The Overnight Report: A Trade Deal Is Coming

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US markets continued to rally setting up the ASX200 for another positive start on the final day of April with all eyes focused on the first quarter CPI reading to be announced at 11.30am AEST.

Good Morning,

US markets continued to advance on talks of trade deals in the offing and despite deteriorating sentiment and major American companies withdrawing guidance.

What happened overnight

US equities gained overnight after U.S. Commerce Secretary Howard Lutnick said in a CNBC interview he had reached a trade deal with an unnamed country.

Lutnick also stated the arrangement still required approvals in said country.

Earlier, Treasury Secretary Scott Bessent described President Trump’s trade policy as “strategic uncertainty” and said markets would gain clarity as the U.S. starts announcing deals. He indicated the U.S. will be speaking to at least 17 important trade partners over the next few weeks.

Bessent did not comment on whether the U.S. and China are in direct negotiations over tariffs, and the Chinese Foreign Ministry stressed in a social media video posted overnight to “never kneel down” to Washington.

In the afternoon, President Trump signed an executive order to prevent the cumulative application of overlapping tariffs on certain imported goods such as automobiles and auto parts when multiple tariff programs target the same item.

The news was welcome after this morning’s data reflected impact from tariff concerns in the form of weakening consumer confidence.

Any tariff deals and concessions would support the narrative the Trump Administration is making headway towards more constructive trade policies, thereby removing some uncertainty for the economy and corporates.

Despite the afternoon rally, the S&P500 ended the day with its biggest loss in the first 100 days of a new presidential term since Nixon’s in 1973. But with today’s upside move, the S&P500 is less than -1.0% away from its 50-day moving average (5,613).

General Motors added to the growing slew of companies that have pulled earnings guidance, pointing to tariffs obscuring the outlook, as well as reporting a decline in quarterly profits.

Other US companies are scrambling to understand how various tariffs will affect their businesses. JetBlue Airways withdrew its guidance and warned soft demand will likely continue this quarter.

UPS said it was going to cut -20k jobs and slash costs, a move its CEO said was timely given macroeconomic uncertainty.

Meanwhile, a consumer sentiment survey showed the economic mood becoming more downbeat in April. The April Consumer Confidence Index slumped to 86.0 (Briefing.com consensus 88.3) from 93.9 in March, pulled down by the lowest reading for the Expectations Index (54.4) since October 2011; meanwhile, average 12-month inflation expectations jumped to 7.0% from 6.0%, hitting the highest level since November 2022.

Another report on March job openings indicated the U.S. job market looked a little weaker heading into this month’s tariff turmoil.

Later this week, investors will be keeping a keen eye on other economic reports for signs of the trade policy’s broader impact.

“While the market can take a breath from tariff news, I think the next leg will be about what it means for the economy,” said Megan Horneman, chief investment officer at Verdence Capital Advisors.

Only one S&P500 sector closed in the red, the energy sector, impacted by falling WTI oil prices, down -2.1% to US$60.14/bbl. Brent crude fell -1.8% to US$64.

The financial sector lifted 1%, materials 0.9%, and consumer staples rose 0.8%.

Today’s 1Q 2025 CPI reading

Australian investors will be keenly watching the first quarter CPI announcement at 11.30am, with NAB economists forecasting 0.6% for the quarter on the previous quarter for trimmed mean inflation, in line with consensus.

That forecast sits below the RBA’s February forecast by one-tenth, and the bank notes a risk for the rate to skew higher to 0.7%.

NAB and consensus are expecting 1Q headline inflation of 0.8% on the December quarter, with an unwind of the electricity rebates after two quarters of low impacts.

Someone Must Be Confident from Steve Sosnick, Traders’ Insights, Interactive Brokers

This morning, we received the latest in a string of downbeat sentiment readings. The latest came from the Conference Board, stating the “US Consumer Confidence Plunged Again in April.” 

Meanwhile, other surveys of investor sentiment show a preponderance of bearish sentiment.  Despite that, stocks are continuing their advance. 

Consumer Confidence for April fell to 86.0, down from a revised 93.9 last month, and below the 88.0 consensus.  Worse, the Expectations Index fell to 54.4 from a revised 66.9.  The Conference Board stated:

“Consumer confidence declined for a fifth consecutive month in April, falling to levels not seen since the onset of the COVID pandemic,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “The decline was largely driven by consumers’ expectations. The three expectation componentsbusiness conditions, employment prospects, and future incomeall deteriorated sharply, reflecting pervasive pessimism about the future. Notably, the share of consumers expecting fewer jobs in the next six months (32.1%) was nearly as high as in April 2009, in the middle of the Great Recession. In addition, expectations about future income prospects turned clearly negative for the first time in five years, suggesting that concerns about the economy have now spread to consumers worrying about their own personal situations. However, consumers’ views of the present have held up, containing the overall decline in the Index.”

And for those who are wondering if the drop had a political bias or failed to affect more affluent households:

April’s fall in confidence was broad-based across all age groups and most income groups. The decline was sharpest among consumers between 35 and 55 years old, and consumers in households earning more than US$125,000 a year. The decline in confidence was shared across all political affiliations.

Meanwhile, sentiment among institutional investors is not particularly great either. The National Association of Active Investment Managers (NAAIM) has created an Exposure Index, which represents the average exposure to US Equity markets reported by our members and the Exposure Index is near, but not quite at, four-year lows.

Yesterday, we considered the idea  that institutions were the primary sellers in the recent downturn and that individuals were the ones who bought through the declines and were instrumental in turning the market higher.  Yet the survey data from the American Association of Individual Investors (AAII) shows bullish readings near their own long-term lows.

Yet someone has been willing to bid up for equity exposure.  We wouldn’t have seen a bounce, nor would we be during a week-long up streak otherwise. 

(An important aside: I HATE when people say there are more buyers than sellers or vice versa when the market moves.  There is always, ALWAYS, equal amounts of shares being bought and sold.  Prices move because one cadre of investors is more aggressive than the other.  Prices go up when the buyers are more aggressive, and down when the sellers are more aggressive.)

The answer lies in the standard caveat when looking at survey data: watch what people DO, not what they SAY.  Actions speak louder than words. 

That said, I am loath to completely dismiss the negative sentiments.  We know that it is often a good time to be contrarian when market-related sentiment gets extreme.  That worked extremely well earlier this month.  But from an economic sense, sentiment can become self-fulfilling.  If too many consumers pull back on their spending and investment, that can cause a contraction, or even a recession, simply on its own.  And since sentiment is down, but not at true long-term lows, that bears watching. 

Corporate news in Australia

– Betr offers $360m bid for PointsBet Holdings ((PBH)) after acquiring 19.9% stake.

– Northern Star Resources ((NST)) cuts FY25 gold output forecast, raises cost outlook.

– Auckland International Airport ((AIA)) has delayed its second runway project by at least 10 years, citing improved operational efficiency.

– Mineral Resources ((MIN)) rules out equity raise as its debt hits $5.4bn, and shares rise despite financial struggles.

– Peninsula Energy’s ((PEN)) shares have dropped -70%, leading to a trading suspension and concerns over a production downgrade. 

– Australia’s wine exports to China are slowing as consumption in China and globally declines.

On the calendar today:

-NZ ANZ Business Confidence

-AU 1Q CPI

-AU March private sector credit

-JP March Industrial Production

-CH April PMI

-EZ 1Q GDP

-US 1Q GDP

-US April ADP employment

-US March PCE

-AMCOR PLC ((AMC)) Qtr Report

-CHAMPION IRON LIMITED ((CIA )) Qtr Report

-COLES GROUP LIMITED ((COL)) Qtr Report

-CORONADO GLOBAL RESOURCES INC ((CRN)) Qtr Report

-IGO LIMITED ((IGO)) Qtr Report

-MAC COPPER LIMITED ((MAC)) Qtr Report

-MIRVAC GROUP ((MGR)) Qtr Report

-ORIGIN ENERGY LIMITED ((ORG)) Qtr Report

-PERSEUS MINING LIMITED ((PRU)) Qtr Report

-QPM ENERGY LIMITED ((QPM)) Qtr Report

-STOCKLAND ((SGP)) Qtr Report

-WESTGOLD RESOURCES LIMITED ((WGX)) Qtr 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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