NEW ZEALAND: Households Pessimistic, Rate Refixing Should Help Going Forward

The ESU5 Friday night range was 6461.50.25 - 6508.75, Asia is currently trading around 6480. The ESU5 contract stalled above 6500 going into the weekend. This morning US futures opened a little higher, ESU5 +0.15%, NQU5 +0.25%. Only a break below 6200 would potentially signal a deeper correction. For now the price action in stocks continues to be bullish ignoring all headwinds as the Trump Administration runs the economy hot which supersedes the seasonal volatility that normally characterises the August/September period.

• Wei Li(CIS BlackRock) on LinkedIn - “With SPX 30% higher from April low it is natural to feel a bit nervous – I feel a bit nervous - about our US equity overweight since mid April. Especially as we head into a period of likely higher inflation and weaker growth. BUT:  The backdrop of Fed cuts is one of below trend growth, NOT recession; The equity market is NOT the economy, it is further boosted by AI offsetting weaker macro: mag7 now expected to grow 25% earnings this year compared to 4% for the rest. With still not very crowded positioning the path of least resistance is probably higher still, especially heading into @nvidia reporting.” 
• The Kobeissi Letter on X: “The equity buying spree: Total US ETF and single-stock purchases hit $5.9 billion last week, well above the 52-week average of $2.3 billion. Institutional investors drove the surge, buying $3.7 billion, the 10th-largest weekly amount in at least 17 years. Corporations followed with $1.6 billion in buybacks, while retail investors and hedge funds added $0.4 billion and $0.2 billion, respectively. Individual investors have now bought in 33 of the last 35 weeks. Market sentiment is incredibly strong.”
• Lance Roberts on X:  “Valuations, a terrible market timing indicator, are certainly at levels that investors should be mindful of. While it seems like the market is unbreakable, historically such has never been the case.” See Fig.1 Below.
• Daily Chartbook on X: "On the surface: steady and solid consumer momentum. Under the hood: a rising share of sales growth is being 'paid for' by inflation." @Econ_Parker

Fig 1: US Equity Valuation

Source: MNI - Market News/Bloomberg Finance L.P/@LanceRoberts

Both Indian and South Korea markets were out on Friday, limiting the equity update for the region. Both markets return today. Elsewhere, Taiwan flows were positive, marginally bringing the 5 day sum of inflows back into positive territory. On Friday, local equities closed just short of recent highs. The authorities also revised higher the 2025 growth forecast to 4.45% from 3.1% (on Friday Q2 preliminary GDP rose 8%y/y, close to the initial estimates). Tech equity sentiment in the US was softer in Friday trade though, with the SOX down over 2%.  

• Indonesian positive inflow momentum continued on Friday, bringing inflows last week to just over $400mn. This is the best run for a 5 day period in terms of inflows since late Sep last year. Local equities faltered on Friday, but remain close to recent record highs. The budget deficit projection of 2.48% of GDP for 2026 is slightly tighter than this year's (just beyond 2.5% of GDP), and is likely to be welcomed by the market that was fearful of fiscal slippage under Prabowo's Presidency. Indonesian markets are out today.
• Elsewhere Malaysian outflows continued, with 16 straight sessions of outflows by offshore investors. 

Table 1: Asian Markets Net Equity Flows 

Source: Bloomberg Finance L.P./MNI  

The federal government’s productivity round table will be held this week from August 19 to 21 with RBA Governor Bullock scheduled to speak on the first day. In the August RBA press conference, she said that she will speak on how increasing productivity growth improves economic resilience. In terms of data, the focus will be on survey releases.

• Westpac consumer confidence for August is released on Tuesday and may improve following the August 12 rate cut decision. It rose 0.6% m/m in July but remains low given that real disposable incomes are rising and rates are lower.
• On Thursday, preliminary August S&P Global PMIs print. Both services and manufacturing improved in July and the data will be watched to see how growth and prices/costs developed into Q3.
• August Melbourne Institute inflation expectations for August are also published on Thursday. They jumped in June to 5.0% but only eased moderately to 4.7% in July, remaining high compared to previous months.
• RBA Head of Payments Policy Connolly will participate in a fireside chat at the COSBOA National Small Business Summit at 1450 AEST on Tuesday. While at 1200 AEST on Wednesday, Assistant Governors McPhee and Jones speak as part of a panel on the Future of Money.