Market navigator: week of 25 August 2025
Powell signals September rate cuts while US sector rotation accelerates. NVIDIA earnings and China PMI data headline critical week ahead.
Summary
- What happened last week: US-Russia summit ends without breakthrough while UK inflation surprises upward. Federal Reserve (Fed) signals dovish pivot as Powell hints at September cuts.
- Markets in focus: US sector rotation accelerates with cyclicals outperforming tech. Hong Kong interbank rates surge, constraining Hang Seng Index despite China optimism.
- The week ahead: Critical US inflation data and NVIDIA earnings dominate alongside China's manufacturing PMI and corporate results.
What happened last week
- Russia-Ukraine conflict: The US-Russia summit in Alaska ended without a ceasefire, as Putin demanded Ukraine cede eastern territories. Despite no formal deal, the US is facilitating bilateral meetings between Putin and Zelenskyy. US and European leaders agreed to pursue security guarantees for Ukraine. WTI crude oil advanced 1.4% as markets await clarity on the situation.
- UK inflation surprise: Headline inflation rose to 3.8% year-on-year (YoY) in July, surprising markets. The increase was mainly driven by higher air fares, masking broader disinflation and creating a policy dilemma for the Bank of England (BoE). Goods prices fell month-on-month, and only 36% of the Consumer Price Index (CPI) basket exceeding 2.5%.
- Fed's dovish pivot: Chair Jerome Powell expressed willingness to lower rates in September during his Jackson Hole address, citing labour market risks. Equities and Treasuries rallied sharply, with the S&P 500 surging 1.5% on Friday as September cut probability rose from 75% to 89%.
- China market optimism: Mainland Chinese stocks posted strong gains on US-China trade truce extension. Investors rotated from cash and bonds into equities. The onshore CSI 300 Index rose 4%, while the Shanghai Composite Index closed at its highest level in a decade.
Markets in focus
US sector rotation gains momentum
Although the S&P 500 declined for five consecutive sessions before Friday's Powell-driven rebound, weakness concentrated in mega-cap technology stocks. NVIDIA and Meta declined as much as 6% intraweek. Cyclical sectors, including Real Estate, Energy, Materials, and Financials led market gains, generating over 2% weekly returns despite the S&P 500's modest 0.3% weekly advance. The Dow Jones benefited from this sector rotation, finishing 1.5% higher for the week.
Corporate earnings from major retailers captured investor attention. Home Depot and Lowe's surged over 4% following robust quarterly results, demonstrating consumer resilience in small-scale home improvement spending. Conversely, Walmart declined 3% after missing earnings expectations and cautioning about cost pressures from elevated tariff rates.
Despite recovering 25% from April's trough, the Wall Street Index's rebound magnitude remains significantly below the US Tech 100's 43% advance. The ongoing sector rotation may provide additional upside potential for the blue-chip index. Technical analysis reveals an Elliott Wave pattern, with price action since 31 July resembling Wave 5. A 61.8% Fibonacci extension of Waves 1 and 3 combined suggests an optimistic price target of 48,578. However, the index must first overcome resistance at the ascending channel's upper boundary near 47,000. Any pullback should find support at the 20-day moving average (MA) at 43,146.
Figure 1: Wall Street Index (daily) price chart
Surge in HIBOR constrains Hang Seng performance
Hong Kong's one-month Hong Kong Interbank Offered Rate (HIBOR) rebounded sharply from approximately 0.9% to 2.9% last week as the aggregate balance in Hong Kong's banking system contracted to HK$53.7 billion following Hong Kong Monetary Authority intervention to prevent HKD weakening beyond HK$7.85 per USD.
The sharp increase in borrowing costs dampened investment appetite, particularly affecting investors utilising margin accounts or leveraged strategies. Consequently, the Hang Seng Index advanced only 0.3% despite the robust rally in onshore markets.
Technology stocks led gains as investors positioned for increased demand for domestic semiconductors amid exponential artificial intelligence growth and reports that Chinese authorities have discouraged use of NVIDIA's H20 chips on national security grounds. Corporate earnings also drove market movements, with Pop Mart shares reaching a record high of HK$328 after the Chinese toy manufacturer reported nearly 400% net profit growth, driven by surging global demand for its Labubu products.
From a technical perspective, 25,750 has established itself as a key resistance level for the Hang Seng Index. Should the index breach this threshold, it will encounter major resistance at 26,300 — a level that proved formidable during 2021. The Relative Strength Index (RSI) warrants close monitoring as early signs of bearish divergence emerge. Should the RSI peak below 64 in upcoming sessions, this would signal diminished price momentum, potentially driving the index toward 24,626 near the 50-day moving average.
Figure 2: Hang Seng Index (daily) price chart
AUD/USD under pressure from regional headwinds
AUD/USD declined 0.4% last week, closing at 0.6485 as weak Chinese economic activity and spillover effects from the dovish Reserve Bank of New Zealand rate cut weighed on the Australian dollar. Chair Powell's Jackson Hole address pressured the USD, enabling AUD/USD to recover from Thursday's low of 0.6412. The Reserve Bank of Australia's (RBA) August meeting minutes, scheduled for Tuesday, and Wednesday's monthly inflation indicator will determine the currency pair's near-term direction.
Technical analysis shows AUD/USD briefly fell below its ascending channel on Wednesday, risking a test of the 200-day moving average at 0.6380. While Friday's recovery restored the pair within the ascending channel, sustained momentum above the 20-day moving average at 0.6492 is required to rebuild confidence in AUD/USD's gradual ascent toward 0.67. Immediate support is positioned at 0.6450, followed by 0.6386.
Figure 3: AUD/USD (daily) price chart
The week ahead
This week presents a critical assessment of global economic momentum and inflation dynamics, with high-impact data releases and corporate earnings influencing market sentiment.
In the US, focus centres on the Fed's preferred inflation measure — the core Personal Consumption Expenditure (PCE) Index, which will provide essential input for the Fed's interest rates decision on 17 September. Personal income and spending data, released alongside the PCE, will further clarify consumer resilience.
Recent inflation reports revealed core CPI growth of 0.3% month-on-month (MoM), while the Producer Price Index (PPI) surged 0.9% monthly, driven by services sector inflation. Producer prices recorded their sharpest monthly increase since March 2022, significantly exceeding expectations as businesses adjust pricing to accommodate higher tariff-related costs. This development raises the possibility that the forthcoming core PCE reading may exceed the market consensus of 0.3% MoM.
China's manufacturing sector faces scrutiny on Sunday with the release of the official Purchasing Managers' Index (PMI) for August. Particular attention will focus on the manufacturing component, which has remained in contractionary territory since April. Investors will analyse the data for insights into the impact of uncertain US-China trade policy developments.
On the corporate front, NVIDIA is scheduled to report quarterly results after market close on Wednesday, 27 August, with analysts anticipating revenue of $45.8 billion (representing 52% YoY growth). These results will prove pivotal for technology sector sentiment, particularly regarding whether continued artificial intelligence enthusiasm can justify elevated valuations.
Concurrently, China's earnings season reaches its climax. Alibaba will announce June quarter results on Friday, while other prominent names including BYD, Meituan, and major Chinese banks are expected to release results, providing insights into consumer trends, industrial performance, and financial sector health.
Figure 4: US consumer and producer price trends
Key macro events this week
Tuesday 26 August 2025
- 9.30am (HK time) — Australia RBA Meeting Minutes
- 8.30pm (HK time) — US Durable Goods Orders MoM (July): previous -9.3%, consensus -4%
- 10.00pm (HK time) — US Conference Board Consumer Confidence (August): previous 97.2, consensus 98
Wednesday 27 August 2025
- 9.30am (HK time) — Australia Monthly CPI Indicator (July): previous 1.9%, consensus 2.2%
Thursday 28 August 2025
- 8.30pm (HK time) — US GDP Growth Rate QoQ 2nd Estimate (Q2): previous -0.5%, consensus 3%
Friday 29 August 2025
- 7.30am (HK time) — Japan Unemployment Rate: previous 2.5%, consensus 2.5%
- 7.30am (HK time) — Japan Retail Sales YoY: previous 2%, consensus 1.8%
- 1.00pm (HK time) — Japan Consumer Confidence: previous 33.7, consensus 33.5
- 8.30pm (HK time) — US Core PCE Price Index MoM (July): previous 0.3%, consensus 0.3%
- 8.30pm (HK time) — US Personal Income MoM (July): previous 0.3%, consensus 0.4%
- 8.30pm (HK time) — US Personal Spending MoM (July): previous 0.3%, consensus 0.5%
Sunday 31 August 2025
- 10.00am (HK time) — China NBS Manufacturing PMI (August): previous 49.3
- 10.00am (HK time) — China NBS Non-Manufacturing PMI (August): previous 50.1
Key corporate earnings
(in local exchange time)
Monday 25 August 2025
Tuesday 26 August 2025
Wednesday 27 August 2025
Thursday 28 August 2025
Friday 29 August 2025
Source: Trading Economics, LSEG (as of 24 August 2025)
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