The Overnight Report: Oil Up, Markets Down

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

US markets retreated as oil prices and Treasury yields rose as the foreshadowed new peace deal between Iran and the US is still not in place.

The Australian market fell for a fourth straight session, led by retailers and banks on weaker than expected FY26 results and outlook statements.

ASX200 futures are pointing to a soft start on Tuesday morning with several large cap results on the calendar.

Good Morning,

The ASX200 fell -42 points or -0.5% on Monday. Retailers sold off post disappointing results from JB HiFi ((JBH)), and banks weighed on a disappointing outlook from National Australia Bank ((NAB)).

Miners outperformed.

Hot off the press, Brookfield has bid for Reliance Worldwide ((RWC)) at $4.75 per share, a 32% premium to Monday’s closing price. Reliance also reports FY26 results today.

BHP Group ((BHP)), CSL ((CSL)), Cochlear ((COH)), Pro Medicus ((PME)), Challenger ((CGF)) are some of the big names reporting today.

August reporting season is now in full swing, and to stay in touch with which companies are due to report, check out the the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

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

AI Spending Finally Has Revenue Behind It

Bloomberg reported Anthropic’s preliminary second quarter revenue at US$11.5 billion, fourteen times last year.

Nobody has confirmed it yet. Sandisk, Marvell and Coherent led the Nasdaq100 anyway, because the number answers the question hanging over every data center deal this year.

Someone is paying.

The Consumer Is Running On Last Spring’s Money

Goldman’s Jan Hatzius traced spring’s spending strength to bigger tax refunds, not bigger paychecks.

July retail sales came in soft on Friday, and China’s July retail sales missed too.

Demand borrowed from earlier in the year has to be paid back at some point, and the back to school quarter is where we find out how much.

Oil Back Near US$90 As The Iran Clock Runs Out

The 60-day understanding between the US and Iran expired today, even after early reports said an extension had been approved.

Talks to reopen the Strait of Hormuz have stalled, and Iran can now charge tolls to move oil through it.

Trump threatened to bomb Oman if it helps Iran take control of the waterway.

Brent traded near US$90.

ANZ Bank, Australian Morning Focus extract

Equity markets wavered and oil prices rose following reports that President Trump is in no hurry to end the war with Iran.

The S&P500 was down -0.5%. The EuroStoxx50 ended its session down -0.1%, while the FTSE100 lost -0.3%.

The yield on the UST 10y note rose around 4.8bp to 4.73%.

WTI lifted 3.5% to US$84.7/bbl. Gold was stronger at US$4,415.4/oz.

US: The Empire State manufacturing index rose 5.0 points to 20.6 in August, its highest level in more than four years. However, the details were more mixed. New orders fell -4.9 points to 17.3, shipments dropped -12.7 points to 11.7 and employment eased to -9.3 from 11.4.

Unfilled orders rose to 15.5 from 5.0. Price pressures remained elevated, with prices paid rising to 58.6 from 52.3, while prices received fell to 22.7 from 27.6, suggesting some pressure on margins.

Given the absence of substantive US data releases early this week, US markets are being driven largely by geopolitical developments and headlines surrounding US-Iran negotiations. Trading volumes remain thin due to the peak US and European holiday season.

From an economic perspective, the focus this week will be the July FOMC meeting minutes, which will be scrutinised for insights into policymakers’ views on inflation and the breadth of dissent behind the decision to hold rates steady, beyond the three voting regional presidents reportedly favouring higher rates.

To some extent, the minutes have been overtaken by softer July labour market and inflation data. However, in the absence of forward guidance on interest rates, the tone and content of the minutes take on added significance.

Data from Japan and China disappointed. Japanese Q2 GDP rose 0.3% q/q, below expectations for a 0.5% q/q increase. Real private consumption was flat (0.0% q/q), while private capital expenditure fell -1.2% q/q.

Growth was driven by inventories and net exports. Weakness in domestic demand raises questions about whether the Band of Japan will raise interest rates when it meets on 18 September.

July CPI data, due later this week, will provide insight on that front. Core inflation measures are expected to rise 0.2% m/m, bringing them closer to the 2.0% target.

In China, July data disappointed across the board, serving as a reminder of the structural headwinds and underlying disinflationary pressures facing the world’s second-largest economy.

The energy sector gained, as the prospects of a US-Iran peace deal waned. Precious metals rose on a weaker USD. Weak economic data weighed on industrial metals.

From the US Market Desk: Micro Over Macro, Chris Galipeau, Franklin Templeton extract

• We are constructive on US equities and have established a year-end target range of 7400 – 7800 for the S&P500, driven by 15-plus % Y/Y earnings-per-share (EPS) growth. Second-quarter (Q2) earnings are BOOMING, with EPS growth rates of about +47% Y/Y and with EBIT margins approaching 17%. Much of this EPS power is Magnificent Seven-driven in Q2. If we remove the impact of Google and Amazon’s investments in OpenAI and Anthropic, the Y/Y earnings growth number is about 30%. Consensus expectations (Bloomberg) for 2026 now sit at US$362.25, up about 23% Y/Y. For 2027, the consensus earnings estimate stands at US$405.16, representing a 13% Y/Y growth rate versus 2026. The EPS growth is incredible considering we usually only see this sort of Y/Y acceleration when the economy is exiting a recession. 
• Bloomberg reports that in Q2, 25 firms in the S&P500 Index have quantified the use of artificial intelligence (AI) on their income statements, saying that on average they have seen 180 bps of margin growth. This is the first inning of hearing about AI impact, I suspect. Meaning, going forward I’d expect we hear more companies quantify the impact of AI on their businesses. Accretive to margins is bullish.
• In Q2, 76% of companies are beating on their top line, stronger than the five-year average of 70%. Similarly, 86% of companies are beating EPS estimates, stronger than the five-year average of 78%. Broad and strong.
• If we assume the consensus earnings estimates are reasonably correct, that puts the tape at 21.37x this year’s earnings and 19.11x 2027 estimates. The long-term historical, forward multiple is about 17x. Portfolio managers are now focusing their efforts on corporate earnings power for calendar year 2027. I can’t make a strong argument that the tape is “cheap” here, but I also can’t make the argument that a 19.11x forward multiple is crazy rich either—unless bond yields move significantly higher. We don’t expect that, but it is a risk.
• All 11 S&P GICS sectors have positive earnings YTD. The top-three performers are energy up 36%, information technology up 25%, and industrials up 19%. In January, our top-three favorite sectors for the year were energy, tech, and industrials. It’s working.
• The tape is recognizing broad fundamental strength. Consider this: The cap-weighted S&P500 Index is up 13.95% year-to-date (YTD) through August 12, and the S&P500 Equal Weight Index is up 16.49%. The S&P400 MidCap Index is up 18.86% and its equal-weighted version is up 16.78%. The Russell2000 Index is up 23.66% and its equal-weighted version is up 21.81%. No single name is dominating. Everything is participating.
• Bottom line: We think it’s prudent to have a diversified equity playbook that includes US large-, mid- and small-cap exposure with a balance of growth and value. The same can be said for ex-US equity exposure; emerging markets and Japanese stocks look attractive. That involves reducing concentration and spreading one’s bets. We favor buying on pullbacks.

Corporate news in Australia:

• Canadian miner NexGen Energy ((NXG)) in talks with BHP Group ((BHP)) as it seeks US$1bn for its Rook 1 project
• Viva Energy ((VEA)) is eyeing ExxonMobil’s New Zealand service station network, while its ties with Vitol face scrutiny
• Ingenia Communities ((INA)) is considering teaming up with Thailand’s Supalai on a bid for Peet ((PPC)) at more than $2 per share
• BlueScope Steel ((BSL)) reported an 872% profit surge and plans to return more than $1.3bn to shareholders as it strengthens its defence against takeover interest from Steel Dynamics and SGH Ltd ((SGH))
• Quadrant Private Equity is seeking a buyer for Fitzpatricks Advice Partners, with Berkshire Global Advisers approaching potential bidders
• Riverside is seeking a buyer for its allied health business, which is valued at more than $500m
• FleetPartners ((FPR)) could attract as many as five bidders, with PEP, Element Group, Smartgroup ((SIQ)), Orix and other Japanese fleet companies in the mix
• Rio Tinto ((RIO)) has appointed Macquarie Capital ((MQG)) to sell its Mt Cattlin lithium mine in WA, with Mineral Resources ((MIN)) and Core Lithium ((CXO)) among potential buyers
• Colter Bay has provided a $115m private credit facility to Vertical Aviation for refinancing and growth
• Kerry Stokes has lifted his stake in Southern Cross Media ((SXL)) to around 23% after acquiring 14.3m shares
• Swipejobs has appointed UBS and Barrenjoey for a potential ASX IPO
• Alphabet is targeting a record $5bn through its first Australian dollar bond issue
• Tasman Capital Partners has reached a $200m first close for its fourth private equity fund, targeting mid market businesses

On the calendar today:

-EZ Aug ZEW

-UK June Earnings & Unemployment

-US Jul Housing starts

-US July Bldg permits

-US July Industrial prod’n

-CA July Housing starts

-CA July Housing starts

-GE Aug ZEW

-GE Aug ZEW

-AMPLITUDE ENERGY LIMITED ((AEL)) FY26 earnings report

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

-CHALLENGER LIMITED ((CGF)) FY26 earnings report

-COGSTATE LIMITED ((CGS)) FY26 earnings report

-CENTURIA CAPITAL GROUP ((CNI)) FY26 earnings report

-COCHLEAR LIMITED ((COH)) FY26 earnings report

-COMPUTERSHARE LIMITED ((CPU)) ex-div 65.00c

-CSL LIMITED ((CSL)) FY26 earnings report

-EBOS GROUP LIMITED ((EBO)) FY26 earnings report

-FLETCHER BUILDING LIMITED ((FBU)) FY26 earnings report

-HEALTHCO HEALTHCARE & WELLNESS REIT ((HCW)) FY26 earnings report

-HUB24 LIMITED ((HUB)) FY26 earnings report

-INFRATIL LIMITED ((IFT)) AGM

-JUDO CAPITAL HOLDINGS LIMITED ((JDO)) FY26 earnings report

-MACMAHON HOLDINGS LIMITED ((MAH)) FY26 earnings report

-PRO MEDICUS LIMITED ((PME)) FY26 earnings report

-REGION GROUP ((RGN)) FY26 earnings report

-RELIANCE WORLDWIDE CORP. LIMITED ((RWC)) FY26 earnings report

-SIMS LIMITED ((SGM)) FY26 earnings report

-SMARTGROUP CORPORATION LIMITED ((SIQ)) FY26 earnings report

-SKS TECHNOLOGIES GROUP LIMITED ((SKS)) 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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