The Overnight Report: And The Beat Goes On

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SPI futures suggest another positive session awaits the Australian stock market.

Good morning.

Despite making a lot of hullabaloo about it while campaigning last year, US President Trump did not announce import tariffs on Day One of his presidency and financial markets are taking it as a positive.

With bond markets not sure what to do (and thus doing nothing) equities have spotted yet another opportunity to add additional gains.

According to media reports, US President Trump will be joined by Softbank’s Masayoshi Son, OpenAI’s Sam Altman, and Oracle’s Larry Ellison at the White House to announce an initial US$100bn investment in artificial intelligence which could scale up to US$500bn over the next four years.

Oracle’s shares jumped about 6% on the news. The company’s stock is up about 56% over the past year.

Crude oil and base metals, however, focused on the fact Trump did suggest there might be tariffs kicking in from February 1st.

As per ANZ Bank market commentary this morning, Trump declared a national energy emergency, which allows him to draw on more resources to support the oil & gas industry.

Executive orders revoked offshore oil & gas leasing bans, and while he encouraged the oil industry to ramp up its drilling activity, he also said that he plans to fill the US strategic oil reserve “right to the top” after it reached levels not seen since the 1980s.

Its maximum capacity sits at 700mbbls, however it fell to only 394mbbls after the Biden Administration sold 180mbbls in an attempt to bring global oil prices down following Russia’s invasion of Ukraine in 2022.

At a Q&A session in the oval office, Trump also said the US is probably going to stop purchasing oil from Venezuela. This suggests his administration will take a harder line against the Nicolas Maduro government.

Venezuelan output of oil was expected to rise to 1mb/d in 2025. This took the focus off supply side issues.

An historic winter storm is threatening to disrupt the oil & gas industry in Texas. The frigid weather is expected to crimp oil production due to freezing water in wells and pipes.

Russian oil exports dropped significantly last week as the new US sanctions bite. Daily flows are down -9% this week while the four-week average is below 3mb/d for the third week in a row. This represents a 16-month low.

By Quasar Elizundia, Expert Research Strategist at Pepperstone

Following the inauguration of Donald Trump and the observance of Martin Luther King Jr. Day, U.S. stock markets resumed activity with a positive tone, as the S&P 500 advanced 0.4% at the start of the session.

This initial optimism is supported by the relative calm that followed the first day of operations under the new administration.

 Although the president reiterated his intention to reform the trade system to “protect Americans” and threatened tariffs and duties on foreign countries, later making specific references to Mexico and Canada with a potential 25% tariff starting in February, the absence of concrete measures created a sense of tranquility in the markets. This lack of immediate action, contrasting with prior rhetoric, has been a key factor for stabilisation.

 The initial moderation in implementing trade measures, compared to the campaign tone, has injected caution and optimism into the markets. This pause allows investors to carefully assess future economic directives.

This respite is also reflected in the fixed-income market. Yields on the U.S. 10-year Treasury bond have declined, dropping below the 4.6% threshold after hitting a multi-year high of 4.8% on January 14. This decline in yields supports risk-taking in other assets, fueling optimism in the equity market.

 However, it is crucial to remain cautious. While the absence of drastic initial measures has calmed markets, uncertainties surrounding trade policies are likely to resurface in the future. Potential trade moves and their impact on inflation remain a risk factor to closely monitor.

 It is too early to celebrate a definitive victory on the trade front. Tensions are highly likely to reignite and generate market volatility. The key will be to observe the evolution of negotiations and the actual implementation of announced policies.

 Looking ahead, attention will begin to shift to the upcoming Federal Open Market Committee (FOMC) meeting.

Investors will be particularly attentive to any indications providing clarity on the stance of the Federal Reserve (Fed), especially following the economic optimism that characterised the early weeks of January.

Recent inflationary economic data, such as the Producer Price Index (PPI) and the Core Consumer Price Index (CPI), which showed positive surprises, have helped to relatively moderate expectations for a more restrictive monetary policy.

The FOMC meeting will be crucial to understanding the Fed’s view on the current state of the economy and its future outlook. Any signals regarding the direction of interest rates, as is customary, will have a significant impact on the markets.

On the calendar today:

-New Zealand Q4 CPI

-US Dec Leading Index

-Amplitude Energy ((AEL)) Qtrly report

-Boss Energy ((BOE)) Qrtly report

-Beach Energy ((BPT)) Qtrly report

-Chrysos Corp ((C79)) Qtrly report

-Evolution Mining ((EVN)) 2Q 2025 Production

-Iluka Resources ((ILU)) 4Q 2024 Production

-Imugene ((IMU)) EGM

-Leo Lithium ((LLL)) ex-div 15.80c

-Paladin Energy ((PDN)) Quarterly update

-Woodside Energy ((WDS)) Qrtly report

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

Corporate news in Australia:

-Regal Partners’ ((RPL)) funds under management leap 63.7% in 2024

-Wesfarmers ((WES)) to wind down Catch

-Star Entertainment’s ((SGR)) lenders hire restructuring lawyer Nikki Smythe as the casino group faces mounting financial risks

-Endeavour Group’s ((EDV)) split from Woolworths Group to cost more than anticipated

By Rania Gule, Senior Market Analyst at XS.com

Gold prices have recently experienced strong positive momentum, trading at US$2,728 on Tuesday, driven by economic and geopolitical shifts.

Investors have turned to gold as a haven amid rising global concerns, especially following U.S. President Donald Trump’s statements regarding new tariffs on Canada and Mexico, as well as his threat to impose tariffs on China if it does not agree to a TikTok deal.

In my opinion, these statements have raised market fears of a potential new wave of global trade wars. These developments have increased demand for gold, as such crises often lead investors to seek protection for their assets from economic fluctuations.

In parallel, recent economic data in the U.S. suggests a potential slowdown in inflation, supporting market bets on an interest rate cut by the Federal Reserve.

Additionally, the decline in U.S. bond yields to their lowest level in three weeks is a positive factor for gold, as low yields reduce the attractiveness of higher-yielding assets compared to gold, which does not generate returns.

Given these circumstances, it seems to me that the Federal Reserve may find itself compelled to adopt a less hawkish stance, thereby allowing gold to maintain its upward trajectory.

From my perspective, the path to gold’s gains hasn’t been without obstacles. The modest rebound in the U.S. dollar value, along with the generally positive tone in equity markets, partially countered gold’s gains.

The dollar benefited from expectations that Trump’s protectionist policies could lead to increased inflation, thereby strengthening the Fed’s case for maintaining higher interest rates.

This balance between geopolitical concerns and monetary policies reflects the complexity of the current economic landscape and its impact on gold performance.

However, I believe gold will remain in a strong position due to the underlying support provided by low bond yields and investor concerns over the potential economic and political ramifications.

Trump’s statements on tariffs not only affected global growth expectations but also raised questions about the U.S. economy’s ability to bear the consequences of these policies.

This dynamic has kept gold attractive as a haven, particularly in the absence of any impactful U.S. economic data in the near term.

Geopolitical risks have also been influenced by ongoing tensions in the Middle East and the recent ceasefire agreement.

Hopes that Trump may ease restrictions on Russia in exchange for a peace deal in Ukraine have partially contributed to calming markets, but these developments have not been enough to neutralise the risks pushing gold higher.

With the Bank of Japan’s meeting approaching and increased anticipation surrounding its monetary policies, gold may experience further short-term volatility.

I see that global economic data indicates ongoing uncertainty about the recovery of the global economy. The release of the preliminary Purchasing Managers’ Index (PMI) data in the coming days may provide further insights into the strength of the global economy, potentially impacting investor appetite for safe-haven assets like gold.

Therefore, gold is likely to remain volatile as economic and geopolitical conditions continue to shape its movement.

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.)

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