The Overnight Report: Relief Rally Continues

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Not as bad as feared. That seems to be the general mood as import tariffs against Merxico and Canada have been put on hold, but with China retaliating nevertheless.

SPI futures are indicating part of Monday’s losses will be compensated for by today’s open of trade, having failed to do so yesterday.

Shares in BHP Group ((BHP)) and Rio Tinto ((RIO)) in particular will be in  focus as their offshore shares have risen strongly.

In the US aftermarket, shares in Alphabet have come under pressure (-7%) following the release of quarterly results.

Amcor has released its set of quarterly financials and management has reaffirmed 2025 forecast and acquisition plans.

By Chris Weston, Head of Research, Pepperstone

Good morning.

With the US-China tariff implementation evolving, traders -at least for now– are seeing developments in a more optimistic light and sensing the set tariffs as targeted and less onerous than what could have played out.

There is still enough uncertainty to suggest keeping positioning light on pro-risk  (such as equity) exposures, but there are signs that the market has become tariff-fatigued and trying as best it can to move on and revert to what we’re far more efficient at pricing risk to; earnings, data dependency, trading relative growth and central bank pricing.

The fact that gold continues to trade so well, with both spot gold and front-month futures rallying to new highs highlights that while momentum is perpetuating the upside many remain of the view that it is prudent to also run gold longs and to increase one’s exposure to US Treasuries as a hedge to mitigate the chance that tariffs could still cause increased and more prolonged anxiety.

We’ve also seen traders reducing USD longs across the board through the session, catalysed by the lower-than-expected JOLTS job openings report (at 7.6m).

European equity indices recorded a huge January, seeing arguably the best risk-adjusted returns across asset classes and there are signs that outperformance may kick back into gear.

Earnings continue to roll in from EU corporates and they have largely been well received. Infineon certainly kicked onto the radar with a result that has delivered the goods, with the share price closing +10.4% and threatening to break out to the best levels since July 2024.

Perhaps some of the sentiment from Infineon’s earnings have spilt over into the US semis and global high momentum plays, with Meta, Google, IBM, and Amazon all breaking out to new highs.

While not at all-time highs, ARM, BABA and Atlassian all look strong.

US equity futures have seen a solid turnaround from the initial sell-off seen on the US-China tariffs news flow that impacted the tail end of Asia cash trade yesterday. 

NAS100 futures sit close to 2% off the lows and look set to push to the top of the 22000 to 20,700 range it has held since December.

With the S&P500 cash index currently sitting at 6038 and close to session highs, the bulls are attempting to take back control, and while breadth is fairly poor (51% of S&P500 companies are higher on the day) the sector outperformance comes from tech and Communication Services, with Energy the place to be; backed by a 3.3% intraday spike higher in crude on headlines that Trump is pushing through orders to inflict “Maximum economic pressure” on Iran.

We turn to the Asian session ahead, and as we look towards what will be a positive open across the major bourses, the focus turns to the re-open of China’s equity market and the PBoC’s CNY fixing (at 12:15 AEDT), where the widely held view is that the PBoC will keep CNY stable through trade.

Headline tariff risk remains a threat, and this needs to be considered in one’s approach to managing intraday risk, although, it’s unclear when Xi and Trump are indeed due to speak.  

By way of known risk; the data come in light through Asia, with NZ employment and Japan real wages the only real considerations. 

We get PMIs (revision) in Europe and the UK, while ADP payrolls and ISM services are due out in the US, with the latter the possible market mover.

On the calendar today:

-New Zealand 4Q Unemployment

-US Jan ADP data

-Global PMIs

-Amcor ((AMC)) earnings report

-BWP Trust ((BWP)) earnings report

-Centuria Office REIT ((COF)) earnings report

-Karoon Energy ((KAR)) Strategy Update

-Midway ((MWY)) ex-div 38.35c (78%)

-Opthea ((OPT)) investor briefing

-Pinnacle Investment Management ((PNI)) earnings report

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

Corporate news in Australia:

-HSBC is selling its retail operations in Australia. Who’s keen to buy?

-Xref shareholders have rejected acquisition by Seek ((SEK))

-Tower ((TWR)) has updated its earnings guidance on underlying net profit after tax owing to strong business performance in Q1 of FY25

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.

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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