Fed Cut Hopes Lift ASX After Rough Week

The S&P/ASX 200 Index closed 0.51% higher at 8,871.20 on Friday, rebounding after a sharp sell-off earlier in the week. Despite today’s rally, the index snapped a four-week winning streak, logging its weekly decline with a 1.14% drop.

The bounce was supported by stronger sentiment on Wall Street, where softer US payroll and jobless claims data reinforced expectations of a Federal Reserve rate cut in September.

What moved the market

• US data: ADP payrolls missed and jobless claims rose, reinforcing the “cooling but not collapsing” labor backdrop. Odds of a September Fed cut increased, lifting global risk assets and duration-sensitive sectors.
• Domestic macro: ANZ flagged a rising chance the RBA may be done cutting if consumer momentum holds and inflation/labor softness does not re-emerge. Near-term, November easing remains the base case but conviction is lower.

Portfolio implications (near term)

1. Stay constructive on quality gold producers. Momentum and macro support remain intact. Focus on balance sheets, cost curves, and production delivery.
2. Tilt toward durable Tech and select REITs that benefit from lower discount rates, but respect factor crowding. Prefer cash-generative software and hyperscale-adjacent infrastructure.
3. Retail discretionary can continue to trade with the rates path. Prioritize operators with pricing power and clean inventory.

Key risks to monitor

• US payroll: A hot print could reprice the September cut odds and pressure duration trades.
• Policy swings risk: Ongoing US tariff rhetoric on semiconductors and evolving trade actions with Japan could stoke volatility in global Tech supply chains.
• RBA path: If domestic demand holds and disinflation stalls, the market may pivot from expecting cuts to a longer hold, weighing on high-duration sectors.

What to watch next week

• ASX confession season tail and any post-reporting season guidance updates.
• China activity data for confirmation on steel and construction run-rates.
• Gold positioning in Commodity Futures Trading Commission and Exchange-Traded Fund flows for signs of overextension or renewed inflows.

Conclusion

The ASX ended its month-long rally with a corrective pullback, reflecting global rate expectations and commodity dynamics. While Friday’s rebound showed resilience, volatility is likely to persist ahead of the US nonfarm payrolls report and the Federal Reserve’s September policy decision.

For investors, gold equities remain a tactical hedge amid rate-cut optimism, while selective exposure in technology, retail, and real estate could benefit from renewed global liquidity.

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