The Overnight Report: An Imminent Peace Deal?

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

US markets were mixed. The Dow Jones reached a fresh record high for the third consecutive day.

The S&P 500 and Nasdaq Composite slipped on Mag7 selling pressure.

The Australian market rallied to a new record high yesterday, with ASX200 futures pointing to a flat-to-negative start.

Media reports suggest Iran and Oman were finalising an agreement late Wednesday (EST) to reopen the Strait of Hormuz.

Good Morning,

The Australian market gathered momentum on Wednesday to close up 82 points, or 0.9%, at 9,228, a fresh record high.

Miners led the rally, up 3.5%, along with Technology, while Energy fell -2.2% on renewed hopes of a US/Iran peace deal.

With the start of the August reporting season, stay in touch with which companies are due to report with the FNArena Calendar: https://fnarena.com/index.php/financial-news/calendar/

AMP ((AMP)), Beach Energy ((BPT)), News Corp ((NWS)), REA Group ((REA)) and Block ((XYZ)) are all due to announce earnings.

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

Money Left AI And Stayed In Stocks

Gold futures got back above US$4,300 an ounce after the World Gold Council reported central banks resumed buying last quarter. The aerospace and defense fund hit its highest level since it launched in 2006. Europe’s benchmarks closed at record highs, with banks and industrials doing the lifting, and Barclays strategist Julian Lafargue called Europe the anti-AI trade. Selling the AI names is not the same as selling stocks, and today made that difference obvious.

Google’s AI Brain Trust Walks Out

Jeff Dean is leaving Alphabet after 27 years and taking senior fellow Sanjay Ghemawat with him to start a new research company. Demis Hassabis is stepping back from running Google DeepMind day to day and moving up to chairman. Google will fund the startup as a founding investor and sell it cloud service. Shareholders voted on that arrangement immediately.

Hiring Cools While Prices Do Not

Private employers added 44,000 jobs in July, roughly half of June’s revised number and short of forecasts, which ran between 65,000 and 75,000. The services survey told the same story from both ends, with its hiring gauge at the weakest reading since March and its prices gauge at the hottest 12-month average since spring 2023. That mix is exactly what Neel Kashkari spent the morning pointing at. Friday’s jobs report is now the most important number of the week.

ANZ Bank, Australian Morning Focus extract

The S&P500 was down- 0.2% and the Dow Jones rose 0.49% to a new record high. The Euro Stoxx50 ended its session down -0.1%, while the FTSE100 gained 0.1%. The yield on the US 10y note rose around 1.4bp to 4.61%. WTI lifted to US$75.1/bbl. Gold was stronger at US$4,246.9/oz.

US: The ISM services index was little changed at 54.1 in July. Business activity rose 3.7pts to 59.1, and new orders rose 2.1pts to 57.2, signalling solid activity. The prices paid index rose 2.6pts to 70.3, largely reversing June’s fall.

Employment fell -3.8pts to 47.4, returning to contractionary territory. Separately, ADP private payrolls rose 44k in July, below the consensus of 65k. Payrolls rose in 7 of 10 industries. Gains were led by education and healthcare (up 36k), financial services (up 10k), and professional and business services (up 9k). Leisure and hospitality payrolls fell 11k. Employment in other industries changed little.

Debate continues as to whether the Fed’s reaction function has changed following the end of forward guidance under Chair Warsh. There are merits in removing forward guidance in the current environment. It can lead to policy inertia, where prior guidance can constrain policymakers from reacting appropriately to the data.

Where forward guidance can be effective is when policy is at or near the effective lower bound, a problem the Fed is far from. As the market adjusts to the Fed’s new communication approach, there is uncertainty among market participants, but we do not believe the Fed’s reaction function has meaningfully changed. In any case, it is too early to judge.

The Fed remains data dependent. June’s encouraging inflation reports provided time for policymakers to wait for more inflation data. The consensus among economists, and our own view, is that the Fed is on an extended hold.

That view is based on our expectation that underlying inflation will continue to moderate in the coming months. Nonetheless, having missed its inflation target for over five years, even if, in recent times, that is the result of exogenous price shocks, policymakers will not hesitate to respond to a lack of progress on inflation over the coming months.

We are aware of that risk. Forthcoming data will dictate the Fed’s next move. That has not changed.

Investors are under-pricing how close the Fed is to a September hike, George Prior, deVere Group

Investors should be preparing their investment portfolios for a possible US interest rate hike by the Federal Reserve next month, as the CME FedWatch data now puts the odds of a quarter-point hike at September’s meeting at 61.4%, up sharply from 50.6% just a month ago.

The probability of a larger half-point move has, meanwhile, fallen to zero, down from 25% a week earlier, suggesting markets have converged on a smaller, more deliberate increase rather than a dramatic shift.

Minneapolis Fed President Neel Kashkari was one of three dissenters at July’s meeting, arguing for an immediate quarter-point hike on the grounds that corporate earnings and the labour market show little sign of policy being restrictive.

It marked the first three-way dissent of Fed Chair Kevin Warsh’s tenure. Oil prices have also pushed above US$100 a barrel in recent weeks, adding fresh pressure to the inflation outlook.

The scale of the shift in market pricing over the past month is the real headline for investors. A jump from roughly even odds to well over 60% in a single month tells you the debate inside the Fed has genuinely changed, not just the mood on trading desks.

The return of energy-driven inflation is the clearest signal that policymakers are running out of room to stay patient.

Officials who felt comfortable holding steady in June are now looking at a very different inflation picture heading into September.

A lot of investors had built positions around the idea that cuts were coming in 2026.

The thesis has been quietly falling apart for weeks, and a lot of exposure to long-duration bonds and richly valued growth names hasn’t caught up with where the data actually points.

The dollar and rate-sensitive sectors are likely to move well before the Fed’s decision itself.

Markets price probability, not certainty, and 61% is already doing real work across currencies and equities. A stronger dollar and firmer margins for financials tend to show up early in this kind of shift. Highly leveraged companies and richly valued growth stocks are usually the first to feel it.

Three policymakers voting for an immediate hike tells you a meaningful bloc inside the Fed already believes the case for staying on hold has weakened. This view is clearly gaining ground.

Six weeks ago, the base case was a hold, maybe even a cut later in the year.

Now a hike looks like the more likely outcome. Investment portfolios built for the old narrative need a serious review before September.

Corporate news in Australia:

• Aura Group has made a scrip-based takeover approach for The Agency ((AU1))
• Multiple infrastructure investors are competing to acquire Morgan Stanley Infrastructure Partners’ StraitNZ
• Quadrant is in exclusive due diligence to acquire a $75m stake in Quayclean
• Macquarie ((MQG)), GO.FARM, Paine Schwartz and Roc Partners are competing to acquire Soul Patts’ Redlands horticulture portfolio ((SOL))
• Endeavour Group ((EDV)) is selling its wineries and vineyards as part of CEO Jayne Hrdlicka’s turnaround plan
• Mayne Pharma ((MYX)) shareholders are urging the company to sell its US women’s health and dermatology businesses following the collapse of its takeover bid
• Qube Holdings is reportedly exploring a potential acquisition of Pacific National in a deal valued at around $6bn
• The US Development Finance Corporation, Neo Performance Materials and Iluka Resources ((ILU)) are among the potential buyers evaluating Wyloo Metals’ controlling stake in the Yangibana rare earths project
• South Australia is seeking private capital for its proposed $5bn Northern Water desalination project
• Ticketek owner TEG has secured $100m of super senior debt to support its turnaround
• Salter Brothers is leading a capital raising for EngageRM through its technology fund
• Glencore plans to pursue a secondary ASX listing to attract Australian resources investors, improve liquidity and strengthen its presence in a key operating market
• Macquarie Group is seeking a $500m partner for Oxford Properties’ build-to-rent assets in Melbourne and Sydney
• Joe Aston’s media publication Rampart has raised $2.3m at a valuation of almost $29m
• Lithium Universe ((LU7)) has raised $900k to advance its lithium refinery project
• Heavy Rare Earths ((HRE)) is raising up to $2.028m through a placement and entitlement offer to fund drilling, project development and working capital

On the calendar today:

-AU June Trade Bal

-EZ June Retail sales

-US 2Q labour costs

-AMP LIMITED ((AMP)) 1H26 earnings report

-BEACH ENERGY LIMITED ((BPT)) FY26 earnings report

-KINATICO LIMITED ((KYP)) FY26 earnings report

-NEWS CORPORATION ((NWS)) FY26 earnings report

-REA GROUP LIMITED ((REA)) FY26 earnings report

-BLOCK INC ((XYZ)) 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…

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