The Overnight Report: Bessent’s BuyBack Boost

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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US Treasury intervention in the bond market eased yields and supported risk assets overnight, sending equities higher.

After another weak session down under on Wednesday, ASX200 futures are pointing to a positive start, ahead of July's labour force data at 11.30am AEST.

Good Morning,

The Australian market declined for a sixth straight session on Wednesday, down -16 points or -0.2% to 9,054. Technology fell -3.2%, and Healthcare rallied (again) by 2.6%, following on from Tuesday’s gains.

Offshore, demand for Healthcare stocks has equally been voracious.

Yesterday, the Australian market recovered from intraday losses, closing down -3 points to 9,070. Healthcare rallied strongly, up 7.8% as CSL ((CSL)), Cochlear ((COH)) and Pro Medicus ((PME)) bounced strongly on FY26 results.

On the calendar today are Goodman Group ((GMG)), Megaport ((MP1)), Telix Pharmaceuticals ((TLX)) and Zip Co ((ZIP)), among many others.

August reporting season is now in full swing, and to stay in touch with which companies are due to report, check out the  FNArena Calendar:

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

RBC Capital’s early response to Auckland International Airport‘s ((AIA)) FY26 result released this morning:

“Auckland Int’l Airport (AIA) has delivered a broadly in line FY26 result with Underlying NPAT ‘flat’ yoy to NZ$309m, in line with RBCe/Cons and prior guidance (NZ$295-320m).

“AIA has declared a final dividend of NZ6.8cps ahead of RBCe/Cons NZ6.3/6.7cps.”

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

Treasury Steps Into The Long End

The Treasury will at least double its buybacks of older long-dated bonds, to US$4 billion per operation.

The 30-year yield came back to about 5.20 after touching a 19-year high on Tuesday.

Gold hit an eleven week high, bitcoin cleared US$68,000, and the dollar had its weakest close since May.

This fixes plumbing, not the deficit, but plumbing was the problem this week.

One Trial Result Lifts All Of Biotech

Moderna and Merck said their personalized melanoma vaccine worked in a study of more than 1,100 patients.

Moderna stock more than doubled.

What stood out is that the entire biotech and pharma complex went along for the ride.

One company’s trial data almost never does that, and traders are reading it as proof the pipeline still delivers.

Money Moved a bit From AI Hardware And Bought Value

Chip names sold off after the report that OpenAI’s losses are growing faster than its revenue.

Broadcom $AVGO and AMD $AMD took the worst of it.

Lower yields sent that money into value and rate-sensitive names instead.

Massimo Santicchia at Procyon said the value bid tells you the earnings cycle is still healthy.

NAB Markets Today Research extract

The key news overnight was a rally in longer-run rates. The US Treasury announced they would at least double buyback operations for longer-dated securities, buying some reprieve from the recent uptrend in yields.

That supported equity markets and drove the US dollar lower.

In other news, Moderna shares soared 177% after it and Merck reported positive results from a personalised cancer vaccine and the US delayed 50% tariffs on billions of dollars of Canadian products for three days, saying the two sides had reached a tentative agreement.

The US Treasury announced it will at least double the size of liquidity-support buybacks for securities in the 10- to 30-year sector to at least US$4bn per operation. The change is in place from 9 September, with more information about future buyback sizes coming at the next Quarterly Refunding on 4 November.

The larger operations are intended to provide greater liquidity support.

The buyback program has been targeted at improving liquidity in off-the-run bonds rather than directly lowering benchmark yields, although the timing of the announcement, just two weeks after the previous Quarterly Refunding Announcement and a couple of hours ahead of a 20yr auction, was taken as a signal that officials are alert to pressure in long-end borrowing costs.

While it hasn’t changed anything about the fundamentals, the announcement did sharply flatten the curve overnight. 30yrs were -10bp lower, 10yr yields -7bp lower, but 2yr yields near flat.

Moves in other global benchmark yields were more modest. German 10yr yields were little changed, although they did follow US yields lower intraday.

The July FOMC minutes showed several officials favoured a rate hike, while many said tightening would be needed if inflation failed to decline. That failed to deliver new hawkish news, and helped 2yr yields retrace earlier gains to be little changed over the past 24 hours.

After the recent run of softer data, markets price around a 1 in 3 chance of a September hike, down from around 70% at the end of July.

Markets are looking to Jackson Hole next week as a potential opportunity for more meaningful clarification around reaction function and framework. The minutes also showed Fed Chair Warsh raised the prospect of reducing the annual number of policy meetings from eight to six, though not this year.

Locally yesterday, WPI rose 3.2% y/y as expected. We don’t see wages growth as a particular driver of stubbornly elevated inflation outcomes, but cyclical conditions in the labour market are also doing little to offset broader inflationary dynamics.

Wages growth will also be supported by elevated administered outcomes, including the award wage increase which flows through next quarter, and some higher public sector agreements. That should keep the RBA cautious even as yesterday’s data was marginally below their August forecast.

RBA Deputy Governor Hauser also spoke yesterday, repeating Governor Bullock’s message at the August meeting.

He said the Board “concluded last week policy is in the right place right now” but also that if “upside risks to inflation crystallize and we don’t see inflation coming down, we’ll have to raise interest rates again, and we’ll do so.”

He highlighted the same three risks on inflation as Bullock (The Iran war, AI infrastructure investment, and stagnant productivity). The RBA’s policy approach continues to leave them with little buffer.

Market pricing was unbothered by the WPI data or Hauser, with around 12bp priced for November and 19bp by February.

UK CPI was near expectations.  Market pricing for the BoE was little changed, with 15bp priced by November, having pared back prior to the data from nearer 18bp following labour market data the prior day.

Oil was little changed, with Brent up 0.4% on the day at US$91.4, but still enough to reach its highest in 3 weeks. The UAE said it was cutting all economic ties with Tehran after accusing Iran of firing ballistic missiles at its territory.

The FT reported that Iran has weighed attacking US military targets in Europe if the war escalates.

Landing with some interest in the last couple of hours was an Axios report that the US has been operating a shipping corridor, citing officials claiming about 10mbbld of oil are being transported out of the Strait.

Diesel prices remain elevated relative to oil, with the US 1-month Nymex diesel crack spread topping US$100/bbl for the first time ever earlier this week.

Equity Outlook: A Constructive Case for Stocks, Andrew Simmon, Morgan Stanley Investment Management

There is one constant for managers of an equity portfolio: We’re always nervous about the future.

If our strategies are performing well, we worry that individual stocks are becoming too overbought and are due for a breather. If our returns lag, we worry about not meeting our investors’ expectations.

When we think that the behaviour of the overall stock market is “irrational,” we wonder whether we may be missing something. And if markets appear to behave “logically,” we worry it’s too obvious.

That’s where we are right now. It appears that the equity market is acting rationally. This behaviour suggests we could experience continued strong returns in the second half of 2026. But there’s reason for caution.

The case rests on three factors: rising 2027 earnings estimates, unrecognized strength in select sectors and improving earnings momentum outside the U.S.

Equity markets are forward-looking, pricing in future earnings rather than past results. Investors are now increasingly focused on 2027, where the earnings outlook remains constructive.

According to FactSet data, the consensus earnings-per-share (EPS) estimate for the S&P500 in 2027 has increased from approximately US$357 at the beginning of the year to US$406 most recently.

Those upward revisions have been regular from week to week. Since the start of 2025, Wall Street has been forced to increase its overall estimates for S&P500 earnings, as corporate results keep beating forecasts.

In my view, that pattern is likely to continue until evidence suggests otherwise.

If the current 2027 EPS estimate of US$406 rises further by the end of the year, applying a reasonable price-to-earnings multiple of 20x suggests the S&P500 could still have meaningful upside for the remainder of 2026.

Viewed through that lens, the market’s roughly 14% year-to-date advance appears supported by fundamentals.

While the outlook is constructive, there are always plenty of risks, and the path to higher valuations is unlikely to be linear.

The most significant risk, in my opinion, is Federal Reserve policy. Historically, equity markets have struggled when the Fed raises interest rates. Although a rate hike is not my base case, it would throw a wrench in my “logical” scenario.

In addition, markets also do not always respond immediately to improving fundamentals, as has been the case this year. Stock prices can take time to reflect stronger earnings. Though frustrating, that disconnect between fundamentals and share-price performance can create opportunities.

For example, the market has been narrowly focusing on risks for AI infrastructure companies, despite strong fundamentals.

My view is that investors who have become less optimistic about large technology companies –the so-called hyperscalers– are making a premature mistake.

Hyperscalers and large commercial banks are among the sectors that have delivered strong earnings growth and positive earnings revisions without seeing comparable stock price appreciation, a potential opportunity for investors.

Global developed-market equities outperformed U.S. equities in 2025. According to Bloomberg data, that has happened only three other times since the Global Financial Crisis, 2012, 2017 and 2022, and international markets could continue to perform well this year.

That said, I am not advocating for a wholesale shift away from U.S. equities. Instead, a diversified allocation that includes U.S., European and Asian stocks may outperform a portfolio invested solely in the U.S. market.

The reason, again, is earnings revisions. As equity managers, we are seeing certain opportunities outside the U.S., such as European bank stocks, where stock prices have been lagging EPS growth, resulting in lower P/Es and potentially a good point of entry.

The current equity rally appears broadly supported by improving earnings expectations rather than speculative enthusiasm alone.

While risks, including potential Fed policy changes, remain, the combination of rising earnings estimates, attractive opportunities among underappreciated sectors and a more balanced global allocation supports a constructive outlook for equities through the end of 2026.

For investors, the implication is not to abandon U.S. equities, but to broaden exposure toward companies and regions where earnings momentum may not yet be fully reflected in valuations.

Corporate news in Australia:

• Smartgroup ((SIQ)) withdraws from the FleetPartners ((FPR)) takeover auction, leaving SG Fleet ((SGF)), Orix and Element as the confirmed bidders
• Macquarie Asset Management ((MQG)) adds Goldman Sachs alongside UBS as it prepares a non-binding bid for the $25bn-plus Stack Infrastructure APAC data centre portfolio
• Natixis reportedly hires Barrenjoey to explore a potential sale of Australian funds manager Investors Mutual
• Anacacia Capital-backed Opteon agrees to acquire its Northern Inland NSW franchise
• Janus Henderson signs an NDA to conduct due diligence on Perpetual’s ((PPT)) asset management business, with particular interest in Barrow Hanley
• EQT acquires a majority stake in Melbourne Storm at a reported $200m valuation
• Medallion Metals ((MM8)) launches a $60m equity placement at $0.48 per share to institutional investors following a strong run in its share price
• Alex Waislitz invests $3m in ViewJobs through a new share issue, increasing his personal stake and diluting his joint holding with Antony Catalano
• Alphabet raises a record $5.5bn in its Australian bond debut after attracting $18bn in demand

On the calendar today:

-AU July Unemployment

-JP July Trade Bal

-US Aug Phil Fed

-GE July PPI

-GE July PPI

-AUSTRALIAN FINANCE GROUP LIMITED ((AFG)) FY26 earnings report

-AUCKLAND INTERNATIONAL AIRPORT LIMITED ((AIA)) FY26 earnings report

-AMP LIMITED ((AMP)) ex-div 3.00c (20%)

-APA GROUP ((APA)) FY26 earnings report

-BEGA CHEESE LIMITED ((BGA)) FY26 earnings report

-BRAMBLES LIMITED ((BXB)) FY26 earnings report

-CUSCAL LIMITED ((CCL)) FY26 earnings report

-CODAN LIMITED ((CDA)) FY26 earnings report

-CLEANAWAY WASTE MANAGEMENT LIMITED ((CWY)) FY26 earnings report

-DOWNER EDI LIMITED ((DOW)) FY26 earnings report

-DEXUS ((DXS)) FY26 earnings report

-ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED ((EOS)) FY26 earnings report

-EQT HOLDINGS LIMITED ((EQT)) FY26 earnings report

-FSA GROUP LIMITED ((FSA)) ex-div 3.50c (100%)

-GOODMAN GROUP ((GMG)) FY26 earnings report

-GWA GROUP LIMITED ((GWA)) ex-div 8.50c (100%)

-HELIA GROUP LIMITED ((HLI)) ex-div 16.00c (37%)

-HELIA GROUP LIMITED ((HLI)) ex-div 27.00c (37%)

-HARMONEY CORP LIMITED ((HMY)) FY26 earnings report

-IDP EDUCATION LIMITED ((IEL)) FY26 earnings report

-LARK DISTILLING CO. LIMITED ((LRK)) FY26 earnings report

-MLG OZ LIMITED ((MLG)) Fy26 earnings report

-MEGAPORT LIMITED ((MP1)) FY26 earnings report

-MEDIBANK PRIVATE LIMITED ((MPL)) FY26 earnings report

-MAXIPARTS LIMITED ((MXI)) FY26 earnings report

-NORTHERN STAR RESOURCES LIMITED ((NST)) FY26 earnings report

-OBJECTIVE CORPORATION LIMITED ((OCL)) FY26 earnings report

-REDOX LIMITED ((RDX)) FY26 earnings report

-RIDLEY CORPORATION LIMITED ((RIC)) FY26 earnings report

-ST. BARBARA LIMITED ((SBM)) FY26 earnings report

-SONIC HEALTHCARE LIMITED ((SHL)) FY26 earnings report

-SKYCITY ENTERTAINMENT GROUP LIMITED ((SKC)) FY26 earnings report

-SPARK NEW ZEALAND LIMITED ((SPK)) FY26 earnings report

-SUPER RETAIL GROUP LIMITED ((SUL)) FY26 earnings report

-TELIX PHARMACEUTICALS LIMITED ((TLX)) FY26 earnings report

-UNIVERSAL STORE HOLDINGS LIMITED ((UNI)) FY26 earnings report

-VICINITY CENTRES ((VCX)) FY26 earnings report

-VEEM LIMITED ((VEE)) FY26 earnings report

-WEB TRAVEL GROUP LIMITED ((WEB)) AGM

-ZIP CO LIMITED ((ZIP)) 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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