Wall Street climbs on AI gains; Australia 200 faces consolidation

Wall Street indices soar on CPI report and AI optimism

The three major indices on Wall Street hit record highs this week, as an inline consumer price index (CPI) report and weak jobs data reinforced expectations that the Federal Reserve (Fed) will resume its rate-cutting cycle next week. The rally was also supported by intensified bullish enthusiasm for artificial intelligence (AI), which sent Oracle shares 35% higher in a single day - an extraordinary occurrence for a billion-dollar company.

Australia 200 faces consolidation amid banking job cuts

Locally, theAustralia 200 (ASX 200) is set for a second week of consolidation after hitting a record high of 9054.5 in late August. Its performance this week was weighed down by falls in energy, healthcare, and financial stocks, after Bendigo and Adelaide Bank became the third bank to announce job cuts this week, following similar announcements by Australia and New Zealand Banking Group Limited (ANZ) and National Australia Bank Limited (NAB).

While job cuts can be seen positively by the market - indicating that leadership is prioritising shareholder interests by cutting costs and boosting earnings - they can also raise concerns about broader economic weakness, potential declines in customer service quality, and the long-term impacts of automation and offshoring on workforce morale and innovation.

The week that was: highlights

• In the United States (US), non-farm payroll revisions totalled 911,000 more than the 682,000 expected
• Headline producer price index (PPI) unexpectedly fell by -0.1% MoM in August, following a downwardly revised 0.7% rise in July, which saw the annual rate ease to 2.6% from 3.1%
• Core PPI prices also declined by -0.1% month-over-month (MoM) in August, bringing the annual rate of core inflation down to 2.8% from a downwardly revised 3.4%.
• Headline CPI rose by 0.2% MoM in August, bringing the annual inflation rate to 2.9% from 2.7%, aligning with expectations
• Core CPI increased by 0.3% MoM in August, maintaining the annual rate of core inflation at 3.1% year-over-year (YoY), unchanged from July
• Initial jobless claims surged by 27,000 to 263,000 - the highest since October 2021
• In Europe, the European Central Bank (ECB) kept its key deposit rate on hold at 2%, as widely expected, and sounded dovish
• In China (CN), consumer prices fell 0.4% YoY in August from flat the prior month, marking the fifth occurrence of consumer deflation this year, with food prices being the sole drag. Core CPI rose 0.9% YoY in August, supported by the trade-in program
• In Australia (AU), Westpac Consumer Confidence for September fell 3.1% to 95.4 over renewed unease regarding the Reserve Bank of Australia's (RBA) rate-cutting cycle
• The NAB Business Confidence Index fell to 4 in August, from 8 in July
• Crude oil gained 0.53% this week to $62.20
• Gold gained 1.30% this week to $3633
• Bitcoin gained 4% this week to $115,681
• Wall Street's gauge of fear, the volatility index (VIX), fell to 14.70 this week from 14.70 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU Reserve Bank of Australia (RBA) Hunter Speech: Tuesday, 16 September at 9.50am AEST
• AU RBA Jones Speech: Wednesday, 17 September at 11.30am AEST
• NZ Q2 gross domestic product (GDP): Thursday, 18 September at 8.45am AEST
• AU unemployment: Thursday, 18 September at 11.30am AEST

China & Japan

• CN house price index: Monday, 15 September at 11.30am AEST
• CN industrial production (IP), retail sales, fixed asset investment (FAI): Monday, 15 September at 12.00pm AEST
• JP CPI: Friday, 19 September at 9.30am AEST
• JP  Bank of Japan (BoJ): Friday, 19 September at approx. 1.00pm AEST

United States

• Retail sales: Tuesday, 16 September at 10.30pm AEST
• Federal Open Market Committee (FOMC) interest rate decision: Thursday, 18 September at 4.00am AEST

Europe & United Kingdom

• UK unemployment: Tuesday, 16 September at 4.00pm AEST
• UK inflation: Wednesday, 17 September at 4.00pm AEST
• UK  Bank of England (BoE) interest rate decision: Thursday, 18 September at 9.00pm AEST

Key events for the week ahead

AU: unemployment

Date: Thursday, 18 September at 11.30am AEST

For July, employment in Australia rose by 24,500 jobs, in line with the 25,000 gain the market expected. The unemployment rate eased to 4.2% from 4.3% prior, as the participation rate held steady at 67%.

Sean Crick, Australian Bureau of Statistics (ABS) head of labour statistics, said: ‘With employment rising by 25,000 people and the number of unemployed decreasing by 10,000 people, the unemployment rate fell by 0.1 percentage points to 4.2 per cent in July.’

The firm employment report validated the RBA’s cautious approach to monetary policy easing this year. It reinforces expectations that it will remain a cautious cutter going forward, given the tight labour market and concerns about upwards pressure on wages.

The preliminary expectation for August is that the Australian economy will add 25,000 jobs and the unemployment rate will remain at 4.2%.

Numbers that meet these expectations are anticipated to prompt the RBA to cut rates by 25 basis points (bp) in November, taking the cash rate back to 3.35%, before delivering a final 25 bp rate cut during the first half of 2026, taking the cash rate back to 3.10%.

AU unemployment rate chart

US: FOMC interest rate decision

Date: on: Thursday, 18 September at 4.00am AEST

At the last FOMC meeting in July, the Fed kept rates on hold at 4.25%–4.50% with two dissents in favour of a rate cut (Bowman and Waller).

Federal Chair Jerome Powell sounded hawkish and noted that a wait-and-see approach was appropriate as the labour market remained solid and that inflation may be more persistent than expected, with uncertainties around tariffs. This saw market pricing of a 25 bp rate cut in September fall to about 44% from 64% prior.

The Fed has since turned dovish, noting at the Jackson Hole symposium that the risk of a labour market slowdown was a more significant risk than persistent inflation.

This shift has been followed by a number of soft labour market readings, including the non-farm payrolls report for August and the Bureau of Labor Statistics’ (BLS) significant downward revisions to job growth earlier this week.

The cooling labour market is widely expected to lead the Fed to cut rates next week, despite inflation remaining well above the Fed’s 2% target.

Given that Fed Governor Lisa Cook will vote after President Trump's attempt to fire her was overruled by a court and considering that Stephen Miran’s appointment to the FOMC may not occur before the meeting, the most likely outcome is a 25 bp cut rather than a supersized 50 bp cut.

Overall, the US interest rate market is pricing in three 25 bp rate cuts for 2025 and a total of 146 bp of cuts between now and the end of 2026.

US Federal funds ratechart

UK: BoE interest rate decision

Date: Thursday, 18 September at 9.00pm AEST

At the BoE last meeting in August, the Monetary Policy Committee (MPC) voted by a majority of 5–4 to lower the Bank Rate by 25 bp to 4.00%. Its forward guidance was more hawkish than anticipated, emphasising data dependency going forward. This combination tempered expectations for additional BoE rate cuts into year-end.

Since then, the annual rate of core inflation has edged up to 3.8%, the highest level since April, while at the same time the unemployment rate has remained at 4.7%, its highest level since July 2021. Growth has been generally better than expected, rising by 1.2% YoY in Q2 2025.

Markets are pricing in a 98% probability that the BoE will keep rates on hold at 4.00% this week, with the BoE’s next rate change not expected until March 2026.

BoE official bank rate chart

JP: BoJ

Date: Friday, 19 September at approx. 1.00pm AEST

At the BoJ ast Monetary Policy Meeting in July, the BoJ kept its key policy rate on hold at 0.50% for a fourth consecutive meeting.

Inflation and GDP forecasts were revised slightly higher, with BoJ Governor Kazuo Ueda noting that 'underlying inflation is on track toward our 2% goal in a sustainable manner,' supported by spring wage negotiations yielding the strongest gains in 33 years. However, he stressed a ‘data-dependent’ approach, avoiding pre-commitment to hike rates amid uncertainties like US trade policies and domestic political instability.

At the BoJ’s upcoming meeting, it is expected to keep the short-term policy rate at 0.50%, though internal discussions suggest a potential rate hike by year-end, possibly in October or December, despite political uncertainties following Prime Minister Shigeru Ishiba’s resignation.

BoJ policy rate chart