FinX Weekly 18th August 2025

Global equities touched new highs early in the week but faded as bond yields rose and optimism around aggressive Fed easing waned after US core inflation and producer prices surprised to the upside. The RBA cut rates as expected, downgrading growth forecasts after productivity adjustments.

China’s July retail sales, production and labour data indicated some loss of economic momentum, contrasting with positive surprises in Japanese and the UK Q2 GDP.

President Trump extended the Chinese tariff deadline, but appeared to have achieved very little from his meeting with the Russian president.

The main events this week include the Treasurer’s productivity review, Jerome Powell’s Jackson Hole speech, the global flash PMI surveys, the Riksbank meeting, and a busy Australian earnings season.

Global equity markets began the week on a firm footing, with the MSCI All Country World Index reaching a new record high on Wednesday. Optimism was driven by hopes that the Federal Reserve might ease policy more aggressively than previously expected. However, as the week progressed, bond yields moved higher and the rally in risk assets moderated, reflecting uncertainty around the outlook for US monetary policy.

In Australia, the Reserve Bank delivered a widely anticipated quarter-point rate cut, lowering the cash rate by a quarter-point to 3.6%. Government bond yields edged lower over the week, although market expectations for further cuts remained little changed. Economic data releases were broadly positive: NAB business confidence rose to its highest level in three years, unemployment declined modestly from 4.3% to 4.2%, and annual wage growth held steady at 3.4%.

The monetary easing, combined with robust corporate earnings, pushed the S&P/ASX 300 to a new record high on Friday. Major companies, including CBA, REA Group and JB Hi-Fi, reported results that exceeded or met expectations, while the property sector showed broader signs of improvement.

Japan and the UK both posted stronger-than-expected second-quarter GDP growth of +0.3%, with Japan supported by surprisingly good net exports.

In contrast, China’s July data indicated a loss of momentum at the start of the third quarter. Retail sales slowed to +3.7% yoy, industrial production eased to +5.7% yoy, and the surveyed jobless rate ticked +0.2% higher to 5.2%. These readings fell short of expectations and reinforced concerns about the durability of China’s recovery.

US industrial production slipped by -0.1% in July, negating a slight upward revision in June, while retail sales added +0.5% with the June figure being revised up from +0.6% to +0.9%.

However, investors paid far more attention to the US inflation data. Equities were buoyed by the seemingly benign headline CPI figure, which remained at +2.7% yoy. On the other hand, core CPI (ex-food and energy) accelerated by more than expected to +3.1% yoy and indicated relatively broad upward price pressure. Core prices are viewed as a better indicator of future inflation. Two days later, core producer prices leapt from +2.6% yoy to +3.7% yoy, suggesting that businesses are bearing the brunt of the tariff pressure, which could eventually be passed on to consumers.

PPI inflation also has a greater bearing on the PCE measure, which is the most important from a monetary policy perspective.

A week ago, there was growing optimism that the Federal Reserve may cut by -0.5% in September following the disappointing jobs report.

After the inflation figures, even a -0.25% reduction is no longer certain.

Investors will now look to Chair Jerome Powell’s upcoming Jackson Hole speech for greater clarity, though the outcome is unlikely to be definitive with further jobs and inflation data due before the meeting.

The White House is displeased with the time taken for cuts to materialise. Treasury Secretary Bessent said the Fed Funds rate should be -1.5% to -1.75% lower than its current level. President Trump said last week that he may name the next Fed chair “a little bit early”, with several candidates said to be in the running.

The president also clarified that gold imports would not be subject to tariffs after the confusion of the previous week. He also extended the pause of higher tariffs on Chinese goods for another 90 days, up until November 10^th, to allow more time for negotiations.

Last week, it was also announced that NVIDIA and AMD would pay 15% of the proceeds of AI chip sales in China to the government. Beijing has urged local companies to avoid using Nvidia Corp.'s H20 processors. The guidance from Chinese authorities does not constitute an outright ban on H20 use, but rather discourages companies from using the chips, especially for government or national security-related work.

The Trump administration is also in talks with Intel to have the US potentially take a stake in the chipmaker, according to Bloomberg. The shares rose +7.4% on the news.

Tariffs on Russia were also apparently paused. The president had given 50 days to agree to a ceasefire or face secondary sanctions on exports. However, at Friday's meeting in Alaska, it is unclear whether the Americans secured any concessions. The Ukrainian president travels to Washington later today.

Besides this week’s Jackson Hole symposium for central bankers, the Swedish Riksbank is expected to keep the policy rate at 2%, and the latest global flash PMIs will be published. In Australia, the Westpac consumer confidence survey is due out, and earnings season gathers steam with 89 companies scheduled to report.

Australian reporting season kicks into full gear this week. Companies we are keeping a close eye on are:

Mon 18th Aug: Lend Lease, Aurizon

Tues 19th Aug: BHP. Seek, CSL, Woodside

Wed 20th Aug: Santos, Transurban, APA

Thur 21st Aug: Xero, Megaport, Qube

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