ASX 200 reaches new heights led by materials sector

US stock market gains as ASX 200 reaches record high

United States (US) stock markets gained this week, poised to secure a fifth month of gains. This rally followed Federal Reserve (Fed) Chair Jerome Powell’s dovish pivot at Jackson Hole, which heightened expectations of a Fed interest rate cut in September. Gains were also supported by better economic data and solid earnings reports.

Locally, the Australia 200 (ASX 200) reached a fresh record high of 9054.5 this week. With one session left, the index is on track for a monthly gain of 2.71%, marking its fifth consecutive month of gains. This surge has seen the index rally over 25% from the lows in April.

Sector performance and earnings

The positive performance this month has been driven primarily by robust earnings and strong gains in the materials sector (8.71%), notably by major miners such as Mineral Resources (28.96%), BHP (9.58%), Fortescue (8.84%), and Rio Tinto (3.32%).

The consumer discretionary (7.07%), real estate (4.88%), and financials (3.62%) sectors have also contributed, supported by expectations of additional Reserve Bank of Australia (RBA) rate cuts and a significant rise in the Westpac Consumer Confidence index for August.

The week that was: highlights

• In the US, durable goods orders fell by 2.8% month-over-month (MoM) in July. The second estimate of second quarter (Q2) gross domestic product (GDP) was revised upward to 3.3% from 3.0%. The Conference Board (CB) consumer confidence index eased to 97.4 in August from 98.7 prior. Initial jobless claims fell by 5000 to 229,000, easing from the prior week's eight-week high. Continuing jobless claims fell by 7000 from a near three-year high the prior week
• In Japan, the unemployment rate fell to 2.3% in July from 2.5% prior
• In Australia (AU), the monthly consumer price index (CPI) indicator rose to 2.8% year-on-year in July, up from a 1.9% increase in June. Trimmed mean inflation jumped to 2.7% in July, up from 2.1% in June
• In New Zealand, ANZ business confidence in August rose to 49.7 from 47.8 prior
• Crude oil rose by 0.83% this week to $64.19
• Gold increased by 1.30% this week to $3415
• Bitcoin fell 0.86% this week to $112,514
• Wall Street's gauge of fear, the volatility index (VIX), rose to 14.44 this week from 14.22 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU building approvals: Monday, 1 September at 9.30am SGT
• AU company gross profits: Monday, 1 September at 9.30am SGT
• AU Q2 GDP: Wednesday, 3 September at 9.30am SGT

China & Japan

• CN Manufacturing purchasing managers' index (PMI): Monday, 1 September at 9.45am SGT
• CN PMI: Wednesday, 3 September at 9.45am SGT

United States

• Institute for Supply Management (ISM) manufacturing PMI: Tuesday, 2 September at 10.00pm SGT
• Job Openings and Labor Turnover Survey (JOLTS) job openings: Thursday, 4 September at 8.30pm SGT
• ISM service PMI: Thursday, 4 September at 10.00pm SGT
• Non-farm payrolls: Friday, 5 September at 8.30pm SGT

Europe & United Kingdom

• EA inflation: Tuesday, 2 September at 5.00pm SGT
• UK retail sales: Friday, 5 September at 5.00pm SGT

Key events for the week ahead

CN: RatingDog PMI  

Date: Monday, 1 September at 9.45am SGT

China’s Caixin manufacturing PMI fell to 49.5 in July from 50.4 in June, missing forecasts of a rise to 50.2.

Its fall came as new export orders declined sharply amid global trade uncertainty, reflecting weaker demand from key markets like the US and Europe. Business sentiment improved slightly, buoyed by hopes of better economic conditions and promotional efforts, yet remained below the series average, indicating tempered optimism under ongoing challenges.

For August, the market is looking for a modest rise to 49.8 as weather disruptions fade and policymakers support the anti-involution effort.

RatingDog Manufacturing PMI chart

AU: Q2 GDP

Date: Wednesday, 3 September at 9.30pm SGT

In the March quarter (Q1) of 2025, Australian GDP increased by 0.2% quarter-over-quarter (QoQ), decelerating from 0.6% in the prior quarter, for an annual rate of 1.3%. It was the Australian economy's 14th consecutive quarter of growth.

Katherine Keenan, Australian Bureau of Statistics (ABS) head of national accounts, said: 'Economic growth was soft in the March quarter. Public spending recorded the largest detraction from growth since the September quarter 2017. Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism, and shipping.'

Within the details:

• Per capita GDP growth fell by 0.2% QoQ, back into negative territory following a 0.1% rise in the December 2024 quarter
• The household saving-to-income ratio rose to 5.2% from 3.9% as the rise in gross disposable income outpaced a rise in nominal household consumption
• Household spending grew by 0.4% following a revised 0.7% rise in the December 2024 quarter. Spending on essentials like food and rent continued to be among the highest contributors to household spending growth. Households spent more on electricity, gas, and other fuels, in part due to warmer than average weather during the quarter. The decline in electricity rebates available to households during the quarter also contributed to the rise in spending by households
• Inventories contributed 0.1 percentage points (pp) to growth in the March quarter. Mining saw a large buildup as reduced export demand and port closures due to severe weather resulted in delayed shipments
• Net trade detracted 0.1 pp from growth as coal and liquefied natural gas (LNG) exports were heavily impacted by severe weather disruptions to production and shipping. Exports of travel services also detracted from growth with a smaller than average rise in the number of international students in Australia during the quarter and reduced average spending by students
• Government spending was flat after nine consecutive quarters of growth. State and local government expenditure (-0.3%) fell with reduced electricity rebate payments to households across most jurisdictions. National government expenditure (+0.3%) continued to moderate as spending on social benefits programs such as the Medicare Benefits Scheme (MBS) and the National Disability Insurance Scheme (NDIS) fell, while defence spending continued to grow steadily.

The tepid Q1 GDP release reinforced the story that the Australian economy continues to muddle along at a rate significantly below the 2.5% to 3% growth rate we grew accustomed to before the Covid-19 shock. Along with softer inflation and labour market data, it was a factor driving the continuation of the RBA’s rate-cutting cycle in August.

As we await the final partial components that feed into next week’s GDP print, the preliminary forecast is for a rise of 0.6% QoQ, lifting the annual growth rate to 1.7% in line with the RBA’s recent revised lower forecasts of 1.7% for December 2025. Assuming this forecast is accurate, it will support the case for further easing of RBA monetary policy in the months ahead.

The Australian interest rate market is pricing in 5 basis points (bp) of rate cuts for the RBA’s meeting on 30 September, a cumulative 25 bp of rate cuts for the RBA’s meeting on 4 November and a cumulative 34 bp of rate cuts for the RBA’s meeting on 9 December.

AU GDP, chain volume measures, seasonally adjusted chart

US: Non-farm payrolls

Date: Friday, 5 September at 8.30pm SGT

For July, the US economy added only 73,000 jobs, below the expected 105,000. The unemployment rate ticked up to 4.2% from 4.1% - a move that was tempered by a decline in the participation rate to 62.2%.

Additionally, there was a significant downward revision to the job numbers for the previous two months, reducing total jobs by 258,000 and dropping the three-month average payroll gain from 150,000 to only 35,000.

This soft jobs report was a key factor behind Fed Chair Powell's dovish pivot during his Jackson Hole symposium speech, setting the stage for a potential rate cut at the September Federal Open Market Committee (FOMC) meeting.

The upcoming payroll report on 5 September and the Bureau of Labor Statistics labour market revisions due on 9 September are now under intense scrutiny. These revisions could result in a substantial downward adjustment of 550,000 to 950,000 jobs for the 12 months through March 2025, ahead of the 17 September FOMC meeting.

If both reports are soft as expected, it is highly likely that the Fed will cut rates by 25 bp in September, December, and January.

For August, the expectation is the US economy will add 78,000 jobs and the unemployment rate will rise to 4.3% from 4.2%.

US unemployment rate chart