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Weakness across European indices has started to weigh on global markets ahead of this week’s European Central Bank (ECB) interest rate decision. The ECB is expected to cut interest rates by 25 basis points this Thursday, reducing the main refinancing rate to 4.25%, the marginal lending rate to 4.50%, and the deposit rate to 3.75%. This will be the first cut in many years although Lagarde may have started to wish she hadn’t been so clear with her messaging for a cut in June. The question being asked is what comes next after this historic pivot.
The ASX200 fell 0.6% on Wednesday, its largest decline in two months, as the market spent its 26th day rotating in a relatively tight 200-point range. However, while the index has been very calm for almost six weeks on the stock level, it's been a very different story with the return of tariff uncertainty and the ever-changing perceptions around the future path for interest rates, spiking volatility across stocks – it’s just been a case of rotation between sectors instead of between stocks and cash.
A weaker session today as Copper tariff news created some volatility amongst the resources, gold stocks were weak, while rate sensitive areas like property felt the pinch from the RBA reticence to cut rates yesterday.
The ASX200 had plenty of reasons to fall on Monday, but again, come 4 p.m., the bears were left disappointed: Trump is throwing around tariffs again like confetti, the Dow dropped over 400 points, and the almost guaranteed RBA rate cut failed to materialise.
The ASX200 closed down 0.2% on Monday, largely shrugging off weakness across US futures markets as Trump’s tariff deadline moved ever closer. Over 40% of the main board managed to close higher, with most of the major movers on the day being news-led.
No trade in the US on Friday night (Independence Day), so a quiet session to kick things off locally ahead of some key data points this week. The RBA should cut rates tomorrow which would be their first back-to-back move in 6-years, while we await the tariff deadline in the U.S on Wednesday night.
Donald Trump’s second presidency has been volatile, and it's still less than six months since his inauguration. When Congress approved Trump’s budget mega bill on Thursday, it was the latest of the milestones for the president as he follows through on his unconventional election promises.
The ASX200 advanced another 1% last week, closing above the psychological 8600 level for the first time. The healthcare, real estate, and materials sectors all closed up around 3%, while the financial sector was the weakest over the five days, closing down 0.7%. For the market to extend the recent gains, it will need to shrug off high valuations and lack of earnings growth, although, as we saw last week, the resources stocks can do some of the heavy lifting after experiencing a tough 18 months.
A quiet end to a solid week for stocks, chalking up a positive move to kick off FY26. The FY25 trend of buying certainty at any price has taken a (slight) knock, with sectors and stocks representing better value attracting more flows this week.
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