Australia’s stock market ended Friday slightly higher, capping a largely directionless week but revealing some powerful under‑the‑surface themes – resurgent resources stocks, a headline‑grabbing AI infrastructure deal, and rising debate over whether the Reserve Bank of Australia (RBA) has really finished tightening.
The S&P/ASX 200 index closed around 8,634.6, up about 0.2% (0.19%) on the day, after swinging between small gains and losses. [1] Gold, metals and mining names led the advance, even as more individual stocks fell than rose and retail laggards weighed on consumer sectors. [2]
At the same time, Australia’s volatility index slipped to a six‑month low near 10.2, signalling market calm that sits awkwardly beside sticky inflation, a firmer Australian dollar and growing talk that the RBA may have to keep rates high for longer – or even raise them again in 2026. [3]
Market snapshot: ASX 200 today
- Index: S&P/ASX 200
- Close (5 December 2025): ~8,634.6
- Daily move: +0.2% / +16 points [4]
- Leadership: Gold, metals & mining, materials [5]
- Laggards: Retail and select tech/IT names [6]
- Breadth: 571 decliners, 551 advancers, 373 unchanged – narrow up‑day. [7]
- Volatility: S&P/ASX 200 VIX down to ~10.2, a new six‑month low. [8]
Global leads were mixed. Overnight, US benchmarks hovered near record highs, while Europe’s Stoxx 600 gained about 0.5%. [9] The Australian dollar traded around US$0.66, near its strongest levels in roughly a year, helped by hotter‑than‑expected local inflation and shifting RBA expectations. [10]
Resources, gold and lithium stocks drive gains
Friday’s modest index rise was built on the back of resources and commodity‑linked shares:
- IGO Ltd (IGO) jumped about 7.9%, closing near $6.98, hitting a 52‑week high.
- Whitehaven Coal (WHC) climbed over 6% to around $7.81, also reaching a 52‑week high.
- Mineral Resources (MIN) added around 4.7% to roughly $50.21. [11]
According to Investing.com, gains in the gold, metals & mining and broader materials sectors were the main engine behind the ASX 200’s 0.19% rise at the close in Sydney. [12]
This came against a favourable commodity backdrop:
- Gold futures for February delivery ticked higher, extending a strong 2025 run. [13]
- Iron ore hovered above US$100 a tonne despite a small pullback, underpinning sentiment toward big miners. [14]
Broker moves also helped. MarketIndex reported that UBS upgraded several lithium majors, including Liontown, Mineral Resources, IGO and Pilbara Minerals, lifting target prices sharply after a recent rebound in lithium names. [15] These upgrades reinforced the “resources rotation” narrative that has been building for weeks, with investors rotating out of expensive defensives and banks into miners leveraged to metals, energy and the AI data‑centre build‑out.
AI infrastructure deal puts NextDC and data centres in the spotlight
One of the biggest talking points today had little to do with traditional commodities and everything to do with artificial intelligence infrastructure.
The ABC’s markets blog reports that NextDC (ASX: NXT) surged intraday by as much as 10.9% after announcing a memorandum of understanding with OpenAI – the company behind ChatGPT – to develop a “sovereign AI infrastructure partnership” in Australia. [16]
The plan centres on:
- A next‑generation AI campus
- A large‑scale GPU supercluster at NextDC’s Eastern Creek site in Sydney
- A framework aligned with the federal government’s new national AI strategy, which targets increased data‑centre and digital‑infrastructure investment. [17]
NextDC ended the session still up around 3%, making it one of the day’s standout large‑cap winners. [18] Kalkine Media notes that AI infrastructure and data‑centre themes remained a key talking point across the session, with attention spilling over to construction and services firms tied to data‑centre build‑outs and power infrastructure. [19]
Beyond being a single‑stock story, the deal reinforces a broader narrative laid out by several asset managers: Australia’s capex cycle is increasingly tied to AI, data centres and digital infrastructure, not just traditional mining projects. Janus Henderson, for example, highlights strong capital expenditure on new data centres as a key driver of “non‑traditional” investment growth. [20]
Retail and small caps under pressure: Premier Investments leads the losers
On the flip side, consumer and retail names were conspicuously weak, underlining persistent pressure on household budgets.
Investing.com lists Premier Investments (ASX: PMV) as the worst performer in the ASX 200, plunging about 16.1% to near $15.17, a fresh 52‑week low. [21]
Further context from The Australian shows why the stock was hit so hard:
- Premier failed to provide its usual sales trading update at its AGM.
- Analysts flagged ongoing struggles at its Smiggle stationery chain in key markets such as the UK and Australia.
- First‑half FY26 profit guidance around $120 million fell well short of the roughly $141 million analysts had expected, despite strong performance at its Peter Alexander sleepwear brand. [22]
The market also appeared wary of governance and strategic noise, including leadership changes at Smiggle and the group’s ongoing CEO search. [23]
Other consumer‑facing names underperformed:
- Nick Scali (NCK) slid about 3.7%.
- Objective Corp (OCL) lost nearly 3.8%. [24]
Taken together, the moves underline a consistent theme in 2025 commentary: discretionary retailers remain vulnerable to any renewed pressure on household income and confidence, especially after a long period of higher‑for‑longer interest rates. [25]
RBA, inflation and the macro backdrop: “on hold, but not relaxed”
Macro‑wise, today’s trading session was dominated by speculation about the RBA’s December meeting and the path for 2026.
Inflation still above target
Recent data from the Australian Bureau of Statistics show:
- Headline CPI up 3.8% year‑on‑year to October 2025, from 3.6% in September
- Trimmed mean inflation at 3.3%, also moving higher and above the RBA’s 2–3% target band. [26]
The RBA’s November Statement on Monetary Policy projects:
- Trimmed mean inflation to stay above 3% until at least mid‑2026
- Headline CPI peaking near 3.7% around mid‑2026 before easing towards a bit above 2.5% by late 2027. [27]
December meeting: no move expected, but guidance matters
A Reuters poll of 38 economists published today finds unanimous expectations that the RBA will leave the cash rate unchanged at 3.60% on 9 December. Most respondents now think that rate will be maintained through 2026, a sharp shift from earlier forecasts for at least one cut next year. [28]
However, there is no single consensus beyond “higher for longer”:
- Canstar notes that none of the big four banks expects a December rate move, and most now foresee no cuts through 2026.
- ANZ has scrapped its early‑2026 cut call, while CBA anticipates no action until after late‑January CPI data, and even warns that if inflation proves persistent, the RBA may need to talk about rate hikes again. [29]
Other commentators are more nuanced. AMP’s weekly update today argues that:
- The RBA is likely to maintain hawkish rhetoric,
- But if trimmed‑mean inflation falls back as expected in the December quarter, rate hikes could be avoided,
- A surprise inflation print could still force a hike as early as February 2026. [30]
Janus Henderson also emphasises the RBA’s “data‑dependent” stance, noting that while the labour market is softening, inflation remains too high for comfort – making staying on hold the “prudent” near‑term choice. [31]
Valuations, volatility and market internals
On the surface, a 0.2% rise in the ASX 200 with volatility at six‑month lows looks benign. Underneath, the picture is more complicated.
Narrow leadership, noisy breadth
Despite the index ending higher, decliners outnumbered advancers (571 vs 551), with 373 stocks unchanged, suggesting gains are increasingly concentrated in a handful of resource and AI‑infrastructure plays. [32]
The S&P/ASX 200 VIX around 10.2 suggests investors are pricing in very little near‑term risk – a level often associated with complacency. [33] With RBA risk skewed toward a hawkish hold and global growth forecasts under constant revision, that low level of implied volatility is striking.
Cheaper – but not “cheap” – Australian equities
BetaShares’ December 2025 Market Trends report highlights how November’s 3% drop in the ASX 200 price index actually improved valuations:
- Forward earnings rose about 1.4% in November, thanks largely to stronger‑than‑expected commodity prices.
- Current expectations point to roughly 7.8% growth in Australian forward earnings by end‑2026, about half the growth expected for global equities.
- A combination of rising bond yields and fading rate‑cut hopes pushed the ASX 200 price‑to‑forward‑earnings ratio down to around 18.2, leaving Australian equities trading at a modest 5.7% discount to global markets. [34]
Private‑bank research from LGT echoes a similar story: Australian equities have underperformed global peers through 2025, but with valuations moving from a premium to a discount and earnings growth “showing tentative signs of strengthening,” the case for staying structurally underweight Australia has weakened. [35]
Strategy views: what analysts expect for the ASX into 2026
Today’s market action sits within a broader debate about what 2026 holds for Australian equities. Several recent outlook pieces are shaping that narrative.
Morgan Stanley: ASX 200 to 9,250, resources in the driver’s seat
Morgan Stanley’s 2026 outlook, published this week, sets a target of 9,250 for the ASX 200, implying roughly 10–12% total return next year, with about 10% earnings growth after several flat years. [36]
Key points from their view:
- Materials and resources are expected to lead returns, supported by an above‑consensus metals outlook, a weaker US dollar and resilient bulk commodity prices. [37]
- Because resources represent roughly 19% of the index but close to 28% of earnings, any improvement in commodity earnings has an outsized impact on the ASX 200’s overall earnings growth. [38]
- Morgan Stanley is cautious on major banks, arguing that their price‑to‑earnings multiples have rerated significantly over this cycle and now look stretched versus history. They see a higher chance of valuation “derating” than further rerating in 2026. [39]
On the macro side, Morgan Stanley’s economists actually expect two RBA rate cuts in late 2026, arguing that slowing domestic momentum and a loosening labour market – rather than runaway inflation – will eventually push the central bank toward easing again. [40]
Other outlooks: cautious optimism, but no boom priced in
- Vanguard’s November 2025 outlook pegs long‑term expected real returns for Australian equities in a roughly mid‑single‑digit range, consistent with modest but positive return expectations, not a roaring bull market. [41]
- BetaShares notes that with earnings expectations improving but valuations still reasonable, Australian equities now trade on a more neutral relative‑return outlook, especially if the resource rotation continues and bond yields stabilise. [42]
- LGT moves its stance on Australian equities from underweight to neutral, citing the valuation discount and improving earnings momentum as reasons to be less negative. [43]
Collectively, these views paint a picture of cautious optimism: upside is there, especially if resources deliver and the AI/infrastructure capex cycle continues, but it is not a “free ride” given the risks around inflation, rates and global growth.
Key themes for investors watching Australia’s stock market today
While this article is for information only and not financial advice, several themes emerged clearly from today’s ASX session and the latest 2026 outlooks:
- Resources remain central to the ASX story
- AI and data‑centre infrastructure are now genuine macro themes
- The NextDC–OpenAI agreement is not just a tech headline; it reflects real‑world spending on power‑hungry facilities, cooling, grid upgrades and specialised construction. [46]
- These projects can support earnings not just for data‑centre operators, but for contractors, utilities and industrials tied into the build‑out.
- Domestic cyclicals, especially retailers, are still fragile
- Premier Investments’ 16% slide and weakness in discretionary names reinforce the idea that household‑facing sectors are sensitive to even small disappointments in trading updates or guidance. [47]
- Rates and inflation remain the swing factors for 2026
- Whether the RBA stays on hold through 2026 (as many economists now expect) or eventually cuts (as houses like Morgan Stanley still forecast) will shape the relative prospects of banks, REITs, growth stocks and defensives. [48]
- Valuations look more reasonable, but not recession‑proof
- The ASX now trades at a modest discount to global markets, and forward earnings expectations have improved. But any renewed spike in bond yields, commodity reversal, or inflation surprise could challenge that setup. [49]
Bottom line: A quiet close masks big rotations under way
On headline numbers, “Australia stock market today” looked uneventful: the ASX 200 crept higher, volatility sank, and the week finished roughly flat. But beneath that calm surface, there were meaningful shifts in leadership and expectations:
- Miners, gold and lithium names are in charge, supported by improving earnings expectations and a constructive 2026 resources narrative. [50]
- AI infrastructure has moved from buzzword to capital‑expenditure reality, with NextDC’s OpenAI deal symbolising the scale of investment now hitting Australia’s shores. [51]
- Retail and domestic cyclicals are still walking a tightrope, exposed to any disappointment on spending, inflation or rates. [52]
- RBA uncertainty – hold, hike, or cut in 2026 – is the key macro risk, colouring how investors think about banks, property and long‑duration growth stocks. [53]
For now, the market has chosen to lean into resources and AI‑linked growth while shrugging off rate‑hike chatter – but with inflation still above target and the Australian dollar firm, today’s low volatility may understate just how finely balanced the outlook for Australian stocks really is.
References
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