The Overnight Report: July CPI & Nvidia Results

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US markets shrugged off potential concerns around the Fed's independence and instead turned positive ahead of tomorrow's all important Nvidia results after the market's close.

After a weak day on the ASX yesterday, futures are pointing to a positive start ahead of the July CPI print at 11.30am AEST.

Good Morning,

The Australian share market fell -37pts or -0.4% on Tuesday. Iron ore miners weighed on the materials sector with eight of eleven sectors retreating.

Consumer staples outperformed, boosted by Coles Group ((COL)) shares rallying 8.5% after earnings were reported.

What happened overnight, NAB Markets Research Today, extract

Fed independence is in focus with Trump moving to remove Fed Governor Lisa Cook for cause. Cook is set to challenge the move.

For now, markets are generally taking the pressure on Fed independence in their stride. The extent of the ‘for cause’ power remains largely untested and is likely to play out in courts, potentially over the next couple of months.

Cook said, “I will continue to carry out my duties to help the American economy as I have been doing since 2022”. The Federal Reserve said in a statement it will abide by any court decision.

At the current juncture, even an FOMC that looks compositionally a little more dovish can remain attached to the macro backdrop, tolerating a little more risk on inflation to maintain low unemployment. FOMC officials generally agree rates are modestly restrictive and the direction of travel is (ultimately) lower. More willingness to look through near-term inflation comes with less risk of being late and needing to move further faster later, but at the expense of additional inflation risk.

But pressure on the FOMC doesn’t look set to go away quickly and risks becoming more overtly detached from the macroeconomic conditions. Trump floated moving Miran to Cook’s seat, which has a term running until 2038, and noted “we’ll have a majority, very shortly so that’ll be great once we have a majority, and housing is going to swing and it’s going to be great”. 

Late in the session, Bloomberg reports the administration is also weighing options to influence the selection of regional Fed Presidents, who are not appointed by Washington and are next set to be authorised by the Board of Governors in February.

Elsewhere, NY Fed President Williams said in a speech that “the global demographic and productivity growth trends that pushed r-star down have not reversed” and that the low neutral rate era appears far from over.

US yields saw a mild steepening in response to the headlines on Cook. The 10yr spread to 2yr yields jumped around 4bp to 58bp and largely held on to that relative move even as yields rallied through the US session. The 10yr yield is 1bp lower on the day at 4.26%, while the 2yr is 4bp lower. The 30yr further underperformed, up 3bp to 4.92%. 5s30s slope is at 116bp and 2s10s at 58bp are each the steepest since 2021.

US equities are higher over the day with the S&P500 up 0.4% awaiting Nvidia’s earnings report after the close tomorrow.

In currency markets, the US dollar was 0.2% lower on the DXY after paring some of the initial reaction to the move to oust Lisa Cook. Traditional safe havens the CHF and JPY outperformed but were still only up 0.3%. The euro gained 0.2%. The AUD was 0.2% higher at 0.6492, treading at 0.6470 to 0.6505 range.

US data were mixed and second tier. Durable goods orders were strong, up 1.1% mom on the ex-transport number. These are July data, so there is some prospect their strength reflects some pull forward ahead of the August tariff increases, but even acknowledging that caveat business equipment investment looks resilient in Q3.

Consumer confidence from the conference board measure was little changed at 97.2 from an upwardly revised prior month. The balance between consumer saying jobs are plentiful and jobs are hard to get slid to 9.7% from 11.0%.

French markets continue to respond to political developments, with Prime Minister Francois Bayrou having called a confidence vote for 8 September. The move is an effort to consolidate support after facing pushback against -EUR44billion of spending cuts and tax increases that the Bayrou considers vital to avert disaster for France’s public finances.

French equities underperformed, the CAC40 down another -1.7%. French 10yr yields were little changed around 3.50% over the past 24 hours but remain 8bp higher than the end of last week and underperformed German bunds. 

The July CPI print is due out at 11.30am AEST and NAB forecasts the July CPI Indicator to be 2.3% yoy, up from 1.9%, in line with consensus. 

The annual trimmed mean measure should also rise a couple of tenths to around 2.3%. Base effects as year-ago subsidy expansions in electricity drop out and electricity prices rise following new default offers are a key driver, with more to come in August and federal subsidies set to unwind in January 2026.

Travel may also be some support alongside major sporting events in July. Note the spread of analyst forecasts is wide, spread between 2.0 and 2.7%, but we would caution against overinterpreting the implications of a surprise given volatility from electricity and travel.

Headline inflation will move up towards 3% before a peak in early 2026 and the annual trimmed mean indicator will converge back to the signal from the full quarterly CPI as electricity impacts wash through. The July indicator contains few services indicators, but does provide quarterly updates on a range of goods prices and the monthly pulse of grocery and housing components.

ANZ Bank Economic Update on RBA Board Meeting Minutes, extract

Yesterday’s Monetary Policy Board Minutes do not change our view that the RBA will deliver a final -25bp cut in November 2025. We then see the cash rate staying at 3.35% for an extended period.

The tone of the Minutes was in line with Bullock’s press conference. The decision to cut the cash rate was unanimous, and there was no discussion around the prospect of a larger cut or a pause. The discussion around the policy outlook centred around the pace of future easing. 

We saw a few key takeaways from the Minutes. First, the Board still thinks policy is “somewhat restrictive”, and its base case is for further easing. Members agreed that based on what they knew at the time of the meeting, preserving full employment while bringing inflation sustainably back to the midpoint of the target range appeared likely to require some further reduction in the cash rate over the coming year. 

Second, future moves in the cash rate are likely to be highly data dependent, with “the pace of decline in the cash rate to be determined by the incoming data on a meeting-by-meeting basis”. 

Looking ahead, the Board will likely be paying close attention to the labour market, with uncertainty about the degree of spare capacity central to its view of the risks to forecast inflation: Various indicators suggested labour market conditions remained a little tight, and the forecast for inflation was for it to be marginally above the midpoint of the target range in the medium term. 

In addition, private demand was showing signs of recovering, with risks on both sides of the forecast. And uncertainty about the degree of spare capacity and the neutral interest rate could warrant a measured approach to assess what incoming information reveals about these and other uncertainties. 

On the other hand, other considerations might warrant a slightly faster reduction in the cash rate over the coming year. Members noted such an approach would be appropriate if the labour market turned out already to be in balance … a slightly faster reduction would also be appropriate if the overall balance of risks to the forecasts became more clearly skewed to the downside. 

Members also discussed the global outlook, noting uncertainty had eased, and any future impacts on Australia were likely to be “modest”. Uncertainty about the outlook for the global economy remained significant but had declined somewhat over prior months as the prospect of retaliation against US tariffs had abated. 

Given the typical lags, any effects of increased trade policy uncertainty on spending were expected to become evident only from late 2025 and, even then, were expected to be modest. On the staff’s updated activity and inflation forecasts, members noted there were risks in both directions.

They agreed the most material risks related to uncertainty around the assessment of spare capacity, the strength of the recovery in domestic demand, and the extent to which global trade and other policy developments would affect output growth and inflation.

Corporate news in Australia

-Humm Group ((HUM)) has delayed its earnings results. The Chairman and largest shareholder, Andrew Abercrombie who is leading a $286m takeover bid, has refused to sign off the accounts.

-Star Entertainment Group’s ((SGR)) lenders are refusing to grant debt waivers for the group to breach the terms on a $430m loan.

-Mineral Resources ((MIN)) is buying the collapsed garnet miner, Resource Development Group, run by the younger brother of Chris Ellison.

-EV carmakers including BYD are failing to disclose information required to conduct repairs and maintenance by independent car mechanics.

-Salter Brothers, a $4bn fund manager is considering a reverse listing on the ASX, valuing it around $200m.

-L1 Capital has called out the underperformance of WAM Global strategy as the battle for Platinum Asset Management’s ((PTM)) $450m international equity listed investment company heats up.

-Ki and Public Storage scrap $2.2bn bid for Abacus Storage ((ASK)).

On the calendar today:

-AU 2Q construction work

-AU July CPI

-CH July Industrial profits

-ARN MEDIA LIMITED ((A1N)) earnings report

-ADAIRS LIMITED ((ADH)) earnings report

-APIAM ANIMAL HEALTH LIMITED ((AHX)) earnings report

-ATLAS ARTERIA ((ALX)) earnings report

-AMOTIV LIMITED ((AOV)) ex-div 22.00c (100%)

-AIRTASKER LIMITED ((ART)) earnings report

-ATTURRA LIMITED ((ATA)) earnings report

-AVA RISK GROUP LIMITED ((AVA)) earnings report

-DOMINO’S PIZZA ENTERPRISES LIMITED ((DMP)) earnings report

-DRONESHIELD LIMITED ((DRO)) earnings report

-EBOS GROUP LIMITED ((EBO)) earnings report

-EML PAYMENTS LIMITED ((EML)) earnings report

-FINEOS CORPORATION HOLDINGS PLC ((FCL)) earnings report

-FLIGHT CENTRE TRAVEL GROUP LIMITED ((FLT)) earnings report

-INTEGRAL DIAGNOSTICS LIMITED ((IDX)) earnings report

-IPD GROUP LIMITED ((IPG)) earnings report

-JOHNS LYNG GROUP LIMITED ((JLG)) earnings report

-KAROON ENERGY LIMITED ((KAR)) earnings report

-LOVISA HOLDINGS LIMITED ((LOV)) earnings report

-MACH7 TECHNOLOGIES LIMITED ((M7T)) earnings report

-MACQUARIE TECHNOLOGY GROUP LIMITED ((MAQ)) earnings report

-MOTORCYCLE HOLDINGS LIMITED ((MTO)) earnings report

-MICRO-X LIMITED ((MX1)) earnings report

-NANOSONICS LIMITED ((NAN)) earnings report

-NINE ENTERTAINMENT CO. HOLDINGS LIMITED ((NEC)) earnings report

-NEUREN PHARMACEUTICALS LIMITED ((NEU)) earnings report

-NICKEL INDUSTRIES LIMITED ((NIC)) earnings report

-NEXTDC LIMITED ((NXT)) earnings report

-PLAYSIDE STUDIOS LIMITED ((PLY)) earnings report

-PATRIOT BATTERY METALS INC ((PMT)) earnings report

-PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) earnings report

-READYTECH HOLDINGS LIMITED ((RDY)) earnings report

-SITEMINDER LIMITED ((SDR)) earnings report

-SIGMA HEALTHCARE LIMITED ((SIG)) earnings report

-SKS TECHNOLOGIES GROUP LIMITED ((SKS)) earnings report

-TABCORP HOLDINGS LIMITED ((TAH)) earnings report

-LOTTERY CORPORATION LIMITED ((TLC)) ex-div 8.50c (100%)

-TELSTRA GROUP LIMITED ((TLS)) ex-div 9.50c (100%)

-TREASURY WINE ESTATES LIMITED ((TWE)) ex-div 20.00c (70%)

-WESTGOLD RESOURCES LIMITED ((WGX)) earnings report

-WORLEY LIMITED ((WOR)) earnings report

-WOOLWORTHS GROUP LIMITED ((WOW)) earnings report

-WAYPOINT REIT LIMITED ((WPR)) earnings report

-WISETECH GLOBAL LIMITED ((WTC)) earnings report

-WISR LIMITED ((WZR)) 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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