ASX Retreats from Record Highs as Bank Stocks Weigh; US Rally Lifts Global Sentiment

Key Highlights:

• ASX 200 dips 0.53% after hitting a record high, weighed by financial stocks.
• Commonwealth Bank profit hits $10.13bn but shares slide 4.47%.
• IAG posts 51% profit surge; materials and health care shine.
• US markets close at record highs after cooler inflation data.
  
   

The Australian share market eased on Wednesday, pulling back from record territory, as sharp falls in banking stocks offset gains in materials, health care, and technology.

The S&P/ASX 200 slipped 47.4 points, or 0.53%, to close at 8,833.4, while the All Ordinaries fell 0.45% to 9,109.0. The retreat came just a day after the Reserve Bank of Australia delivered its third interest rate cut since February, a move that initially propelled the index to an intraday record.

Banks Drag After CBA Results

The market’s mood turned as Commonwealth Bank of Australia (ASX: CBA) shares tumbled 4.47% to $170.80 despite the nation’s largest lender reporting a full-year profit of $10.13 billion, up from last year’s $9.6 billion.

CBA Chief Executive Matt Comyn acknowledged the strong headline result but struck a cautious tone:

“While we have delivered solid earnings growth, global trade disruption risks linger, and domestic conditions remain uncertain. We continue to support customers as the economy navigates slower growth.”

The decline in CBA’s stock dragged the ASX 200 Banks Index down 3.10%, with other major lenders ANZ, NAB, and Westpac also closing in the red.

IAG Soars on Profit Surge

Among the day’s standouts, Insurance Australia Group (ASX: IAG) jumped after unveiling a 51% jump in annual profit, buoyed by premium growth and lower claims expenses. The insurer’s upbeat outlook added further momentum, with the stock extending gains despite broader market softness.

In contrast, AGL Energy (ASX: AGL) plunged 12.62% after revealing a $98 million loss, citing its decision not to fully pass on rising wholesale costs to consumers.

Sector Performance

Seven of the 11 major sectors ended higher. Materials gained 0.90% as gold and copper prices firmed, lifting names like Evolution Mining (ASX: EVN) up 3.97%. Health care rose 0.88%, while telecommunications and consumer staples posted moderate advances.

On the downside, energy stocks slid 2.30% amid softer crude prices, and utilities fell 0.26%. Financials were the day’s weakest link.

Top Movers

Best performers included Tyro Payments (ASX: TYR), up 9.09%, and Clarity Pharmaceuticals (ASX: CU6), up 6.41%.

Notable laggards included Bravura Solutions (ASX: BVS), down 7.44%, and Beach Energy (ASX: BPT), down 6.23%.

RBA’s Measured Stance

The Reserve Bank’s latest rate cut was backed unanimously by its board, after a surprise hold in July. Governor Michele Bullock cautioned that the bank has “limited room” for further reductions, given Australia’s comparatively lower cash rate trajectory in recent years.

Mortgage holders are expected to benefit from reduced repayments, and markets are already pricing in the possibility of another cut before year-end.

US Markets Provide an Upbeat Backdrop

Overnight, Wall Street extended gains, with both the S&P 500 and Nasdaq Composite closing at record highs following softer-than-expected US inflation data.

The S&P 500 rose 1.13% to 6,445.76, the Nasdaq gained 1.39% to 21,681.90, and the Dow Jones Industrial Average added 1.10%.

July’s consumer price index rose 2.7% year-on-year, slightly below forecasts, while core CPI increased 3.1%, reinforcing expectations for a US Federal Reserve rate cut in September. The CME FedWatch Tool now assigns a 94% probability to a cut, up from 85% pre-data.

Tom Hainlin, national investment strategist at U.S. Bank Asset Management Group, described the setup as:

“A bit of Goldilocks for the stock market — rates trending lower, earnings trending higher. That’s a pretty good environment for the broad market.”

Global Market Snapshot

Asian markets tracked the US rally, with Japan’s Nikkei 225 up 2.15% and China’s Shanghai Composite adding 0.50%. In commodities, gold edged higher to $3,351.27 an ounce, while Brent crude eased 0.16% to $66.01 a barrel.

Outlook

Market sentiment remains buoyed by prospects of lower global interest rates, though domestic headwinds — from energy price pressures to banking sector weakness — could limit gains. With the ASX VIX volatility index at 11.0, confidence levels are high, but traders will watch Thursday’s US producer price index and the upcoming Jackson Hole symposium for further cues.