The Overnight Report: April Tariff Detente Rally

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World Overnight
SPI Overnight	8114.00	+ 28.00	0.35%
S&P ASX 200	8126.20	+ 55.60	0.69%
S&P500	5569.06	+ 8.23	0.15%
Nasdaq Comp	17446.34	– 14.98	– 0.09%
DJIA	40669.36	+ 141.74	0.35%
S&P500 VIX	24.70	+ 0.53	2.19%
US 10-year yield	4.18	+ 0.00	0.10%
USD Index	99.44	+ 0.44	0.44%
FTSE100	8494.85	+ 31.39	0.37%
DAX30	22496.98	+ 71.15	0.32%

Good Morning,

A robust turnaround in US markets underpinned a rally into April month-end, despite a poor Q1 2025 GDP print. Microsoft and Meta’s better-than-expected results published after the close confirm the AI revolution is alive and well.

What happened overnight: Extract from NAB Markets Today

US equities fell sharply at the open post the negative Q1 US GDP print before recouping a good chunk of the losses as the session proceeded. After the market close, Microsoft and Meta reported better-than-expected earnings and strong growth in AI-related businesses.

The S&P 500, which dropped as much as -2.3% at its low, closed 0.2% above its prior close. The initial drop was driven in part by stagflation concerns following a disappointing Q1 GDP report.

The US economy contracted at an annualised -0.3% rate in the March quarter (the late-surveyed consensus running into the data was -0.2%).

This is the first GDP fall since 2022. The contraction is largely the result of a surge in imports before the implementation of tariffs. Net trade subtracted -5.4%. Personal consumption expanded at a 1.8% annualised rate while gross private investment surged 21.8%, led by a 22.5% jump in equipment.

This largely reflects a 70% jump in IT and equipment investment, most of which is imported and hence reflective of tariff front-running.

The core PCE deflator rose at a 3.5% annual rate in Q1, which was stronger than expected and up from 2.6% in Q4, but the monthly March data showed a flat core PCE outcome against 0.1% expected (there was an upward revision to the January and February data, both now out at 0.4%).

Elsewhere, the ever-unreliable ADP Employment data showed a smaller-than-expected -62k drop, while the Q1 Employment Cost Index (ECI), the Fed’s go-to for gauging underlying wage pressures in the economy, was 0.9% as expected.

With various revisions stretching back three years, the ECI looks to be fairly stable at 0.9% quarterly, 3.8% annual rate, but with a fair chance it will soon resume a downtrend based on the underlying trend in the JOLTS report’s Quit Rate.

Responding to the GDP data, President Trump in a Cabinet meeting asked for a ‘pass’ on the GDP drop, blaming former President Biden for weak economic data, arguing government data showing increased domestic investment signalled his tariffs are working. “I have to start off by saying, that’s Biden. That’s not Trump. Let’s give us a pass on the first month, we were sort of getting a little bit used to things,” Trump added.

On the stock market’s 2025 year-to-date performance, Trump said in a social media post that it’s “Biden’s Stock Market, not Trump’s,” adding that the US must “get rid of the Biden ‘Overhang.'” He also wrote: “This will take a while, has NOTHING TO DO WITH TARIFFS.” A year ago, recall, Trump had claimed the advancing stock market as his, writing: “THIS IS THE TRUMP STOCK MARKET” because “INVESTORS ARE PROJECTING THAT I WILL WIN.”

European macro data
European data overnight showed the Q1 Eurozone economy growing by an impressive 0.4% in the March quarter compared to the previous quarter. There is no component breakdown for this flash estimate, though of the big four EZ economies, Germany recorded 0.2% growth, France 0.1%, Italy 0.3%, and Spain 0.6%.

On inflation, country data for France and Germany were on the high side of expectations (France 0.6%, Germany 0.5%), implying upside risk to Friday’s pan-Eurozone consensus of 0.5% m/m and core y/y of 2.5% from 2.6%.

On US-EU trade matters, in news just in, Bloomberg reports the European Union is planning to share a paper with the US next week that will set out a package of proposals to kick-start trade negotiations with the Trump administration.

The paper will propose lowering trade and non-tariff barriers, boosting European investments in the US, cooperating on global challenges such as tackling China’s steel overcapacity, and purchasing US goods like liquefied natural gas and technologies, according to people familiar with the matter.

Australia’s Q1 CPI print
Locally, yesterday’s Q1 data came in one-tenth of a per cent higher than market consensus on both headline (0.9%) and Trimmed Mean (0.7%) but in line with the RBA.

There is ongoing disinflation across the market services categories, and housing components have cooled from their mid-2024 pace. That remains encouraging as the RBA’s assessment of domestic inflation pressures evolves.

Residual strength in today’s data is most evident in administered services prices. We had pencilled in elevated health inflation in the March quarter, but it was stronger than we forecast and accounts for essentially all of the modest upside surprise.

Post the data, markets trimmed bets on the RBA doing more than -25bps cut on May 20.

NAB continues to forecast -100bps of cuts, taking the cash rate to 3.1% over the next three meetings, albeit the risk is that they proceed with 0.25-point clips.

Commodities Update: Extract from ANZ Bank’s Australian Morning Focus

Crude oil prices slumped further amid concerns of further OPEC supply hikes. A Reuters report said Saudi Arabian officials have been telling allies and industry experts the Kingdom can endure a sustained period of depressed prices. This added to existing concerns Saudi Arabia, the de facto leader of the OPEC+ alliance, is planning to steer the group to agree to another increase in supply next week.

Sentiment wasn’t helped by signs a quick breakthrough in US trade negotiations is fading. President Trump said China deserved the steep tariffs he imposed. The market shrugged off data showing slightly better demand.

Copper was under pressure in Asian trading after data showed a slowdown in China’s factory activity in April. Despite the slowdown in manufacturing activity, data suggests the copper market remains tight.

The Yangshan premium has nearly tripled to US$94/t over the past three months. Inventories have fallen sharply in recent weeks, leading to a trading house warning the market is suffering one of the greatest tightening shocks in history on fears of US tariffs.

The Shanghai Futures Exchange reported copper inventories fell -24% yesterday to reach their lowest seasonal level since 2022. The selloff in copper prices was even greater on the Comex exchange as traders rushed to square their positions before the holiday in China. Investors have been engaging in arbitrage deals across New York, London, and Shanghai amid the uncertainty caused by tariffs.

Iron ore’s run of monthly losses extended to three, amid signs of ongoing weakness in China’s steel sector. Angang Steel Co, the nation’s second-largest producer, posted its 11th consecutive quarterly loss. This comes amid reports mills are about to cut steel output due to the uncertain economic backdrop.

Gold prices fell after US data showed signs of economic contraction. The US economy contracted for the first time since 2022 on a pre-tariff import surge and more moderate consumer spending. The precious metal pared some of the earlier losses on rising expectations of further interest rate cuts by the Fed.

Corporate news in Australia

– Westpac ((WBC)) flagged hedging losses of -$140m for the upcoming 1H25 earnings result.

– Potter Securities is managing a $70m equity raising for Aeris Resources ((AIS)).

– Spark New Zealand ((SPK)) is seeking a co-investor for its data centre portfolio, estimated at NZ$1.1bn.

On the calendar today:

– AU April Core logic Home Value Index

– JP May BoJ decision

– US May initial jobless claims

– Global Manufacturing PMIs

– AMCOR PLC ((AMC)) Qtrly report

– MICROBA LIFE SCIENCES LIMITED ((MAP)) Qtrly report

– OM HOLDINGS LIMITED ((OMH)) ex-div 0.40c

– RIO TINTO LIMITED ((RIO)) AGM

– WOOLWORTHS GROUP LIMITED ((WOW)) Qtr Report

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3297.97	– 29.68	– 0.89%
Silver (oz)	32.51	– 0.38	– 1.16%
Copper (lb)	4.61	– 0.25	– 5.14%
Aluminium (lb)	1.09	– 0.03	– 2.85%
Nickel (lb)	6.98	– 0.00	– 0.03%
Zinc (lb)	1.17	– 0.03	– 2.42%
West Texas Crude	58.19	– 2.09	– 3.47%
Brent Crude	60.99	– 1.96	– 3.11%
Iron Ore (t)	99.76	– 0.10	– 0.10%

The Australian share market over the past thirty days

Index	30 Apr 2025	Week To Date	Month To Date (Apr)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8126.20	1.98%	3.61%	3.61%	-0.40%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMC	Amcor	Upgrade to Overweight from Equal-weight	Morgan Stanley
ANZ	ANZ Bank	Upgrade to Neutral from Sell	Citi
CYL	Catalyst Metals	Downgrade to Hold from Buy	Bell Potter
FMG	Fortescue	Upgrade to Buy from Neutral	Citi
GOR	Gold Road Resources	Downgrade to Hold from Buy	Bell Potter
MIN	Mineral Resources	Upgrade to Add from Hold	Morgans
MVP	Medical Developments International	Upgrade to Speculative Buy from Hold	Bell Potter
PNR	Pantoro Gold	Downgrade to Sell from Hold	Bell Potter
RMD	ResMed	Upgrade to Buy from Accumulate	Ord Minnett
RMS	Ramelius Resources	Upgrade to Buy from Accumulate	Ord Minnett
SFR	Sandfire Resources	Upgrade to Add from Hold	Morgans
		Downgrade to Neutral from Outperform	Macquarie

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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