The Overnight Report: Enthusiasm Wavers

This story features TELSTRA GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TLS

Overseas trading marked time with investors showing fatigue with rising bond yields starting to raise eye brows. The Aussie market finished flat yesterday and futures are pointing to a soft opening.

World Overnight
SPI Overnight	8276.00	– 31.00	– 0.37%
S&P ASX 200	8279.60	+ 10.60	0.13%
S&P500	5892.58	+ 6.03	0.10%
Nasdaq Comp	19146.81	+ 136.72	0.72%
DJIA	42051.06	– 89.37	– 0.21%
S&P500 VIX	18.62	+ 0.40	2.20%
US 10-year yield	4.53	+ 0.03	0.64%
USD Index	100.96	+ 0.19	0.19%
FTSE100	8585.01	– 17.91	– 0.21%
DAX30	23527.01	– 111.55	– 0.47%

Good Morning,

Nasdaq was the bright spot overnight and managed to end up 0.7%, led by buying in chip stocks, Big Tech and growth names. Concerns over funding the Administration’s tax cuts and the debt ceiling negotiations as tariff reprieves roll off have risk off sentiment rising.

What happened overnight: Extract ANZ Bank Australian Morning Focus

The US S&P500 was unchanged while the Euro Stoxx 50 and the FTSE 100 indices both closed -0.2% lower. 

In bond markets, the yield on the bellwether US 10y Treasury bond was 7.3bp higher at 4.54%. 

In commodity markets, the active WTI oil future was down -0.7%, at US$62.9/bbl, while gold fell -1.6% to US$3,181/oz. 

Hot on the heels of yesterday’s US-Saudi investment deal, Trump travelled to Qatar, where he promoted a deal for the purchase of up to 160 planes from Boeing. 

News reports vary as to the value of the deal and exactly how many planes. The White House is saying US$200bn, but other media are reporting a figure of US$96bn. 

Either way, Trump has endorsed the deal, which helped buoy the plane-maker’s share price. 

China has also lifted its ban on US aircraft deliveries according to news reports.

Following the US-China trade deal, and improvements in disinflation suggest the FOMC will remain patient in determining the timing of the next cut. 

Jefferson said recent inflation data are consistent with progress towards 2%, but uncertainties remain. He thinks higher tariffs could lead to higher inflation this year. 

What is unclear is whether rising inflation pressures on the back of tariffs would be temporary. He judges that monetary policy is well-positioned to respond as needed. 

This signals Jefferson’s preference to remain patient and wait for data to settle before easing monetary policy. 

Chicago Fed President Goolsbee emphasised the need for central banks to look through the day-to-day noise. He said the underlying economic data are steady but acknowledged the environment is difficult for households and businesses in terms of making decisions.

From Euphoria to Caution: Extract Stephen Innes, SPI Asset Management

After sprinting from the April abyss to May’s mountaintop, Wall Street’s rally is starting to wheeze at altitude. 

Despite a barrage of positive Middle East headlines, a China truce, and Gulf money pouring into U.S. assets, equities have hit a wall of technical and likely macro resistance. 

The S&P500 tagged its 200dma and positive year-to-date line and then promptly encountered the systematic selling brigade, with profit-takers hitting eject simultaneously.

The Nasdaq managed to keep its chin up, riding AI tailwinds and tech resilience, but small caps looked like the dirtiest shirt at the Wall Street Laundy Mart, battered by rate sensitivity and fiscal fears. 

The VIX nudged higher, sovereign risk blew wider, and traders realized this isn’t a victory lap it’s a breather, maybe even a warning shot.

The truce with China, a new UK trade pact, and high-profile Saudi investment deals helped reset the risk tone. 

However, the market is now shifting from headlines back to hard economic data and it might not like what it finds. 

The transition from doom and gloom to boom was uncanny and lightning-fast, supported by no apparent re-acceleration in growth. As usual, upside momentum requires fundamentals to catch up. 

The rally didn’t merely price in progress, it priced in perfection. Possible pass-through tariff inflation at the PPI level, released later Thursday, may not suit that tag of perfection.

Meanwhile, bond markets are sending a very different message and it’s not one of confidence. 

Yields are rising for all the wrong reasons. You can draw a straight line from the X-Date for the debt ceiling (conveniently landing near the end of the 90-day tariff pause) to ballooning sovereign credit risk, which now sees short-dated U.S. CDS trading above China and Greece. Let that sink in.

Bond yields are rising steadily but this isn’t your typical growth-led breakout. It’s the type of yield movement that has traders shifting uncomfortably in their chairs. Here’s what’s really driving the pain trade in Treasuries:

First, bearish option flow is hitting the tape hard. Investors are now wagering on 10-year yields reaching 4.8%, about 30bps higher than current levels. That’s not a growth bet, it’s a volatility hedge, signaling that big money sees more upside pressure on yields, likely driven by uncertainty rather than economic strength.

At the same time, SOFR (overnight lending) markets are pushing Fed rate cut expectations into 2026. The message? The Fed isn’t coming to the rescue anytime soon.

With April’s CPI still showing sticky inflation in core consumer categories particularly shelter, insurance, and services, the disinflation narrative has softened. 

And with PPI on deck Thursday, traders are bracing for signs of tariff pass-through creeping into producer costs. That keeps the Fed sidelined and rate cut hopes on ice.

The result? Bond prices take the hit.

But it’s not just macro. There’s a positioning squeeze unfolding, too. Many bond investors who chased longs into the CPI miss are now underwater, especially at the long end of the curve. That opens the door for systematic short sellers to press their advantage, exacerbating the move and forcing weak hands out.

On top of that, there is a growing concern about how Trump’s ambitious tax plan will be financed, and you’ve got a sovereign risk premium sneaking into the picture. Bond traders aren’t just worried about inflation or rates, they’re questioning the fiscal roadmap. 

With the X-Date for the debt ceiling hovering near the end of the tariff pause window, the political risk meter is starting to tick again.

And finally, the dollar’s softening in sympathy is a sign that global capital is beginning to walk back from U.S. assets altogether, not just bonds. That makes the bond sell-off feel even heavier, with cross-asset correlations starting to align in the wrong direction.

This move in yields isn’t a celebration of growth, it’s a repricing of risk, driven by sticky inflation, policy inertia, fiscal uncertainty, and positioning stress. Until one of those pillars breaks, yields may still have room to run and not for reasons bond bulls want to hear.

Stock markets have experienced some turbulence in the bond market. Stocks may stabilize here, but the risk-reward dynamic has shifted without a clear fundamental catalyst. 

The debt ceiling X-Date, persistent inflation, funding concerns, and yield stress all contribute to a larger picture: the U.S. sovereign risk premium has returned to the forefront, and markets are beginning to account for it.

Ink hasn’t met paper on tariffs, fiscal policy remains uncertain, and Wall Street’s Teflon streak just received a reality check that wasn’t, and likely isn’t, on many traders’ radar, although it soon will be.

Corporate news in Australia

-Telstra Group ((TLS)) is launching Starlink-powered satellite text messages increasing competition in rural coverage with TPG Telecom ((TPG)) and Optus.

-Bruce Gordon has raised his stake in Nine Entertainment ((NEC)) to 19.98%.

-Aramco and Woodside Energy ((WDS)) have signed a non-binding deal for joint opportunities.

-Downer EDI ((DOW)) has sold 49% stake in Keolis Downer, ceasing its coverage of public sector transport contracts.

On the calendar today:

-AU April Unemployment

-EZ 1Q GDP

-UK 1Q GDP

-US April PPI

-US April retail sales

-AUTOSPORTS GROUP LIMITED ((ASG)) ex-div 3.50c (100%)

-GRAINCORP LIMITED ((GNC)) earnings report

-UNITED OVERSEAS AUSTRALIA LIMITED ((UOS)) ex-div 2c

-XERO LIMITED ((XRO)) earnings report

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3184.19	– 72.15	– 2.22%
Silver (oz)	32.40	– 0.68	– 2.05%
Copper (lb)	4.64	– 0.08	– 1.67%
Aluminium (lb)	1.14	+ 0.01	1.29%
Nickel (lb)	7.13	+ 0.11	1.62%
Zinc (lb)	1.25	+ 0.02	1.59%
West Texas Crude	62.86	– 0.82	– 1.29%
Brent Crude	65.71	– 0.92	– 1.38%
Iron Ore (t)	100.75	+ 1.24	1.25%

The Australian share market over the past thirty days

Index	14 May 2025	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8279.60	0.59%	1.89%	5.56%	1.48%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AVH	Avita Medical	Downgrade to Speculative Buy from Add	Morgans
BSL	BlueScope Steel	Upgrade to Buy from Accumulate	Ord Minnett
CRN	Coronado Global Resources	Downgrade to Hold from Speculative Buy	Morgans
CYL	Catalyst Metals	Upgrade to Buy from Hold	Bell Potter
GMG	Goodman Group	Upgrade to Buy from Neutral	UBS
MQG	Macquarie Group	Upgrade to Neutral from Sell	Citi
		Upgrade to Add from Hold	Morgans
RWC	Reliance Worldwide	Upgrade to Add from Hold	Morgans

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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms