The Point

Crispin Murray: What’s driving the ASX this week?

Investors should be watching four macro issues at the moment, says Pendal’s head of equities Crispin Murray.

1. US inflation trends and the impact of tariffs: “There is nothing in the current inflation data to derail a September rate cut,” says Crispin. Tariff revenues are beginning to flow through “and we are now in the key phase of assessing the impact on inflation”.
2. US economic growth momentum: “Data suggests the industrial side of the economy is struggling but consumers are holding up okay.” Look to Fed chair Jay Powell’s Jackson Hole speech on Friday and payrolls on Sep 4.
3. Chinese policy initiatives: Expect a softer second half for China, which may mean more incremental stimulus measures.
4. Australian economic growth momentum: The Australian economic outlook looks reasonable but a tight labour market will encourage the RBA to remain measured.

Pendal’s emerging markets team remains bullish on Brazil despite latest tariffs

Despite ongoing tariff uncertainty, Pendal’s emerging markets team remains positive on the outlook for Brazil.

Early this month the US imposed sweeping new tariffs on dozens of countries.

Brazil received a special mention from President Trump, with an additional 40 per cent tariff taking the total to 50 per cent for most Brazilian imports.

But some sizeable exemptions will limit the effective tariff rate to around 30 per cent, says Pendal’s EM team in a new note.

Civil aircraft, fertilisers, pig iron, orange juice and mining exports are largely protected.

“We remain positive on the outlook for Brazil and Brazilian equities,” says the team.

“With a relatively strong economy, attractive valuations and the support of a weaker US dollar, Brazilian equities and the Brazilian real have both performed well this year.

“We see the conditions for this to continue, irrespective of challenging headlines.”

Jim Taylor: What’s driving the ASX this week?

Amy Xie Patrick: How tariffs, inflation and China’s ‘anti-involution’ policy are affecting portfolio decisions

Despite higher input costs from Donald Trump’s tariffs – and some weakness in jobs data last week – US consumer inflation has barely budged.

That’s largely due to contract lags in supply chains and producers absorbing the pain, says Pendal’s head of income strategies Amy Xie Patrick.

Purchasing manager surveys show input prices rising – a sign that tariffs are indeed biting at the producer level.

Normally, higher input costs push up consumer prices. That doesn’t seem to be happening yet.

“But this delay won’t last forever,” says Amy. “When contracts roll off, either producers absorb the cost hit or they pass it on. Either way, corporate earnings are at risk.”

While US earnings season has been solid so far, the trend is heading down: three straight quarters of falling earnings growth.

The market has yet to price-in this “pinch”, argues Amy.

In her latest article, Amy explains how she is positioning Pendal’s income funds in response to these and other global factors.

Anthony Moran: What’s driving Aussie equities this week?