Week commencing 20 July 2026

US and AU shares slip as semiconductor weakness and BHP update pressure markets

United States (US) equity markets are poised to finish the week modestly lower as weakness in the semiconductor sector and escalating conflict in the Middle East weighed on sentiment, even as underlying economic data remained resilient, and the first batch of second quarter (Q2) earnings delivered mostly solid results.

Closer to home, the ASX 200 is set to finish the week modestly lower near the 8800 level, where it has now closed for the past five weeks. The index's decline has been driven primarily by heavy selling in the Materials sector following a soft operational update from heavyweight BHP.

While the report highlighted record iron ore production and another solid year of roughly 2 million tonnes of copper output, the market was disappointed by a downward revision to fiscal year (FY) 2027 copper guidance (1650 – 1800 kt). This reflects a significant decline in concentrator feed grade at Escondida – BHP's largest copper asset – as well as a mechanical issue in South Australia.

The move flowed through to the broader Materials sector, capping any upside for the local market despite gains for consumer-facing, energy and financial stocks.

The week so far - highlights

• US headline inflation eased to 3.5% year-on-year (YoY) in June, coming in below the 3.8% consensus forecast, while the core rate cooled more than expected to 2.6% YoY against a 2.8% estimate
• The producer price index (PPI) fell -0.3% month-on-month (MoM) in June against a flat consensus forecast, reinforcing a disinflationary narrative that was further supported by a flat 0% MoM reading in the core consumer price index (CPI)
• Initial jobless claims fell 8000 to 208,000 for the week to 11 July, well below the 217,000 expected and marking the lowest level in over two months
• Staying in the US, headline retail sales rose 0.2% MoM, while the key retail control group – which excludes volatile items like autos and gasoline and feeds directly into gross domestic product (GDP) – surged 0.5%, following an upwardly revised 0.8% gain in May.
• China's Q2 GDP growth moderated to 4.3% YoY, missing the 4.5% consensus forecast
• China's trade surplus widened to $125.62 billion in June, comfortably beating the $121 billion forecast as exports surged 27% YoY and imports jumped 36% YoY, both well ahead of expectations
• In Japan (JP), machinery orders plunged -12.4% MoM in May, a much sharper decline than the -4.2% consensus forecast
• The United Kingdom (UK) economy returned to growth in May with GDP rising 0.1% MoM in line with expectations
• The Australian Westpac Consumer Confidence Index jumped 4.1% in July to 83.9, rebounding from the 80.6 level recorded in June
• NAB Business Confidence in Australia improved to -5 in June, exceeding the -12 consensus forecast and marking a significant lift from the -14 recorded in the prior month
• WTI crude oil is trading 10.73% higher this week at $79.05
• The US dollar index (DXY) is trading marginally lower this week at 100.70
• Bitcoin is trading flat this week to $63,823
• Gold is trading 3.20% lower this week at $3990
• Wall Street's gauge of fear, the volatility index (VIX), rose to 16.72 this week from 15.02 the previous week.

Key dates for the week ahead

Australia & New Zealand

• NZ – Inflation Rate QoQ: Tuesday, 21 July at 8.45am AEST
• AU – Labour Force (June): Thursday, 23 July at 11.30am AEST

China & Japan

• CN – Loan Prime Rate 1Y/5Y: Monday, 20 July at 11.15am AEST
• JP – Inflation Rate YoY: Friday, 24 July at 9.30am AEST

United States

• US – Initial Jobless Claims: Thursday, 23 July at 10.30 PM AEST
• US – S&P Global Manufacturing PMI Flash: Friday, 24 July at 11.45pm AEST
• US – S&P Global Services PMI Flash: Friday, 24 July at 11.45pm AEST
• US – S&P Global Composite PMI Flash: Friday, 24 July at 11.45pm AEST
• US – New Home Sales: Saturday, 25 July at 12.00am AEST

Europe & United Kingdom

• UK – Unemployment Rate: Tuesday, 21 July at 4.00pm AEST
• UK – CPI YoY/MoM: Wednesday, 22 July at 4.00pm AEST
• EA – ECB Interest Rate Decision: Thursday, 23 July at 10.15pm AEST
• UK – Retail Sales YoY/MoM: Friday, 24 July at 4.00pm AEST
• EA – S&P Global PMI Flash: Friday, 24 July at 6.00 PM AEST
• GB – S&P Global PMI Flash: Friday, 24 July at 6.30 PM AEST

For the week ahead, the key events are:

AU: labour force (June)

Date: Thursday, 23 July at 11.30am AEST 

Last month, the May employment report delivered a stronger-than-expected outcome, with the number of employed people rising by 40,300 – comfortably above the roughly +30,000 consensus forecast. (This followed a sharp revised fall of 40,700 jobs in April.) At the same time, the unemployment rate eased to 4.4% from 4.5%, while the participation rate edged higher to 66.7%.

Looking ahead to the June update, consensus expects a more modest employment increase of around 19,000, with the unemployment rate likely to hold around 4.4% – 4.5%.

A softer-than-expected number – particularly a rise in the jobless rate toward 4.6% or another loss of jobs – would add weight to the view that the Reserve Bank of Australia (RBA) has tightened enough. Conversely, a strong print would keep lingering tightening risk alive, especially with the central bank still alert to wage and inflation pressures.

The Australian interest rate market is pricing in around 6 basis points (bp) of tightening for the RBA's August meeting, with a cumulative 18 bp of hikes now expected for the remainder of 2026.

Australian unemployment rate chart

EA: ECB interest rate decision

Date: Thursday, 23 July at 10.15pm AEST

At its June meeting, the ECB delivered a 25 bp hike – the first since 2023 – lifting the deposit rate to 2.25%.

In the updated staff projections, headline inflation was revised higher, largely due to a higher assumed path for energy prices and their indirect effects on food, goods and services. Core inflation (excluding energy and food) was also revised higher, now seen averaging 2.5% in both 2026 and 2027. On growth, the outlook was revised lower to 0.8% in 2026 and 1.2% in 2027, reflecting weaker domestic demand, reduced confidence and the hit to real incomes from higher commodity costs.

Since then, inflation has surprised to the downside. Headline inflation eased to 2.8% YoY in June from 3.2% the prior month, while core inflation fell to 2.4% YoY from 2.6%. The Governing Council stressed it would remain data-dependent and meeting-by-meeting, with no pre-commitment to any rate path.

Markets enter next week's ECB decision expecting no change, with pricing heavily skewed toward a hold. Attention will centre on Lagarde's press conference for any shift in tone – particularly whether the recent moderation in inflation has altered the balance of risks, or whether the ECB continues to keep the door open for a potential further hike, most likely in September, if underlying pressures prove more persistent.

Euro Area deposit rate chart

JP: inflation rate YoY

Date: Friday, 24 July at 9.30am AEST

Last month, Japan's headline CPI rose 1.5% YoY in May, up modestly from April's 1.4%. Core CPI (excluding fresh food) rose 1.4% YoY in May, remaining at its lowest level since March 2022 and below the Bank of Japan's (BOJ) 2% target for a fourth straight month as government fuel subsidies helped offset price pressures from higher fuel costs.

Next week's June inflation print is expected to show a slight pick-up, with consensus around 1.7% YoY for the headline and a similar modest rise in the core to 1.6%. Fresh food and energy prices, along with pass-through from earlier wage gains and import costs, should provide some upward impetus.

The inflation data comes just days before the BOJ's July policy meeting, where Governor Ueda and colleagues are expected to keep rates on hold at 1%, with markets not pricing in the next BOJ rate hike until December.

Japan core inflation rate chart

US: S&P Global Composite PMI Flash

Date: Friday, 24 July at 11.45am AEST

In the latest reading, the S&P Global US composite PMI rose to 51.9 in June from 51.5 in May, marking the strongest expansion in business activity for several months. The services sector led the way with a modest acceleration (51.2 vs 50.7 prior), while manufacturing gained (53.9 vs 53 prior), supported by output and new orders, though employment trends remained softer.

Next week's flash July reading will offer an early snapshot of whether that momentum is holding as the third quarter (Q3) begins. Consensus expects the composite to ease to 51.9, led by a fall in manufacturing to 53.9. A stronger-than-expected outcome would reinforce the narrative of a still-solid US economy. Weaker figures, on the other hand, would help ease expectations of tighter monetary policy before year-end.

US Composite PMI chart

US: Q2 earnings season

US Q2 2026 earnings season picks up speed next week as the focus moves from the banking sector towards industrial, tech, and consumer giants.

The action begins with Domino's on Monday before a busy Tuesday featuring Charles Schwab, 3M, and General Motors. The intensity peaks mid-week with a high-stakes 'After Close' session on Wednesday headlined by Tesla, Google-parent Alphabet, IBM and ServiceNow. Tech and industrial momentum continue Thursday with Honeywell, American Airlines, Intel, and SAP. American Express, Verizon, and SLB round out the week's reports.