The Overnight Report: Tech Churns Higher

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

The Nasdaq led US markets higher overnight, with the July CPI print coming in as expected, and buying returning to memory stocks and the momentum trade.

The Australian market drifted lower yesterday.

ASX200 futures are pointing to a weak start for Thursday.

Good Morning,

The Australian market drifted lower on Wednesday after a weak overseas lead.

The ASX200 fell -41 points, or -0.5% to 9,209.

Property led the declines down -1%, while Utilities rallied 2.6%.

August Reporting Season in Full Swing

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/

Some of the big names on the calendar today are Amcor ((AMC)), ANZ Bank ((ANZ)), ASX Ltd ((ASX)), Origin Energy ((ORG)), Telstra Group ((TLS)) and Treasury Wines Estates ((TWE)).

RBC Capital’s early assessment of Amcor’s quarterly release: 

“Notwithstanding a Q4 earnings beat (EPS 3% ahead of market expectations) and some positive aspects such as a return to volume growth (0.5%) and synergies of US$115m (vs market circa US$100m), we believe the market will focus on the free cashflow miss, net leverage and below-market earnings guidance for both the September quarter and the December half. 

“FCF of US$1.3bn was below company guidance of US$1.64bn (circa 21%) and the market estimate of US$1.53bn due to higher-than-anticipated working capital. Net leverage was 3.5x. 

“The company has provided September quarter guidance of US$0.92-US$0.98, which is -6 to -12% below market expectations and December half guidance of US$1.80- US$1.90, which is -3% to -8% below market. The company is anticipating synergies of US$130m in the 6-month period, and it expects net leverage to increase slightly to 3.5-3.6x.”

Don’t forget the FNArena corporate results monitor to track the earnings reports.

https://fnarena.com/index.php/reporting_season/

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

Rent And The Power Bill Are Doing The Work Now

Shelter costs barely moved last month and still made up about two thirds of the entire increase, hidden behind a steep drop in hotel rates.

Electricity ran more than four percent above last year during the hottest month on record.

You can wait out a gas price. Rent and the power bill you just pay.

Nobody’s Estimates Assume AI Comes For Them

Apollo’s Torsten Slok went through more than 200 public software and white collar services companies.

Ten expect both revenue and profit to fall over the next two years. Ten.

Every dollar of AI upside is in the numbers and none of the displacement is, and that gap is where I’d look for surprises this fall.

The Buildout Needs Electricians Not Just Chips

Bernstein’s Chad Dillard put the electrical, mechanical and plumbing trades at 1.8 million workers, then cut that to roughly 790,000 once you keep only non residential construction, and fewer still clear the training bar a data center requires.

Thirty percent of that labor lives where seventy percent of the projects are going.

Chips get delivered. Buildings get scheduled, and schedules slip.

ANZ Bank, Australian Morning Focus extract

The US S&P500 was up 0.3%. The EuroStoxx50 and the FTSE100 indices ended the session -0.3% and -0.1% lower, respectively. 

The active WTI oil future fell -0.5% to US$82.81/bbl, while spot gold was 0.9% firmer at US$4,407.3/oz. The yield on the US 10y Treasury bond was little changed.

US headline CPI rose 0.1% m/m and the core measure rose 0.2% m/m in July, matching consensus expectations. The annual rate of core inflation eased -0.1% pt to 2.5% y/y.

On a three-month annualised basis, core inflation fell to 1.6%. Core goods prices rose 0.2% m/m, following two months of modest declines. Price rises were concentrated in technology goods. Shelter prices rose 0.1% m/m. Core services ex shelter (supercore) rose 0.2% m/m.

CPI as expected, but relief seen: 

July’s US CPI report saw the market pare expectations for a near-term rate hike from the Fed. The market is now pricing-in around a 40% chance the Fed hikes at its next meeting in September.

The CPI report reinforced our views that underlying inflation is moderating and that the relative price shocks from tariffs and energy have not broadened inflation.

Alongside renewed signs of weakness in the labour market, recent inflation trends support our expectation that the Fed is on an extended hold.

While the July data raised the bar for the Fed to hike in September, the risk of a hike remains.

Before the September meeting, July’s PCE deflator, along with the August CPI and labour market reports, will be released.

Policymakers have been clear that progress on inflation is needed in coming months.

In our assessment, recent data have shown progress and reduced any urgency to adjust policy. But there are still plenty of data releases before September to challenge that assessment.

Raising Our S&P500 Earnings & Price Targets Outlook Due TO Fabulous Earnings Momentum (FEMO), Ed Yardeni & Joe Abbott, Yardeni Quicktakes

I. Quarterly Earnings Per Share

What a fabulous Q2-2026 earnings season it has been!

So far, 90% of S&P500 companies have reported. They broadly crushed industry analysts’ forecasts for earnings and profit margins, both of which saw a boost from mark-to-market (MTM) gains from Alphabet and Amazon for a second straight quarter.

These MTM gains (along with Meta’s little-mentioned gain from a tax reversal) boosted earnings by US$5.88 to US$75.03 during Q1 and by US$14.00 to US$97.83 in Q2.

As a result, S&P500 EPS rose 19.0% y/y in Q1 and 46.7% y/y in Q2. Without the MTM gains, earnings rose 9.5% and 25.7% during those two quarters.

II. Annual & Forward Earnings Per Share

Those 2026 MTM gains have boosted the S&P500 forward EPS to a record high. The 2027 estimate, which doesn’t include any projections of future MTM gains, has also been rising to new highs.

Forward earnings is converging toward the 2027 estimate, which is currently US$408.83. The two series will be identical at the end of this year. We estimate that the MTM gains lowered the S&P500’s forward P/E by -0.4ppts as of August 10.

Joe and I have been bullish on earnings but not nearly as bullish as the recent consensus of industry analysts. We’ve never seen consensus earnings expectations rise so quickly for the current and coming years as they have since mid-2025.

The result has been an earnings-led meltup in the stock market to record highs.

Our 2026 and 2027 S&P500 EPS estimates have been US$330 and US$375, respectively, since early May, when we raised them in response to Q1’s strong results. Those were bullish estimates back then.

Analysts’ consensus EPS estimates for both years have continued to rocket higher since then. They are currently US$359.60 (up 32.6% from US$271.29 last year!) and US$408.83 (up 13.4% from the current 2026 consensus estimate).

We are raising our S&P500 EPS estimates to US$375 for 2026 and US$415 next year, up from US$330 and US$375.

The 2026 estimate increase of US$45 includes nearly US$20 of the MTM gains that were recognised during Q1 and Q2 by Alphabet and Amazon, as well as Meta’s tax reversal gain.

III. Revenues Per Share & Profit Margin

We are also raising our S&P500 RPS for both 2026 and 2027 to US$2,250 and US$2,450 from US$2,200 and US$2,300.

Our outlooks for EPS and RPS imply that the S&P500 forward profit margin will rise to 16.7% this year (including MTM gains) and 16.9% next year. Absent the MTM gains, 2026’s profit margin would be around 15.8%.

Our forecasts are higher than the current consensus of 15.4% and 16.6%. Keep in mind that prices for semiconductors and other AI-related hardware are soaring, thus accounting for some of the surge in the S&P 500 profit margin.

IV. Roaring 2020s Scenario

We’re now assuming that S&P500 forward earnings per share (currently at US$389.90) will be US$415 at the end of this year. We expect a steady progression to US$550 by the end of 2029. We aren’t anticipating a recession.

We are sticking with our forward P/E range of 18.0x-22.0x through the end of the decade.

Our forecasted target ranges for the S&P500 have increased for 2026 through 2029. We are raising our year-end 2026 point estimate to 8,400 from 8,250. We are maintaining our 10,000 target for the end of 2029, though we are likely to raise it if the Roaring 2020s continue to go our way.

Our key assumption is that the economy will remain resilient, and so will earnings. That’s been our mantra since we first started writing about the Roaring 2020s during the summer of 2020.

We could certainly have another recession scare along the way, as we did in early 2025 and 2026.

We’re leaving our May 10 call of the subjective probability of a continuation of the Roaring 2020s at 80%, up from 60% before merging it with our meltup scenario (previously at 20%).

We think any pullback (and even a meltdown) will be a buying opportunity and won’t trigger a recession or bear market similar to the 1999-2000 Tech Bubble and Tech Wreck.

We are sticking with 20% odds of a recession that causes a bear market.

Joe and I have never seen anything like this.

How Investors Can Weather El Nino, Morgan Stanley extract

El Nino –-a weather phenomenon that has caused as much as US$84 trillion in global economic damage since 2000-– is shaping up for a potentially devastating season.

As a new El Nino gains strength, local governments are watching for potential effects on their communities. Investors are paying attention too, as weather patterns associated with El Nino could affect commodity production, markets and economies.

It is one of the few climate events with a truly global reach. In North America, El Nino typically brings milder winters to the northern U.S. and stormier conditions to the southern states and Gulf of Mexico.

South America generally experiences heavier rainfall, while Indonesia, Australia and southern Asia could face droughts.

The U.S. National Oceanic and Atmospheric Administration (NOAA), which forecasts weather and monitors the global climate, sees an 81% chance of this year’s El Nino becoming a very strong event.

“Most El Nino years are a nuisance, but this one has the makings of a shock, and as weather patterns shift across key growing regions, the effects may extend far beyond local forecasts and into supply chains, prices and investment returns,” says Julia Rizzo, Morgan Stanley Research Equity Analyst and Commodities Strategist for Latin America.

Uneven Impacts for Agriculture

NOAA’s models indicate that El Nino conditions are expected to peak from December through February, coinciding with the main planting and crop-development period in South America.

Wetter conditions could benefit agricultural yields in Argentina and southern Brazil, while other regions of Brazil face a greater risk of irregular rainfall and delayed soybean planting.

“As a result, a super-bullish grain price scenario appears less likely, especially considering that El Nino events have historically coincided with weaker grain prices,” Rizzo says.

Morgan Stanley Research finds that sugar is the agricultural commodity most likely to get a price boost from El Nino. Weaker monsoon rainfall could cut sugar-cane production in India, Thailand and Southeast Asia, while heavier rainfall in Brazil could reduce yields there.

West Africa grows most of the world’s cocoa, chocolate’s main ingredient, and output there could suffer too, first from wet-season disease between June and October, then from the dry, dusty Harmattan winds.

“El Nino is more relevant as a regional earnings and positioning question than as a broad directional trade,” Rizzo says. “Crop timing, geographic exposure and operating flexibility will determine where weather translates into lower volumes, higher costs or stronger prices.”

El Nino’s Long Tail

Historically, El Nino has had little bearing on global asset prices, with some exceptions in commodity markets. But a “super” event, depending on its timing and duration, could break that pattern. Lower agricultural output could add to inflationary pressures, with potential consequences for economies and financial markets.

“We expect copper and emerging-market sovereign credits to be the most structurally exposed to a ‘super’ event,” says Morgan Stanley Research Cross-Asset Strategist Erika Singh-Cundy. “Given these risks, along with headwinds from energy prices, we maintain our preference for developed-market over emerging-market risk assets.”

Here are Morgan Stanley Research’s views on El Nino’s impact across asset classes:

Metals: Copper output could face disruptions, potentially leading to higher prices. In Chile, the world’s largest copper producer, wetter weather and flooding could pose risks to mining infrastructure. Drought in Zambia, which accounts for 4% of global copper production, could cause hydropower shortages, affecting output.

Credit: In debt markets, El Nino could pose risks to sovereign credit in parts of Latin America and Africa, with impacts varying widely by country: droughts threaten agriculture and hydropower, while heavy rains can damage infrastructure or, in some cases, boost harvests. Higher food prices add lagged inflationary risk. Sovereigns with more fiscal capacity and external buffers should be better insulated. Ecuador, Mozambique, Zambia, Colombia, Costa Rica and Peru are likely to be the most exposed, while Chile, Uruguay and Argentina could benefit.

Local rates: Within Latin America, El Nino poses the greatest risk to local rates in Brazil, Colombia and Peru via higher inflationary pressures. While their central banks are likely to look past initial food-price shocks, second-round effects could delay easing cycles or keep rates restrictive for longer.

FX: Latin American currencies could experience more volatility. Higher inflation and interest rates would support local currencies, but weaker growth and uncertainty about the inflation outlook could weigh on them.

Equities: The impact of El Nino is likely to vary by sector. Higher soft-commodity prices would benefit sugar producers and agricultural-input suppliers, including companies providing seeds, fertilizers, chemicals and equipment, as well as the Latin American power sector and scaled U.S. food retailers and discounters.

However, companies that buy higher-priced crops, including Brazilian chicken and protein producers, could face pressure.

Corporate news in Australia:

• Growthpoint Properties Australia ((GOZ)) agreed to sell its Woolworths Group ((WOW)) distribution centre at Perth Airport to Hesperia for $267.7m
• Japan’s Orix has joined the takeover contest for FleetPartners ((FPR)) with an $812m bid
• Sports Entertainment Group ((SEG)) agreed to acquire MediaWorks for NZ$130m, funded through cash, debt and a $35m equity raising
• Hilco Capital has put Cue Clothing and sister brand Veronika Maine up for sale, 16 months after acquiring the retailer
• A Morrison-led consortium has emerged as the frontrunner to acquire Ausgrid’s Plus ES smart metering business for around $2.5bn
• Goldman Sachs will acquire Neos Investments for up to US$2.25bn, expanding its ETF business
• Canva shares were offered on the secondary market at a -29% discount amid investor concerns over the impact of AI
• Atmo Biosciences raised $12m at a reduced $25m valuation as the medtech targets growth opportunities linked to the GLP-1 market
• True North Copper ((TNC)) is preparing an equity raising of at least $15m, with Morgans Financial appointed to oversee the transaction

On the calendar today:

-AU RBA Kent fireside chat

-JP Jul PPI

-EZ June Industrial prod’n

-UK 2Q GDP

-UK June Industrial prod’n

-UK June Trade Bal

-US July PPI

-US June Ind Prod’n

-AMCOR PLC ((AMC)) 4Q26 earnings report

-ANZ GROUP HOLDINGS LIMITED ((ANZ)) 3Q26 quarterly update

-ASX LIMITED ((ASX)) FY26 earnings report

-BANK OF QUEENSLAND LIMITED ((BOQ)) ex-div 15.00c (100%)

-CHARTER HALL LONG WALE REIT ((CLW)) FY26 earnings report

-FINEOS CORPORATION HOLDINGS PLC ((FCL)) 1H26 earnings report

-HOMECO DAILY NEEDS REIT ((HDN)) FY26 earnings report

-INSURANCE AUSTRALIA GROUP LIMITED ((IAG)) FY26 earnings report

-MFF CAPITAL INVESTMENTS LIMITED ((MFF)) earnings report

-ORORA LIMITED ((ORA)) FY26 earnings report

-ORIGIN ENERGY LIMITED ((ORG)) FY26 earnings report

-RIO TINTO LIMITED ((RIO)) ex-div 302.86c (100%)

-RECKON LIMITED ((RKN)) ex-div 2.50c (100%)

-SCENTRE GROUP ((SCG)) ex-div 9.22c

-TRANSURBAN GROUP LIMITED ((TCL)) FY26 earnings report

-TELSTRA GROUP LIMITED ((TLS)) FY26 earnings report

-TREASURY WINE ESTATES LIMITED ((TWE)) 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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