The Overnight Report: Too Calm For Comfort?

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The company is included in ASX300 and ALL-ORDS

With US markets closed overnight for Labor Day, ASX200 futures are pointing to a flat start.

The Australian market fell yesterday on selling pressure for tech stocks and buying in gold miners as the gold price trekked higher.

World Overnight
SPI Overnight	8888.00	– 6.00	– 0.07%
S&P ASX 200	8927.70	– 45.40	– 0.51%
S&P500	6460.26	– 41.60	– 0.64%
Nasdaq Comp	21455.55	– 249.61	– 1.15%
DJIA	45544.88	– 92.02	– 0.20%
S&P500 VIX	16.12	+ 1.69	11.71%
US 10-year yield	4.23	0.00	0.00%
USD Index	97.61	– 0.08	– 0.08%
FTSE100	9196.34	+ 9.00	0.10%
DAX30	24037.33	+ 135.12	0.57%

Good Morning,

The ASX200 fell -0.5% or -45pts to 8,928 on Monday. Technology stocks took the lift down, the sector off -2.7% which led the losses.

Consumer staples rose the most while the materials sector was supported by gold miners.

Gold futures rose US$29.70 or 0.8% to a four month high of US$3,545.80oz in after-hours trade.

What happened overnight, NAB Markets Research Today extract

Markets began the new week on a quiet note, with the US closed for Labor Day and little movement across major asset classes. S&P500 futures edged up 0.2%, while the Euro Stoxx 600 rose 0.2%. 

The standout was Alibaba, which surged over 19% after reporting a triple-digit percentage gain in AI-related revenue and a 26% jump in cloud sales. The rally energised the broader Chinese tech sector, with Baidu and Tencent also posting gains. The move highlights the contrasting fortunes in China tech, where AI is delivering scalable growth even as traditional segments face fierce competition.

US Treasury futures were little changed, implying a 1bps uptick in 10y UST yields to 4.235%. UK and Australian yields also ticked up, while NZGB yields rose 1–3bps. The focus remains on upcoming US payrolls on Friday and the Fed’s rate decision later in the month (17 September).

The USD drifted lower, with the Dollar Index (DXY) down -0.08% on the day and -0.75% over the week. The AUD rose 0.2% to 0.6553.

There was no notable market reaction to the federal appeals court ruling that President Trump lacked legal authority to impose country tariffs under the International Emergency Economic Powers Act. The decision, widely anticipated, leaves tariffs in place for now as legal wrangling continues.

Now it will be up to the Supreme Court to rule, but in the meantime on social media, Trump condemned the judge’s assignment as a “total Conflict of Interest” and demanded recusal, underscoring the ongoing US political tensions which now also include the courts.

At the Tianjin summit, leaders of China, Russia, and India pledged cooperation, sending a pointed message to Washington. Prime Minister Modi and President Putin highlighted their “special and privileged partnership,” with Modi emphasising that India and Russia have always stood by each other in difficult times. The summit’s imagery and rhetoric underscore the challenges facing US efforts to reshape global alliances, particularly as India defends its Russian oil purchases in the face of US tariffs.

Sticking with this theme, after announcing retaliation measures last week, Brazil’s president Lula da Silva is convening a virtual meeting of BRICS leaders to discuss Donald Trump’s trade policy. Lula wants to discuss trade tariffs imposed by the US government and rally support for multilateralism among fellow heads of major emerging market nations.

During the weekend we learned that China’s official manufacturing PMI edged up to 49.4, and yesterday the RatingDog (ex-Caixin) manufacturing PMI hit a five-month high of 50.5. The composite PMI rebounded to 50.5, driven by services, which saw their strongest reading this year. Export orders improved, but domestic demand remains subdued, and construction activity continues to lag. The data suggest some stabilisation, but little prospect of a sustained acceleration in growth as fiscal support wanes.

Moving onto to Russia -Ukraine, while European leaders continue to discuss the terms of a security guarantee, Russia continues to intensify strikes on Ukrainian cities and expanding hybrid warfare tactics. Over the weekend, the European Commission accused Russia of jamming the GPS on President Ursula von der Leyen’s aircraft while on route to Bulgaria. The EU condemned the interference, vowing to ramp up defence support for Ukraine. Russia has not commented, but the episode highlights the ongoing risks to European security.

Back home, yesterday GDP partial releases reinforced our below consensus Q2 GDP forecast of 0.3% qoq (out tomorrow).  Company profits fell -2.4% qoq, led by a -3.5% drop in non-mining profits, while wages and salaries rose 1.0% qoq.

Calm before the ambush, Stephen Innes, SPI Asset Management extract

The market has lulled itself into thinking the tape is bulletproof, but September has a way of reminding traders that complacency is the most expensive position you can carry.

We’ve strung together ninety-one sessions without a two-percent selloff, the longest such stretch since mid-2024. The VIX has been chained to the floor, pinned below its one-year average, and the S&P500 just printed fresh highs, yet that glassy calm feels less like stability and more like a pressure cooker. It’s the eerie silence you hear before a squall, when the wind dies and the sails hang slack, but you can see the line of black water building on the horizon.

The calendar alone is enough to make even seasoned desks sweat. We’re walking into a minefield over the subsequent fourteen trading sessions: nonfarm payrolls, a CPI print distorted by shelter math, the Fed’s September meeting and projections, and then the chaos of triple witching to finish it off. Each event carries its own load of risk, but what matters is the sequencing. One misfire cascades into the next, weak jobs trigger talk of a harder slowdown, CPI muddies the inflation narrative, Powell is left trying to patch holes with platitudes, and option expiry amplifies whatever direction is already in motion.

Dominoes don’t fall in isolation; once one tips, the rest accelerate.

And yet, positioning shows traders are leaning into the idea that nothing can go wrong. Hedge funds are shorting volatility in size, betting the calm will hold. Jobs day is priced with barely eighty-five basis points of implied swing, as if payrolls can’t possibly surprise in either direction. That’s dangerous thinking. We’ve been here before, February 2025, when tariff headlines blindsided the low-volatility crowd, or August 2024, when yen-carry unwinds turned serene positioning into a stampede. Shorting fear when seasonality is at its ugliest is like selling hurricane insurance because the sky looks clear today.

Equity valuations are skating on thin ice. At twenty-two times forward earnings, the S&P is priced like a market that expects nothing but blue skies. Cash allocations are at rock bottom, big tech remains the only horse traders seem willing to bet on, and even the bulls admit they’re sitting on dry powder waiting for a dip. That’s not caution, that’s hope dressed up as prudence. The higher the market rises, the thinner the oxygen becomes, and the easier it is for a small crack to widen into a crevasse.

The polite -25bp cut rubberstamped for September is the stuff of central bank orthodoxy, designed to telegraph patience and let the market speculate endlessly about the next one, keeping cross-asset traders on the swivel for the next month or two. But speculation itself is the problem: it anchors uncertainty and keeps the back end heavy.

The market’s chorus is predictable. Rate cuts at the front end mean the curve must steepen, the long end must blow out, and bond vigilantes will take their victory lap. It’s textbook, and maybe too textbook. Policy is never just about the Fed tugging on the front of the curve while the rest of the ship drifts where it will. This administration has already shown that it prefers to take the lead and steer the current, rather than leaving things to chance. If they want yields lower across the board, they have plenty of levers to pull, levers traders may be underestimating.

Then consider the balance sheet. The Fed is stuffed with short-dated paper: about US$2 trillion maturing inside seven years, only US$1 trillion beyond 15 years. That’s a loaded magazine for an aggressive Operation Twist. Selling the short stuff and gorging on 20-year plus bonds would swallow half the free float.

Treasury, meanwhile, could tilt issuance toward bills and starve the long end. Supply shrinks where it matters, demand swells where it hurts the shorts, and suddenly the curve flattens despite every textbook. Add in a sprinkling of mortgage-backed buying and the political prize of softer mortgage rates is delivered straight to voters’ front doors.

Inflation, too, is a battlefield where data itself is the weapon. The shelter component of CPI—Owners’ Equivalent Rent—isn’t just flawed, it’s an outright distortion. It lagged the rent surge during the “transitory” saga, and now it’s keeping inflation artificially sticky just as real-world rents ease. Cleveland Fed’s alternative series shows the truth: rent inflation is back near normal. If policymakers start hammering this point, the narrative of “inflation too high to cut” crumbles. Undermine the vigilantes’ favourite headline metric, and their arguments lose oxygen.

Yield curve control is no longer heresy, t’s just one more “unconventional” tool waiting its turn. Japan has done it, and this administration has no qualms about fixing prices elsewhere, from tariffs to energy. Pinning the long end would once have been laughed out of Washington, but we’ve been sliding toward this since the GFC and LTCM. Each crisis erodes the taboo, and the slope is steep.

There are accounting tricks too. Revalue the gold hoard at today’s prices and suddenly Treasury books hundreds of billions in “profits.” Sell a slice into a sovereign wealth fund or even the crypto space, and you’ve created a sideshow big enough to distract from the curve narrative entirely. Pair that with buying long bonds below par while offloading shorter ones closer to par, and the optics alone can be sold as savvy fiscal management. It’s smoke, mirrors, and accrual games, but it still shifts flows.

Stablecoins bring their own angle. If regulation channels trillions into dollar-based coins, that’s fresh demand for T-bills. Treasury can lean into that appetite, issuing more short paper while trimming long supply. New net demand is always good demand, and if it frees room to torque the long end with other programs, all the better. Tariffs, meanwhile, continue to ring the cash register, legal challenges or not. Between fresh demand for front-end paper and creative fiscal plumbing, the scaffolding for curve suppression is already there.

None of this is dollar positive. But here’s the rub: for an administration bent on redirecting trade flows, a softer dollar is a feature, not a bug, even if they can’t say it aloud.

The rates street is positioned for a rerun of last September: trim the front, bleed the back, and call it consensus. But that assumes a passive Fed, acting alone and constrained to the standard playbook. If policy turns collaborative, Fed, Treasury, accounting gimmicks, and even statistical re-framing, the consensus steepener trade could prove the crowded side of the boat. The opportunity lies in the opposite direction. The flattener may not be today’s trade, but it’s tomorrow’s ambush.

So September isn’t just another month; it’s a gauntlet. The real question isn’t whether the rally can carry on but how the market will handle stress if the veneer of calm is ripped away.

A five-to-ten percent air-pocket in equities is entirely plausible before year-end targets near 7,000 come back into view. The key is that markets don’t travel in straight lines, and the most painful moves are always the ones traders have convinced themselves can’t happen.

Right now, the street has shorted fear and convinced itself that the calm seas of August will stretch on indefinitely. That’s exactly the setup that history punishes.

Corporate news in Australia

-Weeks before the L1 Capital merger, Platinum Asset Management ((PTM)) reported a large client is removing -$580m from its managed funds.

-Foxtel’s Kato Sports and Seven Network have agreed to a $200m broadcast deal with Supercars over four years.

-Caterpillar is seeking to acquire RPM Global Holdings ((RUL)) for $1.1bn, a 44% premium to the average share price over the last month.

-Pro Medicus ((PME)) has won the US Veterans’ Affairs approval for cloud imaging platform.

On the calendar today:

-NZ 2Q terms of trade

-AU 2Q BoP and CA Balance

-EZ July CPI

-US Aug ISM Manufacturing

-US July construction spend

-BENDIGO & ADELAIDE BANK LIMITED ((BEN)) ex-div 6.00c (100%)

-BELLEVUE GOLD LIMITED ((BGL)) earnings report

-CODAN LIMITED ((CDA)) ex-div 16.00c (100%)

-ILUKA RESOURCES LIMITED ((ILU)) ex-div 2.00c (100%)

-NORTHERN STAR RESOURCES LIMITED ((NST)) ex-div 30.00c (100%)

-SANTOS LIMITED ((STO)) ex-div 20.90c (9%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3545.80	+ 15.10	0.43%
Silver (oz)	41.73	+ 1.01	2.47%
Copper (lb)	4.57	– 0.04	– 0.79%
Aluminium (lb)	1.19	– 0.00	– 0.10%
Nickel (lb)	6.93	+ 0.03	0.49%
Zinc (lb)	1.29	+ 0.00	0.32%
West Texas Crude	64.61	+ 0.60	0.94%
Brent Crude	68.16	+ 0.68	1.01%
Iron Ore (t)	101.81	0.00	0.00%

The Australian share market over the past thirty days…

Index	01 Sep 2025	Week To Date	Month To Date (Sep)	Quarter To Date (Jul-Sep)	Year To Date (2025)
S&P ASX 200 (ex-div)	8927.70	-0.51%	-0.51%	4.51%	9.42%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AIZ	Air New Zealand	Downgrade to Sell from Neutral	UBS
ALC	Alcidion Group	Upgrade to Buy from Hold	Bell Potter
APE	Eagers Automotive	Downgrade to Hold from Accumulate	Ord Minnett
BLX	Beacon Lighting	Upgrade to Accumulate from Hold	Morgans
CUV	Clinuvel Pharmaceuticals	Downgrade to Hold from Speculative Buy	Morgans
DUR	Duratec	Upgrade to Buy from Accumulate	Ord Minnett
GLF	Gemlife Communities	Downgrade to Accumulate from Buy	Morgans
IEL	IDP Education	Downgrade to Neutral from Outperform	Macquarie
LOV	Lovisa Holdings	Upgrade to Neutral from Sell	Citi
		Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Equal-weight from Overweight	Morgan Stanley
		Downgrade to Accumulate from Buy	Morgans
LYC	Lynas Rare Earths	Downgrade to Sell from Hold	Ord Minnett
		Downgrade to Neutral from Buy	UBS
MCE	Matrix Composites & Engineering	Downgrade to Hold from Speculative Buy	Morgans
MIN	Mineral Resources	Downgrade to Accumulate from Buy	Ord Minnett
NAB	National Australia Bank	Upgrade to Overweight from Equal-weight	Morgan Stanley
NEC	Nine Entertainment	Downgrade to Hold from Accumulate	Ord Minnett
NEM	Newmont Corp	Downgrade to Neutral from Outperform	Macquarie
NXT	NextDC	Downgrade to Accumulate from Buy	Morgans
PDN	Paladin Energy	Downgrade to Accumulate from Buy	Ord Minnett
PPT	Perpetual	Downgrade to Neutral from Buy	UBS
QAN	Qantas Airways	Upgrade to Buy from Accumulate	Ord Minnett
S32	South32	Downgrade to Neutral from Outperform	Macquarie
SFR	Sandfire Resources	Downgrade to Neutral from Buy	UBS
SIG	Sigma Healthcare	Upgrade to Hold from Sell	Bell Potter
		Upgrade to Accumulate from Hold	Morgans
SVR	Solvar	Downgrade to Hold from Buy	Bell Potter
TAH	Tabcorp Holdings	Upgrade to Accumulate from Hold	Morgans
WES	Wesfarmers	Upgrade to Neutral from Sell	Citi
WOW	Woolworths Group	Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Equal-weight from Overweight	Morgan Stanley

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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