The Overnight Report: Tricky September Ahead

Array
(
    [0] => Array
        (
            [0] => ((CVN))
            [1] => ((NXG))
            [2] => ((S32))
            [3] => ((BC8))
            [4] => ((WEC))
            [5] => ((4DS))
            [6] => ((CAY))
            [7] => ((ANZ))
            [8] => ((JDO))
            [9] => ((A1N))
            [10] => ((ASB))
            [11] => ((ASL))
            [12] => ((LNW))
            [13] => ((MFG))
            [14] => ((BEN))
            [15] => ((CDA))
            [16] => ((CVN))
            [17] => ((DMP))
            [18] => ((EDV))
            [19] => ((EPY))
            [20] => ((FMG))
            [21] => ((GLS))
            [22] => ((HLO))
            [23] => ((HMC))
            [24] => ((KIT))
            [25] => ((L1G))
            [26] => ((LF1))
            [27] => ((LSF))
            [28] => ((MFG))
            [29] => ((NXG))
            [30] => ((PCX))
            [31] => ((PFP))
            [32] => ((SGI))
            [33] => ((WES))
            [34] => ((WOR))
            [35] => ((WOW))
        )

    [1] => Array
        (
            [0] => CVN
            [1] => NXG
            [2] => S32
            [3] => BC8
            [4] => WEC
            [5] => 4DS
            [6] => CAY
            [7] => ANZ
            [8] => JDO
            [9] => A1N
            [10] => ASB
            [11] => ASL
            [12] => LNW
            [13] => MFG
            [14] => BEN
            [15] => CDA
            [16] => CVN
            [17] => DMP
            [18] => EDV
            [19] => EPY
            [20] => FMG
            [21] => GLS
            [22] => HLO
            [23] => HMC
            [24] => KIT
            [25] => L1G
            [26] => LF1
            [27] => LSF
            [28] => MFG
            [29] => NXG
            [30] => PCX
            [31] => PFP
            [32] => SGI
            [33] => WES
            [34] => WOR
            [35] => WOW
        )

)

This story features WHITE ENERGY COMPANY LIMITED, and other companies.
For more info SHARE ANALYSIS: WEC

The S&P500 had its best August performance in five years, despite Monday's weaker trading, as the oil price ticked higher on US strikes on Iran. The S&P500 rose 2.6% and the Nasdaq 3.9%.

September is historically the weakest month for stocks, and on average the S&P500 falls -1.1%.

The Australian market eased on Monday but clocked up a 1% gain in August.

ASX200 futures are pointing to a weaker start on Tuesday.

Good Morning,

For the final day of trade to the August reporting season, the ASX200 slippped -16 points of -0.2% to 9,076. Banks gained 1.1% and Miners retreated -2%. 

The market rose circa 1% in August, for the fifth consecutive monthly gain. 

While the calendar has had its run, in terms of corporate releases, there’s still plenty of research to re-assesses and re-evaluate.

Carnarvon Energy ((CVN)) is scheduled to release FY26 financials and NexGen Energy ((NXG)) is talking to analysts and institutional investors.

Citi on South32 ((S32)):

“S32 delivered a strong FY26, with EBITDA of US$2,462m (+28% YoY), a 31% margin, and FCF of US$610m (+136% YoY). Divesting its aluminium value chain to Alcoa makes S32 a more pure base metals play led by copper/zinc, with pro-forma net cash of ~US$3.5bn.

“Since the deal was announced, the market has recognized the improved portfolio mix, re-rating S32 from ~5.5x to ~7.2x EV/EBITDA on Bloomberg consensus, helped by greater copper/zinc exposure, a stronger balance sheet, and clearer growth.

“Sierra Gorda’s 4th grinding line is JV-funded via debt, not affecting distributions. However, FY27 looks weaker on higher Cannington costs (+11% to US$205/t) and lower manganese volumes (-8%), leading us to cut our FY27 EBITDA estimate by -8% to US$2.7bn.

“We raise our target multiple to 7.5x EV/EBITDA (from 6.0x); the stock trades at 5.9x our FY27 estimate. We reiterate Buy, new TP A$6.00/sh and £3.20/sh (from A$5.30/sh and £2.80/sh).”

Moelis on Black Cat Syndicate ((BC8)):

“BC8 has published its FY26 results. While NPAT was softer than our estimates, this was driven by lower revenue (not a common source of discrepancy), while remaining expense items on the P&L were generally in line. Operating cashflow was softer, however, this was offset by lower capital (investing) cashflow suggesting an allocation issue on our part. 

“More importantly, however, the FY result was not accompanied by FY27 outlook commentary as previously flagged. There are numerous potential drivers for the delay – now instead due “by the end of September” – which may present a near-term overhang on the stock due to its absence.”

To stay in touch with which companies are going ex-dividend, 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

Traders now expect a hike, not a cut

Odds of a September rate hike sit near two in three. They were about six in ten right after Kevin Warsh spoke at Jackson Hole on Friday.

Warsh said this summer’s better inflation readings do not tell him the underlying trend has improved.

That single line is the whole September argument.

Oil is back above US$90

U.S. forces struck two Iranian rocket launchers on Larak Island Sunday, the first acknowledged strike since late July.

Iranian state media said Tehran fired back at U.S. bases in Jordan.

Brent crossed US$90 and energy was the only S&P sector to finish the day higher.

Tom Hainlin at U.S. Bank says US$80 to US$90 oil is liveable and puts the real pain threshold at US$100.

California utilities lose their legal shield

State lawmakers rejected Governor Gavin Newsom’s plan to stop insurers from suing utilities over wildfire claims.

Edison International $EIX had its worst day since 2001. PG&E $PCG had its worst since the Covid selloff in March 2020.

BMO cut PG&E to hold with a US$21 target, and now assumes uncapped wildfire liability after 2030.

ANZ Bank, Australian Morning Focus

Oil prices and bond yields rose and equities fell as conflict in the Middle East escalated.

The S&P500 was down -0.33%%, the Dow Jones down- 0.7% and the Nasdaq down -0.12%.

The EuroStoxx50 was down -1%.

The yield on the US 10y Treasury note rose 3.6bp to 4.75%. Active WTI futures were up 2.9% to US$85.8/bbl, and Brent lifted above US$90/bbl. Gold fell -0.5% to US$4,433.8/oz.

Middle East conflict. The US and Iran exchanged strikes for the first time in around a month, with US forces targeting Iranian missile launchers on Larak Island, alleging that IRGC personnel were preparing to deploy sea mines.

Iran responded with missile and drone attacks on US bases in Jordan. The UAE intercepted a drone approaching from Iran. The exchange follows Washington’s recent shift towards intensifying economic pressure on Iran, with US Treasury Secretary Bessent pledging an “economic onslaught” against Iran and its trading partners.

The Dallas Fed manufacturing survey beat expectations by a decent margin in August, with the headline index rising to 11.6 from 1.3, well above the consensus forecast of 1.6. Production, new orders, capacity utilisation and shipments all strengthened, pointing to firmer manufacturing momentum.

The six-month outlook also improved sharply to 37.2 from 26.5. While employment softened slightly, it remained positive. Input cost pressures stayed elevated, suggesting inflation risks persist.

Australian GDP upside. Following yesterday’s Q2 business indicators release, we are left with some upside risk to our Q2 GDP growth forecast of 0.4% q/q. We’ll finalise the forecast once the final GDP partial indicators (net exports, terms of trade and public demand) are released.

Signs of credit moderation. The pace of Australia’s private sector credit growth moderated to 0.6% m/m in July from 0.8% m/m in June. There was a broad-based slowdown in monthly business, personal and housing credit growth.

Notably, investor housing credit growth eased -0.3ppt in July to 0.5% m/m, suggesting the pullback in investor activity may be starting to flow through to the credit data.

From the US Market Desk: Now…We Wait, Rick Poisinello, 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 year-over-year (Y/Y) earnings-per-share (EPS) growth. The second-quarter (Q2) earnings season is now over.

Nvidia reported quarterly results this week, and they were eye-opening. The company not only posted another record quarter, which easily beat expectations, but its forward guidance was incredibly strong, with revenues expected to grow 70% in fiscal year 2028.

All in, earnings power has been very strong in the first six months of the year. Consensus expectations for 2026 are now about 25% Y/Y and, for 2027, consensus earnings estimates show growth of nearly 15% versus 2026.

Bloomberg reports that in Q2, 25 firms in the S&P500 Index quantified the use of artificial intelligence (AI) on their income statements, saying that, on average, they have seen 180bps of margin growth.

This is the first inning of hearing about AI’s impact, I suspect. Meaning, going forward, I’d expect to hear more companies quantify the impact of AI on their businesses.

Accretive to margins is bullish.

If we assume the consensus earnings estimates are reasonably correct, that puts the tape at 21x this year’s earnings and 19x 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 19x forward multiple is crazy rich either.

If bond yields move significantly higher, that could change and become a risk. It’s unclear how Bessent might react if this happens.

Here’s the next thing I’m thinking about: the concept of the peak rate of change in earnings growth. Not peak earnings power in dollars, but the peak rate of change Y/Y.

Just looking at consensus estimates for the S&P500 out to 2028, the data says 2026 is the peak Y/Y rate of change.

If this is accurate, I’d expect a higher level of volatility going forward.

The tape is recognising broad fundamental strength. Consider this: the cap-weighted S&P500 Index is up 12.95% year-to-date (YTD) through August 26, and the S&P500 Equal Weight Index is up 17.04%.

The S&P400MidCap Index is up 16.60% and its equal-weighted version is up 15.61%. The Russell2000 Index is up 22.13% and its equal-weighted version is up 20.99%.

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 favour buying on pullbacks.

Midterm Election Years: Volatile, but Potentially Opportunity-Rich, Chris Galipeau, Franklin Templeton extract

Extreme dispersion does not necessarily end bull markets. More often, it changes their character. Leadership becomes narrower, volatility increases, and stock selection matters more than broad market exposure.

History shows that elevated market volatility has accompanied the second half of US midterm election years. Drawdowns can be uncomfortable, even when the underlying economic and earnings backdrop remains healthy.

Importantly, that same volatility has often created attractive long-term buying opportunities. Investors who added exposure during periods of peak uncertainty have historically been rewarded, with equities delivering average one-year forward returns of approximately 32% following midterm market lows.

One of the strongest historical patterns in the four-year US presidential cycle has been to add equity exposure during periods of peak uncertainty in midterm election years.

In our historical sample, doing so has been followed by positive equity returns over the subsequent six-, nine- and 12-month horizons, with a hit ratio approaching 100%.

Conclusion

The broadening bull market remains intact, in our view. Earnings continue to provide fundamental support, and global participation remains exceptionally strong.

But after a powerful advance, we think the combination of higher valuations in parts of the market, tighter monetary conditions and increasing market dispersion argues for greater discipline.

This is a call to maintain discipline. Stay invested, diversified and, if history is any guide, buy the pullback.

The next phase of the bull market is unlikely to reward concentration in a handful of expensive momentum stocks.

Instead, we believe it is likely to favour investors who remain globally diversified, focus on earnings quality and maintain the flexibility to take advantage of the opportunities that periods of higher volatility inevitably create.

Stay invested. Stay diversified. Be ready.

Corporate news in Australia:

• Advent-backed Imaging Associates and Radiology SA have raised $360m to complete their $700m merger, creating a new radiology group called Radia
• White Energy ((WEC)) has agreed to acquire coal assets in the US and Queensland alongside a $15m capital raising, with Nathan Tinkler planned to take a leadership role
• 4DS Memory ((4DS)) has agreed to acquire Australian edge AI software company Jenesys for $5m in shares plus contingent consideration, accompanied by a $5m capital raising to fund integration and commercialisation
• Canyon Resources ((CAY)) shareholders have taken majority owner A2MP’s takeover bid to the Takeovers Panel amid concerns over the terms of the offer
• ANZ Group Holdings ((ANZ)) is reportedly considering a takeover of Judo Capital Holdings ((JDO)) ($1.13bn) as it looks to strengthen its position in SME banking
• Sports Entertainment Group has reportedly ended its interest in acquiring ARN Media ((A1N)) following its $107.4m acquisition of Quadrant-backed New Zealand broadcaster MediaWorks
• Hanwha’s proposed US$1.05bn-US$1.2bn acquisition of Austal’s ((ASB)) US operations is reportedly facing uncertainty following heavy losses at the business and political complications surrounding the transaction
• Andean Silver ((ASL)) has launched a $50m equity raising to fund the restart of its Cerro Bayo silver-gold project in Chile
• Caledonia Investments is selling around 3m shares in Light & Wonder ((LNW)), worth at least $372m, through Barrenjoey ((MFG))
• Private credit lenders are moving to secure assets linked to property developer Bathla, with Ray White Capital reportedly exposed to around $200m

On the calendar today:

-AU 2Q BoP

-AU ANZ-Roy Morgan Consumer Confidence

-AU ANZ-Roy Morgan Consumer Confidence

-AU July Bldg approvals

-JP Aug Manufacturing PMI (final)

-CH Aug Caixin Manufacturing PMI

-EZ Aug CPI

-EZ July Unemployment

-UK Aug Manufacturing PMI (final)

-US Aug Dallas Fed services

-US Aug ISM mfg

-US Aug Manufacturing PMI (final)

-US July Construction spending

-US July Jolts

-CA Aug Manufacturing PMI

-GE Aug Manufacturing PMI (final)

-BENDIGO & ADELAIDE BANK LIMITED ((BEN)) ex-div 33.00c (100%)

-CODAN LIMITED ((CDA)) ex-div 29.00c (100%)

-CARNARVON ENERGY LIMITED ((CVN)) FY26 earnings report

-DOMINO’S PIZZA ENTERPRISES LIMITED ((DMP)) ex-div 32.50c

-ENDEAVOUR GROUP LIMITED ((EDV)) ex-div 1.20c (100%)

-EARLYPAY LIMITED ((EPY)) ex-div 0.18c (100%)

-FORTESCUE LIMITED ((FMG)) ex-div 46.00c (100%)

-L1 GLOBAL LONG SHORT FUND LIMITED REGISTERED ((GLS)) ex-div 2.00c (100%)

-HELLOWORLD TRAVEL LIMITED ((HLO)) ex-div 5.00c (100%)

-HMC CAPITAL LIMITED ((HMC)) ex-div 6.00c

-KAPSTREAM INVESTMENT TRUST ((KIT)) ex-div 1.34c

-L1 GROUP LIMITED ((L1G)) ex-div 2.00c (100%)

-LA TROBE PRIVATE CREDIT FUND ((LF1)) ex-div 1.27c

-L1 LONG SHORT FUND LIMITED ((LSF)) ex-div 3.80c (100%)

-MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) ex-div 25.50c (100%)

-NEXGEN ENERGY LIMITED ((NXG)) investor briefing

-PENGANA GLOBAL PRIVATE CREDIT TRUST ((PCX)) ex-div 1.30c

-PROPEL FUNERAL PARTNERS LIMITED ((PFP)) ex-div 6.90c (100%)

-STEALTH GROUP HOLDINGS LIMITED ((SGI)) ex-div 1.50c (100%)

-WESFARMERS LIMITED ((WES)) ex-div 120.00c (100%)

-WORLEY LIMITED ((WOR)) ex-div 25.00c

-WOOLWORTHS GROUP LIMITED ((WOW)) ex-div 52.00c (100%)

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms