The Overnight Report: Buying Moves Beyond Tech

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ASX200 futures are pointing to a strong start for the final day of the week as tariff related inflation concerns eased overnight with US PPI lower than expected, albeit the data are staring in the rear view mirror.

World Overnight
SPI Overnight	8411.00	+ 80.00	0.96%
S&P ASX 200	8297.50	+ 17.90	0.22%
S&P500	5916.93	+ 24.35	0.41%
Nasdaq Comp	19112.32	– 34.49	– 0.18%
DJIA	42322.75	+ 271.69	0.65%
S&P500 VIX	17.83	– 0.79	– 4.24%
US 10-year yield	4.46	– 0.07	– 1.61%
USD Index	100.67	– 0.29	– 0.29%
FTSE100	8633.75	+ 48.74	0.57%
DAX30	23695.59	+ 168.58	0.72%

Good Morning,

A lower US PPI print supported falling US treasury yields and a rotation from Big Tech and Nasdaq into the Dow Jones and S&P500, with the latter marking its fourth day of rises. The index is now positive for 2025. 

What happened overnight: Extract from NAB Markets Today Research

Much like a drunken dad at a disco, equity, bond and FX markets seemed to be dancing to different tunes overnight, with bonds yields uniformly lower across curves and across countries, and equity markets mixed. 

The S&P500 and most other indices finished up, if only modestly, but NASDAQ down, albeit only slightly, while the traditional safe-haven currencies, the JPY and CHF are the strongest G10 currencies, accounting for a modestly lower DXY dollar index. 

AUD/USD is soft, once again pressuring support at 0.64 having been briefly back above 0.65 earlier in the week. Oil prices are smartly lower on news in relation to a US offer to Iran regarding uranium enrichment.

Highlights overnight in markets

Equity markets closed with the S&P500 up 0.4%, though the S&P gains was led by the defensive consumer staples and real estate sectors, up 2.0% and 1.8% respectively. 

Consumer discretionary stocks were down -0.7% and consistent with the signal from retail sales that the consumer has entered Q2 lacking the Q1 impetus to spend. 

Dow Jones constituent UnitedHealth fell -10.9%  following a Wall Street Journal report that the Department of Justice is investigating the company for possible criminal Medicare fraud. The company said it has not been informed of any such investigation.

As for the NASDAQ under-performance, META shares fell -3.6% in late afternoon trade after the WSJ reported that it was to (again) delay the roll-out of its Behemoth AI model.

Weaker than expected US PPI data was one of the principal components behind the rally in US Treasuries overnight, with spillovers to bond market in Europe, seeing 2 and 10 yields down -8bps and German Bunds -8bps lower.

US 10-year yield has retreated to 4.431% from 4.548% on Wednesday.

Headline (‘final demand’) PPI fell by -0.5% month-on-month, the largest decline in five years, while the core ex-food and energy measure fell, by -0.4% month-on-month. 

Both were well below expectations, albeit large upward revisions meant the annual figures were broadly in line. 

The downside surprises were helped by two specific factors, notably portfolio management charges (broker fees, which rise and fall with equity prices, hence reflecting the earlier plunge in stock prices) and domestic air fares, down -0.8%.

We might wonder if the latter is a spillover to significant reduced inbound foreign tourism in recent months and related excess capacity on flights inside America.

Whatever when combined with CPI data, the core PCE deflator the Fed’s preferred inflation measure will likely print at 0.1% month-on-month, which if so would see annual core PCE down to 2.5% from 2.6% in March (data due May 30)

As for tariff impacts on US inflation, they remain notable by their absence, but realistically it is probably still too early to see them. 

But while there are no signs yet that distributors were passing on extra costs, rather mostly absorbing them in margins, Walmart’s CFO said it planned to raise prices this month and early this summer, when tariff-affected merchandise hits store shelves. 

Walmart’s shares were down -5% at the NYSE open, but have since recouped all the loss.

US retail sales were close to expectations in headline and ex-autos and gas terms, at flat and up 0.2% month-on-month respectively, but the Control measure which feeds into GDP calculations fell -0.2% month-on-month against an expected gain of 0.3%. 

This suggests a weak start to consumer spending Q2, after sales were boosted in Q1 by bringing forward of spending to avoid tariffs. Remember these are nominal numbers.

Other US data included Industrial production, which was flat in April, with manufacturing production falling -0.4% month-on-month. Regional Fed surveys for the NY and Philadelphia regions showed headline manufacturing indices still in negative territory. 

Weekly jobless claims were 229k in line with consensus, while the NAHB housing market index fell -6pts to 34 in May, its joint-lowest reading since 2022, consistent with a weaker housing market.

Fed chair Powell spoke overnight, discussing the Fed’s five-year Framework Review where he indicated policymakers are considering changes to the framework that guides policy decisions, including how they think about shortfalls in US employment and approach their inflation target. 

This is in the context of the prior review in 2020 which came amid a backdrop of low inflation and low interest rates. 

As an aside, were Kevin Warsh to succeed Powell as Fed chair as widely speculated, we should expect a tilt towards much keener focus on the inflation target relative to other elements of the Fed’s mandate. But that’s a conversation for another day.

The other big news overnight is a sharp fall in oil prices, off about -USD$1.50 having been down over -USD$2 earlier in the night. 

This is after President Trump Indicated the US could be close to a deal in which Iran agrees to forgo nuclear weapons. In essence by agreeing to abandon its own uranian enrichment programme for imported processed/enriched product (something Iran has previously said it would not accept). 

Were there to be an agreement that results in the lifting of sanctions, Iran has the capability to pump about 4 million barrels of oil per day, up from around 1.4 million barrels currently (sold mostly to China and so evading western sanctions).

In Europe, UK GDP figures surprise to the upside at 0.7% quarter-on-quarter, making it the fastest growing major economy in the quarter, driven by a somewhat inexplicable surge in business investment (up 5.1 quarter-on-quarter vs 0.4% consensus) which more than offset downside surprises on government spending (down -0.5% against up 0.5% expected and private consumption (up 0.2% against 0.5% expected).

Australia’s employment data 

Yesterday’s local labour market data showed the unemployment rate was steady at 4.1% in April, in line with NAB and consensus forecasts. 

Employment surprised sharply higher at up 89k versus consensus at a rise of up 22.5k,  but since the participation rate rebounded by three-tenths to 67.1% (taking it back to its turn of the year rate) this prevented what would otherwise have been a fall in the unemployment rate.

Looking through the month-to-month volatility, trend employment growth at 26k has been keeping pace with population growth and the unemployment rate has been moving sideways. 

Following the data, markets pared back expectations for the extent of rate cuts over the next three RBA meetings to -49bps from -53bps prior.

Year-to-date US indices performance

-S&P500: up 0.6%

-Dow Jones Industrial Average: -0.5%

-Nasdaq Composite: -1.0%

-Russell2000: -6.1%

Corporate news in Australia

-Insurance Group Australia ((IAG)) has bought Royal Automobile Club of Western Australia for -$1.35bn

-Son of Chemist Warehouse co-founder, Damien Gance has sold $380m of his share in Sigma Healthcare ((SIG)), part of an $800m sale.

-Webjet Group ((WJL)) received a bid at 80c a share from BGH-Weiss to acquire the company with Helloworld Travel ((HLO)) buying a 5% stake just prior to the takeover announcement.

On the calendar today:

-NZ April Manu PMI

-JP 1Q GDP

-EZ March Trade Bal

-US April Housing starts

-US May Uni of Michigan sentiment

-DICKER DATA LIMITED ((DDR)) ex-div 11.00c (100%)

-EZZ LIFE SCIENCE HOLDINGS LIMITED ((EZZ)) ex-div 2.00c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3243.75	+ 59.56	1.87%
Silver (oz)	32.79	+ 0.39	1.21%
Copper (lb)	4.68	+ 0.04	0.90%
Aluminium (lb)	1.13	– 0.01	– 0.89%
Nickel (lb)	7.02	– 0.11	– 1.59%
Zinc (lb)	1.24	– 0.01	– 1.13%
West Texas Crude	61.70	– 1.16	– 1.85%
Brent Crude	64.61	– 1.10	– 1.67%
Iron Ore (t)	100.42	– 0.33	– 0.33%

The Australian share market over the past thirty days

Index	15 May 2025	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8297.50	0.81%	2.11%	5.79%	1.70%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BSL	BlueScope Steel	Upgrade to Buy from Accumulate	Ord Minnett
CQR	Charter Hall Retail REIT	Downgrade to Neutral from Outperform	Macquarie
CRN	Coronado Global Resources	Downgrade to Hold from Speculative Buy	Morgans
		Downgrade to Neutral from Buy	UBS
ILU	Iluka Resources	Upgrade to Buy High Risk from Neutral High Risk	Citi
JDO	Judo Capital	Upgrade to Neutral from Sell	Citi
LAU	Lindsay Australia	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)

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