- ECB Deposit Facility Rate Aug 22:15
- ECB Main Refinancing Rate Aug 22:15
- ECB Marginal Lending Facility Aug 22:15
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
