Devon Funds Morning Note - 4 September 2025

Thursday 4th September 2025

Cautious Confidence Amid Market Swings

Global

Despite a backdrop of heightened volatility, global markets showed impressive resilience, with investors demonstrating a selective appetite for opportunity amid swirling macroeconomic headlines. In the US, the S&P 500 overcame early jitters to finish just off the flat line, capping a session defined by a blend of cooling inflation data and measured optimism from Federal Reserve officials. While the chorus from the Fed remains “data dependent,” most traders continue to price in a September rate cut as highly likely, and fresh signs that consumer inflation remains in check have helped keep overall sentiment supported. US small caps, as reflected by the Russell 2000, continued their momentum, reflecting confidence in the domestic economy's underpinnings and hopes for a further broadening of the recovery.

In Europe, the STOXX 600 held up well, buoyed by strength in energy and healthcare, even as German economic data showed some soft spots and construction activity remained subdued. The FTSE 100 slipped only modestly, while energy names provided ballast as Brent crude hovered near US$69/barrel. Across the region, upbeat second quarter corporate earnings and signs of stabilising inflation have provided investors reason to look through near-term uncertainty.

Asian markets offered more bright spots. Japan’s Nikkei rebounded following policy reassurance from the Bank of Japan, indicating that any normalisation will be gradual and growth supportive. In China, the CSI300 and Hang Seng edged higher, with traders cheered by further property sector support measures and fresh signals that Beijing remains committed to shoring up domestic demand. Vietnam’s stock market notched another record, reflecting growing international recognition of the country’s economic transformation and competitive edge.

New Zealand

On the NZX, local investors navigated the turbulence with a steady hand. The NZX50 finished just 0.5% lower, pausing after a strong four-day rally and reflecting the market’s ability to absorb global headlines without undue drama. Encouragingly, the day saw several notable winners: Hallenstein Glasson soared to a new record at $9.1 following its upbeat trading update, while Kathmandu Brands and Sky Network Television bounced strongly, showcasing the rebound among retailers and consumer-facing names. Fletcher Building added 1.5% as investor optimism about New Zealand’s construction and infrastructure pipeline remained undimmed. Goodman Property Trust and Winton Land both enjoyed solid buying, the latter up 4.5% in another sign that investors remain supportive on the real asset theme.

Ryman Healthcare rose 2.8% after a well-received broker note and improving sentiment in the aged care sector. Napier Port impressed with a 3.3% lift, as cargo volumes surprised on the upside, while Solution Dynamics, Scales Corp, and 2 Cheap Cars rounded out the day’s highlights. Vector, meanwhile, secured attention by naming Chris Blenkiron as its new CEO, underpinning stability at a key infrastructure name even as large caps generally drifted sideways.

On the other side, a handful of large defensive names pulled back as investors took profits or repositioned post-earnings: A2 Milk fell 2.8%, and Ebos Group dropped 1.8%. However, overall turnover was healthy, and the balance between strong individual performers and minor index declines suggested the market’s underlying tone remains constructive, with a clear focus on stock selection and yield resilience.

Australia

The ASX 200 endured its sharpest pullback in months, tumbling 1.8% to close at 8,738—a marked turnaround from last week’s record highs and a sign that investors are growing more cautious as spring event risk intensifies. The sell-off was broad-based, sparing few sectors, with pain across banks, property names, and major retailers.

Resources fared comparatively better, but the energy and mining strength was unable to stem the broader tide. BHP held firmer ground, but standout names were hard to find in a session shaped by risk aversion. Most major banks skidded lower, the spectre of falling loan growth and rising household stress tested confidence in the sector, keeping the pressure on CBA and peers despite generally robust absolute earnings.

Xero’s shares had a rough session, sinking 6.2% to close at A$149.8—dropping below the key A$150 level and underperforming the broader technology sector. The cloud accounting giant came under pressure after RBC Capital downgraded the stock from “Outperform” to “Sector Perform”. Additionally, the company’s CEO was in the Australian Financial Review defending its recent US$2.5b acquisition, Melio. Xero’s shares are now down over 10% year-to-date, as investor sentiment remains cautious despite the long-term strength of its recurring-revenue cloud model.

Comments from our readers

No comments yet