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First Up

UPDATED 06/08/2025 09:28

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The ASX200 surged towards new highs on Tuesday, ending the session up +1.2%, only 6 points below its all-time high. Gains were broad-based, with over 90% of the main board advancing, led by the rate-sensitive consumer discretionary, real estate and financial stocks. After a strong US reporting season, we kick off in earnest locally over the coming days/weeks with REA Group (REA) today and AMP Ltd (AMP) tomorrow. Yesterday’s performance showed investors weren’t afraid of the looming results, putting the widely anticipated RBA rate cuts front and centre of their investment decisions – Michele Bullock is expected to deliver a 0.25% cut next week, followed by an additional easing in November.

Opportunities are likely to present themselves through August as the reporting season delivers strong moves, in both directions – the main reason we have slightly increased cash levels across some portfolios this week.

The “Certainty Trade” initially drove the market towards 8800 with stocks like Commonwealth Bank (CBA), Wesfarmers (WES) and JB Hi-Fi (JBH) doing the heavy lifting, but since late June, they’ve been joined by the miners, healthcare names, and rate-sensitive stocks as investors scoured the market for “value” as many stocks/sectors traded at unprecedented PE’s. The local rare earth stocks were a good example on the main board yesterday after The Australian newspaper reported that the government is considering price floors for critical minerals, following a similar move by President Trump’s administration in the US: Iluka (ILU) +8.7%, Lynas (LYC) +5.2%, and Arafura Rare Earths (ARU) +4.3%.

We remain bullish into Christmas but reticent to chase strength in line with our “three steps forward, two back” outlook over the coming months, i.e. momentum is waning.

Overseas markets finished mixed overnight after the US ISM Services index flatlined in July, adding to stagflation concerns stirred up by the recent job figures. In Europe, the EURO STOXX 50 closed up +0.1% while the French CAC slipped 01.%. In the US, the S&P 500 retreated 0.5% as the mega-cap tech names struggled, whereas the Russell 2000 small-cap index advanced +0.6%.