The Overnight Report: Sell Winners, Buy Losers

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After Friday's brutal sell off in AI-related stocks, the buy-the-dip crowd came back to the technology punch bowl, sending Nasdaq higher.

Last week's winners were sold with the Dow Jones slipping into the red.

After a positive session yesterday, ASX200 futures are pointing to a weak start.

World Overnight
SPI Overnight	8783.00	– 77.00	– 0.87%
S&P ASX 200	8845.70	+ 39.00	0.44%
S&P500	7690.73	+ 31.29	0.41%
Nasdaq Comp	26430.89	+ 290.85	1.11%
DJIA	51966.03	– 36.38	– 0.07%
S&P500 VIX	18.44	– 1.55	– 7.75%
US 10-year yield	5.14	+ 0.04	0.75%
USD Index	102.00	– 0.03	– 0.03%
FTSE100	10764.69	– 117.21	– 1.08%
DAX30	25319.77	– 302.84	– 1.18%

Good Morning,

Yesterday, the ASX200 closed the day’s trading session higher by 39 points or 0.44% to 8845.7.

Technology and resource stocks were weak with the banks, energy and industrials performing well.

M&A activity raised eyebrows with multiple takeovers in play, including Challenger Financial Group (((CGF)). See details in Corporate News below.

Morgans on Pro Medicus ((PME)):

“PME has announced a further seven-year, A$24m full stack cloud contract with Billings Clinic Logan Health, its third new community health system win in FY27 to date (A$72m TCV, A$10.3m new ARR).

“The FY27 wins are modest individually but consistent in size, term and scope, pointing to a repeatable midmarket playbook that broadens the pipeline beyond large Integrated Delivery Networks.

“Near-term focus shifts to RSNA in late November as the likely window for a larger deal, and to execution on a busy 1Q’CY27 go-live schedule underpinning FY28.

“We upgrade to a BUY (from Accumulate), with no change to our A$230 target price.”

On the calendar today are BHP Group’s ((BHP) quarterly update, as well as market updates from Hub24 ((HUB)) and Challenger.

Multiple AGMs feature including for Codan ((CDA)) and Judo Capital ((JDO)) shareholders.

For more details and to stay in touch with which companies are reporting, AGMs and going ex-dividend, check out the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Market Overview, J.L. Bernstein extract

Tech Bounced, but Most Stocks Sat It Out

The Nasdaq bounced after its worst week since June, and chip stocks were on track to end a nine-day losing streak.

But about seven in ten S&P500 stocks fell, as traders sold October’s winners and bought its losers.

I’d like to see more of the market join in before I call this a recovery.

AI Lenders Aren’t Buying the Bounce CoreWeave

$CRWV got a buy upgrade from Goldman Sachs and still slipped into the red, near a fresh 52-week low.

The cost to insure its debt against default has hit distress levels.

Gartner’s chief forecaster told CNBC there’s more AI computing power than demand right now.

For AI companies that borrowed heavily, the bond market is the scoreboard that matters.

Housing Is Feeling Higher Rates

Homebuilder confidence hit its lowest level since June 2012.

Redfin says about one in seven home deals fell apart in September, a record outside the early COVID months.

In Tampa, Jacksonville and Las Vegas, it’s closer to one in five.

Buyers have more choices and more bargaining power right now, and more of them are backing out.

ANZ Bank, Australian Morning Focus extract

US equity markets rebounded as tech selling pressure abated.

European bourses sold off as riots in France over the weekend underscored political risks.

Bond yields rose across the curve, with yields on French OATs rising sharply.

The S&P500 was up 0.6% and the Nasdaq up 1.4%. The EuroStoxx50 fell -1.0% and the FTSE 100 fell -1.1%.

The yield on the 10y US Treasury note rose 8.6bp to 5.15%.

In commodities, the active WTI future rose 3.4% to US$103.6/bbl. Gold fell -1.0% to US$4,141.9/oz.

The NAHB Housing Market Index fell -3pts to 29, its lowest level since 2012. The current sales index fell to 33, also its lowest level since 2012.

Expected sales fell to their weakest level since 2022. The US housing market is facing a perfect storm. High mortgage rates have constrained affordability, while supply constraints continue to bite amid elevated construction costs.

No shortage of risks. While it is a quieter week for US data, there are plenty of risks for markets to contend with. Technology stocks rebounded overnight after heavy selling last week, but Q3 earnings season for the major technology firms begins this week and will be closely watched.

Energy prices remain elevated as inventory drawdowns continue and tensions in the Middle East escalate, maintaining pressure on central banks to tighten policy.

In Europe, sovereign debt concerns have resurfaced following widespread riots across France over the weekend. Similar protests, fuelled by the high cost of living, occurred in Italy, Portugal and Belgium.

The increasingly fragmented political landscape will complicate fiscal consolidation efforts as sovereign borrowing costs rise amid a subdued growth backdrop.

For economies on the periphery of the AI capex cycle, such as the euro area, there is limited offset to higher borrowing costs from the growth impulse associated with AI-related investment that is evident in the US and the technology-exporting economies of Asia.

Global growth and capital allocation are increasingly concentrated.

Despite being at the centre of the AI boom, US fiscal metrics continue to deteriorate. The federal deficit rose 12% to US$1.99trn in fiscal year 2026, with net interest payments exceeding US$1trn.

Political uncertainty ahead of the midterm elections adds another source of risk.

With the Democrats currently projected to take control of the House and potentially the Senate, the balance of power could shift, increasing the risk of policy deadlock at a time when investors are becoming more sensitive to fiscal outcomes.

Rising unrest in the Middle East continues to push the energy sector higher. Precious metals fell amid high bond yields. Industrial metals were mixed.

Weekly Macro Talking Points, Benoit Anne, MFS Investment Management, extract

Time to get real. At 2.74%, the US 10-year real yields are historically quite high. This, to us, suggests that real rates exposure through Treasury Inflation-Protected Securities (TIPS) may make sense, especially if one believes that inflation risks may be underpriced.

The 10-year inflation break-even currently stands at 2.34%, which does seem a bit low given the challenging inflation backdrop.

There are of course risks to this view. If the Fed turned out to be more hawkish in the period ahead, or if nominal UST yields were to rise further out of growing fiscal concerns, real rates would continue to climb, thereby hurting a long TIPS exposure.

Having said that, we believe that the current macro regime, which is characterized by strong growth but overheating risks, is supportive of TIPS.

A resilient global economy – but an increasingly selective one. The IMF’s latest World Economic Outlook (WEO) offers a cautiously stronger global picture. It raised its 2026 growth forecast to 3.1% from 3.0% in July, while leaving 2027 unchanged at 3.4%.

Despite higher energy prices and persistent geopolitical uncertainty, the global economy continues to expand.

But the more important story is not how fast the world is growing – it is where that growth is coming from. Upgrades were concentrated in economies benefiting from AI investment and deeper participation in technology supply chains.

The IMF lifted its Euro Area forecast to 1.1% from 0.9% and its UK forecast to 1.3% from 1.0%, supported by stronger AI investment and defense spending.

By contrast, China was revised down to 4.5% from 4.6%. Global growth is becoming more concentrated: just 32 economies now account for 95% of growth, down from 54 in April. Inflation also remains sticky.

The IMF expects global inflation of 4.7% in 2026, reflecting higher energy prices and demand from the AI investment cycle.

Stronger growth should support risk assets, particularly companies exposed to AI, infrastructure and capital spending. But the same forces are also pushing borrowing costs higher.

Large fiscal deficits, heavy sovereign issuance and rising demand for capital are lifting long-term bond yields and the risk of volatility. Higher discount rates could challenge equity valuations, especially where prices depend heavily on distant earnings.

Fixed income offers a different proposition. Higher yields may create near-term volatility, but they also provide a more attractive entry point and stronger prospective long-term returns.

The investment conclusion is clear: growth is narrowing and outcomes are diverging across countries, sectors and asset classes. In this environment, identifying the winners may matter far more than simply owning the market (contribution from Karis Burrell, Insights Analysis Sr. Analyst).

AI expectations ripple through fixed income. Last week was a turbulent week for the AI sector. Softer-than-expected guidance from OpenAI and Anthropic unsettled AI-linked assets ahead of their anticipated IPOs. Revenue concerns quickly spread to publicly traded suppliers, data-center operators and cloud partners, with the sharpest moves in lower-quality credit.

CoreWeave’s longer-dated unsecured bonds fell into distressed territory, ending the week at spreads above 1,000 basis points as investors reassessed its exposure to model providers’ compute demand. The repricing extended well beyond high yield.

As AI growth expectations weakened, US Treasuries rallied despite hotter-than-expected CPI and PPI data. The move was led by the long end, with 10- and 30-year yields falling -17 basis points over the week.

Markets appeared more focused on the growth implications of an AI slowdown than on near-term inflation pressure. That matters because AI investment has supported manufacturing, while strong asset performance has bolstered consumer spending through the wealth effect.

A more material slowdown could therefore weigh on both business activity and household spending. AI is no longer just an equity theme: it is increasingly shaping high yield, credit spreads and government bond yields.

As the AI cycle evolves, diversification across assets that can perform under different growth and inflation outcomes will be critical (contribution from Dave Peterson, Lead Analyst, Strategy and Insights Group).

Heightened volatility highlights risks of concentrated markets. This past week’s increase in market volatility highlighted fragility in sentiment around the AI trade, with CoreWeave emerging as a focal point for broader risk-off positioning.

Investors used weakness in the name as a reason to reassess exposure across the AI ecosystem, particularly in areas where positioning and expectations had become increasingly crowded.

Concentration risk persists, with semiconductors and other AI-adjacent companies leading the selloff, reinforcing how much market performance has depended on a relatively narrow group of beneficiaries tied to the AI buildout.

When leadership becomes this concentrated, any shift in sentiment or fundamentals can create outsized moves across the broader market.

At the same time, higher Treasury yields make elevated valuations harder to defend and raise the hurdle rate for AI-related investments, particularly those requiring significant upfront capital spending with returns expected further into the future.

As the earnings season ramps up, results will need to provide tangible evidence that the enormous levels of AI-related capital expenditure are translating into real and sustainable revenue growth and earnings (Contribution from Mike Miranda, Strategist, Strategy & Insights Group).

France’s Deepening Crisis Puts Europe On Contagion Alert, Nigel Green deVere Group, extract

France’s escalating debt and political crisis now risks spilling across Europe’s bond markets and into global portfolios.

France counts the cost of its worst civil unrest in years, with around 550,000 people taking to the streets over the weekend and almost 2,400 arrests, just ahead of a pivotal National Assembly vote on the country’s 2027 budget.

France has gone from a slow fiscal problem to an acute political one, and markets are reacting accordingly.

Investors are watching the eurozone’s second biggest economy struggle to pass a budget, keep order on its streets, and give any clear sense of who’ll be running the country after next year’s election.

Any one of those could be managed on its own. It’s the combination that’s worrying people.

Prime Minister Sebastien Lecornu’s minority government is seeking EUR54 billion of savings to bring the deficit down to 5% of GDP from 5.4% this year. Budget fights have already brought down two of his recent predecessors.

France hasn’t run a budget surplus since 1974. Public debt stands at around 119% of GDP and is forecast to reach 122% next year.

The yield on 10-year French government debt neared 5% earlier this month, its highest since 2002, while the gap over German Bunds hit its widest since the eurozone debt crisis.

France is now paying a serious premium to borrow, and the budget itself was drawn up assuming yields well below where they are today.

Every month this drags on, servicing the debt gets more expensive, and higher interest bills eat into the very savings the government is fighting to pass.

When French bonds sold off sharply at the start of October, Italian, Belgian and Greek bonds fell with them, and the euro dropped below US$1.12, its weakest level in 17 months.

French debt is also widely held overseas, with Japanese institutions alone holding around US$145 billion.

Contagion is the word I keep hearing now. French government bonds sit in pension funds, insurance portfolios and bank balance sheets right across Europe and further afield.

If confidence in them cracks, it won’t stay a French issue for long. Italy and Belgium would likely feel the pressure next, because they carry heavy debts of their own.

France’s troubles are landing at the start of a packed run of European votes.

Spain holds a snap general election on 29 November, France chooses a president next April and May with Marine Le Pen leading many polls, and Italy, Poland, Greece and Finland are all due at the ballot box in 2027, alongside five German state elections.

Whoever wins in France inherits a very difficult set of numbers, and the same question hangs over every one of these votes.

Investors want to know whether governments have a credible plan for their debts. Each election between now and the end of next year becomes a moment where that gets tested, and spreads can move sharply in either direction.

The European Central Bank has so far signalled it won’t step in simply because spreads are wide, seeing the moves as driven by France’s own fundamentals.

The ECB has the tools, but it’s made clear it wants France to help itself first. If the budget fails and trading turns disorderly, I believe the pressure on Frankfurt to act will become very hard to resist.

Moments like this tend to force decisions politicians have put off for years. If France gets a budget through and shows it’s serious about its finances, I’d expect spreads to narrow and a lot of the fear to drain out of European markets fairly quickly.

Europe came out of its last debt crisis with tougher rules and a stronger central bank.

If it handles France well, it could come out of this one.

Corporate news in Australia:

• TAL Dai-ichi launches a bid for Challenger ((CGF))’s remaining 79.5% stake, lifting shares 16.9% as the board assesses the conditional proposal
• SG Fleet ((SGF)) secures a $1.13bn agreement to acquire FleetPartners ((FPR)) for $5.30ps following a competitive bidding process
• New Hope ((NHC)) agrees to a $6.3bn share-based merger with Malabar Resources, targeting completion in March 2027, subject to approvals
• Arena REIT ((ARF)) raises FY27 distribution guidance following Goodstart’s proposed acquisition of 31 Edge childcare centres and $16.6m in property divestments
• Reliance Worldwide ((RWC)) maintains support for Brookfield’s $4bn takeover proposal after the go-shop period closes without a rival bid
• Cleanaway Waste Management ((CWY)) agrees to a $9.3bn takeover by EQT at $3.05ps, subject to regulatory and shareholder approval
• Metcash ((MTS)) moves to acquire Peries Group for -$80m–$85m, adding 15 Queensland IGA supermarkets
• Pro Medicus ((PME)) secures a $24m, seven-year medical imaging contract with US healthcare network Billings Clinic
• ASIC scrutinises Sequoia Financial Group ((SEQ))’s sale of Interprac to former CEO Scott Beeton’s Bellbird Australia and its attempt to terminate cross-guarantee liabilities
• Greenwich Capital Partners acquires a majority stake in Melbourne HVAC business Auscool Group, expanding into building services
• Federation Asset Management explores the circa $200m sale of Kennedy Energy Park to help fund $8bn in planned renewable energy equity investments over five years
• Ingenia Communities ((INA)) shares rise 7% amid speculation it may abandon the Peet ((PPC)) acquisition while considering Warburg Pincus’s $2.14bn takeover proposal
• DAZN rules out selling Foxtel for now following reported discussions with Tabcorp Holdings ((TAH)) over a potential transaction
• NextDC ((NXT)) enters a trading halt ahead of an announcement on Melbourne M3 data centre power delays and potential impacts on FY27 guidance
• Squadron Energy and Windlab seek $5bn in debt and equity funding, including $1.5bn in equity, for Queensland’s Bungaban wind and battery project

On the calendar today:

-CH LPR

-EZ Aug Current account

-EZ Oct ZEW

-UK Aug Earnings

-UK Aug Private earnings ex bonus

-UK Aug Unemployment

-US ADP weekly employment change

-US Oct Phil Fed

-US Oct Philadelphia Fed non-manufacturing activity

-US Sep Building permits (prelim)

-US Sep Building permits m/m (prelim)

-US Sep Housing starts

-US Sep Housing starts m/m

-GE Oct ZEW current situation

-GE Oct ZEW expectations

-GE Sep PPI

-GE Sep PPI m/m

-AUDINATE GROUP LIMITED ((AD8)) AGM

-BENDIGO & ADELAIDE BANK LIMITED ((BEN)) AGM

-BHP GROUP LIMITED ((BHP)) Qtrly update

-CODAN LIMITED ((CDA)) AGM

-CHALLENGER LIMITED ((CGF)) Qtrly update

-CLOVER CORPORATION LIMITED ((CLV)) ex-div 1.25c (100%)

-GQG PARTNERS INC ((GQG)) ex-div 3.27c

-HUB24 LIMITED ((HUB)) Qtrly update

-JUDO CAPITAL HOLDINGS LIMITED ((JDO)) AGM

-KINGSGATE CONSOLIDATED LIMITED ((KCN)) ex-div 10.00c

-MYSTATE LIMITED ((MYS)) AGM

-REGION GROUP ((RGN)) AGM

-YANCOAL AUSTRALIA LIMITED ((YAL)) Qtrly update

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Spot Metals,Minerals & Energy Futures
Gold (oz)	4141.93	– 31.29	– 0.75%
Silver (oz)	57.09	– 0.36	– 0.63%
Copper (lb)	6.55	+ 0.02	0.31%
Aluminium (lb)	1.37	+ 0.00	0.13%
Nickel (lb)	6.88	– 0.14	– 1.97%
Zinc (lb)	1.70	– 0.03	– 1.68%
West Texas Crude	103.51	+ 5.85	5.99%
Brent Crude	109.33	+ 3.52	3.33%
Iron Ore (t)	90.95	+ 0.38	0.42%

The Australian share market over the past thirty days…

Index	19 Oct 2026	Week To Date	Month To Date (Oct)	Quarter To Date (Oct-Dec)	Year To Date (2026)
S&P ASX 200 (ex-div)	8845.70	0.44%	0.64%	0.64%	1.51%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BOQ	Bank of Queensland	Downgrade to Trim from Hold	Morgans
BSL	BlueScope Steel	Upgrade to Buy from Lighten	Ord Minnett
CXO	Core Lithium	Upgrade to Buy from Lighten	Ord Minnett
GLF	Gemlife Communities	Downgrade to Hold from Buy	Bell Potter
JIN	Jumbo Interactive	Upgrade to Buy from Hold	Bell Potter
PDN	Paladin Energy	Upgrade to Buy from Accumulate	Morgans
		Upgrade to Accumulate from Sell	Ord Minnett
RGN	Region Group	Downgrade to Hold from Buy	Bell Potter
SKG	Storage King	Downgrade to Sell from Hold	Bell Potter

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)

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