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First Up

UPDATED 16/07/2026 09:16

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The ASX 200 eked out a 0.4% gain on Wednesday, despite fewer than half of the stocks on the main board finishing higher. As we keep saying, the index is awfully comfortable trading around 8800. In a well-timed performance for today’s report, the miners led the market’s advance, with BHP Group (BHP) effectively delivering the index’s entire gain, but a lack of broad-based buying reined in the market’s gain. However, it was a disappointing performance overall, with the local market failing to embrace the soft US CPI (inflation print) or strong start to earnings season.

Despite a +0.4% advance by CBA, the local banks were heavy yesterday, and we pondered if they were on the receiving end of some switching into their US peers as they continue to trade at a notable premium to US banks while domestic headwinds build:

The ASX banking sector is up +1.7% YTD, including dividends, as fears around margins and property prices take their toll, yet they are trading on a Price/Book of 2.2x and a trailing P/E of 20.5x.
The US KBW Bank Index is up +14.6% YTD, and as strong earnings numbers roll in, further gains look likely, while they are trading on a Price/Book of 1.8x and a trailing P/E of just 15.2x.

AI was back in the news yesterday with Prime Minister Anthony Albanese outlining a significant pivot away from Labor’s previously hands-off approach to AI regulation. The government will establish a new Office of AI within the Department of Prime Minister and Cabinet to develop national AI standards and coordinate policy across the federal government, including Defence. Albanese described the initiative as a generational policy shift, likening it to the coordinated regulatory frameworks developed for civil aviation in the 1920s and genetics in the 1990s.

They will require large AI data centres to underwrite new electricity generation and minimise water use, aiming to ensure AI investment does not increase household energy costs.
The framework also includes work on a new AI copyright regime and a strengthened AI Safety Institute to monitor catastrophic risks.

We like the government’s ambition to position Australia as an AI leader, but caution is warranted as poorly designed regulation could deter the foreign investment needed to build the country’s AI infrastructure. Our biggest concerns will occur if/when companies look to become more efficient to compete on the global stage, with redundancies not good news for votes.

Overseas markets were mixed overnight, with another softer-than-anticipated inflation number helping support stocks and bonds. In Europe, the German DAX retreated by -0.6% while the French CAC gained +0.2%. In the US, S&P 500 advanced +0.4% while the tech-focused NASDAQ slipped by 0.3%.