Ahead of the game
Cooling CPI data and upbeat US earnings drive investor confidence, lifting rate-sensitive Australian stocks and setting expectations for an RBA rate cut in August.
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.
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:
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.
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.
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:
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.
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.
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.