Rates Bite, Tech Fights BackThe RBA hiked a fourth time, bond yields hit 24-year highs and the ASX fell 2% in a day — then tech and defence dragged it back into the green.

The RBA hiked again, bond yields hit 24-year highs and the ASX dropped 2% in a day — yet still finished the week in the green, its first weekly gain in five. Tech and defence carried it. Here's what happened, why it matters, and what to watch this week.

Last week's watch-list, scored

Last Monday I flagged three things to watch. Here's how they played out.

The scoreboard

1. The RBA goes again

On Tuesday 29 September, the Reserve Bank lifted the cash rate 25 basis points to 4.60% — its fourth hike of 2026 and the highest rate in 15 years. The decision was unanimous.

Governor Michele Bullock pointed at something new: the AI boom itself. She said AI investment is adding to demand at a time when the economy is already stretched.

The next day's data showed why the Board is nervous:

• Inflation rose to 4.0% in August (from 3.5% in July). Fuel jumped 14.8% in a month after excise relief ended.
• Underlying (trimmed mean) inflation held at 3.6% — still well above the 2–3% target.
• Household spending was flat for the month but up 6.8% on a year ago.
• Building approvals fell 6.1%, dragged down by a 21% drop in apartments.
• Job vacancies slipped to 325,000 — 31% below their 2022 peak. The jobs market is cooling, slowly.

What it means for you: mortgage holders are absorbing a fourth rise this year. Markets currently put only about a 1-in-5 chance of another hike at the next meeting on Melbourne Cup Day, 3 November — but the RBA has said it will move again "if needed".

2. Thursday's 2% scare

On Thursday 1 October, the ASX 200 fell 2% in a single session to 8,614 — its lowest since June. More than $50 billion in value disappeared and every sector closed red.

The trigger wasn't local. Higher oil prices pushed global bond yields up sharply:

• The US 10-year Treasury yield touched 5.34% — its highest since 2002.
• Australia's 10-year yield hit about 5.40%.

When safe government bonds pay over 5%, shares — especially property and other rate-sensitive stocks — look less attractive. That's the whole story of Thursday in one sentence.

3. Tech and defence fight back

Then the rebound. The ASX tech sector rallied about 7% for the week, its best run since August.

• Codan (CDA) jumped 24% in a day to an all-time high after guiding to first-half profit of at least $160 million — more than double last year. Roughly half its communications revenue now comes from conflict regions.
• Data#3 (DTL) rose 14% after forecasting first-half profit up about 40%, well ahead of analyst expectations.
• DroneShield (DRO) gained 13% for the week on contract wins.
• Megaport, WiseTech and Xero all rallied hard on Friday.

On the losing side, lithium miner Liontown (LTR) fell 15% after its mine expansion bill blew out, and Lynas dropped almost 10% after a broker downgrade.

Deal watch: Gold Fields has made a takeover approach for Northern Star, which is reviewing it. Warburg Pincus raised its bid for Ingenia to $5.25 a share.

4. Wall Street: weak jobs, record Nvidia

• US jobs disappointed. Only 29,000 jobs were added in September versus about 90,000 expected. Unemployment ticked up to 4.2%, and annual wage growth slowed to 3.0% — the weakest since 2021.
• The Fed blinked. After hiking in September, odds of another US rate rise in October collapsed from about 64% to about 16–25%. Markets now eye December instead.
• Nvidia hit a fresh record, valuing the company at about US$5.7 trillion. The Nasdaq was the only major US index up for the week.
• Tesla rose about 5% on better-than-expected deliveries; Nike fell about 5% on weak revenue and layoffs.

5. Commodities: oil stays above $100

• Brent crude held above US$100 despite a coordinated 100-million-barrel emergency stock release by G7 and IEA nations. Middle East tensions and China suspending fuel exports kept a floor under prices.
• Gold slipped for a second week. Rising bond yields make a non-interest-paying metal less attractive — it's down about 7.5% over the month.
• Iron ore stayed soft (around US$92/t) with China on its Golden Week holiday.
• The Aussie dollar fell for a fourth week, to about 69.5 US cents, despite the RBA hike. The gap between Australian and US interest rates has narrowed to almost nothing, so the hike gave the currency little lift.

6. The big picture

Three themes ran through the week:

1. The bond market is in charge. Yields at 20-year-plus highs are setting the tone for every other asset.
2. Rates are diverging. The RBA is still hiking into 4% inflation; US jobs data is pushing the Fed toward a pause.
3. A narrow rally. Gains are concentrated in AI, tech and defence names. Narrow rallies can run — but they're fragile when yields jump.

This week: what to watch (5–9 Oct)

Coming soon: RBA minutes (13 Oct), US inflation (14 Oct), Australian jobs data (15 Oct) and Australian September inflation (late Oct).

Next week's scorecard

Next Monday, I'll check these calls against what actually happened:

• Does the ASX 200 make it two up-weeks in a row?
• Does the US 10-year yield stay above 5.2% — and does the AI rally keep narrowing?
• Does Brent hold above US$100?
• Does the Aussie dollar break its four-week losing streak?
• Carried forward: any Air Force CCA decision, and any shift in the January 2027 rare-earth deadline.

Market Monday is commentary and observation, not investment or trading advice. Figures are as reported at Friday 2 October close; some sources differ slightly on exact levels.