Weekly recap
What happened in markets
The Australian sharemarket closed 1.7% higher last week, driven by Tuesday's record high and Wednesday's follow through rally, which saw a broad based rally across sectors. Sentiment turned more cautious later in the week, on concerns over potential US tariffs on Australian pharmaceuticals, weighing on the Health Care sector (-1.0%). However, all other ten sectors closed the week in the green, led by Materials, which advanced 5.2%, supported by strength in gold, lithium and iron ore miners. Pinnacle Investment Manager was a stock standout, gaining 9.1% after reporting strong Q2 earnings, including a 43% increase in net profit. In commodities, iron ore (1.7%) and gold (1.0%) continued to rise, while oil prices dropped 6.7%, after OPEC agreed to raise oil production.
US sharemarkets rebounded strongly last week, with both the S&P 500 and the NASDAQ recording their best week since late June. Markets welcomed the US Federal Reserve's dovish tone, with a September rate cut now priced at 90%, supported by soft labour data. The Information Technology (4.3%) sector was the standout, led by Apple's 13.3% surge after pledging US$100 billion in US production to secure chip tariff exemptions. Earnings season is nearing its end, with 81% of reported S&P 500 companies having beat consensus, though the size of beats has been more modest. CRH Public Company and Spotify Technology both reported positively last week, which pushed their share price up 14.8% and 12.6% respectively.
European sharemarkets also closed in positive territory, recouping most of the previous week’s losses, as the STOXX Europe 600 ended 2.2% higher, marking its best performance in three months. In economic news, the Bank of England delivered a 0.25% rate cut, while the European Central Bank maintained a cautious tone, pointing to tariff inflation risks. The Banking sector led the gains, increasing 6.5%, followed by Basic Resources (4.3%) and Automobile & Parts (3.8%), while Telecommunications (-0.9%) and Utilities (-0.2%) slipped.
Stock & sector movements
What caught our eye
Recently, our eyes have stayed firmly on the US labour market. Not just the numbers, but now also the trust we place in them.
The US labour market has always been a critical piece of the global economic puzzle and an important indicator for investors to watch. After all, the US consumer has been a dominant force in the global economy in the past 20 or so years. However, in recent years, we’ve seen increasing public scrutiny around the revisions to US labour market data.
The most recent revision was big, and importantly, at a critical time for the US economy. The globe is watching what will happen with the world’s largest economy, now that US President Donald Trump has upended it. With burgeoning debt, whipsawing tariffs and higher than hoped interest rates, US jobs have become the canary in the coal mine.
So, when we learned the canary was not as chirpy as we thought, it warranted further attention. It turned out the Bureau of Labor Statistics’ (BLS) latest employment report included downward revisions for May and June 2025, shaving a total of 258,000 jobs off the initially published figures.
Of course, Trump lashed out at the revisions, posting online that, “in my opinion, today’s Jobs Numbers were RIGGED in order to make Republicans and ME, look bad”. He claimed that BLS is biased and that it also faked numbers leading into the 2024 US election to make the Democratic candidate Kamala Harris look better.
The news gave Trump a reason to take advantage of the situation, sack who he deemed responsible and tighten his grasp on the country’s narrative. The person fired was Economist Erika McEntarfer, commissioner of the Bureau of Labor Statistics and nominated by former US President Joe Biden.
Refocusing on what matters most, we decided to look at the jobs data revisions over the past few years (excluding COVID-19). While the average absolute change in the numbers is similar to previous years, it does look as though there’s a downward revision bias in 2024 and 2025. That being said, it has been a particularly eventful couple of years, with lots of disruptions, so we aren’t convinced it’s a sign of bias.
Regardless of whether you believe Trump’s claim, these series of events, together with his politicisation of the US Federal Reserve, have really impacted the credibility of important US institutions. Markets rely on such institutions to be unbiased and objective. Without reliable data we can’t understand what’s really happening. Meanwhile, if we can’t trust policymakers to be objective and consistent, then it makes business decisions even more challenging.
It could be that there is some bias in US institutions. Or, it could be that the US economy has become increasingly complex and harder to precisely understand. Either way, we’ll continue to monitor the US labour market data closely, but perhaps with a grain of salt.
The week ahead
Locally, all attention will be on the latest interest rate decision from the Reserve Bank of Australia, which will be announced on Tuesday, with markets pricing in a 0.25% cut to 3.60%. In addition, wage growth is expected to increase by of 0.8% over the last quarter and we will receive the latest labour force and household spending data later in the week.
Overseas, it is a heavy week in the US for economic reports, with a trifecta of inflation data scheduled, including the all-important monthly CPI indicator, producer price index and retail sales. While industrial production, business inventories and the Federal budget balance are also released this week.
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