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First Up

UPDATED 23/07/2025 09:41

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The ASX200 struggled to close up +0.1% on Tuesday, with over 40% of the main board closing lower, and notable weakness in the influential banking sector. On Monday, we discussed our view that BHP would outperform CBA by at least 10%, and within 24 hours, more than half of our forecast has already played out, although we note that this was a minimum target. After driving the ASX to all-time highs and their own valuations to unprecedented levels, the banks could easily continue to drift lower as we enter the seasonally weak August & September, while the likes of BHP, RIO et al. have still got plenty of underperformance to address, although they’ve been trying hard of late.

Winners: Whitehaven Coal (WHC) +5%, RIO Tinto (RIO) +3.4%, Fortescue (FMG) +3.3%, Mineral Resources (MIN) +3.1%, Evolution Mining (EVN) +2.8%, and BHP Group (BHP) +2.6%.

Losers: Commonwealth Bank (CBA) -3.1%, National Australia Bank (NAB) -2.7%, Bendigo Bank (BEN) -2.1%, Westpac Bank (WBC) -1.3%, and ANZ Group (ANZ) -0.8%.

The “Certainty Trade” is coming off the boil, and if we do see the ASX follow its seasonal roadmap, falling into September, the likelihood is that the performance on the stock and sector level will be similar to the pronounced moves we saw on Tuesday. The next 250-point index move feels like a coin toss, but technically, a close back under 8600 will trigger a sell signal initially targeting a test of the 8400 area.

On the economic front, we felt Michele Bullock and the RBA’s messaging was encouraging yesterday, with a rare flagging that a rate cut was likely before Christmas. Credit markets are even more dovish, with two cuts fully priced in, and a third to deliver some major festive cheer is priced at a 60% probability.

“All members agreed that, based on the information currently available, the outlook was for underlying inflation to decline further in year-ended terms, warranting some additional reduction in interest rates over time,” – RBA minutes.

Overseas markets were mixed overnight. In Europe, the German DAX fell by 1.1% while the UK FTSE gained +0.1%. In the US, the S&P 500 edged +0.1% higher while the higher Beta small-cap Russell 2000 advanced +0.8%. Conversely, the tech-based NASDAQ retreated 0.5% on downbeat sentiment in the chip space, fuelled by a report by The Wall Street Journal that said SoftBank and OpenAI’s $500 billion AI project has faced difficulties getting underway and scaled down its near-term plans.