The Overnight Report: One Day Wobble?

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US markets rebounded on Wednesday after Tuesday's sharp sell off despite a rise in US bond yields.

The Australian market is expected to open higher with ASX200 futures pointing to a positive start on Thursday.

Good Morning,

After a very weak lead from Wall Street, Australian shares fell sharply on Wednesday before buyers stepped in.

The ASX200 ended the session with a loss of -12pts or -0.1% to 8,802 with Tech suffering the most by -2.7%, followed by materials, down -1.1%.

Telcos and financials outperformed, up 0.6%.

What happened overnight, NAB Markets Today Research

US economic data took centre stage, with the ADP private payrolls report showing a 42,000 increase in October—slightly above expectations allaying concerns of a weakening labour market, notwithstanding the fact that ADP has a terrible track record for predicting (the official) monthly non-farm payrolls. 

Putting that caveat to one side, the modest gain points to stabilisation in the labour market, though it remains consistent with a general softening in demand. The ISM services index surprised to the upside, rebounding to 52.4 in October from 50.0, with new orders and prices paid both jumping to multi-month highs. 

The employment sub-index edged up but stayed below 50, suggesting ongoing softness in services hiring. These releases, while not always reliable predictors of broader trends, were enough to move markets in the absence of official data.

The US Treasury’s quarterly refunding announcement confirmed note and bond auction sizes will remain steady for at least several quarters, with next week’s auctions totalling US$125bn. However, the Treasury also hinted at possible future increases.

US treasuries endured a decent sell off with the US treasury news alongside solid US data releases fuelling the move. The 2-year yield climbed 5bps to 3.62%, while the 10-year rose 7bps to 4.15%, the latter closing at the highs for the day, having traded to a low of 4.05% midway through our trading day yesterday. 

The market pared back expectations for Fed rate cuts, with December pricing now reflecting just -16bps of easing and about three cuts in total priced through the end of next year. European yields also moved higher, though less dramatically: Bund 10y up 1.9bps to 2.67%, Gilt 10y up 3.8bps to 4.46%. Italian 10y yields rose 2.3bps to 3.42%.

Equity markets were unperturbed by the rise in yields. The S&P 500 and Nasdaq both rebounded, with investors viewing the previous session’s decline as a buying opportunity. Strong earnings, particularly in the tech sector, and positive US data releases underpinned sentiment.

The narrative remains that high valuations are sustainable if earnings growth continues to surprise to the upside, and the AI theme remains a key support. European equities also gained (Eurostoxx600 rose 0.23%), though to a lesser extent, while Asian markets were mixed.

In currency markets, the USD unable to gain any support from the move up in UST yields, instead the risk positive vibes helped pro-growth currencies outperformed, with AUD and NZD leading the G10. 

NZ labour market data were broadly in line with expectations, with flat employment growth driving a tick up in the unemployment rate to 5.3%, its highest rate in nearly nine years.

Soft labour market conditions supported further moderation in wage inflation, with LCI private sector ordinary time earnings up 0.5% q/q, taking the annual figure down to a four-year low of 2.1% y/y, consistent with the 2% midpoint CPI inflation target.

Commodities were mixed. Gold rebounded 0.8% to US$3,991/oz as investors weighed the outlook for Fed policy and stabilisation in the US job market.

Oil prices fell, with WTI down -1.4% to US$59.74 and Brent off -1.2% to US$63.67, as inventory data showed a build in US crude stocks and traders focused on technical support levels. Industrial metals were generally softer, with copper and aluminium both lower on the week.

In other news, the US Supreme Court is currently considering the legality of President Donald Trump’s sweeping global tariffs. During arguments in Washington, several conservative justices expressed scepticism about Trump’s use of emergency-powers legislation to impose tens of billions of dollars in tariffs each month. 

Chief Justice John Roberts highlighted that imposing tariffs is traditionally a Congressional power, while Justices Neil Gorsuch and Amy Coney Barrett also raised probing questions.

A ruling against Trump could result in over US$100 billion in refunds and would represent the Court’s most substantial challenge yet to the expansion of presidential powers. A decision could come as soon as the end of the year, given the expedited schedule.

Democrats achieved sweeping victories in three major local elections across the US, providing them with a much-needed boost ten months into President Trump’s second term. 

Notably, Zohran Mamdani, a self-described democratic socialist, won the New York mayoral race, while Democrats also secured gubernatorial wins in Virginia and New Jersey.

President Trump himself acknowledged the poor outcome for Republicans, attributing it in part to the ongoing government shutdown, which has now become the longest in US history at 36 days.

Trump also urged Republicans to get the government back open soon. Polymarket gives a 59% chance of the shutdown ending by 15 November and a 90% chance of it ending by 30 November.

ANZ Bank, Australian Morning Focus, Commodities extract

Crude oil ended the session lower as signs of weaker demand weighed on sentiment. 

The weekly Energy Information Administration inventory report showed that stockpiles rose by 5.2mbbl last week, the biggest increase since July. The build was driven by a pick-up in imports, particularly from the Middle East. Crude oil production also edged higher, hitting 13.65mb/d, despite six more oil rigs going out of operation. 

However, a plunge in gasoline inventories helped limit the losses. The fall of nearly -5mbbl pushed stockpiles to their lowest level in three years. This came even as exports were relatively unchanged. Broader market sentiment continues to be framed by expectations of a glut of oil forming. The OPEC-Plus alliance announced over the weekend that it would increase output in December by another 137kb/d. 

The International Energy Agency predicts an even greater glut will emerge because of rising output from OPEC. 

European gas prices fell, as strong LNG imports poured into inventories. The market shrugged off concerns that lower-than-expected wind power generation would boost demand for natural gas, instead focusing on the rising availability of supply. 

Import terminals in northwest Europe have been sending fuel shipments to local grids at levels not seen since March, amid strong LNG imports in recent weeks. Europe’s overall inventory levels have held at 83%, despite an early start to the heating season.

North Asia LNG prices were also lower as above-average winter temperatures in large parts of China raised concerns that the nation’s imports of LNG may remain subdued. 

Copper was under pressure for most of the session, as a stronger USD put pressure on commodities. Copper had reached an all-time high of US$11,200/t last week on optimism that a US-China trade deal would boost demand. The rally cooled as the USD returned to its highest levels since May. The losses have been limited by enthusiastic buying from China. 

Falls on the Shanghai Futures Exchange have increased buying as consumers restock ahead of an expected pickup in demand. Sentiment wasn’t helped by easing supply side issues. Tanzania has reopened its border with Zambia, restoring flows along a key trade corridor for Africa’s two biggest copper exporters. African copper shipments to China have been disrupted for more than a week due to the unrest in Tanzania. 

Iron ore prices extended recent falls amid concerns of weaker demand. Earlier this week the Hebei province reintroduced an environmental production cut alert for steel mills, which could see blast furnace activity impacted. Data releases yesterday showed stockpiles at China’s steel mills are climbing. Inventory level rose by 4.4% to 16.6mt in mid-October compared with early October. 

Gold rebounded after weak US data supported expectations of further Fed rate cuts. Private sector payrolls increased by 42k after two weak months. While helping to temper concerns of a faster deterioration in the job market, the modest payrolls increase is consistent with a general softening in labour demand.

Corporate news in Australia

-Medibank Private ((MPL)) acquired Better Medical’s 61 clinics for -$159m increasing its primary care network.

-AustralianSuper has taken a 5.5% stake in Mineral Resources ((MIN)).

-CommBank ((CBA)) has cut interest rates for wealthy clients and raised rates for traders.

-New IPO, Carma ((CMA)) slid -7.4% on its ASX debut after a $100m raising placing a $370m value on the used car online platform.

-Light & Wonder ((LNW)) is delisting from Nasdaq with its primary listing shifting to Australia.

-Suncorp Group’s ((SUN)) CEO has called on governments, insurers, banks and property developers to build more climate resilient homes and in safer area.

-Capilano Honey sale auction has been paused due to disappointing indicative offers.

-BlackRock backed Akaysha Energy (battery energy storage systems) will go ahead with its Elaine BESS project in Vic.

On the calendar today:

-AU Sept Trade Balance

-UK BOE MonPol Decision

-ATLANTIC LITHIUM LIMITED. ((A11)) EGM

-AMPLITUDE ENERGY LIMITED ((AEL)) AGM

-AUSTIN ENGINEERING LIMITED ((ANG)) AGM

-BISALLOY STEEL GROUP LIMITED ((BIS)) AGM

-BREVILLE GROUP LIMITED ((BRG)) AGM

-COBRAM ESTATE OLIVES LIMITED ((CBO)) ex-div 4.5c (100%)

-COAST ENTERTAINMENT HOLDINGS LIMITED ((CEH)) AGM

-COG FINANCIAL SERVICES LIMITED ((COG)) AGM

-CLEARVIEW WEALTH LIMITED ((CVW)) AGM

-HIPAGES GROUP HOLDINGS LIMITED ((HPG)) AGM

-LIGHT & WONDER INC ((LNW)) 3Q25 Earnings/Investor Call

-NATIONAL AUSTRALIA BANK LIMITED ((NAB)) FY25 Earnings

-NIB HOLDINGS LIMITED ((NHF)) AGM

-NOUMI LIMITED ((NOU)) AGM

-NEXGEN ENERGY LIMITED ((NXG)) 3Q25 Results Call

-SEVEN WEST MEDIA LIMITED ((SWM)) AGM

-TALGA GROUP LIMITED ((TLG)) Investor Briefing

-VICINITY CENTRES ((VCX)) AGM

-WESTPAC BANKING CORPORATION ((WBC)) ex-div 77c (100%)

-WAM GLOBAL LIMITED ((WGB)) ex-div 6.5c (100%)

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

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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