The Overnight Report: Oil Falls, Tech Roars

Array
(
    [0] => Array
        (
            [0] => ((PPT))
            [1] => ((INA))
            [2] => ((TLX))
            [3] => ((TWE))
            [4] => ((PTX))
            [5] => ((TGN))
            [6] => ((FFM))
            [7] => ((FWD))
            [8] => ((LFS))
            [9] => ((SXE))
            [10] => ((TLX))
        )

    [1] => Array
        (
            [0] => PPT
            [1] => INA
            [2] => TLX
            [3] => TWE
            [4] => PTX
            [5] => TGN
            [6] => FFM
            [7] => FWD
            [8] => LFS
            [9] => SXE
            [10] => TLX
        )

)

This story features PERPETUAL LIMITED, and other companies.
For more info SHARE ANALYSIS: PPT
The company is included in ASX200, ASX300 and ALL-ORDS

Nasdaq led US markets higher, as the Mag 7 rallied, boosted by Meta and optimism around its AI shopping agent, Muse.

Hopes of a move towards a diplomatic solution in the Middle East sent oil futures down, boosting general sentiment.

After treading water yesterday, ASX200 futures are pointing to a positive start for Tuesday.

Good Morning,

The ASX200 closed flat on Monday at 8731.90, supported by Healthcare which advanced 0.51%, while InfoTech continued to fall, down -1.6%.

SPI futures are indicating Tuesday’s session will at least start of with more optimism.

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

Oil Under US$100 Did The Heavy Lifting

Brent and WTI both traded below US$100 for the first time since Sept. 9.

Saudi crude moving through the Strait of Hormuz averaged 2.9 million barrels a day over the past six days, up from 700,000 in August.

That is four straight down days for Brent, the longest run since June.

Cheaper oil pulled Treasury yields down with it, and that is what gave everything else room to run.

AMD Is A Trillion Dollar Company

AMD hit an intraday record near US$614 and crossed US$1 trillion in market value for the first time.

The semiconductor index led the entire market.

Trump posted on Truth Social just before noon that he will not stifle AI and will “only encourage” it, and AI names added to their gains right after.

Cheaper energy and softer yields did the rest.

Paramount Settles, Warner Deal Is Free

Paramount reached a settlement with the state attorneys general who sued to block its Warner Bros. Discovery merger.

Reuters reports the terms include independent editorial boards at CNN and CBS, plus a US$30 million penalty for every film Paramount falls short of its pledge to release 30 a year.

Fighting to trial would have pushed the close into mid-2027 and triggered ticking fees worth roughly US$650 million a quarter.

Writing the check was the cheaper option.

ANZ Bank, Australian Morning Focus, extract

Equity markets rose strongly on optimism surrounding US-China talks.

US Treasury Secretary Bessent said that a trade truce was a major focus of the discussions. It was also announced that President Xi will visit the US from 23–25 September.

Meanwhile, oil prices fell after President Trump signalled that he would be open to meeting Iran’s President Pezeshkian at the UN General Assembly.

The S&P500 was up 1.5%, the Dow Jones up 0.7% and the Nasdaq up 2.3%.

In Europe, the EuroStoxx50 was up 1.3% and the FTSE100 rose 0.7%.

The yield on the US 10y Treasury note fell -4bp to 4.96%. Oil prices fell, with WTI down -3.6% to US$95.3/bbl. Gold fell -0.2% to US$4,342.2/oz.

US: The diffusion index of the Chicago Fed’s National Activity Index (CFNAI) fell to -0.04 in August from 0.08 in July. Production-related industries dragged, subtracting -0.07 from the index and the contribution from sales, orders and inventories was flat.

The 3m average of the index was 0.01. A zero value for the CFNAI means the economy is expanding at its historical average rate.

RBA to hike twice: We now expect the RBA to increase the cash rate by 25bp in September, in addition to the 25bp rate hike we already have in for November.

That would take the cash rate to 4.85%, the highest since 2008. 

Our views on the easing cycle are unchanged. We expect a -25bp rate cut in November 2027 and a -25bp rate cut in February 2028. That does leave a higher end point cash rate of 4.35% (versus 4.10% previously).

Given the rapid re-emergence of inflation after the prior easing cycle, we expect the RBA Board will be slow and cautious when it comes to eventually cutting rates.

More hike the theme: We also added hikes to our outlooks for the RBNZ and BoE. For the RBNZ, we are adding in hikes in February and March in addition to October, which would take the OCR to a peak of 3.50%. The track then flatlines.

There are three main drivers of the change in forecast: higher oil prices and crack spreads, a lower exchange rate and a better starting point for the economy than the RBNZ assumed. This track balances upside and downside risks to medium-term inflation.

For the BoE we expect 25bp hikes at its November and February 2027 meetings, taking the policy rate to 4.25%.

Global: Escalating oil supply disruption pushes central banks to a fork in the road, Oxford Economics extract

• The escalating disruption to Middle East oil exports through the Red Sea has led us to reassess our views on growth, inflation, and policy rates. Consequently, we’ve reduced our forecasts for world GDP growth, pushed up inflation, and now anticipate more hawkish behaviour by major central banks. 
• The disruption to oil supply also increases the risks to the outlook – we judge our revised view sits in the centre of that risk distribution.
• We expect Middle Eastern oil supply issues to push up the average Brent oil price in 2027 by just over US$20 per barrel. While the oil price has been persistently higher in the past without causing a global recession, this shock is being exacerbated by outsized rises in the price of refined oil products.
• The more extended period of high energy-driven inflation increases the likelihood of the shock broadening due to the current environment of high-inflation awareness. We are now in an era where central banks are set to behave more hawkishly. Higher oil prices and the need to curb the risk of second-round inflation effects when core inflation is already above target mean policymakers now have little choice but to deliver at least some of the rate hikes that markets are anticipating.
• If another big leg up in the oil price is avoided, we still think that the Federal Reserve and the European Central Bank may deliver fewer hikes than markets anticipate. But one of the lessons from the post-pandemic inflation shock is that early aggressive action is the best way to prevent second-round inflation effects materialising, suggesting the risks are skewed towards a more aggressive response.

Lessons From Past Lift Offs, Lori Calvasina, RBC Capital, extract

Our review of S&P500 performance during the Fed hiking cycles that have occurred since the mid-1990s reminded us that the stock market tends to stumble at lift-off, with a median initial drop of -9.6% (ex 2022, which was an extreme outlier). 

This keeps us vigilant for a near-term tier 1/garden variety pullback of -5%-10% in the S&P 500.

Second, other things that jumped out in our updates this week included the sharp drop in AAII net bulls to levels that have generally marked the low since early 2025 when the Liberation Day tariffs shocked the market (which suggests investor sentiment is at a crossroads), and the choppiness we continue to see in most major positioning trades (Growth/Value, US/non-US) other than Small Caps, which have continued to underperform Large Caps.

Lessons From Past Lift-Offs

With a new Fed hiking cycle underway, we’ve looked back at how the S&P500 traded around first Fed hikes in prior tightening cycles dating back to the mid-1990s. The most important thing that we learned was that the index tends to fall as a new hiking cycle gets underway. 

Meaningful peaks in the index tended to occur before the first hike, but a couple came right as hikes began or shortly after. Ex 2022, which ran much deeper, these drawdowns ranged from -8.2% to -14.2%, with the median coming in at -9.6%. Aside from 2022 (where the drawdown ran much longer than the others), meaningful lows tended to come 1-3.5 months after the first hike. 

The second thing we learned was that there were essentially two kinds of stock market patterns that emerged during the hiking cycles. 

In 1994-1995 and 2022-2023, the shape of the stock market during the hiking cycle (start to finish) looked a bit like the stock market slid into a hole from which it took a long time to claw its way out. On some stats, these were some of the more aggressive hiking cycles (the average basis points per move were 43-47, compared to 25-29 for the other cycles we looked at). 

Three of the other cycles – 1999-2000, 2004-2006, and 2015-2018 – looked a bit different, with the index seeing a sizable drop around lift-off, then essentially moving higher through the rest of the hiking cycle. 

That is not to say damage wasn’t incurred, but it tended to come down the road, with the S&P500 hitting its Tech bubble high near the end of the 1999-2000 hiking cycle, its GFC high after the 2004-2006 hiking cycle had concluded, and at the tail end of the 2015-2018 hiking cycle.

The data were a reminder that it takes time for tightening to filter into financial markets and that it’s when the Fed has gone too far that the stock market has a major problem. Note that the 1997 one-and-done hike looks more like the latter category, with a -9.6% drop (the median we refer to above).

Around that hike, the index peaked about a month before the single hike occurred and put in a trough a little less than a month afterwards.

While we see last Wednesday’s hike as a win for Fed credibility, removing uncertainty, and delivering something a number of macro investors we’ve spoken with thought was needed or inevitable, the fact that we are starting this new phase keeps us vigilant for a near-term tier 1/garden variety pullback of -5%-10% in the S&P 500. 

Quick Hits: What Else Jumps Out From Our Latest Updates

• Sentiment slides. Net bulls on the weekly AAII investor survey fell to -24.5% in the latest update on a weekly unadjusted basis, nearly two standard deviations below the long-term average. The four-week average is now tracking at -8.8%, almost one standard deviation below average. This has been a contrarian indicator for the stock market on a longer-term view and is in a range consistent with a 10.8% forward return in the S&P 500. Putting that aside, on a shorter-term time frame, the data suggests investor sentiment is at an interesting crossroads. At -24.5%, the latest unadjusted weekly data point is a bit below its late March 2026 low (-21%) but not nearly back down to its 2022-2023 and early 2025 lows (when it went beyond -40%). When we look back to past hiking cycles , it’s worth noting that the four-week average on this data set often bottoms out around -20% but also often goes to nearly -40%.
• A lack of leadership. We continue to see signs that the US equity market is struggling to identify which direction it wants to head in some of the major, higher-level positioning trades. Within Large Cap, the Growth/Value and momentum trades have both been choppy in very recent trading, and this has also remained the case for the US/non-US developed markets relative trade. This makes sense to us, as we simply aren’t seeing strong signals on our work right now about which sides of these trades deserve to outperform in the near term. One exception, where the stock market does seem to be sticking with a preference, is Small Cap, which has been underperforming Large Cap since late June. While economic fundamentals have been supportive of Small Cap leadership (i.e. rising ISM manufacturing, a strong jobs print), they have been deeply out of favour, and valuations are falling below post-GFC and long-term averages, we think these dynamics are being overwhelmed by the start of the new hiking cycle. It is also possible investors will soon start harbouring doubts about whether those indicators can remain strong.

Corporate news in Australia:

• Perpetual ((PPT)) rejected EQT’s further revised takeover proposal and ended engagement with the private equity firm, citing transaction execution risks
• Ingenia Communities Group ((INA)) rejected Warburg Pincus’ revised $5.05 per share takeover proposal but remains open to a higher offer
• Telix Pharmaceuticals ((TLX)) agreed to acquire German radiopharmaceutical company ITM for US$1.65bn
• KordaMentha will remain in control of the Whyalla steelworks until at least March 2027 after the court extended the administration deadline
• Treasury Wine Estates ((TWE)) sold the historic Seppelt brand to Stonier, which is partly backed by Celina Thickins, for an undisclosed sum
• Brand Collective acquired Glue Store’s IP and customer database, along with Running Bare and The DOM, to establish a new marketplace division
• Prescient Therapeutics ((PTX)) is seeking $8m through a share purchase plan to fund clinical trials of its cancer treatment candidate
• Fever raised US$250m from investors including EQT, Point72, Baillie Gifford and Sydney-based Athletic Ventures
• Tungsten Mining ((TGN)) appointed Jefferies and Euroz Hartleys to seek $50m to fund development of its Watershed tungsten project in Queensland
• Airwallex faces renewed scrutiny in the US over its Chinese ties as the payments group prepares for a potential 2027 IPO
• CS Energy is in advanced talks to sell its $1.3bn Lotus Creek wind farm to QIC-backed Tilt Renewables
• Innovaero is raising $40m through an ASX IPO as the autonomous defence drone company seeks to expand and secure further Defence sales
• Nvidia’s equity investments and commercial ties with Firmus are attracting attention as the Australian AI infrastructure company progresses towards a proposed $7bn IPO

On the calendar today:

-JP Public Holiday

-US Sep Phil Fed & Richmond Fed

-FIREFLY METALS LIMITED ((FFM)) FY26 earnings report

-FLEETWOOD LIMITED ((FWD)) ex-div 9.50c (100%)

-LATITUDE GROUP HOLDINGS LIMITED ((LFS)) ex-div 5.5c (100%)

-SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED ((SXE)) ex-div 7.50c (100%)

-TELIX PHARMACEUTICALS LIMITED ((TLX)) AGM

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

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms