Daily Market Reports | 8:31 AM
This story features ASX LIMITED, and other companies. For more info SHARE ANALYSIS: ASX
US and overseas markets continued their upward trend on Friday, with Big Tech continuing to find favour. A Moody’s downgrade on US debt after the close has soured the start to the week. US futures are weaker and the ASX200 is indicating a (slightly) negative start.
| World Overnight | |||
| SPI Overnight | 8360.00 | – 7.00 | – 0.08% |
| S&P ASX 200 | 8343.70 | + 46.20 | 0.56% |
| S&P500 | 5958.38 | + 41.45 | 0.70% |
| Nasdaq Comp | 19211.10 | + 98.78 | 0.52% |
| DJIA | 42654.74 | + 331.99 | 0.78% |
| S&P500 VIX | 17.24 | – 0.59 | – 3.31% |
| US 10-year yield | 4.44 | – 0.01 | – 0.31% |
| USD Index | 100.95 | + 0.28 | 0.28% |
| FTSE100 | 8684.56 | + 50.81 | 0.59% |
| DAX30 | 23767.43 | + 71.84 | 0.30% |
Good Morning,
After a big run in US markets last week, this week is shaping up to be big with the RBA cash rate decision tomorrow and ongoing discussions on tariffs from the US with the rest of the world.
What happened on Friday? Extract from Tony Sycamore, IG
US stock markets rallied on Friday, closing the week on a high note after the US and China agreed earlier in the week to significantly roll back tariffs for 90 days, while cooler-than-expected CPI and PPI data reinforced expectations for potential Fed rate cuts later this year.
Over the week, the Nasdaq surged 6.97%, the S&P500 gained 5.27%, and the Dow Jones added 1,405 points, or 3.4%.
The gains on Friday came despite the preliminary May figures from the University of Michigan indicating further deterioration in consumer sentiment. The Consumer Sentiment Index dropped to 50.8, well below expectations of 53.4, marking the second-lowest level on record, with both current conditions and expectations declining further.
Meanwhile, inflation expectations rose, with 1-year expectations jumping to 7.3% from 6.5% a new high since 1981.
Late on Friday, Moody’s downgraded the US credit rating to Aa1 from Aaa, citing the government’s rising debt levels, which far exceed those of similarly rated sovereigns.
The downgrade comes as Congress makes progress on President Trump’s tax bill, which includes permanent tax rate reductions and temporarily eliminates taxes on tips and overtime while increasing the debt ceiling by US$4 trillion.
Moody’s is the last of the big three rating agencies to downgrade the US after Standard and Poor’s in 2011 (from AAA to AA+), and Fitch in August 2023 (from AAA to AA+). At this point, we are seeing only minor risk aversion via IG’s Weekend markets, with gold trading 0.27% higher at US$3210 and Nasdaq futures down -0.38%.
Looking ahead, President Trump has said he plans to announce tariff rates for US trading partners within the next two to three weeks, while indicating that the US and EU have initiated “serious trade talks”.
Meanwhile, US and Japanese finance ministers are scheduled to meet this week for another round of trade discussions.
On the data front, flash PMI’s will be watched for insights into economic uncertainties and potential tariff-related price pressures. Earnings reports from retailers like Target, Home Depot, and Lowe’s will be in focus after Walmart’s warning last week about potential price hikes due to high tariffs.
The US rates market starts the week pricing in a -25bps rate cut in October, with a total of -54bp priced between now and year-end.
Riding a progressively mature trend: Extract Chris Weston, Pepperstone
As we roll into the new trading week, the US fiscal position continues to get increasing attention, with the House Budget Committee having a second attempt today at passing Trump’s reconciliation bill.
We also look at any further fallout from the Moody’s downgrading the US sovereign rating, although this is semantics at play, and the ratings change should have minimal lasting impact on the US Treasury market or swap spreads.
On the economic data side, traders navigate tomorrow’s RBA meeting (and Statement on Monetary Policy), the China April activity data dump, PMI data from the US, UK and EU, with CPI releases in the UK, Japan and Canada.
We also hear from a raft of Fed, ECB and BoE members, although it’s unlikely that we’ll learn anything that moves pricing too intently.
Equity trading views for the week ahead
Having gone into last weeks Traders’ Playbook’ playing for upside in select equity indices, crude and the USD, we see that this has played out well.
In the case of equity, we saw another strong week of equity appreciation, with the NAS100 (+6.8% w/w – week on week) and S&P500 (+5.3% w/w) leading the charge, with both US indices closing higher on all five trading days last week.
US tech and consumer discretionary equity outperformed the S&P500 by 2.65% and 2.25% week on week, respectively, driven notably by a 17% gain in Tesla and a 16% gain in Nvidia, and assisted by solid gains in Google, Meta, Amazon and Apple.
The S&P500 moves past the monthly options expiry (OPEX), and we look to see if dealers roll off unwanted open interest, and eliminate legacy gamma exposures, which would lead to a reduced hedging requirement a factor that could limit the upside in US equity given the influence these hedging flows have had on the performance and the momentum in the MAG7 names.
We look ahead to a quiet week on the US economic data front with earnings from Home Depot (Tuesday), and Target (Wednesday) on the radar, where the focus remains on guidance on consumer demand and tariff-related risk.
I remain biased for further upside in both the SPX500 and NAS100 and will remain that way as long as price holds (and closes on the daily timeframe) above the 8-day EMA, as well as rising uptrend support. By having these simple systematic exit rules, it keeps me unemotional and participating even when it doesn’t feel right.
I acknowledge the price action in the US equity bourses has been pushed higher by mechanical and systematic flows, as well as the resumption of corporate equity buybacks.
However, improving fundamentals have also warranted the rally in the major US equity indices and led to a solid outperformance from US equity cyclicals vs defensives.
Case in point, the Atlanta Fed US Q2 GDP tracking rate is currently seen at a healthy 2.4%, with several sell-side economists also upgrading their US and China 2025 GDP forecasts last week.
US earnings upgrades have outpaced downgrades throughout May, a factor supporting the re-emergence of the long US/short ROW equity trade.
The prospect of new all-time highs in global equity indices?
The S&P500 is up 7% in May and on track for the best monthly performance since Nov 2023.
I find it hard to bet against the bull trend just yet, and that would need Nvidia et al to take a hit, although that risk may well evolve as traders look to manage exposures going into NVDA’s earnings (on 28 May) with some seeing a heightened risk that they miss the US$43.25bn (+10% QoQ) in consensus Q126 sales expectations, and/or fail to guide to US$46.60bn for Q226 sales and Q2 margins of 72.14%.
I also consider that while we may get new trade deals this week, at 11%, we have likely seen the trough in the US effective tariff rate, and the risk over the coming months is that this will gravitate to higher levels.
The German DAX shows us the way when it comes to printing new highs, and other global indices may follow suit soon enough. The S&P500 and NAS100 fall within -5% of their own respective all-time highs, while the ASX200, CAC40, and FTSE100 all sit within striking distance of this milestone.
A hawkish cut
Tuesday’s RBA meeting is a risk for AUD positions and ASX200 interest rate-sensitive stocks, even if a -25bp cut is fully priced by AU swaps/rates futures and seen as a done deal.
The RBA rarely goes against such high conviction in market pricing, but this time around it wouldn’t materially surprise if the RBA did leave the cash rate at 4.10%. In fact, they could hold rates, and justify their actions and not face the sort credibility-related outcry from market players that would typically be the case for any central bank who went against an 80%+ implied outcome.
That said, it would still surprise if they didn’t cut the cash rates by -25bp, with the real cash rate (deflated by trimmed mean CPI) at 1.20% –the highest since 2012– and inflation holding within the RBA’s 2-3% target range.
However, the risk is the accompanying statement fails to meet the additional -50bp of implied easing priced through to December, and that may skew the risk towards AUD upside from the meeting.
The China April data deluge on Tuesday may also get some attention, as will the expected cut to the prime rate on Wednesday.
The economic activity data doesn’t capture the rollback of US-China tariffs, so it may be seen as stale. China/HK equity may still be sensitive to the data as growth, not just liquidity, attracts capital, and I would be a better buyer of the HK50 (our cash market and futures) on a close above 23,600.
Gold remains a trader favourite, and our volumes remain elevated that may well be a function that gold 1-week realised volatility is comparatively high at 25% (the 72nd percentile of the 52-week high-low range), and there is increasing disagreement from market players around the near-term direction for gold.
After finding buying support at the former 3 April breakout high, the price action has come back into balance with buyers supporting at US$3160 and better supply seen at US$3240.
ETF flows both in the GLD ETF and the main Chinese gold ETFs have seen consistent outflows. While we also look at the US Treasury market with yields across the curve pushing recent range highs, with a potential push into 4.6% on the UST 10yr, a near-term risk for the gold market.
Corporate news in Australia
-Bain Capital is deferring the Virgin Australia $4bn IPO for volatility in markets to ease.
-Brookfield is seeking to off load La Trobe Financial for $3bn, with both Japanese buyers and private equity being considered.
-Bupa is looking to become the leader in Australian mental health with 60 new clinics targeted by 2028.
-Litigation Capital Management is working on a class action against ASX ((ASX)) executives for failed execution on the Chess upgrade.
On the calendar today:
-NZ 1Q PPI
-CH April retail sales
-CH April Unemployment
-EZ April CPI
-ALCOA CORPORATION ((AAI)) ex-div 10.93c
-GENTRACK GROUP LIMITED ((GTK)) earnings report
-MACQUARIE GROUP LIMITED ((MQG)) ex-div 390.00c (30%)
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 3187.20 | – 56.55 | – 1.74% |
| Silver (oz) | 32.35 | – 0.44 | – 1.34% |
| Copper (lb) | 4.59 | – 0.09 | – 1.87% |
| Aluminium (lb) | 1.13 | – 0.01 | – 0.83% |
| Nickel (lb) | 7.00 | – 0.02 | – 0.26% |
| Zinc (lb) | 1.22 | – 0.02 | – 1.38% |
| West Texas Crude | 61.90 | + 0.20 | 0.32% |
| Brent Crude | 65.41 | + 0.80 | 1.24% |
| Iron Ore (t) | 100.08 | – 0.34 | – 0.34% |
The Australian share market over the past thirty days
| Index | 16 May 2025 | Week To Date | Month To Date (May) | Quarter To Date (Apr-Jun) | Year To Date (2025) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8343.70 | 1.37% | 2.68% | 6.38% | 2.26% |
| 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 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 |
| LLC | Lendlease Group | Upgrade to Buy from Neutral | Citi |
| NWH | NRW Holdings | Upgrade to Buy from Buy/High risk | Citi |
| RWC | Reliance Worldwide | Upgrade to Add from Hold | Morgans |
| TWE | Treasury Wine Estates | Downgrade to Neutral from Outperform | Macquarie |
| XRO | Xero | 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
CHARTS
For more info SHARE ANALYSIS: AAI - ALCOA CORPORATION
For more info SHARE ANALYSIS: ASX - ASX LIMITED
For more info SHARE ANALYSIS: GTK - GENTRACK GROUP LIMITED
For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED