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The ASX200 retreated 0.8% on the penultimate day of July, closing well below the psychological 9000 level following the heavy losses on Wall Street. It felt like a tough day at the office with 80% of the main board closing lower, but considering the steep 1100-point drop by the Dow, it was another resilient performance by the local index, albeit one that couldn’t manage to close in positive territory.
There were a few glimmers of hope for the bulls, although it was a session dominated by the hawkish commentary from the Fed overnight:
- The banking sector remained firm with the NAB and Westpac closing higher and the Banking Index managing to eke out a small +0.1% gain.
- The local tech sector, which is dominated by software names, continued to benefit from the aggressive rotation out of the AI Trade, e.g. WiseTech (+6.7%) and Xero (+1.4%).
Bond yields have replaced the US-Iran conflict as the market’s primary day-to-day driver in July, although much of the volatility in credit markets still stems from the conflict’s inflationary implications.
- The ASX rallied sharply on Wednesday after the soft inflation data (CPI) wound back fears of an RBA rate hike before Christmas.
- US indices were smacked on Thursday night following a cautionary hawkish speech from Fed Chair Warsh despite the FOMC voting 9-3 to hold the federal funds rate unchanged in a target range of 3.50%–3.75%.
- The UK FTSE slipped 0.1% overnight after the BOE voted 6-3 to keep interest rates steady at 3.75%, with the panel saying it “stands ready to act” to stop high inflation lingering.
Overseas markets were strong overnight, with chip stocks posting their biggest advance since April 2025 and Microsoft surging (+15.5%) after its earnings results smashed expectations. In Europe, the German DAX advanced +0.6%, trumped by the French CAC, which closed +0.9% higher. In the US, the NASDAQ led the gains, closing +3.4% higher, while the S&P 500 ended the day up +1.7%.
- The SPI Futures are calling the ASX200 to open up +1.1% this morning, around 9075, helped by the move on Wall Street and a ~$2 advance by BHP in US trade.
