United States
Wall Street staged an emphatic rebound on Friday, capping a volatile week with a broad-based surge. The Dow Jones Industrial Average jumped 1.9% to a record high, while the S&P 500 gained 1.5%, its strongest single-session advance since May. The Nasdaq Composite climbed 1.8%, fuelled by strength in the mega-cap technology names and renewed appetite for growth-sensitive sectors.
At the heart of the rally was Powell’s keynote speech at the Jackson Hole symposium. Having resisted political pressure for months, the Fed chair acknowledged that risks in the labour market now carry greater weight, a pivot that investors took as a green light for a September cut. While Powell stopped short of confirming the size of any move, markets are almost fully pricing in a 25-basis-point reduction, with some speculation that weaker incoming data could build a case for deeper easing.
The dovish shift set off sharp moves across sectors. Small-cap stocks soared nearly 4%, as lower rates tend to favour more domestically oriented firms. Banks rallied to all-time highs, reflecting the dual boost of improved funding conditions and optimism about credit demand. In technology, Intel surged 5.5% on news that the US government would take a near-10% stake in the company to support domestic chipmaking, while Apple advanced after reports it is considering Google’s Gemini AI technology for Siri. Meta Platforms added momentum after striking a US$10 billion cloud deal with Google.
Bond markets responded just as forcefully. Two-year Treasury yields tumbled 10 basis points to 3.69%, while the benchmark 10-year yield slipped to 4.26%. The US dollar weakened by about 1%, its steepest fall in weeks, reflecting shifting interest rate expectations. Risk assets took off in response: Bitcoin jumped 3.8% to US$116,657, while Ether surged 14% to a four-year high of US$4,835.
Europe
European markets followed Wall Street higher, though the gains were tempered by ongoing trade uncertainties and the prospect of uneven inflation outcomes across the continent. Germany’s DAX edged up, supported by hopes that the European Central Bank (ECB) will tread cautiously after Powell’s remarks. Across bond markets, yields fell, with the 10-year German bund slipping three basis points to 2.72% and the UK’s 10-year gilt down four basis points to 4.69%.
Attention now shifts to the upcoming economic calendar. Germany’s Ifo business climate index will provide insight into corporate sentiment amid trade disruptions, while inflation readings from Germany, France and Spain later in the week will be the first since the imposition of higher tariffs. Analysts expect German and Spanish consumer prices to tick higher, while France is forecast to remain below the ECB’s 2% target at just 0.9%.
ECB President Christine Lagarde struck a cautiously optimistic tone at Jackson Hole, noting that the European labour market remains resilient even as trade levies weigh on growth. Barring a major shock, policymakers are seen holding fire on further cuts at the September meeting, choosing instead to wait for more clarity on the economic impact of tariffs.
Australia
The S&P/ASX 200 is poised to open 0.9% higher at 9,011, extending the index’s record-breaking run. Investors are set to take their cue from Wall Street’s surge and Powell’s dovish comments, which have rippled through local markets by driving bond yields lower and nudging the Australian dollar toward US65¢.
Domestically, corporate earnings are providing a mixed backdrop. Reece reported weaker profit as the slowdown in housing construction weighed on its Australian and US operations. By contrast, NIB posted a solid increase in earnings, buoyed by continued growth in health insurance demand. Ansell announced a $200 million share buyback, aimed at shoring up shareholder returns amid margin pressures in its protective equipment business.
This week’s reporting calendar remains heavy, with results from Santos, Pilbara Minerals, and Regal Partners due today. Energy and resources companies will be in focus as investors assess whether global volatility in commodities is beginning to flow through to earnings. At the same time, the Reserve Bank of Australia’s minutes, due Tuesday, will be scrutinised for guidance on how policymakers are balancing softer domestic conditions against a shifting global backdrop.
Commodities and Currencies
Commodity markets closed the week on a mixed footing. Gold gained 1% to US$3,372 an ounce, lifted by safe-haven flows and a weaker US dollar. Oil prices were steady, with Brent crude holding at US$67.73 and WTI at US$63.82 a barrel. Traders remain cautious, balancing ongoing supply risks with signs that global demand is cooling.
Iron ore slipped 0.6% to US$100.55 a tonne, under pressure from persistent uncertainty around Chinese steel demand. Other industrial metals, however, found some relief from the weaker dollar, which makes commodities priced in greenbacks cheaper for international buyers.
In foreign exchange, the Australian dollar firmed to US64.93¢, while the euro and yen both rose around 1% against the dollar. Sterling also strengthened, climbing 0.8% to US$1.35.
Economic Calendar
US:
- Chicago Federal National Activity Index (MoM) 10:30pm
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
