ASX200 Outlook: Key Catalysts, Earnings & Market Trends to Watch

We take a moment to consider the upcoming catalysts that could shape the trading environment and where the balance of risk resides for the ASX200.

The ASX200 technical set-up

While the fundamental catalysts laid out below will impact sentiment and drive investor and trader flows, the technical set-up on the daily remains highly constructive, with the probability currently skewed towards upside risk and new all-time highs.

We see that since December the AUS200 has printed a series of higher highs and lows with the index working higher within a rising channel. The bullish momentum seen through January stalled on 31 Jan, however, the pullback in February was well supported below 8400 and into the 20-day MA, and we’re now seeing momentum reaccelerate again.

The set-up (on the daily) suggests that swing traders will likely look to work longs into modest weakness, while momentum-focused traders (on the higher timeframes) are now looking to reestablish longs.

A ‘Goldilocks’ environment for ASX200 equity appreciation:

While we saw a strong rally in many of our global equity indices throughout January and into February, we highlight the tailwinds that have been and remain more idiosyncratic to the Aussie equity market – these include:

• The Aus Q4 Q424 trimmed mean inflation rate recently fell to the lowest level since Q121, with the 6-month annualised inflation rate now at 2.7% and within the RBA’s target. In turn, this has cleared the path for the RBA to cut rates on 18 February, and the market pricing a cut at this meeting as a done deal.
• Further out the Aussie interest rate swaps curve, the market prices 90bp of implied RBA rate cuts by December. Essentially, interest rate traders are betting on four 25bp rate cuts by year-end.
• For ASX equities, the most important consideration is the reasoning behind why rate cuts are coming. If the RBA is cutting for risk management purposes – which is currently the markets assumed base case - and because of reduced price pressures, then as long as growth and employment hold up and earnings estimates are assumed to rise, then we see a ‘goldilocks’ backdrop for ASX200 equity appreciation.
• ASX200 1H25 earnings are about to get underway (from 10 Feb) with the reporting period expected to support the view that ASX200 aggregate earnings are set to rise 6% in 2025.
• JBH, CSL and CBA kick the reporting schedule into gear - however, it’s the period between 17-28 February when the number of companies reporting ramps up, where we see around 80% of ASX200 companies report, and at a time when the RBA meeting takes place.
• A solid labour market, increased govt spending, rising household spending, and credit growth continues to tick higher – all positives for equity appreciation. China remains a near-term two-way risk for equity sentiment - but should an agreement between Trump and Xi emerge, and traders build expectations that the Chinese authorities may indeed overdeliver on its stimulus plans at the NPC meeting (5 March), then ASX200 materials and resource plays would have a big upside kicker.

Negative factors that could increase the risk of equity drawdown:

While we’ve seen Trump showing a willingness to forge deals and in the case of Mexico and Canada delay tariff implementation, there are still uncertainties on trade policy and tariffs that may still result in increased and prolonged anxiety in ASX200 and global equity markets.

• The ASX200 is expensive from a valuation perspective - trading on a 12-month PE multiple of 18.1x. Valuation has offered no signal for market timers, but it may limit new capital from coming into the market from here.
• ASX200 banks are incredibly well owned by local insto investors and trade at multi-year high valuations – this runs the risk that we’ll need to see a huge result from CBA (on 12 Feb) to see the banks pushing further higher.
• The RBA may look to cut rates in the 18 Feb meeting, but they’ll almost certainly state that further rate cuts are fully conditional on the incoming data. Subsequently, if we were to see implied rate cuts being priced out it would lift Aussie bond yields, which in turn could weigh on more interest-rate-sensitive equities.
• The Federal election (by May) may still be some months off and while it is unlikely to result in the same degree of volatility that we’ve seen in the US election, the outcome could have big implications for the ASX200. With govt spending and a widening deficit accounting for such a large percentage of job creation and growth, a Dutton-led minority govt could usher in a period of more conservative spending, which, in turn, could weigh on Australian economic activity later in the year.

In summary, while risks remain, and we see a mix of positive and negative kickers on the horizon, the technical structure suggests pullbacks should be shallow and well supported, with the obvious risk of new ATHs into earnings and the RBA meeting.

For more information about trading Australian equity CFDs or the AUS200 with Pepperstone reach out to the team here, or review the share CFD intel section on the website.

Good luck to all,