The Overnight Report: Tariff Reality Bites

This story features IMDEX LIMITED, and other companies. For more info SHARE ANALYSIS: IMD

The company is included in ASX200, ASX300 and ALL-ORDS

European markets turned negative as sentiment following the US trade tariiff deal moved to 'not great' from 'better than expected'.

The Nasdaq edged to a new high, but enthusiasm across the board was weak.

ASX futures are suggesting a soft start as Australia and other countries remain in the US line of sight for blanket 15%-20% tariffs.

World Overnight
SPI Overnight	8608.00	– 58.00	– 0.67%
S&P ASX 200	8697.70	+ 30.80	0.36%
S&P500	6389.77	+ 1.13	0.02%
Nasdaq Comp	21178.58	+ 70.27	0.33%
DJIA	44837.56	– 64.36	– 0.14%
S&P500 VIX	15.03	+ 0.10	0.67%
US 10-year yield	4.42	+ 0.03	0.78%
USD Index	98.40	+ 1.00	1.03%
FTSE100	9081.44	– 38.87	– 0.43%
DAX30	23970.36	– 247.14	– 1.02%

Good Morning,

Australian shares rose on Monday snapping a two-session losing streak with the ASX200 adding 31pts or 0.36% to 8,698. Eight of 11 sectors lifted. Telcos led the gains while banks provided support too.

Miners of uranium & lithium fared worst, weighing on energy and materials sectors.

What happened overnight: NAB Markets Today Research extract

The optimism with which Monday morning’s APAC markets greeted news of the US-EU handshake trade deal limiting tariffs on EU exports to the US to 15% did not receive an extension elsewhere later on. The German DAX index morphed from a 1% APAC day futures market gain into -1% market loss. 

Small knee jerk EUR/USD gains on the deal headlines at the start of the APAC day have flipped to a -1.3% loss to leave the single currency as the worse performing of the G10 majors so far this week. Aiding the move has been falling Eurozone benchmark bond yields (on weaker EZ growth concerns) set against a mild bear steepening in the US yield curve. 

But it hasn’t taken long for markets to conclude that this relatively good news is still, in absolute terms, bad news as far as the near term (through 2025) implications for Eurozone growth are concerned.

While no one is suggesting the deal might not be consummated, even though there are still plenty of ambiguities to be resolved (e.g. in relation to pharmaceuticals and exactly what the EU can commit to re energy purchases from the US) the deal has been roundly condemned by France while others, including German Chancellor Merz, are playing up the negative consequences for exporters and with that economic growth. 

Estimates of +/- 0.25% in terms of the short-term EZ growth hit are currently being bandied around. 

Still to play for on the trade tariff front this week are the fate of countries who have not yet had letters (such as Australia) or who have but are in the throes of negotiations (e.g. South Korea, who as of yesterday was offering up a potentially tantalising prospect of building ships in the US). President Trump’s latest suggestion is a 15-20% baseline tariff rate for countries having not done deals by Friday.

President Trump has also been out saying he would shorten the 50-day deadline for Russia to reach a truce with Ukraine, to “about 10 or 12 days from today”, to be announced later today or tomorrow, adding “I’m not interested in talking anymore” with President Putin.

Unless a deal is made, secondary sanctions, like imposing punitive tariffs on countries that buy oil from Russia (of which China and India are the main protagonists), would kick in. These headlines have contributed to WTI and Brent crudes rising by 2.9% and 2.8% respectively.

Hard commodities, copper and iron ore especially, are down sharply on reduced demand concerns.

US equities closed narrowly mixed, the S&P500 virtually unchanged while the NASDAQ is up 0.33% and the Dow -0.14% with very mixed S&P sector performance, notably energy +1.15%, materials -1.44%. IT (0.8%) and consumer discretionary (0.7%) are the other two outperforming sectors, the former in front of the four ‘Mag-7’ reportees later this week.

US Treasuries come into the NY close with a steeper curve, 2-year notes little changed while 10s are up about 2bps and the 30- year up 3bps. The 5-year note auction tailed by a little less than 1bps versus its pre-action yield and the yield is currently just over 1bps up on the day, so straddled by the flat front end and 2bps rise in 10 year yields. There is a $44bn 7-year note sale tonight.

Franklin Templeton: Extract from Chris Galipeau, Senior Market Strategist

-The long-term annualized return for the S&P500 Index (SPX) is about 9% per year. We just witnessed the market generate about three years’ worth of returns over the past three months.

The tape is now slightly overbought (RSI = 74), and we maintain our view that a digestion of this move is likely. Frankly, for new money, I don’t think the risk/reward is great. It was great in April, but that has changed after a 30% vertical move and with earnings at a 24x price multiple.

From an investment perspective, I think it makes sense to wait for a better entry point at the index level. Pullbacks could be viewed as an opportunity to use a dollar-cost averaging approach. Down in the capitalization stack, mid- and small-cap names are more reasonably priced for investment, in my view. I am focusing on quality factors such as FCF%, ROIC, ROE and low net-debt/EBITDA.

-The tape is broad, part one: In the trailing 12 months, the equal-weight version of the SPX is about -1% behind the cap-weighted SPX, which means that the “average stock” is performing much better than people think.

-The tape is broad, part two: On a year-to-date (YTD) basis, the equal-weight SPX is about -1% behind the cap-weighted SPX. Similarly, the equal-weight SPX is 2.32% ahead of the Mag 7 stocks this year. Large-cap value stocks are roughly 3% ahead of the Mag 7. A broad market is a strong market, in our view. We believe the broadening is both bullish and likely to continue, as we outlined in our January paper, “Get ready for a broader US equity market.” The “Seven Horsemen” are being joined by the rest of the cavalry.

-The tape is broad, part three: As of this writing, the SPX is up about 8% YTD. At the sector level, industrials are up 16%, information technology, 12%, communication services, 11%, utilities, 11%, financials, 10% and materials, 8%. Bull-market sectors are leading.

-Earnings drive stock prices. Period. When we analyse forward earnings power, we observe forward EPS growth to be much broader than what we have seen over the last four to five years. In that period, EPS growth has been explosive in the Mag 7 complex. These incredible companies have reported an astounding 643% cumulative EPS growth. If you take out the Mag 7, the rest of the SPX has reported 33% cumulative EPS growth. (Source: Bloomberg; analysis by Franklin Templeton Institute.) This explains the alpha generation of large-cap growth stocks and the Mag 7, in particular.

-We remain bullish on Europe and emerging markets (EMs) with improving forward earnings power. Forward cumulative EPS growth in EMs is 29%, in Europe, it is 28%, and in the United States, it is 26%. (Source: FactSet; analysis by Franklin Templeton Institute.) This is the first time in 15 years where EPS power in Europe/EMs is stronger than in the United States. US dollar (USD) weakness is responsible for about 50% of foreign returns in USD.

Corporate news in Australia

-Oaktree has sold GenesisCare’s US clinics for $304m, well below the previous value of $1.5bn post restructuring.

-Imdex ((IMD)) is buying AI geoscience from ESA for -$26m as it moves to grow its digital growth platform.

-Cimic had bid for UGL’s transport unit, generating EBIT of $100m with offers closing on Thursday.

-Ariana Resources launches $10m-$15m ASX IPO underpinned by record gold prices and momentum on the mining sector.

-Stockland ((SGR)) alongside John Boyd is converting Kogarah Golf Club into a $3.5bn logistics hub precinct near Sydney airport.

-China launches US$500m annual baby subsidy to boost births.

-Dutch pension fund APG Asset Management is investing more than $1bn to expand the renewables platform of developer Octopus Australia, a sister company of UK’s Octopus Energy, 23% owned by Origin Energy ((ORG)).

– Westpac ((WBC)), ANZ Bank ))ANZ)) and Bendigo & Adelaide Bank’s ((BEN)) are repaying $60m in refunds to low-income customers.

On the calendar today:

-US June Jolts

-US June Trade Bal

-BATHURST RESOURCES LIMITED ((BRL)) Qtr report

-RAMELIUS RESOURCES LIMITED ((RMS)) Qtr report

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3371.35	– 21.15	– 0.62%
Silver (oz)	38.32	– 0.05	– 0.12%
Copper (lb)	5.62	– 0.16	– 2.83%
Aluminium (lb)	1.20	– 0.00	– 0.05%
Nickel (lb)	6.83	– 0.09	– 1.28%
Zinc (lb)	1.28	– 0.01	– 0.57%
West Texas Crude	66.97	+ 1.81	2.78%
Brent Crude	69.52	+ 1.86	2.75%
Iron Ore (t)	98.67	+ 0.12	0.12%

The Australian share market over the past thirty days…

Index	28 Jul 2025	Week To Date	Month To Date (Jul)	Quarter To Date (Jul-Sep)	Year To Date (2025)
S&P ASX 200 (ex-div)	8697.70	0.36%	1.82%	1.82%	6.60%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ALC	Alcidion Group	Downgrade to Hold from Buy	Bell Potter
BAP	Bapcor	Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Hold from Accumulate	Morgans
CGF	Challenger	Downgrade to Underweight from Equal-weight	Morgan Stanley
FMG	Fortescue	Downgrade to Underperform from Neutral	Macquarie
		Downgrade to Sell from Neutral	UBS
GNC	GrainCorp	Upgrade to Buy from Hold	Bell Potter
ILU	Iluka Resources	Downgrade to Neutral from Buy	Citi
KAR	Karoon Energy	Downgrade to Neutral from Outperform	Macquarie
NST	Northern Star Resources	Downgrade to Neutral from Buy	Citi
QOR	Qoria	Downgrade to Hold High Risk from Buy High Risk	Shaw and Partners
WDS	Woodside Energy	Downgrade to Hold from Buy	Ord Minnett
WHC	Whitehaven Coal	Downgrade to Hold from Buy	Bell Potter
		Downgrade to Neutral from Buy	Citi

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