Markets Overview

  • ASX SPI 200 futures up 0.3% to 8,823.00
  • S&P 500 up 0.3% to 6,466.58
  • Dow Average up 1.0% to 44,922.27
  • Aussie up 0.2% to 0.6546 per US$
  • US 10-year yield fell 5.7bps to 4.2326%
  • Australia 3-year bond yield fell 3.1 bps to 3.36%
  • Australia 10-year bond yield fell 1.9 bps to 4.22%
  • Gold spot up 0.2% to $3,355.92
  • Brent futures down 0.6% to $65.75/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 70-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 119-Day Bills
  • 11:00: (AU) Australia to Sell A$150 Million 2% 2035 Inflation-Linked Bonds
  • 11:30: (AU) July Employment Change, est. 25,000, prior 2,000
  • 11:30: (AU) July Unemployment Rate, est. 4.2%, prior 4.3%
  • 11:30: (AU) July Participation Rate, est. 67.1%, prior 67.1%
  • 11:30: (AU) July Part Time Employment Change, prior 40,200
  • 11:30: (AU) July Full Time Employment Change, prior -38,200

Australia’s labor market report for July is likely to show stronger job growth and a slight increase in the unemployment rate, according to Bloomberg Economics. Companies including Telstra, Origin Energy and ASX are scheduled to report earnings while Westpac provides trading update.

 

Wall Street traders kept piling into bets that the Federal Reserve will soon be able to cut interest rates, with stocks hitting all-time highs and Treasury yields falling alongside the dollar.

Just a day after a report showed benign inflation data, traders fully priced in a quarter-point Fed reduction in September, with some wagers pointing to a jumbo-sized move. Market expectations for policy easing also gained fuel after Treasury Secretary Scott Bessent’s remarks that “we could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September.”

About 420 shares in the S&P 500 rose. While the index only eked out a gain amid weakness in most megacaps, Apple Inc. and Amazon.com Inc. rallied. The Russell 2000 of small firms jumped 2%. The Dow Jones Industrial Average added 1%. In late hours, Cisco Systems Inc. gave a lukewarm outlook. Two-year yields dropped five basis points to 3.68%.

Fed policymakers last month kept their benchmark at a target range of 4.25% to 4.5%. Bessent said officials might have cut rates if they’d been aware of the revised data on the labor market that came out a couple of days after the latest meeting.

“As the labor market continues to weaken, we think the US central bank will resume interest rate cuts next month, with 25-basis-point cuts at each meeting through January 2026 for a total of 100 basis points,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.

President Donald Trump said he may name the next Fed chair “a little bit early” and added that he was down to three or four potential candidates as he looks for a successor to Jerome Powell.

“As the market continues to digest the shift in the trajectory of the real economy following the combination of July’s inflation and employment data, it follows intuitively that the question has become: how large of a cut should Powell deliver?” said Ian Lyngen at BMO Capital Markets.

“We don’t expect a 50 basis-point move, although we certainly see scope for a meaningful probability of one to be priced in during the coming weeks,” he added.

After a “not as bad as it could have been” consumer price index, the equity market is now in full “easing expectation” mode, noted Sam Stovall at CFRA.

“We still project 25 basis-point cuts to the Fed funds target range at the September and December Federal Open Market Committee meetings, with a pause in October,” he said.

To Rick Rieder at BlackRock, while the latest inflation report was a bit stronger than we have seen over the prior few months, it was lower than many have feared. Rieder also noted he’s still heartened by the trajectory of some core areas of inflation that are running at lower levels than in the prior few years.

“As a result, we expect the Fed to begin cutting rates in September, and it could be justified cutting the Funds rate by 50 basis points, to get it more aligned with longer-term inflationary expectations and some of the productivity enhancement we are seeing across multiple industries,” he said.

“Stocks are seeing another boost higher as tariff fears are less than expected, earnings are strong, and prospects for a fall Federal Reserve rate cut are rising,” said Rich Mullen at Pallas Capital Advisors. “While we believe it still makes sense to stay invested, much of this year’s stock gains are likely already in.”

Mullen noted that inflation has been tame, and while many businesses have been able to avoid passing on higher costs to consumers, there are still questions on how much longer this trend can last. The big risk for the Fed is the possibility that inflation spikes suddenly from tariffs, he said.

“Just because the inflation data has remained calm, doesn’t mean it can’t spike in the future,” Mullen said.

To Mark Hackett at Nationwide, the path of least resistance for the market is higher as the S&P 500 broke out of the recent trading range.

“Retail investors are increasingly validated in the buy-the-dip approach, given the speed of the recovery from the recent selloff, potentially creating a self-fulfilling prophecy the next time the market experiences a minor selloff,” he said.

The latest reading on consumer prices showed underlying US inflation accelerated in July — but the cost of tariff-exposed goods didn’t rise as much as feared.

A report on producer prices due Thursday will offer insights on additional categories that feed directly into the Fed’s preferred price gauge — which is scheduled for later this month.

“Tariff-related costs are still being absorbed by corporate profit margins rather than passed on to consumers, giving the Fed room to pivot without sparking inflationary risk,” said Fawad Razaqzada at City Index.

Some companies have been holding off on price increases for fear that consumers will pull back on spending, which will heighten interest for Friday reports on retail sales and consumer sentiment.