The Fed hiked. The market didn't much like the press conference, then changed its mind entirely a night later. Chair Kevin Warsh delivered the first US rate rise since 2023 on Wednesday night our time, exactly as more than 90% of the market had priced, and for a few hours that was almost beside the point: his inflation warnings wiped out an early Wall Street rally and the Dow dropped 631 points, its worst session since February. The ASX shrugged it off completely. Thursday's session was a straight "credible Fed" relief trade, banks up more than 3% in places, the index closing 36 points, or 0.41%, higher. Then Wall Street did its own about-face: Thursday night was its best session in six weeks, the S&P 500 up 1.14% and the Nasdaq up 1.69%, as falling oil and a cooling bond market let the market "get on with it," in Marcus Today's words.
That should have set Friday up as an easy up-day locally. SPI futures opened 44 points higher, tracking the US move. Instead the index gave the whole gain back by midday, because the domestic story shifted from the Fed to the Reserve Bank. Governor Michele Bullock told a parliamentary hearing this morning that upside inflation risks "appear to be materialising," naming the sharp rise in the oil price directly as an inflation add and warning that firms are passing higher costs through. The market now prices a 94% chance of an RBA hike on 28 to 29 September, up from a bit over 80% earlier in the week. Banks, which led Thursday's rally, gave most of it back this morning: CBA (CBA -1.2%), NAB (NAB -1.4%), Westpac (WBC -1.0%) and ANZ (ANZ -0.6%) were all lower at midday. Gold and materials, sold hard through most of the week on the stronger yield story, were today's best performers instead.
Wednesday night was the hike everyone expected and the reaction nobody wanted. Chair Kevin Warsh delivered the first US rate increase since 2023, but his press conference read as more concerned about inflation than the market had hoped, and an early rally reversed hard. The Dow fell 631 points, or 1.2%, to 51,461.90, its worst session since February. The S&P 500 dropped 0.45% to 7,551.81 while the Nasdaq was essentially flat. Banks had their worst day since February, the KBE bank ETF down 2.6%, with Bank of America, Wells Fargo, Goldman Sachs and American Express all down 3 to 4%. Transports lagged too, the Dow Jones Transportation Average down more than 2% and on track for a fifth straight weekly decline.
Then the mood flipped entirely. Thursday night was Wall Street's best session in six weeks: the Dow rose 316 points, the S&P 500 gained 1.14% and the Nasdaq added 1.69%, its best day since 4 August. The semiconductor index (SOX) climbed 3.1%, the Mag7 basket rose 1.8% and SaaS names added 0.8%. Nine of eleven sectors finished higher and the VIX fell 12.8%. Bond yields did the heavy lifting: the US 10-year dropped 8.5 basis points to 4.93%, snapping an eight-day rising streak and pulling back from its highest level since 2007, while the 30-year fell 7.4bp to 5.29%. Falling oil was the other half of the story, with Brent settling under US$105, down 1.5%, as markets read a China request for Iran to rein in the Houthis alongside continued progress on the Saudi pipeline repair as reasons the supply shock might be easing. Nvidia rose nearly 3% after chief executive Jensen Huang said chip sales could double again next year, and mining names (gold, copper, lithium, uranium) all firmed in US trade, with BHP up 2.9% in its US listing. On the political side, Donald Trump and Xi Jinping are now set to meet in Washington next Thursday, with the US reportedly delaying a proposed 7.5% tariff on excess-capacity Chinese goods until after the summit.
Three very different sessions. Wednesday was the calm before the Fed, the ASX 200 drifting to a 16-point gain in a session Marcus Today's own podcast titled simply "Yawn," with the Strategy Portfolio sitting in 100% cash ahead of the decision. Thursday was the relief trade: the index was up 17 points, or 0.19%, by midday and closed 36 points, or 0.41%, higher, comfortably ahead of what the bearish overnight lead from Wall Street had implied. Financials led decisively, up 1.42%, with NAB (NAB +3.2%), ANZ (ANZ +2.1%), Westpac (WBC +1.2%) and CBA (CBA +1.6%) all firmer on a "credible Fed" trade. Healthcare added 0.98%, Industrials 0.57% and REITs 0.65%. Gold was the clear underperformer, down 1.98%, with Energy down 1.10% and Technology down 0.98% as both wore the softer commodity and rate-sensitive read-through.
Friday has been the whiplash session. The index opened strongly on SPI futures up 44 points, then gave the entire move back to sit down 7 points, or 0.1%, at midday, as Reserve Bank Governor Michele Bullock told a parliamentary hearing that upside inflation risks "appear to be materialising," pointing directly at the oil price and warning that firms are passing on higher costs. The market moved fast: an RBA hike on 28 to 29 September is now priced at 94%, up from a little over 80% earlier in the week. The sector split flipped in a single session. Gold was today's best performer, the sector up 3.2%, with Evolution (EVN +3.1%) and Newmont (NEM +1.8%) both firm, and Materials added 1.3% with Rio Tinto (RIO +1.0%) and BHP (BHP +0.9%) higher. Consumer Staples was the laggard, down 1.0%, with Coles (COL) and Woolworths (WOW) both off around 0.9 to 1.0% as defensives were sold into a risk-on tape, and Financials gave back most of Thursday's gain, down 0.8%, with the same four majors all lower at midday. Past performance is not a reliable indicator of future performance.
On stock news, Macmahon Holdings (MAH +10.0% today, +6.1% Thursday) continued to run on its agreed acquisition of Aspect Engineering Solutions, struck Thursday at a headline enterprise value of $75 million. Soul Patts (SOL +0.9%) remained in the frame as a bidder for facilities-services group Programmed. Reliance Worldwide (RWC +3.5% Wednesday) entered a binding deal to be acquired by Brookfield at $3.38 a share. Infratil (IFT +3.7% Wednesday) lifted earnings guidance by $20 million on stronger compute demand at its CDC data centres business, and Codan (CDA +7.5% Wednesday) saw its chief executive's pay package lifted after the share price tripled in two years.
Oil has been the week's release valve rather than its risk. Brent settled under US$105 overnight, down 1.5%, and is now more than 5% off its recent peak, as the market weighed a Chinese request for Iran to rein in Houthi attacks alongside continued repair work on Saudi Arabia's East-West pipeline. That is the first genuine easing in the oil-driven inflation story in weeks, and it is doing more work on sentiment than almost anything else on this page: it is the direct reason Wall Street could look past a hawkish Fed and rally, and gold-sector, copper, lithium and uranium equities all firmed in US trade on the same easing narrative overnight. Domestically the gold sector was today's standout on the ASX, up 3.2%, though that is a sector-equity move rather than a bullion price, and should be read as gold miners re-rating on the softer-yield, softer-inflation setup rather than as evidence of a fresh high in the metal itself.
Currency told a different story. The Australian dollar rose 0.3% overnight to 71.11 US cents, but that still leaves it down 0.8% for the week, its largest weekly fall since late July, as the RBA's own hawkish turn this morning has not yet been enough to offset a week of broader US-dollar strength around the Fed decision. Bitcoin was near flat overnight after last week's sharp fall on the failed Clarity Act vote in the US Senate.
The week's clearest theme was rate-sensitivity swapping direction twice inside 48 hours. Thursday's bank-led rally (NAB +3.2%, ANZ +2.1%, WBC +1.2%, CBA +1.6%) was a straightforward relief trade on a Fed outcome the market had already priced. Friday's reversal of that exact move, on Bullock's inflation comments, is the more interesting signal: it says the market now treats the RBA, not the Fed, as the more live domestic risk to rates for the rest of the year. Gold and materials, sold hard earlier in the week on rising yields, were the session's biggest beneficiaries once that RBA repricing began, up 3.2% and 1.3% respectively at midday.
Corporate activity kept running underneath the macro noise. Macmahon Holdings has been the standout mover of the week, up double digits across Thursday and Friday on its Aspect Engineering acquisition. Reliance Worldwide's agreed sale to Brookfield and Infratil's data-centre-driven guidance upgrade both point to the same theme we flagged in the last edition: infrastructure and compute demand are still attracting capital even as public equity markets wrestle with the rate path. Deep Yellow (DYL +0.77% Wednesday) posted an 85% rise in profit driven by accounting and non-cash items, a result the market treated as tepid after a roughly 30% share price fall in the prior month, a reminder that a headline profit number is not the same as an operational improvement.
The Saudi East-West pipeline outage, the story that has driven oil and therefore inflation expectations for weeks, is showing its first signs of easing. China's request to Iran to rein in Houthi attacks on Red Sea shipping, alongside continued progress on the pipeline repair, was enough to pull Brent more than 5% off its recent peak overnight. That is a genuinely different signal to the steady escalation this column has covered through August and early September, though it is one data point, not a resolution.
The other geopolitical story worth flagging is trade rather than conflict. Donald Trump and Xi Jinping are now set to meet in Washington next Thursday, and the US is reportedly delaying a proposed 7.5% tariff on Chinese goods produced with excess industrial capacity until after that meeting. Markets read delayed tariffs as a mild positive by default, but the more relevant point for portfolios is that a major bilateral trade decision is now sitting on the calendar for next week, alongside the Bank of Japan meeting already flagged in our last edition.
Ongoing. The Reserve Bank's next move is now the dominant domestic question. An RBA hike on 28 to 29 September is priced at 94%, and Friday's reversal in bank and defensive stocks shows the market is already positioning for it.
Next Thursday. The Trump-Xi meeting in Washington, with a proposed US tariff on Chinese excess-capacity goods reportedly on hold until afterwards.
Thursday 24 September. Australian labour force data for August. The last print had unemployment at 4.5%, and a soft number would complicate the case for an RBA hike.
This week on the ASX, AIA, FLT, SNL, SKS and MAH went ex-dividend.
Ongoing. The Saudi East-West pipeline outage and its effect on oil, now showing its first signs of easing rather than escalating, is worth watching for confirmation over the coming week rather than treating as resolved.