The Overnight Report: Markets In Limbo

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This story features HUB24 LIMITED, and other companies.
For more info SHARE ANALYSIS: HUB
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

US indices closed lower, as buying support for the S&P500 gave way to selling into the close. Ditto for Nasdaq.

Ongoing Middle East tensions continue to weigh on sentiment.

Yesterday, the local market lost all its gains to finish flat for the day. Today, ASX200 futures are pointing to a weak start.

Good Morning,

After a positive start, the ASX200 ultimately finished flat on Monday, down -5 points to 8,791.

Technology led the falls, down -1.6%, with Energy up 1.8% on higher oil prices.

Quarterly reports continue with updates from Hub24 ((HUB)) and Alkane Resources ((ALK)) due out today.

For more calendar updates, see https://fnarena.com/index.php/financial-news/calendar/

Today’s Big Picture, J.L. Bernstein extract

Oil ran hot, then cooled off

Brent topped US$90 in the morning and finished near US$89.22. West Texas Intermediate settled at US$83.23.

The pullback came after Iran’s foreign ministry said mediators are still passing messages and talks are possible.

Watch the Houthis. They declared a sea navigation ban on Saudi Arabia today, and the Red Sea was supposed to be the workaround for Hormuz.

Only eight ships crossed the strait Friday. Gas is back above US$4 a gallon, up from US$3.87 a week ago.

The chip bounce showed up and left early

Semis opened strong after last week’s beating, then faded into the close. The setup is better than the price action suggests.

Goldman Sachs said hedge funds sold tech in six of the past eight weeks and cut those positions by roughly a tenth, so most of that selling is behind us.

Wells Fargo’s Darrell Cronk called it a healthy reality check and flagged the 200-day moving averages as the next line to watch.

Light positioning plus earnings is how bottoms get built.

Earnings take over from headlines

Alphabet $GOOGL, Tesla $TSLA and IBM $IBM report Wednesday. Intel $INTC follows Thursday after the close.

The Fed is in black out and the economic calendar is nearly empty, so these calls set the tone by themselves.

Dan Ives said it plainly: companies have to show AI is making money, because right now it’s all spending.

We finally get the receipts.

ANZ Bank, Australian Morning Focus, extract

Equity markets were mixed at the start of the week. The S&P500 was down -0.2%, the Euro Stoxx50 and the FTSE100 indices closed -0.1% and -0.7% lower respectively.

The yield on the US 10y Treasury note rose around 4.6bp to 4.59%. 

Oil prices were volatile during intraday trading. WTI dropped -1.7% to US$83.1/bbl.

Gold was weaker at USD4,008.6/oz. 

Despite the recent rally in oil prices, market-based measures of inflation have stayed well anchored. The 5y5y inflation swap is trading at the midpoint of its 2.30–2.50% range this year and 10y breakeven inflation is trading at 2.25%. 

There are several factors that help explain this stability, including, Fed credibility in inflation management, scant evidence of inflation pass-through to the broader environment, receding tariff effects and a non-inflationary labour market. 

This is not a time to be dogmatic about views on the future path for fed funds given the regime change underway at the Fed, elevated annual reads on inflation, and geopolitical risks.

However, sequential monthly core CPI and core market-based PCE inflation data have been declining gradually for most of this year despite the persistence of supply-side shocks. This may be indicating that monetary policy is restrictive. 

We think the soft June inflation and employment data will allow the Fed to maintain a hawkish hold at the 28-29 July FOMC meeting with guidance that the Fed will review policy again when it meets in mid-September.

Froth Coming Out. Tape Remains Resilient, Chris Galipeau, Franklin Templeton Institute

We are constructve on US equities and have established a year-end target range of 7,400-7,800 for the S&P 500, driven by more than 15% year-on-year EPS growth. First-quarter earnings exceeded consensus expectations, lifting the S&P 500’s 2026 earnings estimate to US$344 from US$308 at the start of the year.

Stock prices continue to follow earnings. S&P500 earnings estimates have risen 12% year-to-date, while the index has gained 11% over the same period.

Consensus expectations for the second quarter are for revenue growth of 12% year-on-year, with all 11 S&P GICS sectors expected to deliver positive growth. Earnings are forecast to increase 23% year-on-year, with 10 of 11 sectors expected to report gains, while EBIT margins are projected at 14%.

Unlike a typical quarter, earnings estimates have been revised 3% higher during the quarter, compared with average downward revisions of -2% over the past five years and -3% over the past decade. Energy, technology and materials are leading EPS growth.

The earnings outlook remains robust and valuations reflect that strength. The S&P500 is trading on a price-to-earnings multiple of 21.9x at around 7,550, compared with 22.5x at approximately 6,850 at the start of the year.

As in 2025, earnings growth, rather than multiple expansion, has driven market gains. Large US banks have already reported strong earnings, supporting expectations for a solid reporting season.

Recent weakness in semiconductor stocks reflects a correction following a rapid rally rather than deteriorating fundamentals.

The Philadelphia Semiconductor Index declined around -19% from its late-June peak, while Western Digital fell -41%, Sandisk -38%, Micron Technology -32% and Applied Materials -24%. Despite the sharp rotation within the sector, the S&P500 remains within 50 basis points of its all-time high.

At the same time, investors have returned to the Magnificent Seven stocks, which had been trading below their 10-year median forward valuation multiples. Since late June, the Magnificent Seven basket has significantly outperformed both the Russell1000 Growth Index and the broader S&P500.

The preferred strategy remains a diversified equity portfolio with exposure across US large-, mid- and small-cap stocks, balanced between growth and value.

Large-cap growth continues to offer attractive value, while emerging markets and Japanese equities also appear appealing.

Further market consolidation is viewed as a potential buying opportunity.

US: Methodology change will shift the story on core inflation, Oxford Economics

• Methodological changes by the Bureau of Economic Analysis could erase the acceleration in core PCE inflation seen in 1H26. We calculate those changes will lower year-on-year core PCE inflation by -0.2 percentage points, with the impact concentrated in recent months. While modest, the revisions could reinforce the case for the Federal Reserve to remain on hold.
• The annual revisions to the national accounts will update three controversial price categories, with the methodological changes expected to produce cooler inflation readings in 2026. The revisions will also reduce the measured pass-through of future AI-related price pressures.
• The changes apply only to the Fed’s preferred PCE inflation measure and will revise historical inflation data. This will bring recent core PCE inflation readings more closely into line with core CPI, which is unaffected.
• On September 30, the Bureau of Economic Analysis will publish its annual National Income and Product Accounts revisions, incorporating new data and methodological improvements to PCE inflation back to 2021. The key changes affect portfolio management fees, computer software and accessories, and legal services.
• We estimate the revisions will lower June core PCE inflation from our current forecast of 3.3% to 3.1%, effectively removing the apparent acceleration in core PCE inflation during 2026.

Corporate news in Australia:

• Andrew Forrest has acquired a 16.8% stake in EQ Resources ((EQR))
• South32 ((S32)) exceeded production guidance and is progressing the sale of its Alcoa-related ((AAI)) assets
• Nash Capital has acquired a 40% stake in electrical contracting business Prime Group for $20m
• Tracksuit has acquired Hall to strengthen its AI-powered brand visibility tracking capabilities
• Lug+Carrie has secured $18m in asset-backed financing to support its US expansion
• Point Wild is exploring an ASX listing at an implied valuation of around $5bn
• Wiluna Mining is targeting a $300m-$400m ASX initial public offering with plans to raise $150m-$200m
• Yanara has raised $245m from Mirova to fund its Australian renewable energy portfolio

On the calendar today:

-NZ 2Q CPI

-EZ July ZEW

-UK May Earnings & Unemployment

-US Jul Phi Fed non-mfg

-ALKANE RESOURCES LIMITED ((ALK)) Qtrly update

-HUB24 LIMITED ((HUB)) Qtrly update

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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