Market navigator: week of 1 September 2025
Federal Reserve independence faces scrutiny while Chinese equities surge and gold reaches near-record highs ahead of critical employment data.
Summary
- What happened last week: Fed independence concerns intensified amid Trump's intervention. Onshore Chinese equities rallied and Australian inflation exceeded forecasts.
- Markets in focus: Technology valuations faced scrutiny as AI growth decelerated, while mainland Chinese indices outperformed Hong Kong amid capital repatriation.
- The week ahead: Critical US employment data and European inflation readings will shape monetary policy expectations.
What happened last week
- Fed independence under scrutiny: President Trump dismissed Federal Reserve (Fed) Governor Lisa Cook over suspected mortgage fraud preceding her appointment. Cook filed a lawsuit and refused to step down, raising concerns about central bank autonomy as her departure would give Trump another appointment to the seven-member board.
- Core inflation meets expectations: The Fed's preferred measure, core personal consumption expenditures (PCE), rose 0.3% month-on-month (MoM) and 2.9% year-on-year (YoY). While accelerating from June, it matched expectations and should not derail the Fed's September rate cut plans.
- Chinese stock frenzy persists: The CSI 300 gained 1.8% weekly while the Shanghai Composite maintained decade-high levels. Retail investors rotated from bonds and savings into equities amid artificial intelligence optimism. Household deposits fell 0.7% to RMB 161.9 trillion in July as 10-year government bond yields rose from 1.71% to 1.79% in August
- Australian inflation surprises higher: The consumer price index (CPI) jumped from 1.9% YoY in June to 2.8% in July, driven by housing, food and alcohol costs. The unexpected increase complicates the Reserve Bank of Australia's (RBA) policy path as the central bank had indicated willingness to cut rates if inflation remained within forecasts.
Markets in focus
US tech sector back in focus
The S&P 500 registered marginal decline of 0.1% last week as market participants awaited Friday's personal consumption expenditures data. Energy emerged as the standout sector performer with 2.8% gains, while utilities underperformed with 2.1% losses.
Corporate earnings redirected investor focus towards technology equities. NVIDIA's second-quarter results surpassed analyst expectations across key metrics, with revenue advancing 56% YoY to $46.7 billion and third-quarter guidance projecting $54 billion. However, growth rates have decelerated from approximately 100% twelve months prior, raising sustainability questions regarding the artificial intelligence (AI) expansion. Additional uncertainty stems from potential restrictions on Chinese chip sales. Share prices declined 4% post-earnings despite the strong financial performance.
Concurrently, Marvell experienced an 18.6% share price decline on Friday, notwithstanding 58% revenue growth that met analyst consensus. Management's guidance for flat third-quarter growth underscored the elevated expectations surrounding AI-related enterprises.
The US Tech 100 index concluded Friday's session below its 20-day moving average (MA), indicating deteriorating technical momentum. Failure to maintain support above the ascending channel's lower boundary, established from mid-May levels, may signal the initiation of corrective Wave 4 under Elliott Wave analysis. A 23.6% Fibonacci retracement could direct the index towards 22,400, approximating February's peak resistance level. Positive market developments may propel the index towards the upper channel boundary at 24,528.
Figure 1: US Tech 100 index (daily) price chart
Capital flow dynamics shift from Hong Kong to mainland markets
Investment attention has pivoted from Hong Kong's offshore equity markets towards mainland exchanges, as the CSI 300 benchmark advanced 8% in August. Evidence of capital repatriation emerged through record net outflows of HK$20.4 billion via the southbound Shanghai and Shenzhen Stock Connect programme last Thursday.
Nevertheless, multiple indicators suggest overheating conditions in onshore markets, including valuations of CSI 300 approaching 15x forward earnings significantly above the 10-year average of about 12x, and relative strength index (RSI) readings surpassing the 70 overbought threshold across both Shanghai and Shenzhen primary indices.
Corporate earnings from large-cap companies failed to match equity market performance. Food delivery sector leader Meituan reported a 97% net profit decline attributed to 'irrational competition' in the industry. Alibaba disappointed on both earnings and revenue metrics, though its cloud computing division demonstrated accelerating growth supported by artificial intelligence investments. Major Chinese banking institutions including Industrial and Commercial Bank of China, China Construction Bank and Bank of China reported declining net income as margins compressed under economic deceleration and property sector stress.
From a technical perspective, the Hang Seng Index continues encountering resistance level near 25,750 while maintaining its position within the ascending channel established since mid-April. A decisive RSI recovery may indicate renewed price momentum, provided the index sustains current levels supported by the 20-day MA. A breach below this threshold could drive the index towards 23,800, proximate to the 100-day MA.
Figure 2: Hang Seng Index (daily) price chart
Gold achieves strongest month since April
Gold prices gained 2.2% last week, reaching $3,454 per ounce on Friday, marginally below April's historic peak of $3,500. The precious metal delivered 4.8% returns in August, representing the strongest monthly performance since April.
While Friday's core PCE data indicates persistent US inflation, market participants maintain confidence that Fed September rate reductions remain on track. Bond futures markets have increased cut probability to 87% from 38% one month prior, potentially supporting precious metals demand as lower rates reduce the opportunity cost of holding non-yielding assets.
US dollar weakness provides additional gold price support. The US Dollar Index (DXY) declined 2.2% in August, driven by rate cut expectations and diminished confidence in US assets following the recent Fed Governor Cook dismissal controversy.
Fundamental demand remains robust. Global physically-backed gold exchange traded fund (ETF) attracted $3.2 billion net inflows during July, while central banks continued expanding gold allocations with 123 tonnes of net purchases in the first half of 2025.
Technical analysis demonstrates positive momentum with gold prices supported by all major moving averages and improving RSI readings. The ascending channel from mid-April will likely guide near-term price action, with upward movements initially encountering resistance at the $3,500 historic peak, followed by the upper channel boundary at $3,523. Pullbacks should find support at the 50-day MA near $3,359 before reaching the channel floor at $3,320.
Figure 3: Spot gold (daily) price chart
The week ahead
The forthcoming week centres on critical employment data and inflation metrics that may reshape monetary policy expectations across major economies.
US labour market dynamics assume prominence with the Job Openings and Labour Turnover Survey (JOLTS) results scheduled Wednesday and the non-farm payrolls report due Friday. Markets will scrutinise these releases for potential sampling methodology modifications following President Trump's dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer, who faced accusations of labour survey data manipulation.
July's non-farm payrolls added merely 73,000 positions, significantly below the 110,000 consensus, while substantial downward revisions eliminated 258,000 jobs from May and June combined. This reduced the three-month average job growth to 35,000 compared with the twelve-month average of 128,000. The sharp deceleration has prompted Fed to consider rate reductions at the 16-17 September meeting.
Markets anticipate a modest 78,000 non-farm payroll increase for August. Recent jobless claims data suggest labour market softening without accelerating deterioration.
Euro Area inflation data Tuesday will prove equally significant as the European Central Bank (ECB) evaluates whether price pressures remain aligned with the 2% target. Australian gross domestic product (GDP) and trade figures will provide additional clarity regarding the RBA's monetary policy trajectory.
Figure 4: US unemployment rate and non-farm payroll trend
Key macro events this week
Monday 1 September 2025
- 9.45am (HK time) — China RatingDog Manufacturing PMI (August): previous 49.5, consensus 49.5
Tuesday 2 September 2025
- 1.30am (HK time) — ECB President Lagarde Speech
- 5.00pm (HK time) — Euro Area Inflation Rate YoY Flash (August): previous 2.0%, consensus 2.0%
- 10.00pm (HK time) — US ISM Manufacturing PMI (August): previous 48.0, consensus 48.6
Wednesday 3 September 2025
- 9.30am (HK time) — Australia GDP Growth Rate QoQ (Q2): previous 0.2%, consensus 0.5%
- 10.00pm (HK time) — US JOLTS Job Openings (July): previous 7.437M, consensus 7.5M
Thursday 4 September 2025
- 9.30am (HK time) — Australia Balance of Trade (July): previous A$5.365B, consensus A$4.92B
- 9.45am (HK time) — China RatingDog Services PMI (August): previous 52.6, consensus 52.5
- 8.15pm (HK time) — US ADP Employment Change (August): previous 104K, consensus 72K
- 10.00pm (HK time) — US ISM Services PMI (August): previous 50.1, consensus 50.5
Friday 5 September 2025
- 2.00pm (HK time) — UK Retail Sales MoM (July): previous 0.9%, consensus 0.2%
- 8.30pm (HK time) — US Non-farm Payrolls (August): previous 73K, consensus 78K
- 8.30pm (HK time) — US Unemployment Rate (August): previous 4.2%, consensus 4.3%
Key corporate earnings
(in local exchange time)
Tuesday 2 September 2025
Wednesday 3 September 2025
Thursday 4 September 2025
Source: Trading Economics, LSEG (as of 24 August 2025)
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