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The ASX200 finished up +0.3% on Wednesday after an initial dip into lunchtime, following hotter-than-expected inflation data, which cooled expectations for a September rate cut. The big miners drove the market along with selected earnings standouts, even as the chances of a rate cut next month fell towards 20%. BHP and Rio were two of the key positive contributors to the market’s gain, buoyed by improved commodity sentiment, adding around half of the market’s 25-point gain – the “Big Australian” posted fresh 2025 highs, pushing the Materials Sector up almost 12% year-to-date; over the last three months the sector has gone from underperformer to outperformer helped by a more than 20% turnaround in the fortunes of BHP.
- Australia’s Consumer Price Index (CPI) rose 2.8% in the year to July, above expectations, edging closer to the upper end of the Reserve Bank’s 2% to 3% target range.
Even as we witness the last leg of a mixed and volatile earnings season, investors have remained comfortable with the local market’s lofty valuation, which has reached its highest level since 2021. The market has a similar feel to it as we saw in the second half of July, implying at least a few weeks of consolidation are likely, especially as news is expected to get thin on the ground, assuming, of course, President Trump doesn’t have another surprise up his sleeve.
Overseas markets were mixed overnight ahead of Nvidia’s 2Q earnings report. In Europe, the Euro STOXX 50 closed up +0.2% while the German DAX slipped 0.4%. In the US, the S&P 500 advanced +0.2% while the small-cap Russell 2000 outperformed, closing up +0.6%.
- The SPI Futures are calling the ASX200 to open flat this morning ahead of the AI behemoth’s important update.
As we touched on earlier, the July inflation data came in richer than expected largely due to a 13% hike in electricity prices, a cost similar to petrol, being felt by most Australians. Overall, annual inflation rose from 1.9% in June to 2.8% in July, the highest rate since July 2024, taking inflation back the top end of the RBA’s target band. Market expectations were for a 2.3% print; they got this wrong, unlike the RBA, which has warned that it expects headline inflation to rise to 3% by the end of this year as federal and state government rebates for power bills expire.
- Futures markets are now only looking for one more 0.25% rate cut before Christmas, most likely in November.
