Ahead of the game: 9 June 2025

Australia 200 gains on Wall Street strength and weak GDP

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.

The week that was: highlights

• The Institute for Supply Management (ISM) manufacturing purchasing managers' index (PMI) in the US fell to 48.5 in May, below the expected 49.5
• The ISM services PMI in the US fell to 49.9 in May, below the anticipated 52
• Job Openings and Labor Turnover Survey (JOLTS) job openings in April increased to 7.39 million, surpassing the 7.05 million anticipated
• Automatic Data Processing (ADP) employment growth in May fell to 37,000, compared to the expected 114,000
• US initial jobless claims rose to 247,000 versus the expected 235,000, with the four-week moving average climbing to 235,000
• In the European Union (EU), headline inflation eased to 1.9% year-on-year (YoY) in May from 2.2% prior
• The core measure of inflation in the EU fell to 2.3% from 2.7%, the lowest reading since January 2022
• The European Central Bank (ECB) cut its policy rates by 25 basis points (bp), taking the deposit rate to 2%
• In Japan (JP), headline inflation remained steady at 3.6% in April
• The core measure of inflation in JP accelerated to 3.5% from 3.2%, the highest reading since January 2023
• In China (CN), the Caixin manufacturing PMI fell to 48.3 in May, below the expected 50.7
• The Caixin services PMI in CN rose to 51.1 in May, exceeding the anticipated 50.7
• In Australia (AU), GDP increased by 0.2% in the March quarter of 2025, decelerating from 0.6% in the prior quarter, for an annual growth rate of 1.3%
• Both the quarterly and annual GDP numbers in AU were softer than expected
• Crude oil gained 3.96% this week to $63.20
• Gold rose 2.2% this week to $3361
• Bitcoin fell 3.74% this week to $101,752
• Wall Street's gauge of fear, the volatility index (VIX), fell to 18.47 from 18.57 last week.

Key dates for the week ahead

Australia & New Zealand

• AU: Westpac consumer confidence (Tuesday, 10 June at 10:30am AEST)
• AU: National Australia Bank (NAB) business confidence (Tuesday, 10 June at 11:30am AEST)
• New Zealand (NZ): Business PMI (Friday, 13 June at 8:30am AEST)

China & Japan

• CN: consumer price index (CPI) (Monday, 9 June at 11:30am AEST)
• CN: producer price index (PPI) (Monday, 9 June at 11:30am AEST)
• CN: balance of trade (Monday, 9 June at 1:00pm AEST)

United States

• US: CPI (Wednesday, 11 June at 10:30pm AEST)
• US: PPI (Thursday, 12 June at 10:30pm AEST)
• US: initial jobless claims (Thursday, 12 June at 10:30am AEST)
• US: Michigan consumer sentiment preliminary (Saturday, 14 June at 12:00am AEST)

Europe & United Kingdom

• United Kingdom (UK): unemployment rate (Tuesday, 10 June at 4:00pm AEST)
• UK: GDP (Thursday, 12 June at 4:00pm AEST)
• EU: industrial production (Friday, 13 June at 7:00pm AEST)

Key events for the week ahead

CN: CPI

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.

Chinese inflation rate chart

AU: Westpac Consumer Confidence

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:

• A 7% gain in the 'family finances vs a year ago' sub-index., signalling stronger consumer perceptions of their financial situation
• A 7.4% rally in the Australia 200 between the April and May surveys
• Lower fuel prices and softerinflation expectations, which raised expectations for an RBA cut at its meeting on 20 May.

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. 

Australian consumer confidence chart

US: CPI

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.

US inflation rate chart