Markets Overview

  • ASX SPI 200 futures up 0.6% to 8,599.00
  • Dow Average up 0.2% to 44,459.65
  • Aussie down 0.5% to 0.6545 per US$
  • US 10-year yield rose 2.7bps to 4.4353%
  • Australia 3-year bond yield rose 3.1 bps to 3.49%
  • Australia 10-year bond yield rose 4.3 bps to 4.37%
  • Gold spot down 0.4% to $3,342.87
  • Brent futures down 1.8% to $69.08/bbl

Economic Events

  • 10:30: (AU) July Westpac Consumer Conf SA MoM, prior 0.5%
  • 10:30: (AU) July Westpac Consumer Conf Index, prior 92.6
  • 11:00: (AU) Australia to Sell A$300 Million 4.75% 2054 Bonds

Wall Street traders parsing Donald Trump’s latest tariff remarks sent stocks mildly higher, with the market gearing up for results from big banks and inflation data. Bond yields and the dollar edged up. Oil fell as the US president’s plan to pressure Russia into a ceasefire with Ukraine didn’t include new measures aimed directly at hindering Moscow’s energy exports.

The S&P 500 hovered near its record as Trump indicated he’s open to trade talks, even as he insisted the letters threatening new rates are “the deals.” While Corporate America is bracing for its weakest earnings season since mid-2023, lower estimates could be easier for companies to beat. As US financial giants kick off earnings season Tuesday, strategists say subdued profit expectations are setting the stage for their sizzling run to continue.

President Trump unleashed more tariff threats this weekend, declaring a 30% rate for Mexico and the European Union, and informing key trading partners of new rates that will kick in on Aug. 1 if they cannot negotiate better terms.

“We view the latest move from the White House as a negotiating tactic, and maintain our base case that the US effective tariff rate will settle around 15%, which we believe will allow the S&P 500 to rise further over the coming 12 months,” said Mark Haefele at UBS Global Wealth Management.

A 22V Research survey showed investors see the average effective tariff rate at 17%. They also estimate tariffs will add 28 basis points to core inflation in 2025. This is almost half of what was expected last month.

In the run-up to the consumer price index, Treasuries saw mild losses. After months of seeing little inflation, the CPI probably experienced slightly faster growth in June as companies started to pass along higher costa of imported merchandise associated with tariffs.

The options market is betting the S&P 500 will swing 0.6% in either direction after Tuesday’s CPI, based on the cost of at-the-money puts and calls, according to Citigroup Inc. That would be in-line with implied moves the past two months, though below an average realized swing of 0.9% over the last year.

“The stock market’s muted reaction to the latest volley of tariff headlines suggests investors may be growing numb to them, or are deciding that the tariff bark will likely be worse than the eventual bite,” said Chris Larkin at E*Trade from Morgan Stanley.

To Emily Bowersock Hill, investors have become inured to the tariff drama, arguably to the point of complacency, and the S&P 500 is now overpriced.

“Absent a negative surprise, we expect the complacency to continue, particularly given the equity market’s upward momentum,” said the founding partner of Bowersock Capital Partners.

Advances in categories including furniture, toys and recreational goods, as well as cars, are seen putting an end to the streak of benign consumer inflation figures. It’s a tough position to be in for the Federal Reserve, which has defended holding rates steady in anticipation of tariff-driven inflation that hasn’t shown up yet.

“Inflation pressures have remained muted so far, but tariffs will eventually feed through pushing prints higher and creating some discomfort for the Fed,” said Seema Shah at Principal Asset Management.

Meantime, the tally from 22V Research also showed that 67% of investors think core CPI is on a “Fed-friendly” glide path. In addition, 42% of investors surveyed believe that the market reaction to CPI will be “risk-on,” 29% said “mixed” and 29% “risk-off.

“I don’t think people are viewing any of the data points expected over this week as being materially indicative of how to position portfolios,” said Josh Rubin at Thornburg Investment Management. “We’re still in a waiting game around tariff policies as well as additional inflation and employment data that could influence Fed decision-making.”

Rubin notes that activity naturally slows down during the summer period, and while investors will pay attention to earnings, most won’t view them as highly indicative of companies’ future outlooks, rather waiting to hear about any updated thoughts on tariff policy.

“We are not out of the woods just yet, as the next few weeks will be pivotal to see how countries respond to the administration’s new Aug. 1 tariff deadline,” said Glen Smith at GDS Wealth Management. “The big question for markets in the coming weeks is if earnings, which are expected to be solid, can overshadow the tariff issues.”

Investors already expect a sluggish second quarter, so the bigger risk may be to the back half of the year, according tp Bret Kenwell at eToro.

“Will management again tell a good story about the consumer and its customers, providing some stability (or even upward revisions) to third and fourth-quarter earnings?” he said. “If so, stocks could react favorably to that development. If not though, and estimates are instead revised lower, stocks may decline as they reflect this new reality.”

US megacaps are attractive as they’re likely to be boosted by the fiscal spending bill as well as a robust earnings outlook, according to Morgan Stanley strategists led by Michael Wilson.

Meantime, RBC Capital Markets strategists including Lori Calvasina lifted their year-end target for the S&P 500 to 6,250 from 5,730. The new level “is midway between the median and average of five different models,” they said. “We still see a wide range of outcomes in our modeling which we think reflects a high degree of uncertainty.”