Here’s what you need to know today

• Coles and Woolworths have lost a class action in the Federal Court accusing the Australian supermarket giants of underpaying workers. Woolworths have estimated the remediation costs to repay workers will be between $180-$330 million (on top of almost $500m already paid) while Coles have estimated costs of between $150-$250 million (on top of $31m already paid). (Capital Brief)
  
  

• The total cost of this underpayment scandal, which has been running since 2013, will end up costing the two supermarkets more than $1 billion, making it “the biggest underpayment scandal in Australian history”. (SMH)
  
  

• The World Health Organisation has added GLP-1 weight loss drugs (such as Ozempic) to its “essential medicine” list. The organisation noted that more than 800 million people live with diabetes, half of which goes untreated, and more than one billion people are affected by obesity. (Quartz)
  
  

• China accused Australia and Canada of “provocative actions” after Australia’s HMAS Brisbane and Canada’s HMCS Ville de Québec completed a freedom of navigation exercise through the Taiwan Strait. (Capital Brief)
  
  

• Meanwhile China’s exports grew at the slowest pace in six months, as trade tensions with the US continue to weigh on the country’s economic fortunes. Exports were up 4.4% in August, down from 7.2% in July. (Financial Times)
  
  

• Trump’s war of words with the European Union has escalated after the European Commission fined Google $3.5 billion for anti-competitive conduct. Trump’s warning of further tariffs came days after many of America’s tech leaders (including Alphabet CEO Sundar Pichai and cofounder Sergey Brin) dined with the President and First Lady at the White House. (Quartz)
  
  

• South Korea has said it will send a plane to retrieve the 300 South Korean workers arrested at a Hyundai battery plant in the US state of Georgia. American officials said the Koreans were not authorised to work in the US. The raids came just days after South Korea pledged to invest $350 billion in the US as part of the trade talks with the Trump Administration. (WSJ)
  
  

• Japan’s Prime Minister, Ishiba Shigeru, resigned less than a year after taking office last October. His leadership has been under pressure after his Liberal Democratic Party suffered disastrous election results and lost majorities in both houses of parliament. He will remain Prime Minister until the Liberal Democratic Party picks a new leader. (Financial Times)
  
  

• France’s fourth Prime Minister in three years, François Bayrou, appeared almost certain to lose a no-confidence vote on Monday, as French politicians reject his attempt to get French government debt back under control. French government debt is nearing 120% of GDP and its budget deficit is almost 6% of GDP (above the EU’s limit of 3%). (Reuters)
  
  

• The Universal Postal Union has reported an 80% drop in the volume of post going into America after the Trump Administration ended the de minimis exemption that meant low value parcels did not have to pay tariffs. 88 postal operators worldwide, including Australia Post, have either fully or partially suspended parcel delivery to the US. (Yahoo)

What the…?

Turkey continues to deal with hyperinflation. The latest inflation numbers show that the annual rate of inflation has dropped from 34% to 33% in August. At that rate prices are doubling every two-and-a-half years.

In July, the Turkish Central Bank lowered interest rates from 46% to 43% but the stability of the Turkish Lira remains a long way off. (Bloomberg)

Investing is a lifelong journey

Here’s what you can learn today

The narrowing of America’s stock market

This is an excerpt from our interview with Alexander Whight, portfolio manager at Milford, on the Basis Points podcast (Apple | Spotify | YouTube)

If we look at the S&P 500 over the last two years, there's only 27, 28% of stocks that have outperformed the index return in that period. So it's barely one in four stocks that are actually doing better than the overall market indices are doing, which is pretty startling.

Compared to the last 30 years, that's the lowest it's been. It's been a really narrowly led market. It's been narrowly led by some of the large cap stocks that have been outperforming. Not just the large caps, but really anything exposed to that AI infrastructure build out phase.

When we think about some of the news flow and noise of this year, then certainly that AI infrastructure trade and where we are on that journey has been called into question a couple of times. A lot of it's been politically related in the US, the new Trump administration, what they are doing in terms of tariffs, government expenditure and areas they are targeting for cuts.

So it's probably those two dynamics that I'd really call out as being most noisy and most impactful for where we are.

That concentration point is really important. Historically, when we do get to these extreme levels of concentration, there are some measures that suggest we're at the most concentrated we've been since the 1960s. When we are at these levels of concentration, historically we do see a real pickup in volatility. In the 12 months following, you get top decile type volatility. So we think it's really important to be mindful of the skews within your portfolio, how diversified you are, whether by stock or by factor, or whether you're overly positioned for one particular macro outcome.

Want to watch our full episode with Alexander? Check it out on the Basis Points YouTube channel:

A message from Fidelity

Where should investors be looking for the next wave of global growth?

As large caps hover near historical valuation highs, and with a few stocks dominating its index, many investors are seeking signals for the next wave of growth and new avenues for diversification. With global small-and-mid-caps gaining renewed momentum, could now be the time to broaden your portfolio?

The Fidelity Global Future Leaders Active ETF offers investors an easy way to access tomorrow’s global growth, backed by Fidelity’s research-powered investing, and experienced investment experts dedicated to investing in global small to mid-cap companies.

Discover tomorrow’s global leaders, today.

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