The Overnight Report: This Is It (For FY26)

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This story features ACCENT GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: AX1
The company is included in ALL-ORDS

The Dow Jones closed at a new record, boosted by the entry of Alphabet at the expense of Verizon.

The Nasdaq staged a 2% rally, boosted by buying in selective Big Tech names.

After a strong Technology-led rally yesterday, ASX200 futures are pointing to a hesitant start for the final session of the month, quarter and FY26.

Good Morning,

The Australian market rallied 59 points, or 0.7%, to 8,823 on Monday.

Technology stocks led the gains, up 4%, while Utilities fell -2.6%.

The RBA’s June Policy Meeting minutes will be released today. For more details, see below.

Today is the final trading day of the month, quarter and FY26.

In the battle between window dressing and tax loss selling, the former had the upper hand yesterday.

Today’s Big Picture, J.L.Bernstein

Supreme Court Protects The Fed

The court ruled 5-4 that Trump can’t fire Fed Governor Lisa Cook, saying she never got due process.

More importantly, the justices carved out a specific exception for the Federal Reserve while expanding presidential power to fire leaders at other independent agencies.

Bond yields barely moved because this was the expected outcome, but it removes a real tail risk that had been hanging over rate policy.

Comcast Splits, Telecom M&A Heats Up

Comcast $CMCSA is spinning off NBCUniversal and Sky into a standalone media company. Co-CEO Mike Cavanagh will lead the new entity.

The bigger story is what comes next. Charter $CHTR rallied hard on speculation that a slimmed-down Comcast bids for them after the split.

Same day, Rocket Lab $RKLB announced an US$8 billion deal to buy Iridium $IRDM for its satellite fleet and spectrum.

Broadband companies are racing to bulk up before Starlink eats their margins.

Gold Posts Record Quarterly Loss

Gold fell to US$4,022 an ounce, now down over -US$625 this quarter.

That is the largest quarterly dollar decline ever recorded.

Silver is off -22 percent this quarter, the worst in 13 years.

Goldman Sachs still sees US$4,900, calling this a structural bull market pullback.

Whether central bank buying resumes at these levels will tell us a lot.

ANZ Bank, Australian Morning Focus extract

Equity markets gained, while bond yields were little changed in a quiet start to the week.

Oil rose following an exchange of fire between the US and Iran over the weekend, although an agreement was reached to halt the attacks and negotiations are set to resume tomorrow. 

The S&P 500 was up 1.2%. The EuroStoxx50 rose 0.2%, while the FTSE100 fell -0.2%. The yield on the UST 10y note was up 0.4ppt at 4.38%. 

The active WTI future rose 1.4% to US$70.5/bbl. Gold fell -1.0% to US$4,016/oz. 

Annual growth in M3 increased from 2.7% to 3.0% in May, above the consensus in the Euro zone.

Lending to households rose modestly, up from 3.0% y/y to 3.1% y/y and remains well below its long-run average.

Meanwhile lending to non-financial corporates rose from 3.4% to 4.0%, the fastest pace since 2023.

Given the backdrop of heightened uncertainty, weak demand and declining profitability as reflected in business surveys, the recent pickup in business lending may reflect signs of stress, rather than firms investing. 

Industrial and precious metals fell as risk appetite was impacted by renewed fighting in the Middle East. Oil gained, as flows through Hormuz faltered.

NAB Markets Today, extract

RBA Minutes of June Policy Meeting: The RBA held rates unanimously in June. The Minutes will be parsed for clues on how high the bar is for another hike.

Data flow this past week showed strong inflation, but no stronger than the RBA forecast in May and the expected fallback in the unemployment rate after a noisy April print.

The RBA should remain concerned about inflation risk, but we think they would need a firmer push to tighten further given below trend growth.

Closely watched will be whether the Board is taking signal from some signs of easing capacity pressures, how they are assessing the risks from slowing in housing, and how comfortable they are conditions are restrictive.

The statement’s characterisation they are merely “tighter than they were” suggests at least one member may be doubtful.

Australia Private Sector Credit Data: The consensus looks for a 0.6% m/m rise in May after 0.7% in April.

Europe’s heatwaves are major investment megatrend of next 2 decades: George Prior, deVere Group extract

Europe’s record-breaking heatwave is highlighting not only the human and environmental costs of climate change, but also the scale of the long-term investment opportunities emerging from the continent’s adaptation needs.

Western Europe is enduring one of the most severe heatwaves in modern history, with France reporting around 1,000 excess deaths in a single week, temperatures exceeding 40C across multiple countries, and governments issuing rare “risk to life” warnings affecting tens of millions of people.

Beyond the immediate impacts, the extreme weather is reinforcing the need for Europe to rebuild infrastructure, housing, healthcare systems and electricity networks for climate conditions that differ markedly from those they were originally designed to withstand.

The continent has spent decades developing cities and economies around a cooler climate. Adapting to more frequent and prolonged periods of extreme heat is expected to require trillions of euros of investment over coming decades, creating significant structural opportunities across multiple industries.

Markets may still be underestimating how quickly extreme heat is becoming a permanent economic feature across Europe.

Scientists have warned for years that Europe is warming faster than any other continent, with the consequences now becoming increasingly visible through disruptions to transport networks, reduced nuclear power generation caused by rising river temperatures, pressure on agricultural production, and hospitals operating under emergency conditions.

One of the most obvious investment opportunities lies in cooling technologies. Air conditioning penetration remains relatively low across Europe, with only around one in five households equipped with cooling systems compared with close to 90% in the United States.

As hotter summers become more common, demand for residential, commercial and industrial cooling, together with energy-efficient climate control technologies, is expected to rise substantially.

The increased use of cooling systems will also place greater pressure on Europe’s electricity networks.

Existing grids were not designed for sustained periods of elevated summer electricity demand, pointing to substantial investment requirements in grid modernisation, electricity transmission, battery storage, energy management software and new power generation.

Water infrastructure is also emerging as a major long-term investment theme.

More frequent and intense heatwaves increase water stress, driving demand for technologies and services related to water treatment, storage, recycling, efficiency and distribution.

Healthcare and urban infrastructure are also expected to benefit from increased adaptation spending. Heatwaves already account for more weather-related deaths in Europe than any other natural hazard, while ageing populations and rising temperatures are likely to support ongoing investment in healthcare infrastructure, pharmaceuticals, medical technologies and climate-related health services.

At the same time, many European cities will require extensive redesign to better cope with sustained periods of extreme heat through improved building standards, green spaces, cooling systems and more resilient public infrastructure.

The broad investment case reflects a structural shift rather than a temporary weather event. As Europe’s climate continues to change, adaptation spending is likely to become one of the defining long-term investment themes across the developed world.

Rotation Nation. Large-Cap Growth on Sale, Chris Galipeau, Franklin Templeton Institute, extract

We are constructive on US equities and have established a target range of 7400-7800 for the S&P500 Index, driven by 15%-plus year-over-year (Y/Y) earnings per share (EPS) growth.

First-quarter earnings exceeded consensus expectations, which has helped drive the S&P 500’s 2026 earnings estimate to US$341 today, up from US$310 at the start of the year. 

Would you believe the market is cheaper today than it was on January 1, despite being up 7% year-to-date (YTD)? It is. Coming into the year, the market was trading at 22.5x 2026 estimates. Today, it trades at 21.5x earnings. 

When it comes to equities, according to my analysis, the single most important variable is forward earnings growth.

Corporate profitability.

The only thing that puts earnings under severe pressure is a recession. A new Fed chair might be challenged by markets in the near term, but a lot would have to go wrong to cause earnings deterioration. As of this writing, I see zero chance of a recession.

We reiterate our “broadening” call on equities and emphasise our bullish view on US small- and mid-cap stocks. We also continue to favour emerging market equities and Japanese equities.

Earnings estimates have steadily ticked up all year and, I’ll repeat, earnings drive stock prices, not geopolitics.

The Equal Weight S&P500 Index, representing the “average stock”, is up 11.53% as of this writing (June 25 close). The cap-weighted S&P500 is up 8.09%.

The average stock is beating the index by 344 basis points. The average stock is performing better than the index.

This looks bullish to me.

Leadership is found in the small-cap space, with the Russell2000 Value Index up 22.53%, the Russell2000 Index up 21.96%, and the Russell2000 Growth Index up 21.42%. The Russell 2000 Index has outperformed the S&P500 by 13.87% YTD.

We have been advancing our small-cap thesis since January 2025. Strength in forward earnings growth has driven this view. This remains true today, and we think it will continue through 2027.

As we see it, it makes sense to have exposure to small caps, and we’d be looking to buy on pullbacks.

Mid-cap stocks are also strong YTD. The S&P400 MidCap Growth Index is up 19.99%, the S&P400 MidCap Index is up 16.35%, and the S&P400 MidCap Value Index is up 12.61%.

The S&P400 MidCap Index is outperforming the S&P500 by 8.26% YTD. Therefore, exposure to mid-caps also makes sense.

Again, we’d be looking to buy on pullbacks.

The Russell1000 Large-Cap Value Index is up 17.10%, compared with the Russell1000 Large-Cap Growth Index, which is up just 0.7% YTD.

The Russell1000 Large-Cap Value Index has outperformed the S&P 500 by 9%. Therefore, we also think exposure to large-cap value makes sense.

We’d be looking to buy pullbacks here, too.

Bringing up the rear YTD is the vaunted Magnificent Seven basket, which is down -6.80% YTD and trails the S&P500 by 14.89% points this year.

Within the Magnificent Seven basket, Microsoft is the biggest drag, down -26.72% YTD, while Google is the biggest winner, up 9.95%.

The Magnificent Seven’s median YTD performance is -1.65% and the mean is -6.95%.

This massive underperformance by the Magnificent Seven has probably gone too far, in my estimation. Collectively, these stocks are now as oversold as they have been in five years.

Looking at technical indicators, the relative strength index for the basket is 28.7. As such, these stocks are technically oversold and may be worth a look.

Fundamentally, the Magnificent Seven basket is trading at 22x 2027 EPS estimates. EPS growth is expected to be around 20% Y/Y in 2027 versus 2026. The price/earnings-to-growth (PEG) ratio is about 1.

In my view, it looks like a good time to buy.

Bottom line: We think it’s prudent to have a diversified equity playbook that includes large-, mid- and small-cap exposure in the United States, with a balance of growth and value.

Large-cap growth is on sale right now. The same can be said for ex-US equity exposure, with emerging markets and Japan looking attractive.

Our takeaway is to reduce concentration and spread one’s bets. Consider using any further market consolidation to your advantage.

Corporate news in Australia:

• Accent Group’s ((AX1)) board urges shareholders to reject Frasers Group’s takeover offer, arguing it undervalues the company
• Japanese-backed investor and BKC acquire a Sydney industrial estate from a Goodman Group ((GMG)) fund for $127.5m 
• Private equity firms and strategic buyers review Healius’ ((HLS)) Agilex Biolabs as a potential acquisition target
• ASX-listed companies consider bidding for Programmed as Persol explores an exit
• HMC Capital ((HMC)) raises $1.35bn from institutional investors to expand its private credit real estate lending platform
• Wiluna Mining prepares a $200m IPO to relist on the ASX following administration
• Karoon Energy ((KAR)) resumes its share buyback after restoring Bauna oil production
• FDC Group lodges a prospectus for a $400m ASX IPO
• Firmus expands through an Nvidia partnership while preparing for a potential ASX listing
• Brokers launch an $84m block trade in BMC Minerals ((BMC)) equity

On the calendar today:

-NZ June ANZ Business Confidence

-AU June RBA Minutes

-JP May Ind Prod’n

-JP May Unemployment

-CH June PMI

-CH June PMI

-UK 1Q GDP

-US May Jolts

-ABACUS GROUP ((ABG)) ex-div 4.25c

-ABACUS STORAGE KING ((ASK)) ex-div 3.10c

-COLLINS FOODS LIMITED ((CKF)) FY26 earnings report

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.

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