The Overnight Report: September Hesitancy?

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US markets glided past Nvidia's results with the S&P500 and Dow Industrials hitting a new all-time closing high as the US economy grew at a faster pace than anticipated.

After posting a gain yesterday, the ASX200 futures are pointing to a slightly weaker start on the last trading day of the August reporting season.

Good Morning,

The Australian market inched higher on Thursday in one of the busiest days of the local August reporting season.

The ASX200 lifted 19 points or 0.2% to 8,9080. Financials rallied 1.1% with energy lagging as Woodside shares traded ex-dividend.

For all the updates on earnings, check out FNArena’s Corporate Earnings Monitor at https://fnarena.com/index.php/reporting_season/

What happened overnight, NAB Markets Today Research

US stocks have closed with the S&P500 up 0.3% (another record high), NASDAQ up 0.5% and Russell2000 up 0.2%.

In the S&P, Communications Services are up 0.9% followed by 0.6% gains for both IT and Energy, the losers being defensive sectors, i.e. Utilities, Health Care, Real Estate and Consumer Staples.

With a day of trading to come, the S&P500 is up 2.6% month to date, and the NASDAQ 2.8%, enough to potentially elicit, in FX, some rebalancing of hedges in favour of USD selling/currency buying. This month’s standout winner though is Shanghai, the CSI300 up 1.8% Thursday to currently be 9.5% up on the month.

Fed governor Waller is due to speak at 8:00 AEST. Data highlights for Friday include Tokyo CPI and US Person Income, Spending and the PCE Deflator.

Embattled Fed Governor Lisa Cook has sued President Trump over what she claims to be an ‘illegal firing’. Her lawyer describes the alleged fraudulent mortgage applications which was the basis for Trumps dismissal letter as a potential ‘clerical error’ without allegation of intentionality or materiality which, as well as occurring prior to her taking office, would not be the type of offence constituting ‘cause’ for her dismissal.

A hearing is scheduled in Washington on Friday, presided over by judge Jia Cobb (a Biden era appointee) following her filing of a request for a restraining order against her firing.

Worth remembering here that regardless of whether Cook succeeds in her lawsuit (chances are she will) the elephant in the room regarding Fed independence is the full Supreme Court deliberation and ruling about the right of the administration to fire Fed officials (without cause). This is following the earlier interim Supreme Court ruling that deemed the Fed to be a special case outside of White House jurisdiction in terms of replacing federal agency officials at will. We don’t yet know when that will take place.

Meanwhile, the Republican-led Senate is reportedly on track to meet President’s Trump ambitions to have Stephen Miran confirmed as a Fed governor prior to the Sep 16-17 FOMC meeting. Trump can afford to lose as many as 3 Senate votes against Miran’s confirmation, though as Bloomberg notes, to date he has succeeded in securing the confirmation of even his most controversial nominees.

In economic news, US Q2 GDP growth was revised up by three-tenths to an annualised 3.3% pace, driven by business investment revised up to 5.7%, from 1.9%, and a two-tenths upward revision in private consumption to 1.6%. The first reading of gross domestic income was an annualised 4.8% increase.

Though exaggerated by the contraction in Q1 GDP as firms rushed to import ahead of the April liberation day tariff announcements, the US economy is showing some resilience. This has been evidenced by Citi’s economic surprise index rising sharply on the last week or so’s economic data, including impressive strength on both manufacturing and services S&P Global PMIs last week, to its highest level this year.

The Atlanta Fed GDPNow estimate for Q3 is currently running at 2.2% (trend growth in the US is still officially reckoned to be 1.8%).

US initial jobless claims fell -4k last week to 229k, while continuing claims slipped back to 1.954k from 1,961k in what is the relevant week for the August non-farm payrolls report. The level of claims is nevertheless deemed consistent with a rise in the unemployment rate to 4.3% from 4.2%, plus we’d note that the number of unemployed people no longer eligible for benefits, having been unemployed for more than 26 weeks, has been trending higher.

Also out overnight, US July Pending Home Sales fell a further -0.4% after dropping- 0.8% in June, a bit below the -0.2% consensus. Our friends at Pantheon Economics regard weakness as largely reflective of asking prices remaining too high, and affordability too stretched at prevailing mortgage rates (the Case-Schiller house price index has fallen for four straight months but is still only about 1% down, peak to trough).

Housing remains the weakest spot in the US conomy and is, alongside debt servicing costs, President Trump’s publicly declared motive for wanting the Fed to slash rates, choosing to ignore the fact most US mortgages are set off the 30-year US Treasury Bond yield.

In other news, the EU is reportedly moving towards abolishing all tariffs on US industrial good and easing the path for some agricultural imports, as part of the as yet undocumented deal between Trump and EU. This is in return for what the EU hopes to secure a reduction in EU auto exports to the US from the current 27.5% to 15%.

In bonds, whether because of diminished prospect of President Trump being able to shoehorn yet another preferred pick for Fed governor onto the FOMC seat by September 16, or otherwise, the US yield curve has flattened, twisting around the 5-year yield point with 2s finishing in New York up 2bps and 10s down -3bps to 4.20%.

European year benchmarks ended their day mostly lower (gilts -3.5bps, Bunds -0.7bp and with the OAT-Buind spread coming in 3.4bps, following the recent blow out that took it through the likes of the BTP-Bund spread.

In FX, the USD and risk sentiment are, currently, proving to be negatively correlated with the DXY USD index down -0.35% led by similar sized gains for EUR/USD and fall in USD/JPY.

Of more interest to us AUD-watchers, USD/CNY has dropped clean through what has been a significant support level of 7.15 since late June, all the way down to 7.13. This is the strongest CNY closing level since 5 November 2024.

It’s no coincidence then, in our view, that after the ‘high beta EUR/USD’ that is SEK, AUD and NZD are the next best two performing G10 currencies in the past 24 hours, both up 0.4%, AUD/USD to a high of 0.6538. Its 0.6532 NY close is the strongest since August 14.

In commodities, gold again likes the weaker USD, up US$20 to $3,417, iron ore rose 1.7% and most base metals are higher (copper by over 1%) as is oil with WTI and Brent crudes 0.4% and 0.2% respectively.

Stephen Innes, SPI Asset Management extract

The S&P500’s move through 6,500 wasn’t fireworks or drama. It was a steady, deliberate march, the kind of stride that shows the consensus has already voted with its feet. Yesterday’s dip around Nvidia was just a pothole, the kind that jolts the suspension but doesn’t change the direction of travel. The AI caravan keeps rolling, and for now, traders are still paying up for the view that this rally has more ground to cover.

The market has a way of turning yesterday’s anxieties into today’s afterthoughts. Nvidia’s earnings, the supposed thunderclap, landed more like a heavy raindrop, briefly unsettling, but quickly absorbed into the broader flow of the tape. The stock wobbled at first on guidance that didn’t leap tall buildings in a single bound, yet it soon steadied. Traders realized the AI caravan hadn’t lost its wheels; it merely slowed for a checkpoint. 

At nearly 8% of the S&P, Nvidia isn’t just another passenger, it’s the axle of the current rally. And even if the forecast lacked fireworks, the omission of China sales in its outlook leaves an unpriced kicker dangling like bait. If Washington and Beijing strike a deal, the numbers could fatten quickly, reminding us this ship is still loaded with powder below deck.

Around it, the broader economy flexed its resilience. The revised GDP showed the US growing at a 3.3% clip in Q2, with the consumer still carrying the torch despite tariffs, import distortions, and ongoing whispers of a slowdown. It’s as though the American household refuses to relinquish the oars, even as the tides grow choppier. Jobless claims, too, point to employers gripping their workers tightly, perhaps out of loyalty, perhaps out of fear they won’t easily find replacements. Whatever the reason, the labour keel still holds steady.

Yet the sea ahead isn’t without reefs. The PCE report due Friday looms like a navigational buoy: pass safely and the rally sails on, clip it and the hull could scrape. Traders know this game; Nvidia was priced with a 6% swing implied, but the boat barely rocked. At the same time, PCE carries a decent option premium of expectation, but most suspect it too will be absorbed, a speed bump, not a derailment. Powell’s Jackson Hole speech gave the market hope that cuts are coming, but inflation is still sticky enough to keep hands on the wheel.

In the currency markets, the dollar has finally begun to bend again. EUR/USD threatened 1.1700, thanks to stabilizing EU bond yields and healthy car sales data in Germany. The real story lies further east. Beijing has taken the painter’s brush to its currency, fixing the yuan stronger day after day. It’s a deliberate act and less about near-term growth, more about casting China as a responsible steward of global finance.

A firmer renminbi cushions households’ purchasing power, draws in foreign capital, and signals intent to wear the robes of a grown-up central bank. Like a tugboat pulling others in its wake, the yuan drags emerging-market currencies along with it, from the rand to the real, and even lends a tailwind to the euro.

Traders would be wise, however, to keep the calendar in mind. September has a nasty habit of turning smiles into grimaces. On average, it’s the market’s cruellest month, a season where rallies often stumble. Yet this year, the market enters September above its 200-day moving average, sails taut with momentum, and a cut on the horizon like a lighthouse beam. History whispers of storms, but the present sky shows clear blue.

What’s becoming a bit clearer is that this isn’t just a one-stock story, nor a single-sector dream. Nvidia may be the poster child, but the AI revolution is beginning to broaden its cast. However, the sell side is pointing clients to the laggards, the secondary characters in this rally: financials, utilities, and healthcare. These steady plodders may yet enjoy their moment as capital redistributes down the value chain. The rally is no longer about one rocket: it’s a fleet.

For now, the market hums like a train on polished rails. There are bumps, yes, but the rhythm of forward motion persists. Nvidia may no longer set off fireworks, but the economic engine is still warm, the dollar’s grip is loosening, and the renminbi is rising like a new conductor in the orchestra. The music hasn’t stopped, if anything, it’s just shifted to a steadier tempo. Traders can dance while it plays, mindful that September is never far from turning harmony into dissonance.

For now, the skies are blue, the VIX is anchored, and the AI engine is still running hot but September always keeps traders on their toes. The road ahead may have bends, but there are no derailments in sight.

Corporate news in Australia

-Lynas Rare Earths ((LYC)) has raised $750m in equity to grow production of metals for defence and decarbonisation.

-Mineral Resources ((MIN)) is assessing additional asset sales to reduce debt and lower its geared balance sheet.

-FTI Consulting is seeking expressions for interest for Bowen Coal ((BCB)), due by October 2.

-Bank of Queensland ((BOQ)) is selling a multibillion-dollar loan book (equipment & finance loans) to free up capital.

-Macquarie Group ((MQG)) crossed $481m of Sigma Healthcare ((SIG)) after the close at $3.10 as Chemist Warehouse founders sell-down.

On the calendar today:

-NZ A&NZ consumer confidence

-AU July private credit

-JP July Industrial production

-JP July retail sales

-JP July unemployment

-US Aug CPI

-US July personal income/exp

-US U. of Mich sentiment

-AUMEGA METALS LIMITED ((AAM)) earnings report

-AMPOL LIMITED ((ALD)) ex-div 40.00c (100%)

-AUSTAL LIMITED ((ASB)) earnings report

-BEAMTREE HOLDINGS LIMITED ((BMT)) earnings report

-BOSS ENERGY LIMITED ((BOE)) earnings report

-BUBS AUSTRALIA LIMITED ((BUB)) earnings report

-BHAGWAN MARINE LIMITED ((BWN)) earnings report

-CHRYSOS CORP. LIMITED ((C79)) earnings report

-CETTIRE LIMITED ((CTT)) earnings report

-CLARITY PHARMACEUTICALS LIMITED ((CU6)) earnings report

-CLINUVEL PHARMACEUTICALS LIMITED ((CUV)) earnings report

-CIVMEC LIMITED ((CVL)) earnings report

-DIGICO INFRASTRUCTURE REIT ((DGT)) earnings report

-DRONESHIELD LIMITED ((DRO)) earnings report

-DUSK GROUP LIMITED ((DSK)) earnings report

-DUG TECHNOLOGY LIMITED ((DUG)) earnings report

-ENERO GROUP LIMITED ((EGG)) earnings report

-EMERALD RESOURCES NL ((EMR)) earnings report

-EVT LIMITED ((EVT)) earnings report

-HELIA GROUP LIMITED ((HLI)) ex-div 16.00c (37%)

-HELIA GROUP LIMITED ((HLI)) ex-div 27.00c (37%)

-HARVEY NORMAN HOLDINGS LIMITED ((HVN)) earnings report

-IMEXHS LIMITED ((IME)) earnings report

-LGI LIMITED ((LGI)) earnings report

-MAC COPPER LIMITED ((MAC)) AGM

-METRO MINING LIMITED ((MMI)) earnings report

-MCMILLAN SHAKESPEARE LIMITED ((MMS)) earnings report

-MESOBLAST LIMITED ((MSB)) earnings report

-MAYNE PHARMA GROUP LIMITED ((MYX)) earnings report

-NOBLEOAK LIFE LIMITED ((NOL)) earnings report

-ORORA LIMITED ((ORA)) ex-div 5.00c

-PALADIN ENERGY LIMITED ((PDN)) earnings report

-PEXA GROUP LIMITED ((PXA)) earnings report

-RAMSAY HEALTH CARE LIMITED ((RHC)) earnings report

-RPMGLOBAL HOLDINGS LIMITED ((RUL)) earnings report

-STEADFAST GROUP LIMITED ((SDF)) earnings report

-SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED ((SXE)) earnings report

-WAYPOINT REIT LIMITED ((WPR)) 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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