The laggards

The mining sector (down 0.9 per cent) was the biggest drag on the benchmark ASX 200, with iron ore heavyweights Rio Tinto (down 2.5 per cent) and BHP (down 1.4 per cent) among the biggest large-cap decliners, despite speculation that top consumer China will unveil more stimulus measures this week.

Consumer discretionary companies were also weaker, with Aristocrat Leisure declining 3.3 per cent and Harvey Norman shedding 1.8 per cent. Treasury Wine Estates (down 1.5 per cent), Viva Energy (down 1.6 per cent) and software accounting firm Xero (down 1.4 per cent) were also among the worst-performing megacaps.

The lowdown

Capital.com senior financial markets analyst Kyle Rodda said the ASX 200 softened, with cyclical companies underperforming, after Chinese data showed growth there remains weak.

“Nevertheless, the markets remain supported by expectations for US rate cuts and what’s likely to be a solid earnings season for Wall Street,” he said, noting a cut is already baked into US equity prices for September and another by December.

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On Wall Street, which overnight was trading for the first time since the attack on the former and aspiring future US president, the “Trump trade” gained momentum. The wagers – based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulation – had already been gaining ground since President Joe Biden’s poor performance in last month’s debate imperiled his campaign.

The Dow Jones Industrial index rose 0.5 per cent to a record high. The S&P 500 index added 0.3 per cent and the Nasdaq Composite index gained 0.4 per cent.

Among the 11 major sectors of the S&P 500, energy shares enjoyed the biggest percentage gains, while utilities were the laggards. Trump’s rising odds of victory bolstered the shares of oil producers, gun makers and private prisons. His pro-crypto stance also lifted Bitcoin and related companies.

Traders also kept a close eye on remarks from Federal Reserve chair Jerome Powell, who said second-quarter economic data had provided the central bank’s policymakers greater confidence that inflation is heading down to the central bank’s 2 per cent goal, possibly paving the way for near-term rate cuts.

US 30-year bond yields rose above two-year yields for the first time since January on bets Trump would pursue an expansive fiscal policy if he wins the November election.

Quote of the day

“If you think about why three airlines really struggle, it’s a number of things – our population; the US has 250 million people, we have 26 million … and spread between the economics of being a viable airline, it’s challenging because it’s capital intensive,” said Qantas boss Vanessa Hudson as she spoke about Australia lacking the passenger numbers to sustain more than three domestic airlines.

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With Bloomberg, Reuters

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