Weekly Wrap: ASX 200 Ends Week on a High Despite Friday Dip Amid Tariff Uncertainty

A slight Friday fall still left the ASX 200 in positive territory for the week as investors remained positive even as the United States prepared to collect the highest import tariffs since the Great Depression.

While there are still ongoing trade negotiations with some countries and uncertainty around tariffs on computer chips and pharmaceuticals, overall incoming tariffs seem to be settling at an average a little above 17%.

That is a historically significant tariff wall but investors seem to be confident that corporate profits will remain strong enough to support elevated share prices and global trade will muddle through and find a new equilibrium.

The ASX 200 Index fell 0.3% or 24.3 points on Friday to reach 8,807.1 points, which still represented a hefty 1.7% gain for the week.

The week also included a new record high on Wednesday.

RBA decision and company results will be vital

The coming week will be an interesting one too, with the Reserve Bank board almost unanimously expected to cut official cash rates by 25 basis points to 3.6% on Tuesday, job figures out on Thursday and a raft of corporate earning reports including Commonwealth Bank, Cochlear, JB Hi-Fi, Westpac and Telstra.

Materials were the strongest amid gold prices trading above US$3,400 per ounce, as tariffs kicked in and Trump named a temporary US Federal Reserve governor expected to echo his calls for lower interest rates.

Gold continues climb as miners rise

On Friday, the share market picture ended up quite mixed, with five sectors stronger and six closing lower.

Positive stories surround gold stocks and materials as gold prices rose above $US3,400 an ounce.

Newmont (ASX: NEM) rose a hefty 2.2% to $106.68 while Northern Star (ASX: NST) were up 4% and Westgold Resources (ASX: WGX) added 6.2% to $3.08.

The big miners were also mainly firmer, with Fortescue Metals (ASX: FMG) up 1.8% to $18.85 after securing a $3 billion syndicated loan from China.

BHP (ASX: BHP) were also up 2.5% to $40.21 while Rio Tinto (ASX: RIO) were also higher, up 1.1% to $113.62.

Financials fall apart from AMP and Block

On the other side of the equation, financials were mostly lower, with global insurer QBE (ASX: QBE) crunched by 8.8% to $21.39, as some analysts remained sceptical about its profitability given that its numbers could have been buoyed by the inclusion of past years’ reserves.

The banks were mostly lower with shares in Westpac (ASX: WBC) down 1% to $33.66, NAB (ASX: NAB) and Commonwealth (ASX: CBA) falling 0.9% and ANZ (ASX: ANZ) down 0.2%.

The one bright spot among the financials was the slimmed down investment giant AMP (ASX: AMP) with shares up 7.1% to $1.88 as brokers upgraded its prospects for the future.

Another stock that ramped up by an impressive 8.3% to $126.12 was Block (ASX: XYZ), with growing consumer spending on its Afterpay platform lifting profits and growth over the second quarter.

Iress could be taken over

Financial information company Iress (ASX: IRE) saw its shares rise 12.2% to $9.40 after it confirmed media reports that it is in talks with Blackstone and Thoma Bravo about a possible takeover.

Excellent sales news saw shares in furniture company Nick Scali (ASX: NCK) rise by 6.9% after it beefed up Australian sales by 7.3% and recorded a gross margin of 65%.

Shares in GQG Partners (ASX: GQG) headed in the opposite direction, down 14.6% after US$1.4 billion was withdrawn from its funds in July, mostly due to losing a single institutional client.

The week ahead

We are all in for a busy week to come, with an almost certain fall in the cash rate to 3.6% expected when the RBA board announces its decision on Tuesday.

The fall is the closest thing to a certainty that you can get, although that was the case last month when there was an unexpected hold waiting for more data.

That has arrived in the form of a weaker jobs market which should also be confirmed with the labour force numbers out on Thursday and also weaker inflation.

Will tariffs boost US inflation?

US inflation numbers are out this week and might show the beginnings of higher prices courtesy of rising import tariffs, although the full effect will obviously take a little longer to filter through.

US quarterly earnings results are winding down this week but here in Australia there will be a raft of important results to watch for.

One will be the beleaguered operator of the stock exchange, ASX (ASX: ASX), which is threatened by new competition and has struggled to avoid big mistakes and complete trading system upgrades.

Other big results to watch for include the Commonwealth Bank, Cochlear, JB Hi-Fi, Westpac, Telstra, AGL, IAG, Mirvac and CAR Group to name just a few.

There has been speculation that the Australian market faces a more modest series of profit results and has been dragged upwards by better profit results in the US which has seen our market rise in sympathy.