The laggards

Mining stocks, which make up almost 20 per cent of the entire ASX, weighed on the local bourse. Fortescue Metals, Australia’s second-biggest miner, led the sector lower after reporting profits had slumped 41 per cent to $US3.37 billion ($5.2 billion) as prices for the steel-making metal declined amid weaker demand from China. The company has declared a final dividend of 60¢ a share, taking the total payout for the year to $1.10, down 44 per cent from the previous year.

Loading

Fortescue’s shares fell 3.9 per cent, while its bigger rivals BHP dropped 1.1 per cent.

Childcare provider G8 Education’s share price lost 5.5 per cent, having hit a five-year-low of 84¢ in early trade. That’s despite a 12 per cent rise in net profit to $22.5 million and assurances by the company that bigger-than-expected fall in occupancy levels at its 399 centres was not due to its recent scandal in Victoria, where alleged childcare paedophile Joshua Brown worked at five of its daycare centres, including Creative Garden Early Learning in Point Cook, and allegedly sexually abused babies and toddlers.

Meanwhile, Corporate Travel Management flagged its shares will be suspended from trading until late September as the company can’t finalise its results for the 2025 financial year by the August 31 earnings season deadline. Its auditors found there “may be adjustments required relating to the timing of the recognition of revenues and certain costs”, which would probably lower its profits for the year just passed and raise the prior year’s earnings, it said.

The lowdown

It was a day of contrasts on the local bourse on Tuesday, with the big supermarket chains rallying, while sentiment for the rest of the market was more subdued, and investors sold down mining stocks after the massive drop in Fortescue’s earnings.

Consumer staples as a sector rose 3.2 per cent to the highest in almost a year, led by the nation’s second-biggest supermarket operator, Coles. The mining sector fell 1.2 per cent, though Fortescue’s profit slump shouldn’t have come as a surprise after its larger rival, BHP, a week ago reported its smallest profit since 2020 after a fall in coal and iron ore prices.

Fuelling investor concerns about the mining giants’ prospects, US President Donald Trump’s trade wars continue to raise uncertainty for the global economy and the outlook for Australia’s most lucrative mining exports.

The mixed feelings on the local bourse followed losses on Wall Street overnight following a big jump last week on hopes for interest rate cuts. The S&P 500 fell 0.4 per cent, and the Dow Jones gave back 0.8 per cent after setting a record on Friday. Tech stocks did better than the rest of the market, leaving the Nasdaq composite down just 0.2 per cent.

Loading

The sense of euphoria around the prospect for Fed rate cuts has eased, just days after chair Jerome Powell signalled a September rate cut is likely amid downside risks to the jobs market. Doubts over the pace of those reductions lingered on Wall Street as traders braced for a not-so-friendly inflation report later this week.

Fed policymakers are grappling with inflation that’s still above their 2 per cent goal – and rising – and a US labour market that’s showing signs of weakness. That unnerving reality, which pulls policy in opposite directions, is made worse by a high degree of uncertainty about how each of those factors will evolve over the coming months.

The Fed’s preferred gauge of underlying inflation probably ticked higher last month, with the personal consumption expenditures price index, excluding food and energy, rising 2.9 per cent from a year ago. That would be the fastest annual pace in five months.

“Now the discussion will likely turn to how aggressive the Fed may be,” said Chris Larkin at E*Trade from Morgan Stanley. “Signs of a slowing labour market currently appear to be outweighing inflation concerns, but the Fed hasn’t abandoned its 2 per cent target.”

Wall Street is still overwhelmingly betting the Fed will cut interest rates at its next meeting in September. Traders see an 86 per cent chance that the central bank will trim its benchmark rate by a quarter of a percentage point, according to data from CME Group.

The Fed has been maintaining rates at their current level since the end of 2024 amid worries about inflation heating up as tariffs work their way through the economy to businesses and households.

Aside from the macro picture, the next big test for the US sharemarket will be a read on what’s been driving gains for the past few years: artificial-intelligence euphoria.

Nvidia – the last of the “Magnificent Seven” to report earnings – is due to unveil its results on Wednesday after the close [Thursday early morning AEST]. Traders are hoping it can soothe fears about AI spending and effectively confirm that the market’s latest rally isn’t just a technology bubble.

“Unless we get some sort of major UFO (UnForeseen Occurrence), the most important development of this week will be the earnings report and guidance out of Nvidia,” said Matt Maley at Miller Tabak. “Those earnings will be good. The only question will be whether they’re good enough to push the stock higher after almost doubling over the past four to five months,” he added.

Nvidia has been a driving force for much of Wall Street’s recent gains, along with several other tech giants with pricey stock values.

With AP, Bloomberg

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.