The Overnight Report: PPI & Putin Pause Rally

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A higher than expected producer price index reading, and the lead up to Trump and Putin meeting in Alaska put US markets on the back foot, recovering from lows, and ending mixed on the day.

SPI futures are suggesting a flattish opening for the local bourse on Friday, with more August earnings reports to be released.

Good Morning,

The ASX200 hit another record intraday high on Thursday, closing up 0.5% to 8,874 with eight of eleven sectors gaining on the day.

Utilities were helped by Origin Energy ((ORG)) rallying 6.33% and Financials boosted by Westpac ((WBC)), up 8.31%.

Other stocks that rallied on earnings reports include Temple & Webster ((TPW)) up 8.75%, and Pro Medicus ((PME)) up 6.24%, all in the top five performers in the ASX200.

What happened overnight, ANZ Bank Australian Morning Focus extract

Australia’s employment rebounded by 24.5k in July after a net -2.0k decline in May and June. The unemployment rate pulled back from 4.3% in June to a high 4.2% (4.24%). The results were in line with market expectations and suggest a resilient labour market despite soft employment growth in May and June. 

July employment growth was driven by a 60.5k increase in full time employment, the strongest pick-up since February 2024, offset somewhat by a -36k decline in part time employment. The RBA softened its tone about labour market tightness in its August post-meeting statement, noting that “labour market conditions remain a little tight” versus just “tight” previously, and that conditions are moving closer to full employment.

Looking ahead, forward indicators remain solid, with forward orders picking up in recent months while our own ANZ-Indeed Australian Job Ads series remains stable.

Equity markets overnight were trading mixed. S&P500 eked out a new record close, up 1.96pts or 0.03%, with Nasdaq and the Dow slightly down. The Euro Stoxx50 rose 0.9% and the FTSE 100 was up 0.1%. 

The US 10yr bond yield was up 4.8bp at 4.29%. 

US prices strong in PPI were announced with final demand data showing headline prices rose 0.9% m/m in July, above consensus expectations for a 0.2% m/m rise, and its fastest pace in over three years. 

PPI ex food, energy and trade (core PPI) showed prices rose 0.6%. Of the headline prices, final demand goods prices were up 0.7% m/m, while final demand services prices surged 1.1%. The Bureau of Labor Statistics notes over 30% of the price rise in final demand services can be traced to margins for machinery and related wholesaling (up 6.7% m/m). 

Elsewhere within services, portfolio management services prices rose 5.8% m/m and securities brokerage and dealing services prices were up 3.2% m/m. That is expected in an environment where stock markets are rising. Healthcare related services prices broadly rose at a modest pace and even fell in a few categories (hospital outpatient care down -0.5% m/m). 

In a commodities update higher-than-expected inflation weighed on sentiment, with the stronger USD creating headwinds for the commodity complex. Metals and energy ended lower.

Gold retreated as traders trimmed their expectations of a Fed rate cut. This came after US wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs. Swap traders are now pricing in an 85% chance the US central bank will cut rates in September. This is down from fully pricing in a cut yesterday. Bond yields and the USD advanced after the data, sending the gold price down as much as -0.8%. 

Inflation data cast a pall over the industrial metals complex. Higher borrowing costs tend to weigh on the sector, both by weakening demand and strengthening the USD. Traders were also cautious ahead of key economic data in China. Retail sales, industrial production and fixed asset investment are all expected to improve despite lingering trade concerns. 

Iron ore futures were steady as the market continues to shrug off ongoing weakness in China’s property sector. The prospect of further rationalisation of its steel industry could add further support to prices. Iron ore prices have rallied more than 20% since June to reach a one-year high. Recent economic and trade data in China suggest demand remains robust. First half GDP growth came in at 5.3% and industrial fixed asset investment up 6.4%.

However, it is improved sentiment in the steel market that has sustained the gains. A pullback in steel output in recent months has improved profitability in the sector. Margins for steel mills have pushed back into positive territory, reaching as high as US$150/t in recent weeks. This has provided some breathing space for iron ore prices to push higher.

Beijing’s renewed focus on reducing overcapacity could see this rally sustained, and its anti-involution campaign will increase focus on the steel industry in coming months. Expectations are that policymakers will apply meaningful cuts to capacity. This should provide further support to iron ore prices. 

Crude oil prices edged higher, recouping some of the losses recorded earlier this week as traders take stock of the geopolitical landscape. All eyes remain on the meeting between presidents Trump and Putin, which could determine whether sanctions are eased or tightened on the OPEC-Plus member.

Trump reiterated his threat he would impose “very severe consequences” if Putin didn’t agree to the ceasefire at today’s summit. He said earlier today European leaders may attend a second meeting with Putin along with Ukraine’s President Zelensky. For the moment, markets appear to be taking a wait-and-see approach, but risks remain high. 

Global gas prices remained range bound amid a lack of clear direction on fundamentals. Traders of LNG are continuously changing US cargoes between Europe and Asia. One cargo has had its destination switched between the two regions twice during its journey.

Europe did several diversions away from its markets last month amid ample supply. Stronger demand in Asia is also being figured into the trade flows. Japanese imports are on track to record strong gains in August as record high temperatures boost the nations cooling demand and gas consumption for power generation. LNG stockpiles held by Japanese utilities are below the five-year season average.

Stephen Innes, SPI Asset Management “Putin and Trump deal under the midnight sun”

Anchorage, Alaska isn’t just warm under its endless summer sun — it’s about to be the geopolitical equivalent of a pressure cooker set on the edge of a restless volcano.

On one side, Vladimir Putin, the seasoned chess master who’s been playing the same game since before most of today’s ministers had security clearance. On the other hand, Donald Trump, the self-styled dealmaker-in-chief, swaggered into the Elmendorf-Richardson military base like he’s about to close on the most significant piece of political real estate in history.

The stakes? Nothing less than the fate of Ukraine, Europe’s security architecture, and the credibility of U.S. diplomacy. The street’s take: this is no polite fireside chat — it’s a knife fight under the midnight sun, only with nuclear overtones and cameras rolling.

Putin has already begun his pre-summit seduction, calling Trump’s efforts “energetic and sincere” — diplomatic sugar meant to stroke the ego and soften the defences. But behind that velvet compliment is a steel demand: a deal that rewrites the map, rolls back NATO’s reach, and clips Ukraine’s independence to the bone. To Moscow, the “root causes” of the war aren’t shell craters, they’re the prospect of NATO bases.

Trump, ever the poker player, has been telegraphing two hands at once. Publicly, he’s selling this as a test of chemistry — “I’ll know in the first few minutes” — a line that sounds like dating advice but in geopolitical markets reads as a bid-ask check. If the vibes are bad, he says, it’ll be a short meeting. But if the sparks fly, he’s dangling the possibility of a “more important” sit-down with Zelenskyy, maybe even bringing European leaders along for the ride. In other words, round one could just be the weigh-in.

Kyiv, meanwhile, is working the phones like a short-seller trying to stem a squeeze, calling in every political favor it has to prevent being carved up like a distressed asset sold to the highest bidder. European capitals are in on the hustle too, pitching Trump on security guarantees that sound supportive but avoid the one four-letter acronym — NATO — that turns Moscow’s blood cold.

Back in Moscow, Putin’s bringing his A-team: Lavrov for the diplomatic icework, Siluanov to talk sanctions evasion like it’s an emerging markets investment pitch, and Kirill Dmitriev — the Kremlin’s salesman-in-chief — who still believes the Arctic could be the next joint venture gold rush if the politics thaw. The message is clear: peace on our terms, plus a commercial kicker, and we can make history together.

For traders, this summit isn’t about hugging it out — it’s about the spread between talk and action. The risk premium on geopolitical détente is still fat, because every time someone says “long-term peace,” the fine print usually reads “until the next crisis”. Markets don’t do sentiment analysis on handshakes; they wait for the ink to dry and the troops to move.

If this were an FX chart, it would be a narrowing wedge pattern with a breakout coming — but no one’s betting the house on which way. Friday could be a false break, a photo-op that leaves the battlefield unchanged. Or it could be the kind of shock headline that blows stops from Kyiv to Brussels to Wall Street.

Either way, the ground under this summit is scorching, and both men are wearing gasoline-soaked boots

Corporate news in Australia 

-Ampol ((ALD)) is acquiring EG Australia service station portfolio for -$1.1bn, adding 500 sites and generating synergies of $65m-$80m annually. 

-South32 ((S32)) is set to book an impairment of -$568m on Mozal as power supply uncertainty remains.

-Lake Resources ((LKE)) is raising $10m at 3.6c per share, a discount of -14.3% to the last close.

-ASIC is suing Mercer over unreported investigations, delays and misleading reports.

On the calendar today:

-NZ July PMI

-NZ June net migration

-JP 2Q GDP

-JP June IP

-CH July Retail sales

-CH July unemployment

-US Aug U of Michigan Sentiment

-US July IP

-US July retail sales

-AMCOR PLC ((AMC)) earnings report

-ANZ GROUP HOLDINGS LIMITED ((ANZ)) Qtr update

-BABY BUNTING GROUP LIMITED ((BBN)) earnings report

-CENTURIA OFFICE REIT ((COF)) earnings report

-COCHLEAR LIMITED ((COH)) earnings report

-HEALTHCO HEALTHCARE & WELLNESS REIT ((HCW)) earnings report

-MIRVAC GROUP ((MGR)) earnings report

-OFX GROUP LIMITED ((OFX)) earnings report

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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