ASX set to jump as jobs report sparks Wall Street rally

Consumer and Mining Stocks Lead Gains

Consumer discretionary stocks rose 1.8%, paced by Wesfarmers (+2.1%), Aristocrat Leisure (+1.1%) and IDP Education (+3.7%). IG Australia analyst Tony Sycamore said the sector had been "beaten up" and oversold in the past month, prompting a reversal as investors adopted a "risk-on" stance. This rebound reflects renewed confidence in household spending capacity despite broader economic headwinds, as retailers and leisure providers benefit from improving sentiment and pent-up demand.

Materials also advanced after iron ore prices lifted 2% on hopes of new Chinese property stimulus. BHP gained 1.7%, Fortescue jumped 3.6% and Rio Tinto added 1.3%. The rally in mining stocks underscores the market's sensitivity to developments in China, where policymakers are reportedly considering targeted measures to stabilize the struggling real estate sector, a key driver of iron ore demand. Energy stocks rose 0.7% early after Saudi Arabia announced a 1 million barrel-a-day output cut for July, though gains moderated by the close with Woodside up 0.8% and Santos 1.1% higher. The initial spike in energy shares reflected immediate market reaction to tighter global supply, but profit-taking later in the session tempered the advance as investors weighed the longer-term implications for demand and prices.

Tech and Utilities Lag as Defensive Stocks Sold

Information technology fell 1.1% as Xero (-1.8%) and Altium (-1.2%) gave back ground after a recent AI-fuelled rally. Sycamore characterised the move as "a bit of profit-taking" following the sector's surge. This pullback aligns with a broader rotation out of high-growth, defensively perceived names as investors shift toward cyclical sectors benefiting from improving economic indicators. The decline in tech stocks also reflects some caution amid elevated valuations, even as innovation themes like artificial intelligence continue to attract long-term interest.

Utilities dipped 0.3% with Origin Energy (-0.5%) and APA Group (-0.2%) lower. Gold miners also retreated, with Newcrest down 1.4% and Northern Star off 0.4%, as investors rotated out of defensive names. The decline in utilities and gold highlights a shift in market psychology, where traditional safe-haven assets lose appeal when risk appetite rises. With bond yields climbing and inflation concerns persisting, investors are reassessing the opportunity cost of holding low-yielding or non-income-generating assets in favor of equities with stronger growth prospects.

Wall Street Rally and US Jobs Data Fuel Optimism

Friday's US session provided a strong tailwind: the S&P 500 leapt 1.5%, the Dow Jones rose 2.1% and the Nasdaq gained 1.1%. The S&P 500 has now rallied nearly 20% since mid-October, nearing bull-market territory. This sustained advance has been underpinned by resilient corporate earnings, easing supply-chain pressures, and growing confidence that the Federal Reserve may be nearing the end of its tightening cycle.

A surprisingly strong US jobs report showed employers accelerated hiring last month, easing recession fears and prompting traders to expect the Federal Reserve to pause rate hikes at its June meeting—the first such pause in over a year. The data revealed robust non-farm payroll growth and declining unemployment claims, signaling that labor market strength is persisting despite higher borrowing costs. This resilience has become a critical pillar supporting consumer spending and overall economic activity.

However, Fed officials have warned a June pause would not signal the end of tightening. CME Group data shows traders increasingly expect a July hike, pushing the 10-year Treasury yield to 3.69% from 3.60% and the two-year yield to 4.50% from 4.34%. The yield curve remains inverted in parts, reflecting ongoing uncertainty about the peak and duration of restrictive policy. The Senate's approval of a debt-ceiling deal, averting a US default, also supported sentiment by removing a major systemic risk that had weighed on markets for weeks.

RBA Meeting in Focus

All eyes now turn to the Reserve Bank's Tuesday policy decision. Financial markets assign a 40% chance of a rate increase after last week's 5.75% rise in award-linked wages, hotter-than-expected inflation figures, and data showing a jump in capital city house values. These indicators collectively suggest that domestically generated inflation pressures remain elevated, complicating the RBA's task of balancing price stability with growth concerns.

A further hike would extend the RBA's tightening cycle as it continues to battle persistent inflation. The central bank has already implemented a series of aggressive rate increases over the past year, bringing the cash rate to levels not seen in over a decade. Policymakers are now scrutinizing whether additional tightening is necessary or if the lagged effects of prior moves will eventually suppress inflation without further harm to economic activity.

Market analysts note that the RBA faces a delicate communication challenge: signaling resolve on inflation without triggering excessive market volatility or undermining consumer and business confidence. The upcoming statement and any accompanying forward guidance will be closely parsed for hints about the terminal rate and the likelihood of future cuts. Investors are particularly attentive to any shifts in the RBA's assessment of wage growth, services inflation, and the output gap.

What this means

Monday's rally reflected a confluence of positive offshore cues and domestic sector rotation, but the advance is tempered by the looming RBA decision. With markets pricing a near-even chance of a rate increase, the next 24 hours will test whether the ASX can sustain its momentum or whether tighter monetary policy expectations reassert downward pressure. Investors will watch the RBA's statement closely for signals on the inflation outlook and the potential peak in the cash rate. The interplay between global risk sentiment, commodity prices, and domestic policy will continue to shape near-term market direction, making the central bank's communication a pivotal factor in determining whether the current rally can extend into a sustained uptrend.