The Overnight Report: Not So Fast

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

Despite Treasury Secretary Bessent's bond buying program announcement on Wednesday, US Treasury yields rose on higher oil prices, and equity markets retreated.

The Australian market rallied on one of the biggest days for the August reporting season, led by Materials.

Below the surface, however, polarisation remains. Outside of direct responses to result updates, many share prices cannot find any sustainable momentum.

ASX200 futures are pointing to a weaker start for this week's final session.

Good Morning,

The Australian market moved higher on Thursday, breaking a six session losing pattern. The ASX200 rose 30 points or 0.3% to 9,084.

Miners lifted 3.5% and Tech rallied, offset by ongoing weakness in Financials, down -1.9%. 

On the calendar today are result releases for Charter Hall ((CHC)), Digico Infrastructure REIT ((DGT)), GQG Partners ((GQG)), and many more.

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/

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’s Bond Relief Lasted One Day

Treasury said yesterday it would at least double the amount of long-dated debt it buys back, and yields dropped. By this morning they were back up.

Buying back old bonds doesn’t reduce the new debt Treasury has to sell every month, and that supply is what’s pushing rates up.

It matters outside Wall Street too. Mortgage and auto loan rates are priced off the 10-year, so when it climbs, so does the cost of a house or a car.

Oil Higher As Trump Tightens Iran Sanctions

Brent traded above US$93 and US crude above US$86 after Trump promised the toughest economic campaign ever aimed at a single country.

The United Arab Emirates suspended trade with Tehran, and Bessent said the sanctions coming will be the strongest on record.

The Strait of Hormuz is still the piece that matters most, because it decides how much crude actually reaches buyers.

Walmart Beat, And Shoppers Got Choosier

Walmart $WMT came in ahead on revenue and earnings, then had its worst day since May 2022 on its slowest US store sales growth in more than six years.

Finance chief John David Rainey said customers were making “choices between necessities” because of where gas prices are.

Target reported improving sales that same week.

The money is still getting spent, it’s just landing in fewer places.

ANZ Bank Australian Morning Focus extract

The S&P500 was down -0.9%. The EuroStoxx50 ended its session down -0.3% while the FTSE100 gained 0.1%.

The yield on the US 10y note rose around 5.9bp to 4.71%.

WTI lifted 2.1% to US$87.8/bbl. Gold was stronger at US$4,518.5/oz.

US Initial jobless claims fell -6k to 206k, in the week ended 15 August, covering the survey week for nonfarm payrolls. In July, initial jobless claims were 189k during the nonfarm payrolls survey week.

Following a brief reprieve on the back of the US Treasury’s surprise announcement of increasing its buyback operations for longer dated securities, US bond yields resumed their advance, largely wiping out yesterday’s fall.

The yield on the 30y Treasury bond rose over 7bp to 5.26%, before paring some of its rise. The recent rise in yields serves as a reminder of the current unsustainable path of fiscal policy.

Comments from Treasury Secretary Bessent today were encouraging, signalling fiscal announcements to come with an increased focus on fiscal consolidation.

In the first 10 months of FY26, the federal deficit, at US$1.8trn, has already eclipsed FY25’s deficit. More than half is interest repayments.

The primary deficit has also resumed widening, partly reflecting tariff rebates being paid out following the Supreme Court’s ruling earlier in the year.

Measures such as increased T-bill issuance may help to contain funding pressures in the short run, but fiscal consolidation is ultimately required.

In the long run, credible monetary policy requires credible fiscal policy.

RBC Capital, Midterms On Our Mind, Lori Calvasina extract

As noted in our last Pulse report, midterm elections were one of the topics in focus on our recent trip to see investors in Australia, and have regularly come up throughout the past year in discussions of risks to the outlook.

And so, upon our return, we spent some additional time looking at the past two midterm election years in terms of 2nd-half equity market performance and the sector playbook around the event.

In terms of second-half performance for the broader market, conditions were choppy in the back half of both years, a contrast to the last two presidential election years when stocks rose.

Both 2H18 and 2H22 saw the S&P500 peak in the early fall (August or September), trough in October, peak in November, and trough again in December. Moves were significant.

The good news was that these periods of volatility helped to usher in more durable lows that would hold into the new year.

Note, in both years, the election was just one thing relevant to stock market performance in the mix. Fed/interest rate concerns were present in both years, while trade policy also factored into 2018, and a Tech earnings recession impacted 2022 along with the Russia/Ukraine war.

In terms of the sector playbook, the sectors that outperformed during both drawdowns in both second halves were Consumer Staples and Health Care, while Technology and Consumer Discretionary underperformed.

During each of the rebounds, Financials, Industrials, and Materials outperformed, while Communication Services, Consumer Staples, and Health Care underperformed. 

To be clear, we are not calling for this kind of turbulence in the months ahead, but we did find the exercise useful for thinking through tail risks, particularly regarding the timing of inflections.

Quick Hits: What Else Jumps Out

• Factor fluctuations. Within both the S&P500 and Russell2000, our high price momentum factor has started to outperform again in recent trading (captured as of Monday’s close), while our EPS quality factor has underperformed. 
• What we read the past week and a half as 2Q26 reporting season winds down. On the broader macro, companies described a dynamic and challenging backdrop, citing geopolitical risk, inflation pressures, supply chain challenges, and low housing turnover, while also citing strength in AI, energy, manufacturing, and reshoring-related end markets. On the consumer, one home improvement company stood out for its detailed description of how the consumer was cautious due to fuel, geopolitics, and other uncertainties. Value-seeking behavior and weakness in demand for big-ticket purchases were highlighted. IEEPA tariff refunds remained a point of discussion, with companies highlighting how they lowered COGS, offset other unplanned costs (i.e., fuel and transportation), or how the benefits were one-off in nature. On AI, we continued to focus on comments from non-Tech companies on their use cases. In that context, one theme that stood out to us was how some consumer companies were using the technology to enhance the consumer experience. Productivity impacts remained in focus. One Tech company stood out for highlighting how its customers were reprioritizing existing budgets.
• Tracking animal spirits. Given headlines around IPO activity, we took a fresh look at the relationship between US IPO activity over time and stock market performance. Looking at the number of deal counts specifically, we found that the stock market tends to go up while deal counts are elevated, it’s when the activity stops that the stock market tends to have a problem. 
• Valuations are fine. Given the angst that returned to financial markets this week, we think this is an important point to take note of.  The forward P/Es of the S&P500 and Nasdaq100 are sitting in the middle of their post-COVID range, and this is also the case for the biggest market cap names in the S&P500. Meanwhile, the Russell2000’s forward P/Es are sitting around average levels. August has been a down month in 4 of the past 10 years for the S&P500, while September has been down in 5 of the past 10 years. If a pullback does occur, we suspect it won’t take too long for valuations to get back down to the low end of their post-COVID range.

Looking For An Update On Our Latest US Equity Market Outlook?

• We remain constructive on the S&P500 in the year ahead, noting that the interest rate backdrop is the biggest risk to our view. While we haven’t expected and still don’t expect the path to be linear, we anticipate pullbacks will be contained in the -5%-10% range unless risk of a recession and/or interest rate shock ramps up. We are not calling for a near-term pullback but would not be surprised to see the stock market rally take a breather soon. 
• On positioning, we continue to believe the major rotation trades are caught in a tug of war. Following the burst of US and Growth leadership we saw in the first half of August, we give Growth and the US a slightly greater edge over Value and non-US than we did several weeks ago. In the case of Growth vs. Value, our Growth bias is driven by the ongoing strength of the earnings story in the AI theme. In the case of US/non-US, our US bias is driven by the attractive valuation reading in the US relative to non-US that has returned in our latest update.

Corporate news in Australia:

• Advent International agrees to acquire a majority stake in New Zealand clinical trials provider NZCR at a valuation of around $1bn
• GenusPlus Group ((GNP)) joins the roughly $1bn auction for Programmed, competing with Service Stream ((SSM)), EQT, PEP and Carlyle
• Non-bank lender Thinktank, 32% owned by Australian Finance Group ((AFG)), is up for sale, with UBS hired to run the process amid consolidation in Australia’s non-bank lending sector
• Morrison is reportedly preparing to abandon its pursuit of a minority stake in Singtel-owned Optus 
• Healthscope’s lender vote is delayed as a Calvary-led bid competes with a not-for-profit proposal
• MA Financial Group ((MAF)) considers fresh funding as its mortgage book surges 127% to $7.5bn
• Straight Bat’s $389m private equity fund is struggling as portfolio investments underperform

On the calendar today:

-NZ Jul Trade Bal

-AU Aug PMI (prelim)

-JP Aug PMI (prelim)

-JP July CPI

-EZ Aug PMI (prelim)

-UK July Retail sales, Aug PMI (prelim)

-US Aug PMI (prelim)

-XX Global PMIs

-CA June Retail sales

-CA June Retail sales

-GE 2Q GDP (final)

-GE Aug PMI (prelim), 2Q GDP (final)

-AIC MINES LIMITED ((A1M)) FY26 earnings report

-ASX LIMITED ((ASX)) ex-div 104.70c (100%)

-COAST ENTERTAINMENT HOLDINGS LIMITED ((CEH)) FY26 earnings report

-COGSTATE LIMITED ((CGS)) ex-div 4.00c (100%)

-CHARTER HALL GROUP ((CHC)) FY26 earnings report

-COCHLEAR LIMITED ((COH)) ex-div 130.00c (85%)

-DIGICO INFRASTRUCTURE REIT ((DGT)) earnings report

-GQG PARTNERS INC ((GQG)) 1H2026 earnings report

-GUZMAN Y GOMEZ LIMITED ((GYG)) FY26 earnings report

-INGHAMS GROUP LIMITED ((ING)) FY26 earnings report

-JAMES HARDIE INDUSTRIES PLC ((JHX)) AGM

-LIFESTYLE COMMUNITIES LIMITED ((LIC)) FY26 earnings report

-LENDLEASE GROUP ((LLC)) ex-div 9.55c

-NRW HOLDINGS LIMITED ((NWH)) FY26 earnings report

-PREDICTIVE DISCOVERY LIMITED ((PDI)) AGM

-TPG TELECOM LIMITED ((TPG)) 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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(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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