Fin-X Weekly 25th August 2025

Jerome Powell’s Jackson Hole speech was less hawkish than feared, supporting an equity rally into the end of the week and strong gains in global property.

Australian earnings reports were mixed: CSL and James Hardie slumped on weak guidance and restructuring plans, while BHP and Woodside highlighted margin pressures.

US trade policy and tariffs continued to dominate, with Walmart warning of rising costs and Japan reporting its steepest export decline in four years.

Global PMI surveys pointed to resilience, though inflationary pressures remain persistent.

The highlights this week include inflation updates in the US, Australia, and the eurozone, alongside Chinese industrial profits and Japanese activity indicators.

Equity markets were cautious for much of the week as investors awaited Jerome Powell’s final annual speech at the Jackson Hole symposium, with particular concern that he might strike a hawkish tone. Selling in technology shares dominated in the run-up to the event, reflecting nervousness about the sector’s valuations and its sensitivity to higher interest rates. Adding to this sense of unease, Howard Marks of Oaktree commented in a Bloomberg interview that US equities may be in “the early days” of a bubble, though he emphasised he was not sounding alarm bells.

In the end, Chair Powell’s address was less hawkish than markets had feared, easing some of the tension and paving the way for a broad rally in stocks and bonds. Global property was the standout performer across asset classes, while equities more generally posted positive weekly returns. The S&P/ASX 200 and MSCI World indices reached another record high. Investors took the speech as a sign that the Fed may be more flexible in its approach, though Powell’s remarks left room for interpretation.

In Australia, corporate earnings releases were a key driver of stock-specific volatility. CSL shares dropped sharply, diving -20.0% over the week, as the company announced it would cut 3,000 jobs and embark on a significant restructuring. Despite underlying profit growth of +14.0%, management pointed to heightened competition and geopolitical uncertainty as reasons for the overhaul. James Hardie fared even worse, with its stock plunging -33.1% after reporting sales that fell short of analysts’ expectations. The adverse reaction underscored investor sensitivity to earnings misses.

BHP provided a mixed picture, with the stock ending only modestly higher at +0.1%. The miner revealed a -26.0% fall in full-year earnings, reflecting weaker commodity prices and rising costs, and announced it would scale back investment in new mines. The company also flagged a willingness to carry more debt, a shift that could have implications for its balance sheet and future shareholder returns. Job cuts in Australia were also signalled, with management seeking to preserve margins in a challenging environment.

Woodside shares slipped -0.8% as the energy producer reported a -24.0% decline in first-half profit, citing higher depreciation and restoration charges.

Corporate developments intersected with geopolitics during the week, with US President Donald Trump criticising an appeals court ruling that temporarily halted development of the Resolution Copper project in Arizona. The project, backed by Rio Tinto and BHP, has been delayed for two decades amid environmental and legal hurdles. Trump’s public rebuke came shortly after hosting the companies’ chief executives at the White House, where efforts to advance the project were discussed.

Trade policy remained a significant theme. The White House announced an extension of tariffs on products containing steel and aluminium, adding further cost pressures for consumers. Trump also instructed Goldman Sachs to appoint a new economist after a report suggested that most tariffs would ultimately be passed through to end-users. Walmart’s chief executive, Doug McMillon, reinforced these concerns, warning that tariffs were driving up costs. He noted that while consumers had so far adjusted gradually, higher prices were filtering through inventory replenishment cycles, and he expected this trend to continue into the second half of the year.

International trade developments also drew focus in Asia, where Japan reported its steepest export decline in over four years. July exports fell -2.6%, a sharper drop than the -2.1% contraction economists had expected, with shipments to the US falling by -10.1%. Analysts cautioned that the additional 15% tariffs set to come into force in August would further weigh on Japan’s trade performance, raising concerns about the resilience of its export-oriented economy.

Despite these headwinds, global survey data provided some encouragement. Flash S&P Global PMI figures for August showed resilient momentum across major developed economies, led by gains in the US and Australia. In the eurozone, the composite PMI output index rose from 50.9 to 51.1, the highest level in 15 months, though the improvement was modest. Manufacturing activity managed to climb back above the 50.0 threshold for the first time since June 2022, hinting at an end to the region’s post-pandemic factory downturn. However, the recovery was uneven, with services remaining sluggish. Across advanced economies, surveys pointed to persistent upward pressure on selling prices, suggesting inflationary risks may prove more entrenched than expected.

The minutes from the latest Federal Open Market Committee meeting highlighted divisions within the Federal Reserve. Most policymakers judged the risks from inflation to be greater than those from labour market softening, particularly given the potential inflationary impact of tariffs. The majority of the 18 officials in attendance underscored this “upside risk to inflation” as the dominant concern. Nevertheless, Powell’s speech at Jackson Hole struck a more balanced note. He acknowledged that downward revisions to payroll data could be persuasive evidence of cooling demand and suggested that the interaction of supply and demand shifts with fiscal measures such as tariffs and the One Big Beautiful Bill Act made the economic outlook unusually difficult to forecast.

Markets interpreted Powell’s remarks as opening the door to policy easing, with many investors expecting the Fed to cut rates as early as the next meeting on September 17^th.

Bloomberg data showed rate cuts were 81% priced in, though Powell himself refrained from offering explicit guidance.

In the meantime, attention has turned to incoming data, with the latest personal consumption expenditure (PCE) deflator expected to remain steady at an annual increase of +2.6%, while core PCE is forecast to edge up to +2.9%.

Political developments at the Fed added further uncertainty. Governor Lisa Cook came under pressure to resign after Federal Housing Finance Agency Director Bill Pulte accused her of falsifying loan documents. President Trump publicly called for her resignation, later suggesting he could dismiss her if she refused to step down. Cook rejected the allegations, but a forced departure would tilt the balance of the FOMC towards more dovish members, potentially influencing monetary policy decisions into 2026.

Elsewhere, monetary policy decisions reflected diverse regional conditions. The Bank of England was judged to have less than a 50% probability of cutting rates again this year, despite ongoing inflationary pressures. While markets shifted their expectations after the BoE’s August meeting, analysts maintained that a reduction in November remained possible if inflation tracks in line with forecasts and labour market slack builds further. The Swedish Riksbank kept rates unchanged at 2.0%, consistent with expectations, while the Reserve Bank of New Zealand trimmed its policy rate by -0.25% to 3.0%.

Geopolitical risk remained elevated as Ukraine continued to seek Western backing in negotiations with Russia. President Volodymyr Zelenskyy met President Trump and seven European leaders in Washington, where Trump also took a 40-minute call with the Russian president. Trump suggested that a trilateral peace initiative might be possible and that a ceasefire may not be necessary if Ukraine received “Article 5-like” security guarantees from the US and Europe, even without NATO membership.

However, such guarantees would likely require Ukraine to relinquish around 20% of its territory. The outcome of these talks carries significant implications for European security and energy markets.

Looking to the week ahead, investors will focus on a dense run of data releases. Inflation updates are due in the US, Australia, and the eurozone. Chinese industrial profit figures are also scheduled, along with several activity indicators in Japan.

Significant upcoming data fro this weel:

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