The Australian sharemarket finished the week largely flat, with the ASX 200 edging down 0.07%. Global bond yields and oil prices continued to weigh on equities as monetary policy remained restrictive amid elevated inflation expectations. The Health Care sector was the strongest performer, rising 3.77%, while CSL gained 5.08% to become the standout large-cap performer. The REITs (-1.81%) and Energy (-1.29%) sectors were the main detractors. Lendlease Group was particularly weak, falling 10.32% after reporting disappointing FY26 results. Market breadth was also soft, with seven of the 11 sectors declining, indicating broad-based selling.
US sharemarkets told a similar story to Australia: most sectors were weak, but the broader market finished close to flat. The S&P 500 slipped 0.06% as the Federal Reserve made its much-anticipated decision to raise interest rates by 25 basis points, its first increase since 2023. The Health Care (1.85%), Information Technology (1.06%) and Communication Services (1.15%) sectors led the gains, supported by strong weekly returns from Moderna (6.99%) and Advanced Micro Devices (8.46%). Most other sectors declined, with Utilities (-3.02%) and Financials (-2.33%) recording the largest falls. Overall, elevated Treasury yields and discount rates continued to weigh on rate-sensitive and cyclical parts of the market.
European sharemarkets ended the week lower, with the STOXX Europe 600 falling 0.55%. As in the US and Australia, rising bond yields, higher oil prices and tighter global monetary policy weighed on equities. The Utilities (0.68%), Health Care (0.42%) and Energy (0.06%) sectors were the only sectors to finish higher. The main areas of weakness were the Automobiles (-3.29%), Retail (-2.62%), Resources (-2.52%) and Telecommunications (-2.50%) sectors, as interest rates remained a concern and inflation of 3.2% stayed above the eurozone target. Volkswagen fell 5.74% as weaker profits placed further pressure on the Automobiles sector. Much of the market’s recovery earlier in the week was reversed on Friday.
Stock & sector movements
What caught our eye
Headline Earnings Growth Flatters the ASX 200
August reporting season wound up with Australian companies growing earnings at roughly 12% for the 2026 financial year, the strongest rate in four years. Don’t get too excited though, read a little further into the numbers and the story for the domestic economy is far more modest.
Our analysis shows that the aggregate figure is doing a lot of heavy lifting. Strip out the resource companies and earnings growth is closer to 2%. That means the rest of corporate Australia grew earnings by less than the market's long run trend…and inflation. It’s no wonder the ASX has underperformed compared to the rest of the world, where corporate earnings have been strong.
What the season really told us is that commodity prices did the work. Copper now accounts for more than half of BHP's underlying earnings, gold producers such as Genesis and Regis reported record profits, and Ampol's first half profit rose more than fourfold on refining margins lifted by the Middle East conflict.
The companies that face Australian households told a different story. With the cash rate at 4.35% after three increases this year, Harvey Norman reported July sales down 3.4% and Gerry Harvey spoke of fewer people walking into stores. Domino's saw same store sales fall close to 6% in the first eight weeks of the new year. Inghams flagged around $130 million of extra cost inflation ahead. Even the banks, which posted record profits, saw their shares fall in August, the worst month since 2022. CBA was notably weaker, with its share price down 9.9% over the month.
This is why the market spent August looking forward rather than back. In the final week of the season, 58 companies reported and beats outnumbered misses by more than two to one, yet analysts cut FY27 earnings forecasts for 32 companies and lifted them for 21, with the average revision around minus 3%. Morgan Stanley's conclusion was that simply meeting expectations was no longer enough. Share prices moved on the credibility of guidance. Companies such as Zip and Pro Medicus that jumped on results day have since given most of those gains back, while CSL, which lifted its outlook, held on to its gains and helped the Health Care sector to its best month on record.
For investors, this suggests two things. The first is that Australian shares have been a market of two halves this year, with resources carrying the index while everything else treads water, so diversification matters more than usual. The second is that the trimming of FY27 expectations is a necessary and rational reset rather than a warning sign. Forecasts that were set in February, before the rate rises and the Middle East disruption, are simply being marked to a harder reality. We are watching consumer trading updates and credit growth closely, because those will tell us when the pressure on households eases.
Overall, the headline domestic earnings growth number was real, but it was fortuitously mined by few rather than hard earned by all, and the year ahead will be judged on how the domestic economy adapts to higher interest rates.
The week ahead
This week in Australia, major manufacturing data will be released on Tuesday, followed by unemployment data on Wednesday. In the US, manufacturing data is due on Wednesday and jobless claims figures will be released on Thursday. Together, these releases will provide important signals about the strength of economic activity.