The Overnight Report: Oil Up, Software Down

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This story features RESMED INC, and other companies.
For more info SHARE ANALYSIS: RMD
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets traded flat to weaker as the Iran/US peace deal remained elusive, for now.

As the oil price moved higher, software stocks were sold off, regardless of earnings quality.

AI trading robots love these pair trades.

After a second record day on the Australian market, ASX200 futures are pointing to a flat-to-weaker start for Friday.

Good Morning,

The Australian market rallied strongly for a second consecutive day on Thursday. The ASX200 rose 44 points or 0.5% to 9,272.

Materials led the market, up 1.1%, boosted by gold stocks, Property fell -0.9%.

This morning, Sydney time, US-listed ResMed ((RMD)) released FY26 Results.

RBC Capital’s First Take:

“Revenue was in line with consensus expectations, with a slight miss in Americas and SaaS being offset by a beat in rest-of-world. 

“Gross margin was a miss to RBC’s forecasts and consensus and non-GAAP income from operations was a miss due to the lower gross margin and higher R&D expenses. 

“While the company has delivered strong growth we expect the company’s miss in Americas, slight gross margin miss and miss to non-GAAP income from operations to weigh on the stock.”

The shares are trading down -4.8% in the US aftermarket. 

Citi’s first assessment:

“RMD’s 4Q sales were in line with VA consensus with devices and masks both in line, but a stronger performance ex-Americas than in the Americas.

“Gross margin was 46bps below consensus, although slightly ahead of our estimate. EPS was 2% ahead, but R&D costs were higher.

“Other income, mainly interest income, pushed a 3% EBIT miss to a 2% EPS beat. “We think investors will focus on performance in the Americas and expectations for gross margin trajectory, in particular to try to work out the collective effects of the acquisition of Noctrix divestiture of MatrixCare and active Astral ventilator safety recall.”

Other earnings results due out today include  Avita Medical ((AVH)), Charter Hall Retail REIT ((CQR)), James Hardie ((JHX)) 1Q27 results, Nick Scali ((NCK)) and Kingsgate Consolidated ((KCN)).

James Hardie shares are trading up 7% in the US aftermarket.

RBC Capital’s first take:

“We expect a positive reaction in James Hardie’s shares in trading today after the release of FQ127 results, which follows the company’s preliminary results release from July 22.

“We expect a positive reaction to the strong quarter and raised guidance, although we are slightly cautious (in the context of largely positive updates) and expect questions about evolving margin guidance, the implied guide for H2/27, and any impacts of load-in associated with new distribution relationships to be topical on the call today.”

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

The FNArena Corporate Results Monitor, https://fnarena.com/index.php/reporting_season/  to track the earnings reports.

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

Oil Is Not Buying The Hormuz Deal Yet

Iran and Oman are close to a temporary plan for traffic through the strait, with no fees or tolls to start.

Then Iranian state media published a parliamentary draft that would bar U.S. and Israeli ships, and a tanker crew heard explosions off the coast of Oman.

Crude closed above US$77 here and Brent above US$82.

Deutsche Bank’s Jim Reid says the argument has moved from whether there is a deal to what is in it, mainly whether Iran can charge tolls later.

The Market Wants More Than a Good Quarter

Sandisk, Western Digital, Datadog and AppLovin all grew and all finished lower.

Each of them guided the current quarter to roughly what analysts already had written down.

Sandisk and Western Digital have been two of the biggest winners of the past year, so some of today was profit taking.

The market is paying for the outlook now, not the quarter.

The Job Market Is Holding Up

Claims came in at 199,000 for the week ended August 1, better than economists expected.

Challenger counted 33,429 announced cuts in July, the lowest month in two years, with hiring plans the strongest for a July since 2022.

Productivity beat and unit labor costs came in light, which is the friendly combination for inflation.

That matters tomorrow, because this Fed is arguing about a hike, not a cut.

ANZ Bank, Australian Morning Focus extract

It was a quiet day in financial markets ahead of the US nonfarm payrolls report tonight (10.30pm AEST). Equity markets were mixed, while bond yields followed oil higher. The  S&P500 was down -0.2%. 

The EuroStoxx50 ended its session up 0.4%, while the FTSE100 lost -0.2%. 

The yield on the US 10y note rose around 6.5bp to 4.67%. 

WTI lifted 4.6% to US$78.3/bbl. Attacks on vessels in the Strait of Hormuz pushed the energy sector higher. Industrial metals were mixed amid a plethora of supply side issues. Precious metals were slightly lower on inflationary concerns

Gold was weaker at US$4,235.4/oz. Gold declined as the renewed rise in oil prices fuelled inflationary concerns. The precious metals have been battered by concerns that higher energy prices will force the Fed to raise rates.

Markets are currently pricing-in a single US rate increase by year end, down from two as recently as last week.

Euro area retail sales volumes fell -0.3% m/m in June, below the consensus of a 0.1% rise. The annual rate slowed from 1.9% to 0.7%. The data continue to show a lack of consumption momentum.

Trend US productivity growth has been exceptional in the post-pandemic period. In 2Q, nonfarm labour productivity rose 1.4% saar, well above the consensus expectation of 0.6%.

Unit labour costs were weaker than consensus at 1.3% saar, below the 2% level generally consistent with the Fed’s inflation target.

Real compensation continues to lag labour productivity gains, suggesting that productivity gains have recently accrued more to capital than labour.

Over the long run, real wage growth should equal growth in labour productivity. An argument could, therefore, be made that weak growth in real wages corroborates the view that the labour market is a source of disinflationary pressure.

But using trend concepts to determine that in real time is not best practice.

Amid the current investment supercycle, there is much attention on whether AI will deliver the anticipated productivity gains, but it’s difficult to draw firm conclusions.

RBC Capital, 2Q26 Reporting Season Snapshot For Key Sustainability Themes, Sara Mahaffy

Most of the themes we track have seen strong EPS beat rates (compared to the broader market), as well as constructive revenue beats, though there have been some pockets of weakness in certain areas. 

The tone around demand outlooks remains constructive for most themes, with AI/data centre demand continuing to be the most cited tailwind, and margin outlooks have also remained constructive despite concerns around inflation. Most themes are seeing positive revisions momentum recently. 

While headline results have generally looked strong for most themes, reactions to earnings prints have been a little more mixed depending on the theme. 

Overall, the Grid theme has been a bright spot across our earnings indicators, and trends are also generally constructive for the Digital Security and Pollution & Waste themes.

Grid Theme Looks Constructive Across Our Earnings Indicators:

Like last reporting season, the Grid theme has been a bright spot across all of the earnings indicators we track. Beat rates have been strong relative to the broader market, most names have traded up following earnings releases, and earnings/revenue revisions are positive and strong relative to the broader market. 

The outlook around demand and margins has been constructive relative to other themes, as companies continue to cite longer term tailwinds related to rising energy demand, electrification, and grid resilience and modernisation. 

From an end market perspective, AI/data centres have been key drivers, though companies have cited broad based strength. A few of our earnings indicators are hovering near peak levels, which bears watching, mainly revisions momentum and long-term growth expectations.

The theme underperformed in late June/July alongside weakness in the AI/momentum trade, but stabilised towards the end of the month, in part helped by better earnings results. We’d note that relative valuations have meaningfully improved from their peaks but remain slightly elevated vs. their long-term average.

Digital Security and Pollution & Waste Themes Also Look Positive Across Our Indicators:

The other two themes that have generally seen constructive trends across our earnings indicators have been the Digital Security and Pollution & Waste themes. Both themes have seen strong EPS/revenue beat rates, and stock price reactions to earnings prints have been positive on average.

Revisions momentum has been positive for both themes recently, but particularly strong for the Digital Security theme, though, similar to the Grid theme, our indicators are showing signs of peaking, which bears watching.

The tone around demand has also been positive for most names in these themes. Companies in the Digital Security theme continue to highlight how AI has expanded the threat landscape in 2026, creating a new level of urgency for governments and organisations.

We also found comments around how strong AI governance and cybersecurity practices are now being viewed as an enabler of greater AI adoption.

Companies can only confidently deploy AI, and unlock productivity benefits, if they have the appropriate privacy and security guardrails in place. Both themes have been performing better recently, particularly the Digital Security theme, but our relative valuation models have remained in attractive territory even following recent outperformance.

Renewable Energy Has Been A Bit More Mixed So Far:

EPS beat rates and revisions momentum have been strong relative to the broader market.

However, revenue beat rates have slipped a bit, and stock price reactions to earnings prints have been weaker so far this reporting season.

Most companies continue to highlight constructive demand backdrops, with AI/data centre demand most frequently cited, though some have noted that policy uncertainty (tariffs, final FEOC regulations) remains a headwind. Companies continue to cite challenges for wind, though some have noted recent stabilisation in residential solar markets.

Tougher Backdrop For Sustainable Ag & Food Theme But Interesting Commentary Around Precision Ag Tech:

Our earnings indicators have been more mixed for the Sustainable Ag & Food theme.

The theme stands out as one of the few areas where revisions momentum has been negative, though we’ve found that this reporting season beat rates have been constructive, particularly on the revenue side. Stock price reactions to earnings prints have also been positive.

Companies continue to highlight challenging market conditions, due to broader weakness in agricultural markets with farmers under pressure, though some have highlighted bright spots around precision agriculture technology, as farmers seek yield and productivity improvements.

Risks Related To Data Centre Moratoriums Showing Up In Q&A:

During Q&A, companies in Industrials and Utilities were asked about the growing local community opposition towards data centres, particularly with the recent one-year data centre moratorium passed by New York state.

For the most part, we found that companies have so far said this has not impacted their projects or pipeline to date.

One company noted that recent developments highlight the need to be geographically exposed to different markets. Policies won’t stop data centres, it’s just a matter of where they are built.

Other companies highlighted the need to better communicate the positive aspects of data centres early on, including economic benefits from jobs, property taxes, and improvements in water usage, and that they are encouraged that hyperscalers and data centres are becoming more focused on transparency.

Similar to last reporting season, we found that some companies are framing their solutions in the context of local community acceptance. For example, Bloom Energy noted that the fact their customers can obtain air permits faster with their technology (vs. combustion alternatives) has been a competitive advantage.

Growing Demand For Adaptation & Resilience Solutions:

Recent extreme weather events in Europe and Canada have continued to bring focus to adaptation solutions. MSCI noted that while demand for its sustainability data offerings is facing persistent market challenges, as customers are rightsizing their sustainability spend, particularly in the Americas, it is seeing growing opportunities in climate, specifically related to its physical climate risk data solutions.

We also found comments from Perimeter Solutions interesting. The company noted that recent severe fire seasons have prompted governments in Canada, Australia, and parts of Europe to increase funding for firefighting resources.

Corporate news in Australia:

• Regis Resources ((RRL)) has rejected investor pressure to pursue another acquisition after losing the bidding war for Vault Minerals ((VAU)) to Genesis Minerals ((GMD))
• Nova Entertainment and Sports Entertainment Group ((SXE)) have emerged as the leading bidders for Quadrant’s MediaWorks as the sale enters its final stage
• I Squared is leading the bidding for oOh!media ((OML)) ahead of final offers, with plans to apply Stroer’s growth strategy to the outdoor advertising business
• Point Wild has reportedly appointed brokers for its planned ASX IPO, choosing the Australian market over Nasdaq
• Innovaero has opened its $40m IPO, targeting a $158m valuation ahead of its planned ASX listing next month
• Leading US law firms, including Paul Weiss, Quinn Emanuel and Proskauer, are exploring selling equity stakes to private equity investors
• Future Group is reportedly considering a secondary share sale after earnings increased by 36%. Ariadne Australia ((ARA)) is a shareholder
• ACFS Port Logistics has entered administration after lender ScotPac appointed external administrators, despite the company’s efforts to repay creditors

On the calendar today:

-CH Jul trade bal

-US NonFarm Payrolls, Unemployment

-AVITA MEDICAL INC ((AVH)) FY26 earnings report

-CHARTER HALL RETAIL REIT ((CQR)) FY26 earnings report

-JAMES HARDIE INDUSTRIES PLC ((JHX)) 1Q27 Results

-KINGSGATE CONSOLIDATED LIMITED ((KCN)) FY26 earnings report

-NICK SCALI LIMITED ((NCK)) FY26 earnings report

-RESMED INC ((RMD)) Q4/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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