Are Wall Street highs and soft inflation setting up a bullish run for Aussie stocks?

Global equities rise on US–China trade optimism and tech earnings

The US 500 (S&P 500) and US Tech 100  (Nasdaq 100) hit fresh record highs this week, driven by optimism from trade deals with the European Union (EU), Japan, and South Korea, alongside a 90-day tariff reprieve for Mexico and signs of positive United States (US) and China trade talk progress. Strong US economic data, including 3% second-quarter (Q2) 2025 gross domestic product (GDP) growth and robust Q2 earnings from tech giants like Microsoft and Apple further fuelled gains.

Locally, the Australia 200 (ASX 200) surged to near‑record highs, buoyed by a cooler‑than‑expected Q2 2025 inflation print. Headline consumer price index (CPI) came in at 2.1%, and trimmed mean inflation reached 2.7% - both well below forecasts - boosting expectations of a Reserve Bank of Australia (RBA) interest rate cut on 12 August. Gains were led by rate‑sensitive sectors such as consumer discretionary, real estate and financials, though losses in mining stocks like Rio Tinto and Beach Energy offset some of the upside due to lower commodity prices and company-specific impairments.

The week that was: highlights

• Job Openings and Labour Turnover Survey (JOLTS) jobs openings in the US in June fell by 275,000 to 7.437 million, below market expectations of 7.55 million
• The Conference Board (CB) consumer confidence index was stronger than expected, rising to 97.2 in July from 95.2 in June
• The ADP employment report showed a 104,000 increase in July versus 76,000 expected - the strongest increase since March
• The advanced estimate of US Q2 GDP showed the economy grew at an annualised rate of 3% in Q2 2025, rebounding from a 0.5% contraction in the first quarter (Q1)
• The Federal Open Market Committee (FOMC) kept interest rates on hold within a range of 4.25% to 4.50%, with two dovish dissenters, Michelle Bowman and Christopher Waller, calling for a rate cut, largely as expected
• The Federal Reserve’s (Fed) preferred measure of inflation, the core personal consumption expenditures (PCE), increased by 0.3% month-on-month (MoM) in June and was 2.8% higher year-on-year (YoY), pushing the three-month annualised rate to 2.6% in June from 2.0% in May
• Initial jobless claims rose to 218,000 last week below market expectations of a rise to 224,000
• In China (CN), the National Bureau of Statistics (NBS) manufacturing purchasing managers' index (PMI) fell to 49.3 in July from 49.7 prior.
• In Japan (JP), the Bank of Japan (BoJ) kept interest rates on hold at 0.5% as widely expected
• In Europe, Q2 GDP rose by 1.4% YoY, beating market expectations of 1.2% YoY
• In Australia (AU), the RBA’s preferred measure of inflation, the trimmed mean, rose by 0.6% quarter-on-quarter (QoQ), allowing the annual rate to fall to 2.7% from 2.9%
• Staying in Australia, building approvals increased by 11.9% in June, well above the 1.2% expected. Retail sales rose by a robust 1.2% MoM in June, beating the consensus forecast of 0.3% MoM
• Crude oil gained 6.26% this week to $69.23
• Gold fell by 1.38% this week to $3290
• Bitcoin fell 3.71% this week to $115,000
• Wall Street's gauge of fear, the volatility index (VIX), rose to 16.71 this week from 14.92 in the previous week.

Key dates for the week ahead

Australia & New Zealand

• New Zealand Q2 employment: Wednesday, 6 August at 8.45am AEST
• AU balance of trade: Thursday, 7 August at 11.30am AEST

China & Japan

• JP BoJ monetary policy meeting minutes: Tuesday, 5 August at 9.50am AEST
• CN Caixin services PMI: Tuesday, 5 August at 11.45am AEST
• CN balance of trade: Thursday, 7 August at 1.00pm AEST
• CN CPI and PPI: Saturday, 9 August at 11.30am AEST

United States

• Factory orders: Tuesday, 5 August at 12.00am AEST
• ISM services PMI: Wednesday, 6 August at 12.00am AEST
• Initial jobless claims: Thursday, 7 August at 10.30pm AEST

Europe & United Kingdom

• United Kingdom (UK) Bank of England (BoE) interest rate meeting: Thursday, 7 August at 9.00pm AEST

Key events for the week ahead

US: ISM services PM

Date: Wednesday, 6 August at 12:00 am (AEST)

In June, the ISM services PMI returned to expansion territory at 50.8, up from 49.9 in May.

Key sub‑indices showed improvement:

• Business activity: 54.2
• New orders: 51.3
• Inventories: 52.7
• Export orders: 51.1.

Meanwhile, price pressures slightly eased, with the prices paid index declining to 67.5 from 68.7. Ongoing concerns among survey participants continued to focus on the impacts of tariffs.

For July, consensus is for a slight uptick to around 51, indicating modest expansion in the sector. However, given the ongoing trade tensions, watch for continued price pressures reflected in comments and the prices paid index, while employment and new orders may show cautious optimism amid trade uncertainties.

US ISM services PMI chart

UK: Interest rate meeting

Date: Thursday, 7 August at 9:00 pm (AEST)

At its June meeting, the BoE’s Monetary Policy Committee (MPC) voted 6–3 to hold the bank rate at 4.25%, with Dhingra, Ramsden, and Taylor dissenting for a 0.25 percentage point (pp) cut to 4%.

The MPC retained its 'careful and gradual' easing guidance, with minutes noting dovish signals from weak underlying UK GDP growth, increasing labour market slack, and moderating pay growth, though the majority viewed inflation risks as balanced.

Since the June meeting, core UK inflation rose to 3.7% in June, driven by persistent wage inflation and higher labour costs, while the unemployment rate climbed to 4.7%, the highest in nearly four years. Meanwhile, GDP growth contracted by 0.1% MoM in May following a 0.3% MoM fall in April, sparking fears of contraction when Q2 numbers are released in mid-August.

Markets are pricing an 82% probability of a 0.25 pp rate cut at the BoE’s August meeting, with expectations for another cut in December, potentially lowering the bank rate to 3.75% by year-end.

BoE official bank rate chart

CN: CPI

Date: Saturday, 9 August at 11.30am AEST

For June, China’s consumer prices rose by 0.1% YoY, reversing a 0.1% drop in the previous three months and beating market forecasts of a flat reading, marking the first annual increase in consumer inflation since January, driven by e-commerce shopping events, increased subsidies for consumer goods from Beijing, and easing trade risks with the US.

The broader Chinese economy faces rising pressure, as July’s manufacturing PMI illustrated reflecting weaker demand:

• New orders: falling to 49.4 (down 0.8 points)
• New export orders: dropping to 47.1 (down 0.6 points)
• Production: eased to 50.5 (down 0.5 points) due to weaker demand and upstream production controls tied to anti-involution policies.

Real GDP growth is projected to slow to 4.5% YoY in Q3 2025 from 5.2% in Q2, driven by export front-loading payback, the cumulative impact of US tariffs, and muted new stimulus following the Politburo’s July meeting, which signalled no major fiscal expansion.

For July the preliminary expectation is for CPI to rise by a modest 0.2% YoY. Core CPI, excluding food and energy, is projected to remain steady at around 0.7% YoY.

China inflation rate chart

US Q2 earnings season

The Q2 2025 earnings season continues next week,with earnings reports scheduled from Palantir, Pfizer, Caterpillar, Supermicro, Rivian, Snap, McDonald's, Disney, Airbnb, Uber, DoorDash, Lyft and Under Armour.