Market Moves: August

We review August’s market moves and its key drivers. With the XJO representing the top 200 ASX-listed stocks and forming the basis for many passive ETFs, we delve into the movements within this index. Additionally, as the XJO is the most actively traded options series, we examine market positioning as we head into September.

Table of Contents

Key Drivers

The Australian share market extended its winning streak in August, with the S&P/ASX 200 gaining +2.6% to record its fourth consecutive monthly rise. Gains were underpinned by easing inflation expectations and a lift in global risk appetite but were offset by weakness in heavyweight financial stocks.

The Index hit record highs over August, closing above 9,000 points for the first time, driven by:

Strong Earnings Season: Robust corporate profits, despite mixed results, boosted market sentiment, with 18% of companies seeing earnings upgrades.
RBA Rate Cuts: Three interest rate cuts, including one in August, eased household pressures and supported consumer confidence.
Global Market Influence: Positive U.S. earnings and expectations of a Federal Reserve rate cut lifted global markets, with the ASX closely correlated to Wall Street.
Commodity and China Factors: A late rebound in iron ore prices (up 2.81% to $US103.6/tonne) and China’s 5.2% GDP growth supported resource stocks.
Geopolitical and Trade Optimism: Reduced fears of U.S. tariff impacts and progress in trade negotiations bolstered confidence.

Overall Market Moves

United States: The S&P 500 rose ~2.5%, Nasdaq gained ~2.5%. Tech and consumer discretionary stocks led, fuelled by expectations of a Federal Reserve rate cut after weak July payrolls and dovish Powell comments. U.S. tariff concerns added volatility.
Europe: The STOXX 600 climbed ~2%, driven by media and telecom sectors. Eurozone inflation held at 2%, with German 30-year bond yields easing to ~3.34%.

Asia-Pacific:

China: CSI 300 soared 10%, Shanghai Composite up ~8%, driven by domestic liquidity. U.S. tariff risks lingered.
Japan: Nikkei 225 edged up 0.2%, TOPIX fell 0.83% amid rebalancing and weak industrial data.
Hong Kong: Hang Seng dropped 1.03%, underperforming due to trade concerns.

Moves in the XJO

Companies that demonstrated strong near-term positioning through their performance reporting this month did well. Banks rebounded after selling in July CBA had trouble justifying its lofty price and CSLs result underwhelmed sending its share price plummeting.

Table 1. Key index points contributors to the XJO

Sector Moves

At a sector level, Healthcare was a standout again this month, though it gave up most of last month’s gains. Resources led the way, with the big miners outperforming.

Figure 2. Sector moves for the month of August

Table 2. Option position summary of the five largest traded options series at the end of August (Source: ASX)

NOTE: Option Volumes in the above table are single-sided (i.e. on a per contract basis) excluding Market Makers

1. Total Volume including volume executed by Market Makers 2 Derivatives Liquidity Ratio (DLR) = options volume (in shares) / volume of underlying security

2. Put/Call Ratio: total volume of Puts excluding Market Makers / total volume of Calls

3. The net calls & net puts are the number of options contracts bought minus the number of options contracts sold, excluding Market Makers

Options Moves

The S&P/ASX 200 Index (XJO) saw investors protecting portfolios by purchasing puts, with fewer selling calls for income.

BHP: Rose strongly in August; options traders sold calls to generate income, capitalising on the upward move.

FMG: Saw call-selling, but with a notably higher volume of bought puts, suggesting traders anticipated potential downside.

Banks: Gained, with a smaller group of traders selling calls for income.

PLS: Experienced significant call-selling; as the stock surged, investors likely sold calls to boost income, expecting limited further upside.

Popular trades for the month:

Taking profits in WES

WES has continued to climb over the month and is well above it consensus targets for the month. A number clients took the opportunity to sell down the stock or sell calls for additional income.

Moves Ahead for September

Opportunities for ASX in September 2025

Consumer Strength: Retail sales up 3.8% YoY and Q2 GDP growth (0.6% QoQ) lift consumer stocks.
RBA Rate Cuts: Expected cuts and conservative FY26 guidance support financials, real estate, and tech.
China Recovery: Stabilizing Chinese economy may boost miners
Market Dips: Shallow pullbacks create buying opportunities in undervalued stocks like CSL, AMC and WOW.

Risks for ASX in September 2025

Seasonal Weakness: September’s historical -0.11% average return and recent -2.2% trend signal volatility.
Overvaluation: ASX 200 at 22x earnings with 36% earnings downgrades risks corrections.
Volatility: 5% pullback likely (75% probability), with ex-dividend trading adding pressure.
Global Pressures: Rising U.S. yields, Fed uncertainty, and tariffs threaten exporters and commodities.
Sector Weakness: Mining, energy (earnings down 8-26%), and healthcare (CSL -21%) face challenges.

Further Information

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