The Overnight Report: Dow Closes At Record High

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This story features CREDIT CORP GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: CCP
The company is included in ASX300 and ALL-ORDS

US indices rallied on weaker oil prices, led by the Magnificent Seven, with Microsoft and Alphabet outperforming.

The Dow Jones closed at a new record high.

The Australian market recovered from an early sell-off to close higher on Monday. ASX200 futures are pointing to a flat start.

Good Morning,

The Australian market recovered from early losses to close higher.

The ASX200 rose 43 points or 0.5% to 9,019, led by Utilities, while Energy underperformed.

The local results season is gradually warming up with result releases from Credit Corp Group ((CCP)) and Centuria Office REIT ((COF)) scheduled for today.

The FNArena Calendar: https://fnarena.com/index.php/financial-news/calendar/

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

Iran Talks Pull Oil Lower

President Trump paused planned strikes and said talks begin today.

Brent came back toward US$84 and West Texas slipped under US$80.

The traffic tells a slower story than the price does.

Ship tracker Kpler counted nine transits through the Strait of Hormuz on Sunday, roughly a tenth of the pre-war pace, and a gas carrier was hit on Friday.

Amazon Reaches US$3 Trillion

Amazon $AMZN crossed US$3 trillion in market value for the first time, the fifth company ever to get there.

Its cloud unit grew at the fastest pace in eighteen quarters.

Management raised this year’s capital spending to US$220 billion and blamed memory prices.

Investors sold Meta for spending like that a week ago and bought Amazon for it, and the difference was AWS.

Factories Post Their Best Month In Four Years

July manufacturing came in at 55.6, the strongest since May 2022 and ahead of the 54 economists expected.

Factory hiring grew for the first time in thirty-three months.

Prices paid eased slightly but stayed high.

One purchasing manager described customers pulling orders forward to beat expected price increases, which flatters the number a little.

NAB Markets Today Research

Markets started the week on a positive footing, as developments in the Middle East moved in an encouraging direction overnight. President Trump told reporters that new talks with Iran would begin on Monday.

This followed weekend reports that he had agreed to cancel a major attack on Iran. Meanwhile, Iran’s foreign minister said Iran was not currently negotiating with the US, although talks with Oman about a temporary route through the Strait of Hormuz were in their final stages.

In the past few hours, Trump has spoken to reporters in the Oval Office and claimed that talks with Iran were ongoing and that they were discussing reopening the Strait of Hormuz tomorrow. “We’re talking about the strait, the opening of the strait, having it open literally by tomorrow, completely open, and that’s phase one,” Trump said, according to Bloomberg.

The newswire also noted that Trump said phase two would include de-nuclearization talks.

Brent crude opened the week lower and has held these levels overnight, to be trading just shy of US$84/bbl this morning. The decline in oil boosted both sovereign bonds and equities, with US equity indices registering robust gains.

US equities traded with a positive tone overnight, led in the main by solid gains in the tech complex. The IT sector of the S&P500 was up 1.8%; the Bloomberg Magnificent Seven index rose 4% overnight.

In Europe, moves were positive too, although of a slightly lesser magnitude; the EuroStoxx50 rose 1.1%, marking a new high for the year.

Sovereign bond yields fell across the board overnight, reflecting some easing in inflation worries. The USD was stronger, pushing AUD back down towards the USD0.70 level.

Data wise, the main event in yesterday’s Asian session was the RatingDog China PMI data for July. The print came in weaker than expected, with the headline index falling from 51.7 to 50.9 and validating official PMI data released late last week.

This didn’t seem to trouble $A too much, despite the data reflecting a lacklustre start to Q3 activity data in China.

Overnight, US data was limited to the ISM manufacturing index for July and construction spending data for June. The ISM index was strong in July, jumping 2.3 index points to its highest level in over four years.

The S&P manufacturing PMI was also released overnight, registering a solid outcome in the month. Construction spending fell 0.1% in June, with a downward revision to the May data adding to the softer tone. Elsewhere, final manufacturing prints for the UK and Euro area validated the strong preliminary outcomes.

Sovereign bond yields were lower, with 10-year US Treasury yields falling -5bp. There were larger moves in the UK, where the yield decline in the 10-year tenor was in the order of -10bps. The Australian bond market was also well supported overnight, but moves were smaller, in the order of 2-3bps on the implied yields for 3- and 10-year futures contracts.

In FX markets, the focus remains very much on the USD/JPY cross, after confirmation of joint US-Japan intervention to support the Japanese currency; Japan’s Finance Minister Katayama confirmed the first joint US intervention with Japan in currency markets in 15 years. 

US Treasury Secretary Bessent said the US would not hesitate to step into the market again, while Trump described the intervention as a signal of friendship. 

A Fed facility –-established during Covid-– which allows Japanese authorities to access US dollars without selling UST holdings was also mentioned by the Japanese Finance Minister, adding weight to the message of joint support for the Yen.

From the US Market Desk: Wait. Wut? Chris Galipeau, Franklin Templeton Institute

We are constructive on US equities and have established a year-end target range of 7,400–7,800 for the S&P500, driven by more than 15% year-on-year earnings per share (EPS) growth.

Second-quarter earnings have started strongly, led by the major banks and several cyclical companies. Consensus 2026 EPS forecasts have risen to US$353.93, up around 20% year-on-year, while 2027 estimates stand at US$402.86, implying 14% growth.

Assuming consensus earnings forecasts prove broadly accurate, the S&P500 is trading on 20.7x 2026 earnings and 18.2x 2027 earnings, compared with a long-term forward average of around 17x. While valuations are no longer cheap, they are not considered excessive unless bond yields move materially higher, which remains a key risk.

Recent corporate earnings updates have generally pointed to resilient consumer spending and industrial capital expenditure.

Companies including Visa, Ford, Coca-Cola, Johnson Controls, Microsoft, Lam Research, Starbucks, Seagate and Teradyne all delivered positive commentary. Meta Platforms disappointed after lifting capital expenditure guidance while issuing slightly weaker forward revenue guidance, with Qualcomm also delivering a softer outlook.

According to FactSet, second-quarter revenue is expected to grow 12% year-on-year, with all 11 S&P Global Industry Classification Standard (GICS) sectors contributing to growth. Earnings are forecast to increase 23%, with 10 of the 11 sectors expected to report positive growth.

EBIT margins remain strong at 14%. Notably, 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.

While semiconductor fundamentals remain strong, the sector had become overheated after a parabolic rally. The recent correction has improved the risk-reward balance, although volatility is expected to remain elevated.

Despite the sharp sector rotation, the S&P500 remains within around 2% of its record high, highlighting rotation rather than a broader market downturn.

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

Large-cap growth stocks are viewed as offering improved value following the recent pullback.

Outside the US, emerging markets and Japanese equities also appear attractive.

Investors are encouraged to reduce portfolio concentration, diversify exposures and use market pullbacks as buying opportunities.

Global Focused Growth Equity Strategy, David Elswart T.Rowe price extract

• We believe one of the biggest mistakes investors are making is treating AI as the next software cycle. Unlike traditional software, AI becomes more capital-intensive as it scales. Every new model, inference request and application requires additional computing power, memory, networking capacity and energy infrastructure.

• Much of the current debate is focused on which company has the most advanced large language model, whether open-source models will push prices lower, or which chatbot will ultimately prevail. From an investment perspective, however, the more important question is whether further investment continues to produce meaningfully better models and economic value.

• As long as these scaling relationships remain intact, companies are likely to continue investing in AI infrastructure. Governments may also maintain or increase their investment, given AI’s growing importance to productivity, economic competitiveness and national security.

• Investors nevertheless need to distinguish genuine AI disruption from businesses that were already experiencing slower growth. A disappointing result from a software company does not necessarily mean that AI has undermined its business model. In some cases, capital may simply be moving towards areas where returns are improving more rapidly.

• The AI investment opportunity is also broadening beyond graphics processing units. Demand continues to outpace supply across parts of the ecosystem, while increasingly power-intensive data centres are supporting demand for memory, optical networking, power management, cooling systems and electrical infrastructure. AI is therefore becoming an increasingly physical investment story.

• Strong momentum in AI-related companies has contributed to greater market volatility, but volatility should not automatically be interpreted as a deterioration in fundamentals. The more relevant questions are whether demand is weakening, supply constraints are easing or the underlying economics of additional investment are changing.

• Like every capital investment cycle, the AI buildout will eventually mature. The challenge for investors is not to predict that the cycle will end at some point, but to recognise when the fundamental drivers have genuinely changed rather than reacting to short-term shifts in sentiment.

• In our view, the opportunity is not simply about identifying the company with the best model. It is about understanding how capital expenditure, scarcity and improving returns may flow through an economy being rebuilt around intelligence. The principles of investing have not changed, but the playing field has.

Corporate news in Australia:

• Westpac Banking Corp ((WBC)) completed the $15.4bn sale of its RAMS residential mortgage portfolio to a consortium comprising Pepper Money ((PPM)), KKR and a PIMCO-managed fund
• Regis Healthcare ((REG)) agreed to acquire Royal Freemasons Homes of Victoria’s home care business, expanding its home care operations and revenue
• Steadfast Group ((SDF)) extended the exclusivity period for a $6.7bn takeover proposal from a consortium comprising Amwins, Dragoneer and KKR
• Maas Group Holdings ((MGH)) entered a trading halt as negotiations continue over the potential sale of its Heidelberg Materials joint venture stake
• ACOM Group acquired the Barbeques Galore brand and inventory
• Grant Thornton Australia was sold in a private equity-backed transaction valued at around $1bn, with new owners planning further acquisitions
• Brookfield Asset Management is pursuing Australian property acquisitions as it targets growing its local real estate portfolio to $50bn
• TMX Group completed its acquisition of Cboe Australia, strengthening competition with ASX Ltd ((ASX)) in Australian capital markets
• Exxon Mobil and Chevron’s growing cash reserves are fuelling market speculation over potential acquisitions in the Australian energy sector
• Gigacomm acquired internet provider DGtek to expand its telecommunications footprint
• Regal Partners ((RPL)) reduced its holding in Firmus while Maas Group Holdings ((MGH)) founder Wes Maas reportedly considers a $200m investment
• Australian Venue Co increased earnings by 27% as continued pub acquisitions and expansion supported growth
• OneQode is seeking new funding at a valuation exceeding $250m to expand its AMD-based AI cloud computing platform
• ASIC proposed changes to provide greater flexibility around IPO advertising rules

On the calendar today:

-AU July ANZ job ads

-AU June Household spend

-US June Factory orders

-US June Jolts

-US June Trade Bal

-CREDIT CORP GROUP LIMITED ((CCP)) FY26 earnings report

-CENTURIA OFFICE REIT ((COF)) 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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