The Monday Report – 21 September 2026

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            [9] => WDS
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This story features WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED, and other companies.
For more info SHARE ANALYSIS: SOL
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The Dow Jones posted its third straight losing week as higher bond yields continued to impact stocks.

The S&P500 and Nasdaq have been more resilient and closed up on Friday, as the US 10-year Treasury yield reached 5%.

The Australian market finished flat on Friday but down again for the week.

ASX200 futures are pointing to a weak start as fears around the Middle East oil price spike and higher rates continue to weigh on market sentiment.

Good Morning,

The Australian market finished flat on Friday, down -1.2 points to 8731.20, marking the third week of declines.

The index is now down -3.8% in September and off some -6% since early August.

Companies reporting financials out of season this week include Washington H. Soul Pattinson ((SOL)), Premier Investments ((PMV)), Minerals 260 ((MI6)) and Tuas ((TUA)).

Telix Pharmaceuticals ((TLX)) has scheduled an R&D update in New York.

For more details and to stay in touch with which companies are going ex-dividend, check out the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Today’s Big Picture, J.L. Bernstein extract

Buffett Steps Down as Berkshire Chairman 

Warren Buffett, 96, handed the Berkshire Hathaway $BRK.B chairman job to his son Howard but will stay on the board.

The stock barely moved, and I’m not surprised.

Shares peaked May 2 last year, the day before he announced he’d leave the CEO job, and haven’t been back since.

The market said its goodbye 17 months ago.

Fed Talk Pushes the 10-Year Yield Back Above 5 

The 10-year Treasury yield climbed back above 5% today after a one-day dip.

Kansas City Fed President Jeff Schmid said the Fed “has work to do on inflation.”

Traders added bets on another hike in October, and stocks couldn’t get going.

The Dow is headed for its third straight losing week, its worst since March.

Bitcoin Tops US$80,000 Again 

Bitcoin climbed back above US$80,000 for the first time since Sept. 7.

The push came from Thursday’s SEC decision letting trading venues offer digital token versions of U.S. stocks.

That mattered more to traders than the big crypto bill that died in Congress this week.

Regulators are now writing the rules Congress couldn’t pass.

ANZ Bank, Australian Morning Focus, extract

Equity markets were lower across Europe and mixed in the US on Friday night as Middle East concerns dominated, with Saudi Arabia reportedly telling European refiners they will get no crude next month.

The S&P500 closed up 0.2%, but the EuroStoxx50 was down -1.4% and the FTSE100 fell -1.5%.

The yield on the US 10y Treasury note rose 5.7bp to 5.0%, building on upward pressure seen across Europe (UK +7bp, France +12bp, Germany +4bp).

Crude oil prices were slightly lower. WTI fell -0.6% to US$100.3/bbl, but gasoil (diesel) prices were higher. Gold was broadly steady at US$4,378.6/oz.

US August industrial production was unchanged and manufacturing output fell -0.3% m/m, the first decline in seven months. The output of business equipment fell -0.5% m/m and for defence and space it fell -1.2% m/m.

Manufacturing capacity utilisation fell -0.3% m/m to 75.7% and is -2.5% below its long-run average since 1972.

Central banks on the march: The round of September central bank meetings over the past 10 days resulted in 25bp rate rises from the Fed, ECB and BoJ and guidance from the BoE that it may be pushed into raising interest rates if the conflict in the Middle East persists.

Deteriorating geopolitics in the Middle East have been a significant swing factor in current central bank decision making and thinking.

In the inter-meeting period over the late northern summer, central banks have moved from observing developments and an absence of second-round effects to proactively implementing precautionary policies to anchor inflation expectations and prevent spill-over to the broader inflation framework.

Tighter monetary policy works through both a signalling and demand channel. Central bank credibility in pursuing and maintaining price stability is one of the biggest determinants in anchoring medium- to longer-run inflation expectations.

Given the deterioration in the Middle East and no signs of a resolution in sight, central banks are now acting as they see fit.

At the margin, high oil prices and higher interest rates will work to dampen growth.

That is not the market’s focus now, but in the context of a K-shaped US economy, fragile consumption environment in Japan, cautious consumers in Europe and a struggling UK economy, the downside risks to global growth are increasing.

CBA Economics: RBA to hike in September, risk sits with still higher rates, Belinda Allen, extract

RBA to hike in September, risk sits with still higher rates

• We bring forward our base case for the next increase in the cash rate to September, from November.
• The context of the meeting, recent RBA communications and market pricing are all supporting the case to move earlier than we had anticipated post the surprise July CPI print.
• The risk sits with the need to tighten monetary policy further beyond September given the inflation backdrop but it is not an easy decision to push monetary policy further into restrictive territory.
• We will be watchful of the data flow from here, particularly upcoming CPI and labour force prints. The conflict in the Middle East, the price of oil and signs of pass through from the energy supply shock will also be crucial.
• But the Australian economy is slowing, the housing market is undertaking a large downturn and the labour market is closer to balance than it has been in years and the risks to inflation and growth will even out with further tightening.
• We continue to see the case for rate cuts in 2027 but the timing remains uncertain given the inflation backdrop and structural tailwinds for the Australian economy which is placing upward pressure on growth and the neutral cash rate. We now see the cash rate on hold for longer than our previous assessment. We push our rate cuts out as a result till August and November 2027.

We now expect the RBA to hike the cash rate by 25bp to 4.60% at its 28-29 September meeting.

At 4.85% the cash rate would be close to 100bp above our estimate of neutral and would see weaker growth outcomes and home prices than we currently forecast.

Rate cuts still on the agenda in 2027

We have had rate cuts in our forecasts from May 2027 and we maintain -50bp of easing in 2027.

Tight monetary policy, a slowing economy and a gradual shift lower in inflation should still see the RBA be able to remove some of the tightness in monetary policy next year.

At this stage we now see this occurring in the second half of 2027, starting in August, later than our earlier view of May.

But at close to a year away there is considerable uncertainty around the timing and extent of an easing cycle.

As we have flagged before, AI, renewables and defence are putting upward pressure on investment, inflation and growth.

Combined with larger government deficits, this raises the risk that the neutral rate is higher than we think, which could make rate cuts less likely in 2027.

US MARKET CALL: Investors Curbing Their Enthusiasm As Less FOMO Offsets More FEMO, Ed Yardeni & Toby Hearst extract

I. Curbing Our Enthusiasm

Last week on Tuesday, we pushed our 8,400 year-end target for the S&P500 to mid-2027. Our new year-end target is 7,900.

We remain confident in the resilience of both the economy and S&P500 companies’ earnings per share (EPS). On the other hand, we think recent developments may weigh on their stocks’ valuation multiples for the rest of the year.

The recent re-escalation of the war in the Middle East increases the chances of higher-for-longer oil prices and stickier inflation. As a result, the FOMC voted unanimously to hike the federal funds rate (FFR) last week, and the Committee seems set to tighten some more in the coming months.

Bond yields remain on an uptrend worldwide. A growing backlash against the proliferation of AI is also weighing on valuation multiples. It is becoming a political issue during midterm congressional campaigns, and the election results are likely to exacerbate the partisan divide in the US.

Then again, perhaps President Donald Trump will soon find a way to end the war, causing oil prices to drop. Perhaps China will convince Iran’s IRGC to stop their Houthi friends in Yemen from disrupting shipping through the Red Sea. Perhaps bond yields will stop rising. Perhaps.

In any event, our base-case scenario remains a continuation of our Roaring 2020s scenario, which has been underway for almost seven years.

It posits that rapid, noninflationary economic growth will result from tech-led productivity growth. We give it 70% odds of continuing. So far, so good: Three more years to go.

Nevertheless, we’ll keep updating our worry list of unhappy scenarios, which currently has a subjective probability of 30%.

For now, let’s review the recent developments in the financial markets.

II. Earnings Exuberance

S&P500 companies’ forward EPS rose to a record US $404.84 last week. The analysts’ consensus 2027 EPS estimate is up to US$419.93. We expect it to keep climbing to US$425 by year-end, which would put forward EPS at US$425 too.

Multiplying that forward EPS target by a forward P/E of 18.6 yields our year-end target of 7,900. To get to 8,400 by year-end, the forward P/E would have to rise to 19.8. The current forward P/E is 18.9.

The Q3-2026 earnings season starts in early October. Analysts project 23.7% y/y growth for Q3 and 28.2% for Q4. Both estimates continue to rise. Q2’s 50.8% jump included huge mark-to-market capital gains; excluding those gains, EPS growth was about half that.

Analysts’ estimates for the second half of the year carry no such distortion.

Forward earnings rose to record highs for the S&P500, S&P400, and S&P600 last week. Fabulous earnings momentum (FEMO) isn’t just a LargeCap story.

III. Valuation Compression

The S&P500’s forward P/E is down to 18.9, with the Magnificent-7’s at 22.7, the S&P400’s at 15.1, and the S&P600’s at 14.3.

As earnings have soared this year, forward P/Es have declined. FEMO has been partly offset by less FOMO (fear of missing out). While analysts have been increasingly exuberant about earnings, investors have been curbing their exuberance.

Investors want a valuation discount for the known unknowns: How far will the Fed tighten from here? How long will the war last? How high will oil prices and bond yields go? What will the midterm elections deliver? Will the AI labs’ push to slow frontier development slow the capital-spending boom driving earnings? By how much?

The Fed’s Stock Valuation Model (named as such by Dr. Ed in 1997) is working again. The S&P500 earnings yield and the 10-year Treasury bond yield are moving in tandem. Rising bond yields are depressing the forward P/E, which is the reciprocal of the forward earnings yield.

Analysts’ consensus long-term annual earnings growth (LTEG) expectation is up to 26.6%, as analysts have kept raising what they think their companies will earn over the next five years.

That’s well above the 18.9 to which the S&P500 forward P/E has fallen. During the 1999 Tech Bubble, both LTEG and the forward P/E moved higher together and then fell together during the Tech Wreck.

Their disconnect now shows that investors aren’t completely buying what analysts are selling.

IV. Investor Sentiment Mixed

The Investors Intelligence Bull/Bear Ratio eased to 2.88 last week, close to its 2.60 average, while the AAII ratio fell to 0.54, well below its 1.18 average.

Institutional bullishness has come off its summer extreme, and retail remains washed out, which is constructive on a contrarian read.

V. Bond Yields On 5% Fence

Following Wednesday’s FOMC decision, the 2-year Treasury yield is at 4.67% and 12-month FFR futures are at 4.66%.

They both imply roughly two and a half more 25bps FFR hikes over the coming year.

The 10-year Treasury yield is at 5.00%, the top of the 4.00%-5.00% “old normal” range that we have argued is the right one for this business cycle.

A sustained Fed tightening cycle could push yields into abnormal territory.

The good news is that breakeven inflation rates dropped sharply after the Fed raised the FFR on Wednesday

The Bull/Bear Report, Lance Roberts, extract

We remain concerned about breadth, which thinned as well this past week.

With the banks and the rate-sensitive groups taking the brunt of the hit this past week, it was technology, AI-adjacent sectors, and the megacap complex that kept the market afloat.

As we have noted many times before, when leadership narrows to a handful of names while the average stock struggles, the tape is more fragile than the index level would suggest.

The weekly range was the widest in more than a month, the kind of expansion that tends to arrive at inflection points rather than in the middle of trends.

So, what does this mean for investors heading into next week as we begin to wrap up the third quarter?

First, the levels that matter to investors are very close by. Resistance sits at 7,650 (S&P500), and then the round 7,700, the zone the rally must reclaim to prove Friday was more than a reflex.

Support runs first to 7,585, Wednesday’s reaction low, and a failure there opens 7,500 and then 7,400, where the rising intermediate averages come into play.

For shorter-term investors and traders, the market setup argues for patience over conviction. I say that because the current backdrop does not provide the proper entry to chase risk.

However, if the market can rally toward overhead resistance levels (7,650 and 7,700), trimming exposure and raising stops seems the most logical course of action, rather than adding exposure. For now, with the 10-year pinned at 5%, a rejection at that level seems the higher-probability outcome.

With that understanding, we would only suggest adding exposure if the market makes a decisive break and holds above 7,585, with improving breadth.

Lastly, consider sizing positions for two-way volatility, which has been the case as of late, and keep stops tight beneath any reaction low. A defined-risk hedge here costs little, and it earns its keep the moment 7,585 gives way.

The most important level to watch is 7,585. If the bulls can defend that level, then the record-high structure survives to fight another week.

If they lose it, the burden of proof shifts to the bulls, with 5% yields and a hawkish Fed offering them little help.

Corporate news in Australia:

• Abacus Group ((ABG)) agrees to sell its 19.6% stake in Storage King Group ((SKG)) for $284.8m via a strategic sale to Ki Corporation and an institutional block trade
• Maas Group Holdings ((MGH)) receives FIRB approval for the $1.703bn sale of its construction materials business to Heidelberg Materials Australia
• Frasers extends its $0.65 per share takeover offer for Accent Group ((AX1)) to January 29, 2027
• Osaka Gas agrees to acquire a 5% stake in Woodside Energy Group’s ((WDS)) $30bn-plus Browse LNG project from BP
• Ingenia Communities Group ((INA)) rejects Warburg Pincus’s revised $3bn takeover proposal despite shareholder pressure to engage with the private equity firm
• BGH Capital and Allegro Funds enter exclusive talks to merge TheirCare and Camp Australia, potentially creating a childcare platform with around $40m in EBITDA
• IFM Investors and AIP appoint Azure Capital to advise on their joint bid for Stack Infrastructure’s APAC data centre platform
• Australian fintech Tangerpay merges with UK laundromat software company CleanCloud, creating a business valued at more than $70m
• EQT submits an improved takeover proposal for Perpetual ((PPT)) after its previous $22.50 per share offer was rejected
• Macquarie Group ((MQG)) freezes investments into two Alceon private credit funds amid increased scrutiny of Australia’s private credit sector
• Thoma Bravo is considering relisting Nearmap on the ASX through a potential multibillion-dollar IPO as it explores an exit
• Best Practice leads a $5.4m private funding round for AI-powered clinical search company Medcast, investing $1.5m
• Foresight raises a US$660m continuation fund to transfer its 30% stake in Australian bus operator Kinetic from an existing fund
• NextDC ((NXT)) settles $1.1bn of convertible notes to help fund its accelerated data centre buildout, with the securities to trade on Vienna’s Multilateral Trading Facility
• Bathla Group’s voluntary administration is extended to September 2027 while administrators seek additional funding to continue construction projects
• Hysata receives $49m of ARENA funding for a $98m hydrogen electrolyser manufacturing line at Port Kembla
• Deleted Firmus job advertisements indicated plans for 2m GPUs, up to 5GW of power and nine US$1bn-plus customer accounts by 2028, alongside its planned US$7bn IPO
• CSIRO increases its backing of Main Sequence’s Atmosphere pre-seed fund fourfold to $20m to support deep-tech startups emerging from Australian science

On the calendar today:

-JP Public Holiday

-CH PBOC rate decision

-US Aug Chicago Fed

-HK 2Q BoP

-COCHLEAR LIMITED ((COH)) ex-div 130.00c (85%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

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