United States
Wall Street closed out last week in subdued fashion after a strong run, with major benchmarks holding near record levels. The S&P 500 finished little changed at 6,584.29, while the Dow Jones Industrial Average slipped 0.6 per cent to 45,834.22. Investor focus remained firmly on the US Federal Reserve, which meets mid-week and is widely expected to deliver its first interest rate cut since President Donald Trump returned to office.
The economic backdrop was mixed. Consumer prices rose 0.4 per cent in August, the steepest monthly increase in seven months, highlighting sticky inflation. At the same time, labour market data pointed to weakness, with jobless claims climbing to their highest level since October 2021. This combination of rising inflation and soft employment has pulled the Fed in opposing directions, but consensus points to a quarter-point cut to the policy rate, taking the mid-point to 4.12 per cent. Economists anticipate at least two reductions by year-end, while some expect as many as three.
Corporate news was also in focus. Tesla led gains among the megacaps, while vaccine makers fell sharply following reports US health officials plan to link Covid jabs to a number of child deaths. In the tech space, Adobe impressed with a strong revenue outlook tied to its investment in artificial intelligence features, while Microsoft avoided a hefty antitrust penalty in Europe by settling a probe into the bundling of Teams. Amazon and Google came under fresh scrutiny from US regulators over alleged advertising misrepresentation.
Europe
European equities ended the week on a cautious note, with the Stoxx 600 down 0.09 per cent as the global rally lost steam ahead of the Fed decision. Ocado slumped nearly 20 per cent after key partner Kroger raised doubts about its US expansion plans, dragging the retail sector lower. Novartis also weighed on sentiment after a downgrade on valuation concerns, while France’s Edenred tumbled on reports of a new levy on staff vouchers.
There were bright spots: miners advanced on stronger metal prices, sending the basic resources index to its highest since March. Insurers outperformed, buoyed by an upgrade for Hannover Re and gains across Munich Re and Swiss Re. Industrials also ended the week at record levels, with Schneider Electric and Wolters Kluwer among the standouts.
Bond markets reflected the cautious tone, with Germany’s 10-year yield up six basis points to 2.72 per cent, while the UK’s equivalent climbed to 4.67 per cent.
Australia
Local markets look set for a softer open. Futures point to the S&P/ASX 200 starting around 20 points lower, or 0.2 per cent down, after Friday’s rally. Despite near-term caution, sentiment remains constructive with investors expecting Australian equities to benefit from a global rate-cutting cycle.
Banking stocks will be in the spotlight after ANZ agreed to pay $240 million in penalties following findings of unconscionable conduct and widespread failures across both its institutional and retail divisions. The Australian Securities and Investments Commission highlighted the impact of ANZ’s mis-reporting in bond markets on taxpayers, as well as retail failings ranging from mishandled hardship notices to fee refunds for deceased customers.
Elsewhere, BHP continues to watch industry developments closely as Anglo American’s move on Teck has put larger miners on the defensive. The Reserve Bank of Australia is expected to maintain a measured approach to monetary easing, with markets pricing in another rate cut in November and only one more in 2026. That contrasts with the more aggressive easing cycle expected in the US, giving the Aussie dollar support.
Commodities and currencies
Gold continued its climb towards record levels, supported by expectations of lower US interest rates and safe-haven demand. Spot gold rose 0.3 per cent to US$3,644.92 an ounce, close to the all-time high of US$3,673.95 reached last week. Bullion has now advanced nearly 39 per cent this year, driven by central bank buying, a weaker US dollar and ongoing geopolitical uncertainty.
Oil prices also gained ground, with Brent futures up 0.9 per cent to US$66.99 a barrel and West Texas Intermediate rising 0.2 per cent to US$62.51. Concerns over possible supply disruptions stemming from Russian export hubs underpinned sentiment.
In currency markets, the Australian dollar has posted its best weekly performance since May, closing last week at US66.68¢ before easing slightly to US66.47¢. The rally was fuelled by diverging policy expectations between the Fed and the RBA. The US dollar was broadly steady, with the euro at US$1.1736 and the yen at 147.58 per dollar.
Economic Calendar
US:
- Empire Manufacturing Sep 22:30
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
