The Australian share market is poised for a subdued open on Tuesday, with ASX 200 futures slipping 0.3% to 8,818, as the relief rally fueled by falling oil prices appears to have largely been priced in. This comes after Monday's cash market surged 1.39% to 8,894.00, marking the index's best single-day performance in six weeks.
Oil Prices Decline but Futures Signal Caution
Brent crude tumbled 9.3% overnight to $87.78 per barrel, yet the drop in futures suggests that the initial boost from lower energy costs has already been absorbed by the market. The divergence highlights that most of the oil-relief trade is now reflected in prices, leaving investors to weigh other factors.
Sector Performance Reflects Market Shifts
Monday's sector moves underscored this shift. The technology sector outperformed energy by roughly 7.5 percentage points, with the S&P/ASX 200 Information Technology index climbing 4.52%. Mining and banking also posted gains, with the mining sector rising 2.4% and financials adding 1.2% to reach their highest point in three months. In contrast, the energy sector fell 3.0%, as oil producers saw their shares drop alongside crude prices.
Key individual stocks reflected these trends. BHP Group (ASX: BHP) rose 1.2%, Rio Tinto (ASX: RIO) gained 2.2%, and Fortescue (ASX: FMG) advanced 1.4%. However, the mining sector has still declined more than 8% since early June. WiseTech Global (ASX: WTC) climbed 7.0%, and NEXTDC (ASX: NXT) added 2.1%, recovering from earlier sharp declines among Australian growth stocks. Woodside Energy (ASX: WDS) and Santos (ASX: STO) posted their steepest declines since mid-June.
Inflation Data and RBA in Spotlight
Domestic interest rates are becoming the primary focus for investors. According to ASX pricing, there is a 37% chance of a rate hike to 4.60% in August, up from the current cash rate of 4.35%. Early consensus forecasts suggest June's headline inflation will be close to 4.1% year-on-year, with trimmed-mean inflation projected at 3.8%. The official CPI release is scheduled for Wednesday at 11:30 AEST.
Reserve Bank of Australia Governor Michele Bullock is scheduled to speak at 1:05 p.m. AEST on the topic of "Monetary Policy in an Era of Shocks." Market participants will scrutinize her remarks for insights into how the RBA balances lower oil prices with ongoing domestic inflationary pressures.
Global Cues and Market Context
Overnight, Wall Street provided weaker cues. The Nasdaq slipped 0.18%, and the PHLX semiconductor index dropped 2.2%, now standing 21% below its record set on June 22. Tim Waterer, chief market analyst at KCM Trade, described Monday's gains as "very much part of a global relief trade," cautioning that if inflation comes in stronger, rate expectations could shift quickly.
Monday's advance was about 4.6 times greater than the index's 0.3% decline from the previous week, highlighting the speed at which Australian market valuations adjusted as geopolitical risk faded.
Outlook and Risks
Risks are balanced on both sides. Renewed conflict in the Gulf could push oil prices and rate forecasts higher. A stronger-than-expected CPI report might erase gains in technology and banking, while a weaker CPI result could allow those gains to continue. Regular cash trading opens at approximately 10:00 AEST, with initial focus on how banks and miners handle any fresh volatility in energy and technology stocks.
