The Australia 200 extended its winning streak as soft GDP data strengthened expectations of more Reserve Bank of Australia cuts. Global markets gained on easing inflation and dovish signals from central banks.
United States (US) stock markets gained this week as investors navigated trade tensions, mixed economic data, and the public fallout between Tesla chief executive officer (CEO) Elon Musk and US President Donald Trump.
Locally, the Australia 200 (ASX 200) recorded its seventh week of gains in the past eight. This week's rally was supported by tailwinds from Wall Street and a disappointing first-quarter (Q1) 2025 Australian gross domestic product (GDP) reading, which bolstered expectations of additional Reserve Bank of Australia (RBA) interest rate cuts by year's end. The financial and energy sectors were the strongest performers.
Date: Monday, 9 June at 11:30am AEST
In April, China's CPI declined 0.1% YoY, marking the third consecutive month of deflation as China confronts weakening domestic consumption and mounting trade uncertainty.
In May, the government implemented a series of monetary easing measures, including reductions in policy rates and reserve requirement ratios. Additionally, US tariffs on Chinese goods were temporarily reduced from 145% to 30%. These policy interventions may alleviate deflationary headwinds facing consumer and production prices.
On the contrary, Caixin's composite PMI released this week dropped sharply from April's 51.1 to 49.6. Which highlights reduced foreign demand and intensified business competition, pressuring output prices downward.
For May the market anticipates the CPI to fall by -0.2% YoY, indicating a need for further measures to boost consumption, particularly in services sector. In addition, allowing the Chinese yuan to fall against the US dollar would ease the deflationary risks to the Chinese economy.
Date: Tuesday, 10 June at 10:30am AEST
The Westpac-Melbourne Institute consumer sentiment index rose by 2.2% to 92.1 in May 2025 from 90.1 in April, reflecting modest recovery in Australian consumer confidence. This increase followed a significant 6% April decline due to US tariff impact concerns.
The May rebound regained one-third of April's decline, driven by several factors:
Despite this uptick, the index remains below the neutral 100 threshold - signalling lingering pessimism. A modest rise to 93.5 is expected in June, reflecting additional gains in the Australia 200 and following the RBA’s 25 bp rate cut in May and the expectation of another RBA rate cut in July or August.
Date: Wednesday, 11 June at 10:30pm AEST
In April, the headline inflation rate rose 0.2% month-on-month (MoM), bringing the annual rate to 2.3% YoY, the lowest since February 2021. Core inflation rose 0.2% MoM, keeping the annual rate at 2.8% YoY, aligning with market forecasts.
This week, Federal Reserve (Fed) speakers (Waller, Bostic and Cook) expressed caution on inflation and potential rate cuts, due to uncertainties surrounding tariffs as well as their potential to drive both inflation and an economic slowdown. Waller emphasised that if tariffs are moderate at around 10%, and underlying inflation continues trending toward the Fed’s 2% target, with a solid labour market, he would support 'good news' rate cuts later this year.
This month, the preliminary expectation is for headline inflation to rise by 0.2% MoM and for the annual rate to rise to 2.5%. The core inflation rate is expected to also rise by 0.2% MoM and for the annual rate to tick higher to 2.9%.
The US rates market is pricing in an 85% chance of a 25 bp Fed rate cut in September, with a cumulative 55 bp of Fed rate cuts expected by year-end.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.