United States
Wall Street extended its losing streak overnight, continuing its downward momentum as traders scaled back expectations for an imminent rate cut by the Federal Reserve. The S&P 500 fell 0.4%, while the Nasdaq 100 shed 0.5%, with both benchmarks deepening losses that started last week. The Dow Jones slipped 0.3% as big tech stocks came under pressure, with Walmart sinking 4.5% following a disappointing quarterly earnings report and concerns over higher costs driven by tariffs and weakening consumer demand.
The economic backdrop remained mixed, with signs of a slowing labour market. Jobless claims rose, which pointed to softening in the US labour market. However, the manufacturing sector showed resilience, growing at its fastest pace since 2022. These conflicting signals caused markets to reassess their expectations for Federal Reserve policy. Futures markets now price in only a 70% probability of a rate cut in September, down from more than 90% just a week ago.
Fed officials have increasingly signalled a hawkish stance ahead of Chair Jerome Powell’s speech at the Jackson Hole economic symposium. Cleveland Fed President Beth Hammack stated that she would not support easing if the decision were made today, while Atlanta’s Raphael Bostic suggested only one rate cut this year remains appropriate. Treasury yields rose across the curve, with the 10-year yield climbing to 4.33%, strengthening the US dollar and tightening financial conditions.
Europe
European markets were relatively steady, with the Stoxx 600 little changed as traders weighed disappointing eurozone business activity data and awaited Powell’s speech for guidance. Sector rotation dominated European equity performance. The biggest loser was media, where CTS Eventim saw its stock plummet 17% after it reported a significant earnings miss, marking its worst performance since 2002. The healthcare sector also struggled, with Novonesis falling 7% due to weak profitability. However, the financial sector outperformed, led by Aegon, which surged 7.6% after beating earnings expectations and announcing a larger-than-expected share buyback programme. This helped lift the broader insurance sector. Banks were also in the green, with Commerzbank up nearly 3% and European banking stocks as a whole closing at their highest levels since the global financial crisis in 2008.
In defence, stocks saw notable gains as reports surfaced that the US would play only a minimal role in providing security guarantees for Ukraine, which buoyed Rheinmetall (+3.3%), Rolls-Royce (+1.4%), and Safran (+1.1%). Conversely, telecoms came under pressure, with Telefonica falling 5% on concerns that the company may need to raise capital in the near future. On the downside, telecoms struggled, with Telefonica falling 5% amid concerns about a potential capital raise. The telecoms sector overall retreated 0.3%, pressured by worries over regulatory hurdles and capital expenditure commitments. Energy stocks performed well, supported by rising oil prices. Shell, Siemens Energy, and Orlen were top performers, with Orlen rising 3.8% on positive guidance. The oil and gas sector benefited from higher oil prices, which were driven by concerns about supply disruptions. Finally, the luxury goods sector faced some volatility. LVMH, L’Oreal, and Hermès saw declines, following warnings from Coty about ongoing sales declines in the cosmetics market. However, CD Projekt gained 3.6%, benefiting from a successful gaming release.
Australia
The ASX 200 is set to open slightly weaker, with futures pointing down 12 points, or 0.1%, from its recent record high. After closing at 9,019.1 yesterday, up 0.5%, the Australian market is likely to experience a modest pullback as global sentiment, particularly from Wall Street’s losses, influences local futures. Despite this, commodity stocks such as mining and energy sectors could provide support, especially with oil prices maintaining their strength. Corporate earnings continue to be a key focus. Fonterra’s announcement that it would sell its global consumer business to Lactalis for $3.5 billion was one of the day’s major corporate events. This sale, which includes key Australian dairy brands like Anchor and Mainland, will see capital returned to farmer shareholders. The deal highlights continued consolidation within the food and agricultural sectors and signals potential growth opportunities for Lactalis in the Australasian market. The impact of such a transaction will likely ripple through the dairy and food sectors, especially as Fonterra retains a supply relationship with the acquired brands.
Cuscal also made headlines, confirming its $75 million acquisition of payments business Indue. This move will bolster Cuscal’s position in Australia’s competitive payments industry, making it one of the few companies with an end-to-end system for processing all types of payments. The acquisition aligns with Cuscal’s strategy to enhance its resilience and streamline its operations as it competes with the big four banks.
In terms of earnings, the local market will be closely watching reports from Guzman y Gomez and Monash IVF, both of which are slated to release results soon. These reports could provide key insights into the consumer services and healthcare sectors, potentially impacting investor sentiment across the market. Morningstar analysts also highlighted the sharp declines in CSL and James Hardie stock prices. Despite these companies’ long-standing blue-chip status, both have recently faced underperformance, which some analysts see as creating buying opportunities. The sell-offs have pushed the valuations of these stocks to levels not seen in years, with CSL’s current price now approaching historical lows. The ongoing earnings season suggests that market sentiment remains positive overall, with 40% of stocks seeing upgraded fair value estimates—a higher-than-average proportion. Despite some negative earnings surprises, the overall market reaction has been relatively contained. CSL and James Hardie, while disappointing in their updates, could represent opportunities for investors with a long-term view as the current price adjustments might be exaggerated.
Meanwhile, the broader commodity sector continues to thrive, with mining stocks benefitting from the ongoing strength in iron ore prices, which were up 0.5% to US$101.25 per tonne. This supports Australian miners and strengthens the outlook for BHP, Rio Tinto, and Fortescue as key players in the sector. The energy sector is also likely to remain strong, particularly given the 1.1% increase in Brent crude, which helps bolster the outlook for Woodside Petroleum and Santos, both of which are well-positioned to capitalise on rising oil prices. Overall, the Australian market remains resilient, with strong earnings from resource companies and continuing activity in the payments sector helping to buffer against broader global uncertainties. The ASX 200 may face a slight dip in the short term, but medium-term support could come from ongoing strength in commodity prices and positive earnings momentum from key sectors like energy, resources, and financials.
Commodities
In commodities, oil prices extended their rally, with Brent crude up 1.1% to US$67.59 as tensions over Russian crude exports added to concerns about global supply. The US has ramped up pressure on India regarding its purchase of Russian crude, suggesting additional tariffs may be imposed, which further supported the oil price rebound.
Iron ore saw a modest gain, rising 0.5% to US$101.25 per tonne, offering a boost to Australian mining stocks. Meanwhile, gold prices eased by 0.3%, ending at US$3,338.71 an ounce, as the strengthening US dollar and rising bond yields diminished gold’s appeal as a safe-haven asset.
The Australian dollar remained relatively stable, slipping 0.2% to US64.2¢, in line with broader movements in the currency markets. The US dollar maintained its strength, supported by higher yields, while the euro held steady at US$1.16, and the Japanese yen traded unchanged at ¥148.35 per dollar.
In the cryptocurrency space, Bitcoin saw a slight decline of 1.6%, trading at US$112,251, while Ether increased by 0.3%, settling at US$4,255.25.
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
