The Monday Report – 11 August 2025

This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies. For more info SHARE ANALYSIS: CBA

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

With markets topping new all time highs last week, investors will be looking to the US July CPI print, ongoing tariff announcements and more quarterly earnings for direction.

ASX200 futures are pointing to a (cautiously) positive start ahead of tomorrow's RBA meeting and a big week of earnings.

Good Morning,

Tony Sycamore: IG extract

The ASX200 finished 145 points or 1.68% higher last week at 8807. Most of the gains occurred in the first half of the week, culminating in a new record high of 8848.8 on Wednesday. Its robust performance followed gains on Wall Street and was driven by the big miners, who regained favour after the shakeout following Rio Tinto’s lacklustre earnings report.

At a sector level, Materials rose 5.24%, Consumer Discretionary, up 3.78%, Real Estate, up 2.85%, and Utilities lifted 1.93%; these sectors were the strongest last week. The laggards included Health Care, down -0.97%, Industrials, up 0.19%, Financials, up 0.28%, and Consumer Staples, up 0.80% as the rotation out of the big banks and into the big miners, which began in late June, continued.

The next move for the local bourse will largely depend on this week’s key events, including the forward guidance at Tuesday’s RBA interest rate meeting, where a -25bp rate cut is widely expected, and Thursday’s July labour force report. Additionally there will be numerous earnings updates from companies, including CommBank ((CBA)).

The Australian interest rate market starts the week fully priced for a -25bp RBA rate on Tuesday, taking the cash rate to 3.60% and there is a cumulative -63bps of RBA rate cuts priced between now and the end of the year.

Chris Weston, Pepperstone extract “Risk feeling the heat through summer markets”

The immediate assessment for traders as they gear up to take on the markets is the holistic review of the market/trading environment (i.e. ranges, volatility, liquidity, volume traded), as well as the technical set-ups, marking out key price levels and a pulse check on sentiment.

The process of managing risk throughout the week, not just in a position or into for an emerging opportunity, but mentally and psychologically, is also a critical aspect within the trading process. Therefore, reviewing the upcoming key event risks and themes, both scheduled and probable (unscheduled), that could impact sentiment and the intraday price action (in a market), makes the job of managing risk more efficient.

At a high level, the core risks to markets look set to be the US-China truce rollover, US core CPI release and possibly retail sales, the RBA meeting, UK jobs/wages, and earnings from ASX200 & HK50 heavyweights CommBank ((CBA)) and Tencent, relatively.

We roll into the new trading week with sentiment frothy, risk well bid and implied levels of cross-asset volatility at year-to-date or at multi-year lows. The NAS100 went on a tear last week, closing up 3.7% w/w and at an all-time closing high. Longs hold will hold a positive expectancy for new absolute at-the-highs to come into play, as they do for the S&P500. 

That said, there will be close focus and possible headwinds early this week to the US AI sector, given reports that Nvidia and AMD are set to pay 15% of revenues sourced from China to the US Administration. This comes amid calls from Chinese state media that Nvidia’s H20 chips pose a national security risk, raising the prospect of import controls.

EU equity has regained form with the EU Stoxx50 index closing higher on each consecutive day last week. Whether this positive flow is impacted by developments from the Trump/Putin meeting in Alaska is yet to be seen, but it seems unlikely.

The ASX200 spent much of last week at or near all time highs, although the risk ramps up this week, and traders need to be alert and consider the propensity for intraday volatility and movement given the tier one risk in play.

On Tuesday, the RBA is almost certain to cut the cash rate by -25bp (to 3.60%) – an outcome fully discounted by Aussie interest rate futures/swaps, and by extension ASX200 equity valuations and the AUD. Subsequently, the move in markets this week likely comes in reaction to the tone and the appetite seen in the RBA’s statement and Govenor Bullocks press conference to keep reducing the cash rate towards neutral, as well as any increased concerns on the labour market.

We also navigate the Australian July employment report on Thursday (consensus: 25k jobs, unemployment rate at 4.2%), and to a lesser extent, Q2 wages (Wednesday); the outcomes of which could help steer rates pricing and expectations for the September RBA meeting.  

Aussie equity and AUS200 traders are set to take on a deluge of ASX200 corporate earnings throughout the week. That said, it will be the Wednesday session that garners the closest focus, where we see close to $400bn of ASX200 market cap set to report. CommBank will dominate the market’s focus on Wednesday, as you’d expect given its reach into the domestic economy, and the incredible valuation premium it commands relative to other global banks.

With a punchy 11% weight on the ASX200, CommBank could have a significant influence on the broad equity index, especially if the reported numbers and the guidance filter through to outsized moves in ANZ Bank ((ANZ), Westpac ((WBC)) and National Australia Bank ((NAB)). Consider the CommBank options pricing implies a plus/mins 2.3% move on the day of reporting, which, if realised –-in isolation– would move the ASX200 by plus/minus 0.3%.

Forex and gold traders became familiar with Stephen Miran’s temporary appointment as a Fed governor; a factor that almost assures three votes for a cut at the September FOMC meeting. That stance is known even before the outcome of this week’s US core CPI release and the August payrolls report (released 5 Sept). 

The July US core CPI print (on Tuesday) will therefore be the marquee scheduled risk this week, and while the economist’s consensus is for a 0.3% m/m rise in core inflation, all eyes will be on the degree to which core goods inflation is affected by tariffs and whether these same factors could be even more pronounced in the August CPI read.

Tariff headlines will offer some degree of risk, with the US-China truce set to expire on Tuesday. The market has fully subscribed to the high probability of the tariff truce being rolled over for another 90 days, and as such, unless diplomatic talks fully break down, news of extension shouldn’t move markets too intently.

The gold market is also keenly watching any further news flow around the treatment of gold exports from Switzerland to the US, and if there are any new surprises on the exemption of the 39% headline tariff. 

Ed Yardeni extract is the sky the limit?

The S&P500 nearly matched its July 28 record high on Friday. The Nasdaq did rise to a record high. Once again, the Magnificent-7 stocks collectively are leading the pack. That’s because these remarkable companies continue to deliver magnificent earnings, which are increasingly being driven higher by the demand for cloud computing as AI increasingly powers the Digital Revolution.

The sky seems to be the limit for the cloud providers. More and more of us are using AI’s large language models, like GROK, ChatGPT, Claude, and Copilot, as tools to do research, to write software, to create content, and to work more productively.

These AI tools are all processing and storing our interactions with them in the cloud and learning from these interactions to become more useful to us. As the tools become more useful, the cloud companies earn more, and they must spend more to expand their data center capacity. Our collective ability to process more data leads us all to create more data to process. And so on. So the sky really is the limit!

Better-than-expected earnings reported by the Magnificent-7 contributed to the better-than-expected earnings results of the S&P500 companies in aggregate during Q1 and Q2 2025. Q1’s earnings rose almost twice as fast as was expected just before the earnings reporting season. Q2’s growth rate may be on track to be three times greater than expected.

S&P500 earnings estimates for 2025 and 2026 jumped significantly last week on strong results from Amazon, Apple, Meta, and Microsoft. S&P500 forward earnings per share rose to yet another record high, of US$288.85, last week. By definition, this series will converge with the 2026 earnings expectations series by the end of this year. The latter rose to US$302.61 last week. We expect the two of them to converge at $300 per share by year-end. Our outlook for earnings doesn’t seem to be as wildly optimistic as it was at the start of this year!

The percentage of S&P500 companies with positive three-month percent changes in their forward earnings jumped to 84.1% last week. This measure of earnings breadth augurs well for the bull market and suggests that it could broaden in the coming months.

The sky may be the limit for the Magnificent-7 and the bull market they are leading. However, as Icarus learned the hard way, flying too close to the sun invites a meltdown. The forward P/Es of the S&P500 with and without the Mag-7 are at 22.5 times and 19.9 times, respectively, with the Mag-7’s valuation multiple at 29.7 times. Stocks are not cheap. But as long as the odds of a recession remain low, these high valuation multiples are sustainable.

The Mag-7 stocks continue to justify their elevated valuation multiples by regularly beating analysts’ consensus earnings expectations. The only wild card seems to be Tesla. Collectively, they now account for 32% of the market cap of the S&P500, 23% of its aggregate forward earnings, and 12% of its aggregate forward revenues

Since the April 8, 2025 correction low of the S&P 500, the Mag-7 stocks are up 48%, outpacing all the other major stock market indexes. Their outlook remains sunny as long as they don’t fly too close to the sun.

Corporate news in Australia

-Aurizon Holdings ((AZJ)) is discussing the sale of up to 49% of its QLD rail tracks to generate up to $4bn in funds.

-Pacific Equity Partners is finalising the acquisition of a majority stake in Spark New Zealand’s ((SPK))’s $550m data centres platform.

-Sushi Hub is seeking a $1bn valuation as its 200th store is opened with a strategic push into NZ and the US markets.

-Liontown Resources ((LTR)) is reported as having raised as much as $316m from an institutional and share purchase plan which were oversubscribed.

-French dairy company Lactalis is the leading bidder for Fonterra’s ((FSF)) Australian food business.

On the calendar today:

-JP Public Holiday

-ALCOA CORPORATION ((AAI)) ex-div 10.8c

-CAR GROUP LIMITED ((CAR)) earnings report

-CHARTER HALL SOCIAL INFRASTRUCTURE REIT ((CQE)) earnings report

-DEXUS CONVENIENCE RETAIL REIT ((DXC)) earnings report

-IRESS LIMITED ((IRE)) earnings report

-JB HI-FI LIMITED ((JBH)) earnings report

-TEMPLE & WEBSTER GROUP LIMITED ((TPW)) 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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