Cutcher's Investment Lens | 26 October 2026 - 30 October 2026

What happened in markets 

The Australian sharemarket recorded a solid week, with the ASX 200 gaining 1.3%. The Materials sector (+3.6%) led gains, supported by strength across lithium stocks and positive production updates from several miners, while the Real Estate sector (+3.8%) also advanced amid gains across REITs. The Financials sector (+1.1%) was supported by strength among the major banks. In contrast, the Consumer Staples sector (-5.1%) was the largest detractor, with Coles falling 10.9% over the week, including a 7.7% decline on Friday following weaker-than-expected Q1 sales. The Consumer Discretionary sector (-2.4%) also declined as hotter-than-expected inflation increased expectations of another RBA rate hike, weighing on retailers. Overall, strength across resources, property and financials outweighed weakness in consumer-focused sectors, allowing the Australian market to finish the week higher.

The US sharemarket finished lower over the week, with the S&P 500 falling 0.6% and the Nasdaq declining 2.0%. The Communication Services sector (-8.5%) was the largest detractor, with Google parent Alphabet (-12.6%) falling sharply as its results raised concerns around Search performance and the impact of AI. The Information Technology sector (-1.8%) also declined amid mixed performance across AI-related stocks. In contrast, the Health Care sector (+3.1%) led gains, supported by pharmaceutical and biotechnology companies, while the Materials sector (+2.0%) and Utilities sector (+2.0%) also advanced. Overall, declines were largely driven by major technology stocks, while most other sectors finished the week higher.

The European sharemarket gained over the week, with the STOXX Europe 600 rising 1.8%, supported by a solid Q3 earnings season despite elevated energy prices and interest rate uncertainty. The Health Care sector (+5.1%) was the strongest performer, supported by a series of positive earnings results and outlook upgrades, while the Construction & Materials sector (+3.8%) also recorded strong gains. In contrast, the Banks sector (-0.9%) was the weakest performer following several disappointing Q3 results, while the Basic Resources sector (-0.7%) declined as gold, silver and copper prices weakened. Overall, strong corporate earnings supported European markets, despite persistent inflation pressures and expectations that the ECB may raise rates in December.

Stock & sector movements

What caught our eye

This Is a Diesel Story, Not an Oil Story

Crude oil is moving through the Strait of Hormuz at close to normal volumes again. Yet high petrol and diesel prices at bowsers have barely moved. The reasons are worth setting out before anyone plans around quick relief to inflation and the cost of living.

The pressure in energy markets has shifted from crude supply to refining capacity. Refining infrastructure has been damaged and takes longer to repair. Crude shipments through Hormuz have recovered to around three quarters of their level before the Iran conflict, at roughly 10 million barrels a day. Some most recent weekly readings in October have come close to the full pre-war volume, if bypass pipelines are included. Refined products have not recovered. Shipments of diesel, petrol and jet fuel through the strait were running at about 1.3 million barrels a day in early October against 3.6 million before the war.

Three factors remain critical to the story:

• Damaged refineries. Several Gulf refineries were hit during the Iran conflict. Restarting a refinery is slow. Each unit has to be repaired, inspected and brought back up in stages. Some large plants remain offline. Gulf producers have also prioritised crude exports because crude is simpler to ship.

• Missing exporters. Russia normally exports around one million barrels of diesel a day. That figure has fallen close to zero after strikes on its refineries. China has restricted fuel exports to protect its own supply.

• The price data confirms it. The margin between a barrel of diesel and a barrel of Brent crude was close to US$90 last week. The typical level is around US$20. September recorded the highest monthly average on record.
  

Goldman Sachs expects diesel and jet fuel margins to average more than double their normal level through 2027. That is even with an assumption that Brent eases back towards US$80 as crude flows recover. US oil producers surveyed by the Dallas Federal Reserve expect diesel prices to stay elevated for at least another year. Lower crude prices should flow through to petrol before diesel. Refining capacity is the limiting factor, and it is rebuilt over quarters rather than weeks.

For Australia, the impact is direct:

• We import close to 80% of our refined fuel, so local prices track the global product market rather than the crude market.

• Diesel across the five largest cities averaged about $2.77 a litre in late October. That is roughly a dollar above its level in late February.

• The ABS confirmed last week that automotive fuel prices rose 9.4% in September after 14.8% in August. Transport costs are up 8.7% over the year, making them the second largest contributor to inflation after housing.

• Brent is still around 45% above the level the Reserve Bank assumed in its August forecasts. September quarter inflation figures came in above expectations last week, with headline inflation at 4.3% over the year and the trimmed mean at 3.7%, driven in part by energy prices. That makes an interest rate increase the most likely outcome in this week’s RBA meeting, with the market pricing in an 78% probability.

For investors, this suggests the headline oil price is not the most useful guide right now. The diesel margin is the better indicator. It points to energy costs remaining a factor in freight, farming and the broader price level for some time. The key consideration is that the timing of any interest rate relief now depends partly on fuel prices and that timing looks later than it did three months ago.

The week ahead

Locally, attention will centre on Tuesday’s RBA interest-rate decision, with markets pricing an approximately 78% chance of a 0.25% rate rise following September’s stronger inflation reading. The RBA’s updated economic forecasts will also be closely watched for guidance on inflation, economic growth and the outlook for interest rates.

Overseas, the US midterm elections on Tuesday will be the major focus, with control of Congress at stake. The outcome could influence government spending and tax policy, while a divided Congress may make significant policy changes more difficult. Investors will also monitor Friday’s US employment report for further insight into the strength of the economy.