The Overnight Report: July CPI Data Awaits

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

US markets rallied as oil prices eased on renewed hope of an easing in Middle East tensions.

Nvidia reports earnings after the close on Wednesday (EST).

The Australian market rallied for a second straight session, with BHP Group shares hitting another record high. 

ASX200 futures are pointing to a positive start ahead of the July CPI data at 11.30am (AEST).

Good Morning,

The Australian market rallied 62 points ot 0.7% to 9,1655. Technology moved higher by 2.3% and BHP Group ((BHP)) shares kept on rallying.

August reporting season moves into the final stages. Check out the the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

On the calendar today are some investor favourites such as Lovisa Holdings ((LOV)), WiseTech Global ((WTC)) and Woolworths Group ((WOW)).

Citi’s afterthought following yesterday’s market update by Abacus Group ((ABG)):

“ABG’s FY26 FFO of 9.08cps came in marginally ahead of estimates — However FY27 guidance encompasses a large reset of the business. Distribution guidance of 6.70cps and FFO guidance of 7.4–8.4cps reflect higher debt costs (~5.25% WACD in FY27 vs. 4.5% in FY26) and the loss of SKG management fee income post-internalisation.

“NTA declined 7.6% to $1.59ps. At the current price of ~$0.89, ABG trades at a ~44% discount to NTA — one of the widest in the sector and, in our view for a portfolio delivering +5.5% office and +8.4% retail leasing spreads.

“The strategic direction — Simplify, Strengthen, Grow — with >$150m in funding capacity and 81% of debt hedged. We maintain our Buy rating and see the current dislocation as a compelling entry point. ABG is a potential takeover candidate in our view given its large discount to NTA vs peers.”

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

Consumers Feel Better About Now And Worse About Later

Every month the Conference Board asks Americans how the economy feels right now and how they think it will feel in six months.

The right-now answer improved for the first time in three months, mostly because the job market looks steadier than it did in the spring.

The six-month answer went the other way, down to 68.2, which pulled the headline reading to 89.4.

New home sales were light too, at an annual pace of 607,000 in July against the 620,000 expected.

Dick’s Cuts Its Outlook And Sneakers Take The Hit

Dick’s Sporting Goods $DKS lowered full-year profit guidance to US$10.94 to US$11.94 a share from US$13.27 to US$14.27, on sales of US$5.59 billion against the US$5.65 billion expected.

The weak spot is Foot Locker, which Dick’s bought last fall, where older sneaker models are sitting unsold and rivals are cutting prices to clear them.

Nike, Lululemon and Under Armour fell alongside it.

Bitcoin Tops US$80,000 And Gold Sets Up Its Best Month Since 1999

Bitcoin traded above US$80k for the first time since May. Gold reached a three-month high near US$4,677 and is on pace for its strongest month in twenty-seven years.

Both moves come back to the same decision, the Treasury doubling its buybacks of long-dated bonds to hold yields down.

Stanley Druckenmiller, who Scott Bessent once worked for, wrote in the Journal that the plan is a mistake, because cheaper borrowing lets Washington keep putting off a debt that just passed US$40 trillion.

ANZ Bank, Australian Morning Focus

Equity markets were modestly higher, while bond yields followed oil lower on reduced fears of escalation in the Middle East. 

The S&P500 was up 0.3%, the EuroStoxx50 rose 0.1% and the FTSE100 rose 0.3%. 

The US 10-year Treasury yield fell -8bp to 4.62%. WTI eased to US$81.2/bbl and gold rose to US$4,662/oz.

US consumer confidence. Conference Board consumer confidence declined 0.8pts to 89.4 in August, the lowest in seven months. The decline in the headline index reflected a fall in the forward-looking expectations component, down 5.8pts to 68.2.

Expectations regarding future business conditions, the labour market and household income all deteriorated. In contrast, the present situation index rose 6.8pts to 121.2, reflecting a decent improvement in perceptions of current labour market conditions.

The number of consumers reporting jobs as plentiful rose 2.6ppt to 27%, while the number reporting jobs as hard to get eased 2.2ppt to 19.5%.

Australian CPI. We expect trimmed mean inflation to have lifted 0.34% m/m in July. This would see annual growth moderate to 3.5% y/y (consensus is also at 3.5% y/y).

Headline inflation is likely to have risen 0.8% m/m, with annual growth easing to 3.2% y/y (consensus is at 3.3% y/y). Recent RBA communication, including in yesterday’s minutes, has focused on upside inflation risks.

If trimmed mean inflation prints in line with our expectations, the November RBA meeting will be live.

Euro area. After survey data pointed to weakness in March in the early stages of the Middle East conflict, the hard data for Q2 have revealed a more resilient picture for Europe’s economy.

The flash estimate of euro area GDP in Q2 (up 0.4% q/q), released a few weeks ago, had already exceeded expectations.

Overnight, the second read of German GDP for Q2 was revised up 0.1ppt to 0.3% q/q.

On an annual basis, the economy expanded 1.0% y/y, the fastest pace since 2023. The euro area’s largest economy has been the bellwether for European growth concerns in recent years, owing to structurally higher energy prices following the war in Ukraine, weakening demand from China for its exports and increasing competition from China in sectors it has historically dominated.

Structural headwinds to growth remain, but the relative resilience through the current energy shock is encouraging.

For the ECB, resilient growth will strengthen its resolve to raise interest rates. We continue to expect the ECB to deliver a 25bp hike at its meeting in September, but that this will mark the end of the current tightening cycle.

Macro Talking Point, Benoit Anne, MFS Investment Management, extract

Getting the wrong end of the stick. Or the yield curve rather.

The US authorities appear increasingly concerned about the elevated level of long-end UST yields and therefore decided to engage in some surprise yield curve interventionism last week.

Technically, the US Treasury carried out an expansion of the buy-back operations at the long end of the curve, with an amount that was doubled relative to the regular volume (note that this was not QE, as there was no net reduction in Treasury supply).

Here lies the problem. More often than not, market interventions –be it in FX markets or elsewhere– may have limited effectiveness. The simple reason is that interventions typically do little in terms of addressing the fundamental market drivers that caused the “undesirable” market moves in the first place.

In short, it is just a band-aid approach.

There are many reasons why UST long-end yields have been creeping higher. For a start, the recent shift in the Fed’s communication (or lack thereof) seems to have contributed to higher policy uncertainty, and in turn caused a pickup in rate volatility and the overall term premium.

Broader concerns over the US policy framework and fiscal policy issues have also caused the risk premium to rise. Finally, the robust macro backdrop does not support a sharp decline in market rates.

This all means that long-end rates are unlikely to move much lower, in our view. Indeed, the US curve has been steepening for the wrong reasons, which, in our view, supports a cautious stance toward long-duration exposures.

Meanwhile, the USD, playing out as a release valve, appears to be one of the most vulnerable assets to the potential erosion in US policy credibility. On this basis, global diversification across currencies and regions may help broaden sources of risk exposure.

When do higher yields become a problem for stocks? 

Investors want a precise yield level, but markets rarely break on cue. The better question is whether higher rates are already changing behavior. So far, the answer is no.

Equities have absorbed rising yields without broad credit stress or a clear rotation into defensives. Banks are still participating, and bonds do not yet look attractive enough to pull capital decisively away from stocks.

What matters is not just the level of yields, but how they feed through the economy.

This cycle is not only about monetary tightening. It is also about real-economy demand for capital. AI infrastructure, power, reshoring and defense require physical investment. Much of that spending is strategic, policy-supported or funded by cash-rich companies, making it less rate-sensitive than housing, autos or weaker borrowers.

The market may be shifting from a low-rate, capital-harvesting world to a higher-rate, capital-planting one. That does not make the economy immune.

The pressure is uneven. Housing, autos, consumer credit and weaker balance sheets remain exposed. Employment and wealth effects are still supporting demand, but affordability is tightening.

Tariffs, energy and compute costs could also keep inflation sticky, limiting how quickly slower growth translates into lower rates. The key signals are behavioral: funding costs, credit availability, equity leadership and capex plans.

If companies keep investing, lenders keep lending and leadership does not retreat into defensives, equities can absorb higher yields. If financing tightens and management teams start delaying projects or cutting guidance, yields have become a market problem.

The real question is no longer “what yield breaks the market?” but “which companies can still create value when capital is no longer free?” (Contribution from Ross Cartwright) 

From AI momentum to monetization.

July’s equity momentum unwind may have marked a transition, not a turning point. The sell-off challenged the idea that AI winners could keep outperforming regardless of valuation, positioning or the macro backdrop.

Semiconductors, data centers and AI infrastructure bore the brunt as crowded trades unwound. Yet the correction looked more like a reset in valuations and positioning than a break in the AI investment case.

The bigger question is what comes next. The first phase rewarded the suppliers of chips, compute capacity and physical infrastructure. The next phase may reward companies that can turn AI investment into revenues, productivity gains and earnings growth.

Markets have recovered some of July’s losses, but the rebound has been selective. Investors are beginning to look across the AI value chain rather than simply chasing the buildout trade.

During the correction, software applications held up better while hardware and data-center infrastructure suffered some of the steepest declines.

Some of that reflected a rebound from earlier software underperformance, helped by Microsoft’s 29% gain. But even excluding Microsoft, the equal-weighted return of the remaining S&P 500 software constituents was still around 14%.

 It is too early to call a durable leadership rotation. But the divergence suggests investors are starting to differentiate more sharply between AI infrastructure providers and AI adopters.

As the cycle matures, the opportunity may extend beyond the crowded winners of the buildout.

Active management and security selection may help identify where adoption is translating into earnings, while diversification across the value chain can reduce reliance on any single part of the AI ecosystem.

If the first phase rewarded AI investment, the next may reward AI monetization (Contribution from Karis Burrell).

Corporate news in Australia:

• Radiology Partners agrees to acquire Australian-founded Everlight Radiology for around $1bn, delivering a major exit for Livingbridge
• Iris Capital, owned by Sydney billionaire Sam Arnaout, has emerged as the mystery second bidder for SkyCity Entertainment ((SKC)), alongside Oaktree Capital
• Bupa has tapped Morgan Stanley and Jarden to pursue a $2bn-plus sale of its A&NZ aged care businesses
• Eureka Pet Co is seeking a buyer for a minority stake valued at up to $40m, with private equity firms including L Catterton reportedly circling
• Coles Group ((COL)) has fuelled speculation it could revive its $4bn-plus pursuit of TPG-owned Greencross after signalling an appetite for acquisitions in key adjacent markets
• GenusPlus Group ((GNP)) appears unlikely to pursue the potential $1bn acquisition of Persol-owned Programmed, leaving private equity firms EQT, Pacific Equity Partners and Carlyle as leading contenders
• Service Stream ((SSM)) remains interested in Programmed’s maintenance arm rather than the labour-hire business, while GenusPlus’ apparent withdrawal could improve the position of private equity bidders
• Viva Energy Group ((VEA)) has indicated it will not pursue large-scale M&A, which is being interpreted as a sign it may have stepped back from a potential acquisition of ExxonMobil’s New Zealand service stations
• Tokio Marine is reportedly considering a potential acquisition of Suncorp Group ((SUN)) in what could become the Japanese insurer’s largest-ever acquisition
• Powerhaus Uranium ((PHU)) has raised $9m through its ASX IPO and will begin exploration at the Central Malbec uranium project in Argentina ahead of planned drilling in October
• Prescient Therapeutics ((PTX)) has launched a share purchase plan seeking up to $7m to advance its PTX-100 cancer treatment
• WAM Income Maximiser ((WMX)) has raised $172.4m at $1.62 per share through its combined capital raising
• Salter Brothers is backing online investing platform Superhero in a $30m capital raising at a $186m valuation
• MA Financial Group ((MAF)) has temporarily capped monthly redemptions from its $2.3bn MA Secured Real Estate Income Fund at 1%
• 360 Capital Group has placed its Mortgage REIT into a trading halt pending an announcement regarding its exposure to collapsed property developer Bathla Group

On the calendar today:

-AU 2Q Construction work done

-AU July CPI

-JP July PPI services

-US 2Q GDP (second estimate)

-US July Durable goods orders (prelim)

-US July PCE

-US July Personal income & spending

-AUSTRALIAN CLINICAL LABS LIMITED ((ACL)) FY26 earnings report

-ALKANE RESOURCES LIMITED ((ALK)) 3QFY26 earnings report

-AIRTASKER LIMITED ((ART)) FY26 earnings report

-ATTURRA LIMITED ((ATA)) FY26 earnings report

-ACCENT GROUP LIMITED ((AX1)) ex-div 1.25c (100%)

-BELL FINANCIAL GROUP LIMITED ((BFG)) ex-div 5.00c (100%)

-BSP FINANCIAL GROUP LIMITED ((BFL)) ex-div 13.94c

-CATAPULT SPORTS LIMITED ((CAT)) FY26 earnings report

-CHAMPION IRON LIMITED ((CIA)) FY26 earnings report

-COG FINANCIAL SERVICES LIMITED ((COG)) FY26 earnings report

-DOMINO’S PIZZA ENTERPRISES LIMITED ((DMP)) FY26 earnings report

-FLIGHT CENTRE TRAVEL GROUP LIMITED ((FLT)) FY26 earnings report

-GQG PARTNERS INC ((GQG)) ex-div 3.56c

-HMC CAPITAL LIMITED ((HMC)) FY26 earnings report

-LOVISA HOLDINGS LIMITED ((LOV)) FY26 earnings report

-MAXIPARTS LIMITED ((MXI)) ex-div 5.46c (100%)

-MASTERMYNE GROUP LIMITED ((MYE)) FY26 earnings report

-NINE ENTERTAINMENT CO. HOLDINGS LIMITED ((NEC)) FY26 earnings report

-NETWEALTH GROUP LIMITED ((NWL)) FY26 earnings report

-NEXTED GROUP LIMITED ((NXD)) FY26 earnings report

-OOH!MEDIA LIMITED ((OML)) ex-div 2.00c (100%)

-PALADIN ENERGY LIMITED ((PDN)) FY26 earnings report

-PARAGON CARE LIMITED ((PGC)) FY26 earnings report

-POLYNOVO LIMITED ((PNV)) FY26 earnings report

-READYTECH HOLDINGS LIMITED ((RDY)) FY26 earnings report

-REGAL PARTNERS GLOBAL INVESTMENTS LIMITED ((RG1)) ex-div 5.00c (100%)

-STEADFAST GROUP LIMITED ((SDF)) FY26 earnings report

-SANDFIRE RESOURCES LIMITED ((SFR)) FY26 earnings report

-TABCORP HOLDINGS LIMITED ((TAH)) FY26 earnings report

-LOTTERY CORPORATION LIMITED ((TLC)) ex-div 8.50c (100%)

-TELSTRA GROUP LIMITED ((TLS)) ex-div 10.50c (90%)

-WEST AFRICAN RESOURCES LIMITED ((WAF)) 1H26 earnings report

-WORLEY LIMITED ((WOR)) FY26 earnings report

-WOOLWORTHS GROUP LIMITED ((WOW)) FY26 earnings report

-WISETECH GLOBAL LIMITED ((WTC)) 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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