The RBA's odds of a rate hike on 29 September have gone from an afterthought to better than even across four sessions. A stronger-than-expected June quarter GDP print (0.4% quarter-on-quarter, 2.1% annually) on Wednesday pushed market-implied hike probabilities from around 10% a week ago to somewhere between 54% and 67%, depending on which desk you ask. NAB and Deutsche Bank have now pencilled in a September move to 4.60%. CBA and ANZ are holding out for November. Westpac thinks the board sits on its hands for the rest of the year. Three of the big four banks, three different calls, and none of them looking especially confident.
Layer on top of that a genuine three-session whipsaw. Wednesday was ugly: a US bond-market rout and fresh US strikes on Iranian oil infrastructure sent the ASX 200 to a four-week low, materials down 3.6%, lithium stocks cut in half a dozen ways. Thursday reversed most of it as Hormuz tensions eased. Then last night Wall Street had its best session since early August after Nvidia dropped US$12.9 billion on Hugging Face and Fed Governor Waller signalled he'd be comfortable holding rates in September if inflation keeps cooling. That rally showed up on the ASX this morning as an early 50-point pop that had halved by 2pm. Two central banks, two different inflation stories, and a local market that can't decide which one to believe.
Tuesday's overnight session set the tone for the week's first leg down: the S&P 500 fell 0.71%, the Nasdaq 1.03%, the Dow 419 points, as fresh US strikes on Iranian oil infrastructure sent WTI up 5.06% to US$90.70 and the US 30-year Treasury yield pushed toward a 19-year high of 5.275%. Fed rate-hike odds for September jumped to roughly 70% from around 40% a week earlier. That is not a market pricing in a soft landing.
It didn't last. Wednesday's session flipped on a single stock: Dell jumped 15.8% after lifting its full-year revenue guidance by US$25 billion on AI server demand, dragging the S&P 500 (+0.46%), Nasdaq (+0.45%) and Dow (+0.56%) off a three-day losing streak. Broadcom told the opposite story, guiding AI chip revenue to double but missing near-term estimates, and slipped after hours. Then last night was the standout: the S&P 500 rose 1.06% to 7,748, the Nasdaq 1.40% to 26,584, the Dow 1.18% to 53,686, Wall Street's best session since early August. Nvidia's US$12.9 billion purchase of AI platform Hugging Face, its second-largest deal ever, was the headline. Fed Governor Christopher Waller did the heavy lifting underneath it: he said he'd support holding rates steady at the 15-16 September FOMC meeting if the data keeps confirming disinflation, noting the Fed's preferred 3-month annualised inflation gauge has fallen from 4.76% in February to 3.05% now. Two different central banks, two different reaction functions, in the same 72 hours.
The ASX 200 has now traded through a genuine three-session round trip. Tuesday: -0.1% to 9,066.7, energy (+1.2%) and materials (+0.6%) holding up while consumer cyclicals (-1.7%), technology (-1.4%) and consumer staples (-1.4%) took the rate-sensitive hit. Judo Capital (+7.3%) and Liontown Resources (+6.7%) led the gainers; Pinnacle Investment Management (-9.9%) and REA Group (-3.9%) led the fallers. The Australian 10-year bond yield hit 5.16%, its highest since April 2011.
Wednesday was the low point: -0.95% to 8,978.4, a third straight loss and a four-week low, as the bond-market rout met the overnight Iran oil shock. Materials copped it hardest, down 3.6%, with lithium the epicentre: Core Lithium -9.2%, Pilbara Minerals -5.3%, Vulcan Energy Resources -5.1%, Liontown Resources -5.0%. Financials held roughly flat (+0.02%) and energy was the standout gainer as oil ripped higher. Thursday reversed most of it: +0.46% to 9,020.1, snapping the losing streak as easing Hormuz tensions lifted gold stocks (+2.2%) and banks (three of the big four up 0.7-1.8%). SGX iron ore futures jumped 1.7% to US$99.55 a tonne, a seven-week high, lifting Fortescue (+2.0%) and Rio Tinto (+1.3%).
Today, in afternoon trade at 2pm, the ASX 200 sits at 9,001.6, down 0.21%, having given back half of an early 50-point rally sparked by the Nvidia-driven Wall Street session. BHP is off around 2%, leading miners lower. Note this is an intraday reading, not a close: the market has another two hours to trade.
Gold is the week's most useful lesson in what actually drives it. It fell roughly 2.9% on Tuesday to around US$4,325/oz as hawkish Fed repricing lifted the US dollar and real yields, then reversed hard, touching US$4,428 on Thursday (+0.9%) and running further to somewhere between US$4,486 and US$4,505 by Friday morning on the Nvidia-fuelled risk rally and Waller's dovish tilt. Gold is trading as a rates and risk-appetite instrument this cycle, not a steady geopolitical hedge. That distinction matters for anyone sizing a gold allocation on the assumption it moves opposite to risk assets.
Oil moved the other direction entirely. Fresh US strikes on Iranian infrastructure sent Brent up 5.1% to US$95.13 and WTI up 5.7% to US$90.65 overnight Tuesday, before Brent eased 1.2% to US$94.51 on Thursday as tensions cooled. Iron ore closed the week at a seven-week high of US$99.55 a tonne, supported by Chinese steel-mill restocking, a constructive read for BHP, Rio Tinto and Fortescue if it holds. The AUD/USD has strung together three straight days of gains, trading around 0.7210 this morning, up from 0.7166 on Tuesday, as rising RBA hike odds do the currency's work for it.
Buried under the geopolitics this week: Australian reporting season just posted its best scorecard in five years. Bloomberg reported Wednesday that earnings beats outpaced misses for the first time since 2020, with 32% of S&P/ASX 300 companies beating consensus by more than 5% against 20% missing by more than 5%, a net 12% beat. Ausbil called it the strongest performance in a number of years. The dispersion tells the real story: Macquarie research found AI-enabling names, roughly 21% of the ASX 300 by market cap, delivered the biggest earnings surprises (around +23% on average) and the most FY26 upgrades (+27%), while AI-disrupted names managed surprises of only around 3%. The market is not rewarding a broad re-rating. It is rewarding a specific and narrow theme, and punishing everything adjacent to it.
Away from the AI dispersion trade, the standout individual mover was Dell offshore, up 15.8% on its US$25 billion guidance lift, a direct read-through for anyone holding AI infrastructure exposure. Locally, Judo Capital's 7.3% Tuesday gain suggests business-lending credit quality is holding up better than the macro backdrop implies, while the lithium complex, Core Lithium, Pilbara Minerals, Vulcan Energy Resources and Liontown Resources all down between 3% and 9% on Wednesday, remains the most volatile corner of the index. Bell Potter upgraded GrainCorp to Buy with a $7.15 target on strong crop reports, and lifted Nufarm to Buy at $3.75.
Iran remains the dominant driver behind this week's oil and equity swings. Fresh US strikes on Iranian oil infrastructure Monday night into Tuesday drove the Brent and WTI spike that hit the ASX on Wednesday. By Thursday, signs of reduced tit-for-tat hostilities pulled Brent back from its highs and helped risk sentiment recover, both offshore and locally. The pattern is worth remembering for the next flare-up: a genuine supply-side shock to Brent this week added over 5% in a single overnight session, then unwound more than half of that move within 48 hours as the situation cooled. Energy-driven CPI shocks can reverse as fast as they arrive, which is exactly the kind of variable the RBA has to look through, not just react to.
General Advice Warning: This communication contains general information only and does not take into account your personal objectives, financial situation or needs. Before acting on this information, consider its appropriateness to your circumstances and seek professional advice. Joel Threadgold (AR 001297336) is an Authorised Representative of RiverX Financial Services Pty Ltd (AFSL 556458).
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