The Overnight Report: Slipping Into August

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US markets faded over the day, as month end trading books were squared off for the upcoming August holiday.

The ASX200 slipped on the last day of July trading and futures are pointing to a weak start for August 1, tariff deadline day.

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The ASX200 fell -14ppts or -0.16% on Thursday dragged down by Materials, off -2.5%, and energy stocks. Technology and the banks provided support.

European shares closed at more than a one-week low on Thursday, down -0.8%. Investors were disappointed by earnings reports including from Sanofi and Ferrari. Beverage makers slipped on the prospect of a US 15% tariff hit.

NAB Markets Today Research extract

Markets continue to be buffeted by various tariff announcement and where the fate of some counties –-including Australia-– looks set to be known in the coming few hours via fresh Executive Orders ahead of the 1 August deadline for their commencement. 

Mexico has won a reprieve from the planned 30% tariff rate for 90 days, but the 15% EU’s tariff rate looks as though it will include wines and spirits, dashing earlier hopes for an exemption. 

The White House says trade talks with China are “moving in the right direction” while President Trump called India a “dead economy” hours after announcing a 25% tariff rate and hit out at Canada, saying its decision to recognise Palestine would “make it very hard for us” to make a trade deal.

US equities wiped out an early day gain led by Meta and Microsoft which topped a US$4tn market capitalisation. The S&P500 ended the day down -0.4%, led by a fall in pharma stocks after Trump demanded lower drug prices. 

The USD is up 0.25% driven mostly by sharp USD/JPY gains following BoJ Governor Ueda’s post meeting press conference. AUD is unchanged on the day while US treasuries are little changed across the curve. Apple has just smashed its 3Q2025 revenue estimate at US$94.04bn against US$89.3bn consensus. Markets are awaiting the US non-farm payrolls to be announced on Friday.

US real personal spending was subdued in June, rising 0.1%, which was in line with consensus expectations. The Fed’s preferred core PCE deflator inflation gauge rose 0.3% in line with expectations and took the annual rate to 2.8%. The surprise in the 2Q core PCE deflator in yesterday’s GDP report was due to small upward revisions to the April and May data. Weekly jobless claims at 218k were a little below the 224k expected, attributed to the delayed auto-sector re-tooling and associated temporary layoffs. 

Locally, the Cotality (formerly CoreLogic) June House price index shows a capital city gain of 0.6% in July, matching the June increase. Yesterday’s retail sales numbers showed 2Q2025 sales going out with a bang, above expectations for a 0.4% rise with a 1.2% jump (NAB was at 1.0%, consistent with strength in its own transactions data). 

In volume terms, retail sales rose 0.3% QoQ versus 0.1% consensus (NAB estimate at 0.2%). Positive volumes growth has now been seen for four consecutive quarters, though the annual rate remains relatively subdued at 1.5% annually. The data overall for June and May suggests the economy looks to have picked up some momentum and is consistent with our forecasts for modestly better GDP outcomes in 2H2025 versus the 1H2025.

In commodities, the big story has been the collapse in the CME-LME copper spread after the wholly unexpected decision by President Trump to exempt refined copper from the 50% tariff. The spread, which had been above 30% in mid-week, has fallen to zero. LME copper is down -0.9% on the day at US$9,611 per tonne while the CME price is down -21% and -24% on the week. 

Stephen Innes, SPI Asset Management extract

The S&P500 finished the session barely changed, caught in a tug-of-war between blockbuster tech earnings and a broader tape weighed down by month-end rebalancing and profit taking. Microsoft and Meta may have lit up the scoreboard, but the rest of the field limped toward the close as systematic and discretionary players trimmed risk into the dog days of August.

If the FX options market and VIX August futures (VIQ25) are telling the truth, and they often whisper more than they shout, if so, then the rest of the summer could be a snoozer. Implied volatility has melted like a popsicle on a Bangkok pavement, with traders signalling little appetite for bold new FX and equity exposure once this week’s macro fireworks pass. August, in short, may be the month the Street quietly goes fishing.

Pro traders, like pro golfers, aren’t swinging for the pin on every hole. Even the best only hit 60–65% of greens in regulation, which means it’s all about playing the high-percentage shots. You don’t pull the big stick unless the setup is clean, the wind’s in your favour, and the reward outweighs the risk.

And August? That’s not the time to force a hole-in-one. It’s the time to walk the course, keep the swing loose, and protect your scorecard. Capital preservation is the August play, lay up, chip close, and tap in. The big bets can wait until the fairways get crowded again in September.

Despite intraday records in both the S&P500 and Nasdaq, the final hour pullback felt more like end-of-month housekeeping than genuine risk aversion.

The month of July was no slouch with the S&P500 up over 2%, the Nasdaq nearly 4%, and even the Dow squeaked out a modest 0.6% gain. But as the calendar flips, positioning looks ripe for capital preservation strategies. This is the season when the smart money often closes the books early, especially with a major jobs report and tariff enforcement deadline looming just as traders eye their summer escape.

In short, the music is still playing, but the dance floor is thinning out.

The dollar’s nearly 2.5% surge this week is no small feat, especially for a currency as liquid, deep, and globally entwined as the greenback. Moves like this don’t come out of nowhere, and they don’t usually stop on a dime either, and there are still a few compelling reasons to believe this dollar move isn’t finished—not by a long shot.

For starters, the market remains far too dovish on the Fed. Futures still price in a rate-cutting cycle through the back half of 2025, leaving ample room for repricing if growth holds up and inflation proves sticky. The macro narrative has been dominated by trade war drama. Still, once that dust settles, as we suggested two weeks ago, markets will likely revert to core fundamentals, where U.S. growth outperformance and yield differentials reassert themselves.

The “U.S. exceptionalism” story isn’t dead; it’s just been waiting for the trade war intermission to end.

Then there’s positioning. Dollar shorts were built up over months of consensus bearishness amplified by virtually every Wall Street analyst calling 1.20 + on EURUSD. That wall of supply is now being unwound in real-time. What we’re seeing is not just a rally—it’s a proper squeeze. And we’re not even close to the end of it.

The most potent force in FX isn’t central banks or trade policy, it’s price action. And price action has just shattered the dominant market narrative that the dollar would fall in a straight line toward 1.25. That level now looks like fantasy land, a relic of a different macro regime.

What does August imply? To draw on the golfer analogy, there’s a reason I’ve shelved the big stick and shifted toward a short-stroke game. August doesn’t look like the month for hero shots. We’re in that “drive for show, putt for dough” phase of the market, tight, tactical, and reactive rather than bold.

The EUR/USD vol curve says it all. Implied volatility collapses once this week’s event risk clears. One-month vol is trading a full figure below one-week, which is rare and telling. The market’s not buying long-term turbulence—it’s renting short-term protection. Vol is being priced like a weekend tee time: you’re in, out, and back to the clubhouse before the crowd even wakes up. I think this should support the dollar from an August carry perspective.

What that tells me is simple: the market’s attention span is short, conviction is thin, and liquidity is shallow. This is the environment where you keep the shots low, hug the fairway, and don’t overthink the wind. Let the macro noise play out, fade the overreactions, and pick your trades like you take your putts—deliberately, patiently, and with respect for the grain. The big moves will come again. But right now, it’s about tapping in, not swinging for the green in two.

As for the tariffs, most desks now view them as transactional, not ideological. Trump may impose a fresh round of duties by executive order, but the prevailing assumption is they’re bargaining chips. Markets are beginning to bake in a baseline 15% tariff that gets lifted if enough money flows back into U.S. soil, either via investment pledges or trade realignments. The view is that these are leverage plays, not permanent trade barricades.

Of course, there’s still headline risk. The spectre of secondary sanctions on China, India, or Turkey, especially over Russian oil flows which could rattle sentiment. But for now, volatility continues to drip lower across asset classes. Unless something genuinely disruptive hits the tape, August could shape up to be exactly what it always threatens to become: a month of low conviction, low liquidity, and low vol.

Everyone’s waiting for the next significant macro catalyst. But judging by the price action this week , the dollar may have already found it.

Corporate news in Australia

-HMC Capital ((HMC)) has divested its stake in GrainCorp ((GNC)) which may signal more asset sales.

-TPG Telecom ((TPG)) is finalising its asset sale to Vocus netting cash of $4.7bn.

-Telstra Super and Aware Super are evaluating a $228bn merger by FY26.

-AGL Energy ((AGL)) has approved its $800m Tomago battery project.

-Pro Medicus ((PME)) has invested $10m, in 4DMedical ((4DX)) to back lung imaging technology.

On the calendar today:

-NZ July consumer confidence

-AU 2Q PPI

-US July ISM manufacturing

-US July NFP

-US July Uni of Michigan

-XX July manufacturing PMI

-ALS LIMITED ((ALQ)) investor briefing

-BEACH ENERGY LIMITED ((BPT)) Qtrly update

-CAPSTONE COPPER CORP. ((CSC)) earnings report

-ORIGIN ENERGY LIMITED ((ORG)) Qtrly update

-RESMED INC ((RMD)) earnings report

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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