The Overnight Report: Friday Pause

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US markets racheted up another rally, making it eight consecutive positive days. After the ASX200 closing 19pts higher for the sixth consecutive day on Thurday, futures are pointing to a lower start on Friday, ahead of tonight’s US non-farm payrolls.

World Overnight
SPI Overnight	8130.00	-32.00	-0.33%
S&P ASX 200	8145.60	+ 19.40	0.24%
S&P500	5604.14	+ 35.08	0.63%
Nasdaq Comp	17710.74	+ 264.40	1.52%
DJIA	40752.96	+ 83.60	0.21%
S&P500 VIX	24.60	– 0.10	– 0.40%
US 10-year yield	4.23	+ 0.05	1.29%
USD Index	99.98	+ 0.54	0.54%
FTSE100	8496.80	+ 1.95	0.02%
DAX30	22496.98	+ 71.15	0.32%

Good Morning,

It was Big Tech, namely Microsoft and Meta, that rode to the rescue for US markets overnight, as increasingly economic data and sentiment raise concerns around growing risks of a recession.

What Happened Overnight: Extract from NAB Markets Today Research

Tech stocks led a move up in US equities on the back of better-than-expected earnings reports from Microsoft and Meta.

The “Sell America” narrative went into reverse overnight following the strong results. Microsoft shares jumped over 7% on Thursday after the software giant reported third-quarter results that beat expectations, with the cloud business again “shooting the lights out.”

Meta shares gained over 4% after a report that beat earnings expectations, alongside a positive outlook and higher capital expenditure.

Of note, Nvidia was boosted after Bloomberg reported the US is weighing a potential easing of restrictions on its chip sales to the UAE. The results and news lifted tech stocks broadly, with software and cloud names leading the move.

That said, it wasn’t all good news. General Motors edged lower after stating a financial hit from tariffs could reach -US$5bn, slashing its annual guidance. McDonald’s shares fell close to -2% after it reported its largest drop in US sales since the height of the COVID-19 pandemic, down -3.6%, with customers “grappling with uncertainty.”

Many European and Asian markets were closed for May Day holidays.

Meanwhile, in tariff news, China state media reported yesterday the Trump administration had recently reached out to Beijing “through multiple channels” to initiate trade talks “something China sees little downside in exploring at this stage”. This aligned with the theme of trade war de-escalation seen in late April.

Another major development overnight was the April ISM Manufacturing report better, or rather not as bad as expected. The survey’s headline index fell to 48.7 in April from 49.0 in March, better than the expected 47.9.

The April reading is a five-month low and the second consecutive print in contractionary territory. Report details were mixed: eleven industries expanded, six contracted. Producers reported higher costs amid an uncertain economic environment.

The survey also revealed stronger new orders and employment, but a 4.3pt slump in production to 44.0. Respondents cited tariffs as a key issue, causing supply chain disruptions, reducing demand, and driving higher inflation.

In other US economic news, initial jobless claims rose 18k last week to 241k, largely attributed to holiday timing in New York. Of greater concern was the 83k leap in continuing claims for the prior week and another elevated reading from the monthly Challenger job cuts series, both possibly foreshadowing a rise in the unemployment rate.

The US 10-year yield rose five basis points to 4.23%, and the 2-year yield was eight basis points higher at 3.70%. The rise in US Treasury yields lifted the USD, marking its third consecutive day of gains.

Yesterday, the BoJ left its policy rate unchanged as expected, though the accompanying statement struck a cautious tone. The BOJ now sees “risks to prices skewed to the downside for FY2025 and FY2026,” a shift from its previous outlook that had risks skewed to the upside.

Consistent with this caution, the BOJ lowered its GDP forecast: FY2025 growth is now seen at 0.5% (previously 1.1%) and FY2026 at 0.7% (previously 1.0%).

Importantly, though unsurprisingly, the Bank stressed the heightened level of uncertainty, noting it is “extremely uncertain how trade and other policies in each jurisdiction will evolve” and how overseas economies will respond. Governor Ueda attempted to strike a hawkish tone, suggesting rate hikes are in sight, though he offered no guidance on timing.

CommSec noted that with today’s gain, the S&P500 has now posted eight consecutive positive sessions, closing above its 50-day moving average (5,592) after falling just shy of that level yesterday.

Seven S&P500 sectors closed higher, led by technology (up 2.2%), communication services (up 1.6%), and consumer discretionary (up 1.0%).

Healthcare stocks were notably weak, dragging the sector down -2.8%, following quarterly results from Eli Lilly, whose shares fell -11.7% as management lowered its full-year earnings outlook.

Qualcomm shares declined -8.9% and McDonald’s fell -1.9% after reporting its largest US sales decline since the height of the COVID-19 pandemic, as customers are “grappling with uncertainty.” General Motors also edged lower on its tariff-related guidance downgrade.

Year-to-Date Performance for US indices

-Dow Jones Industrial Average: -4.2% 

-S&P500: -4.7%

-S&P MidCap 400: -8.3%

-Nasdaq Composite: -8.3%

-Russell 2000: -11.4% 

Is the Economy on the Edge? Ed Yardeni Extract

The good news: the Magnificent-7 remain magnificent. Three –Alphabet, Meta, and Microsoft– beat Q1 earnings expectations. We have argued that while AI may or may not monetise directly for LLM providers, it will drive greater demand for cloud computing, benefitting at least four of the Mag-7.

The bad news: recent economic reports have raised the probability of recession, according to Polymarket.com. Our subjective probability remains at 45%.

The Consumer Confidence Index (CCI) fell to an almost five-year low in April, down -8 points to 86.0. It marked the fifth straight monthly decline –the worst such stretch since 2008– driven by the expectations component. The present situation component remains relatively upbeat. However, the ratio between present and expectations components soared in April, as it has before previous recessions.

April’s M-PMI edged down to 48.7, a second consecutive sub-50 reading. The production index was particularly weak at 44.0. New orders and employment also remained below 50. The word “tariff” appeared 27 times in the ISM report. Tariffs are pushing the prices-paid index higher, which remained elevated at 69.8.

Both import and new export orders indexes declined in April; the latter hitting its weakest point since 2020, during the early COVID period.

Initial claims for the week of April 25 rose by 18,000 to 241,000, with New York contributing 15,525 of that increase. Continuing claims stayed relatively elevated. Though not definitive signs of recession, the trend is concerning.

Following recent data, federal funds rate futures now price in four to five -25bp cuts over the next year. This may explain the resilience of equities despite weak data. The bond market appears less convinced about the Fed cutting rates.

Corporate News in Australia

-Resolute Mining ((RSG)) will acquire two Cote d’Ivoire gold projects from AngloGold for -$234m.

-FIIG Securities is being acquired by Ausiex.

-Dimerix ((DXB)) has secured one of the largest licensing deals by an Australian biotech, with Amicus Therapeutics agreeing to $940m in payments for future sales of its kidney disease drug.

-WiseTech Global ((WTC)) is conducting a strategic review for the potential acquisition of NYSE-listed supply chain platform e3open for up to -$3.5bn.

-L1 Capital has proposed a merger with Platinum Asset Management ((PTM)).

On the calendar today:

-NZ March Building permits

-AU 1Q PPI

-AU 1Q Retail sales

-JP March Unemployment

-EZ April CPI

-EZ March Unemployment rate

-US April NFP

-US March durable goods

-US March factory orders

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3248.05	– 49.92	– 1.51%
Silver (oz)	32.21	– 0.31	– 0.94%
Copper (lb)	4.63	+ 0.02	0.45%
Aluminium (lb)	1.09	+ 0.01	0.61%
Nickel (lb)	6.81	– 0.17	– 2.41%
Zinc (lb)	1.17	– 0.00	– 0.38%
West Texas Crude	59.02	+ 0.83	1.43%
Brent Crude	61.88	+ 0.89	1.46%
Iron Ore (t)	99.25	– 0.51	– 0.51%

The Australian share market over the past thirty days

Index	01 May 2025	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8145.60	2.23%	0.24%	3.85%	-0.17%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMC	Amcor	Upgrade to Overweight from Equal-weight	Morgan Stanley
CRN	Coronado Global Resources	Downgrade to Speculative Hold from Buy	Bell Potter
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
NST	Northern Star Resources	Downgrade to Hold from Buy	Bell Potter
PNR	Pantoro Gold	Downgrade to Sell from Hold	Bell Potter
RMS	Ramelius Resources	Upgrade to Buy from Accumulate	Ord Minnett
RRL	Regis Resources	Downgrade to Hold from Buy	Bell Potter
		Downgrade to Neutral from Outperform	Macquarie
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.

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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