The Monday Report – 17 February 2025

This story features WESTPAC BANKING CORPORATION, and other companies. For more info SHARE ANALYSIS: WBC

The US celebrates today (though that is subject to interpretation) and the local reporting season is accelerating in numbers.

Westpac’s ((WBC)) Q1 profits weakened, but revealed growth underneath the surface and a2 Milk’s ((A2M)) result has beaten forecasts with increased guidance on top.

Tomorrow the RBA will deliver its first rate cut since 2020.

Having set a fresh all-time high on Friday, SPI futures are indicating the market will take a step back on Monday morning.

The calendar today also shows results releases are due from BlueScope Steel ((BSL)), Bendigo and Adelaide Bank ((BEN)), Reliance Worldwide ((RWC)), and others.

https://fnarena.com/index.php/reporting_season/

By Chris Weston, Head of Research, Pepperstone

Good morning.

Bold moves are being made and there’s no doubt that what went down across markets last week would have left some with some noticeable bruising.

Many others, however, would have executed their strategy to great effect, and these players move into the new week looking to psychologically remove any feeling of invincibility, knowing that a new set of challenges will need to be skillfully navigated.

 It was a week that saw headlines flashing across the screens seemingly every hour, with news hitting us across all time zones; economic data, Trump tariffs (now set to be implemented in Q2), optimism towards a Russia/Ukraine ceasefire, company earnings and corporate developments and JVs centred on AI adoption.

The wash-up and aggregation of all known news, interpretations and beliefs has been some upbeat cross-asset flows, trend build and persistency and some of the best weekly performances in select markets for 2025, if not far longer.

 Can Meta make it to 21?

Meta is the absolute epitome of consistency, with its share price gaining for an incredible 20 consecutive days as Meta is reportedly set to start taking orders of silicon chips from Arm, the market clearly loves Meta’s story, but one questions who is now left to buy the stock?

The HK50 Index on a Tear – Alibaba and China Tech/AI are Ripping

Intel closing up 23% on the week did not go unnoticed, helped along by JD Vance’s “ensuring the most powerful AI systems are to be built in the US” comments at the AI Action Summit in France, with a JV with TSMC also in the works.

Alibaba also finds the buyers only too readily, with shares up 20% on the week, taking the rally from 13 Jan to 55%.

Traders built on longs post the news of its partnership with Apple, with increasing optimism ahead of today’s symposium (in China), with President Xi leading the proceedings with the aim of lifting sentiment towards China’s private sector. 

Alibaba reports earnings on Thursday with options pricing implying a -/+7.5% move on the day of earnings – it promises to be another lively week for BABA and China AI/tech more broadly.

The HK50 and CHINAH have been by far the standout equity indices on the week, rallying 7%.

Both have been the beneficiaries of the moves in Alibaba and the evolving view that the China tech/AI players can compete on a global stage and deserve an increased percentage of the global capital concentrated in the US equity markets.

Will Last Week’s USD Sell-off build?

In FX markets, after a period of choppy price action, the USD has emerged as the weak link closing lower last week vs all G10 currencies, bar the JPY.

We now observe the DXY at the weakest levels of the year and closing below the 27 Jan low on Friday.

We question if the move can kick, with price action then evolving into more of a trend, although for that we would need to see EURUSD break the 27 Jan swing highs of 1.0533.

The market now digests JD Vance’s speech at the Munich Security Conference, in which Trump’s deputy didn’t hold back and relations between the US and European nations appear evidently fractured.

One suspects this will have a minimal effect on near-term FX rates, and we look towards the data, where this coming Friday we receive the EU PMI data.

We could also see traders managing EUR and EU equity exposures into the latter part of the week, given the potential for gapping risk from Sunday’s German election.

US economic data last week certainly catalysed the USD selling flows. Granted, we saw US CPI and PPI inflation come in far hotter than expected, but the inputs that feed into the US core PCE inflation (due 28 Feb) are less concerning, with tracking estimates running around 2.5% to 2.6% y/y.

Friday’s weak retail sales release has put US growth and consumption trends concerns back on the map, with the Atlanta Fed Q125 GDP tracking estimate pulled lower from 2.94% to 2.34%.

With consumption increasingly front of mind, Walmart’s earnings on Thursday (in the pre-market) could therefore get greater attention from both equity traders and macro heads. 

Of the US economic releases this coming week I’d argue it would be the S&P manufacturing & services PMI data (due Friday) that has the greatest potential to move the USD and risk dial.

I’d also argue the USD will be more sensitive to a miss in the PMI data and the other growth data points, relative to the USD upside on a beat.

A Focus Down Under The RBA Set to Cut for the First Time Since 2020

The AUD gets increased focus this week, partly due to AUDUSD breaking out top side of its 0.6330 to 0.6150 range it has held all year, but also due to the deluge of macro event risks out this week.

Tuesday’s RBA meeting/Statement on Monetary Policy and Gov Bullock’s presser are set to dominate the local news flow.

However, we also get the Q4 Wage Price Index, and January employment report, with the RBA then testifying to Parliament on Friday.

With Aussie interest rate swaps pricing the -25bp cut at an 85% probability, the message we’re hearing from the options pricing is the RBA meeting will likely be a low-volatility affair and that a cut is a done deal.

Given the rates implied pricing and the volatility structure, one would like to believe that the RBA should be highly cognisant of an impending volatility spike should they leave rates unchanged at 4.35%.

They would also risk injecting a high degree of policy uncertainty ongoing in the rates market as the market has essentially priced a 70%-plus chance of the RBA easing all year and the bank hasn’t guided market expectations away from this view.

So, either the cut is a done deal, or the RBA would be seen as injecting volatility into rates pricing, which would seem somewhat illogical at this point in the cycle.

 ASX200 Earnings Increase in Frequency

With the ASX200 hitting a new all-time high on Friday, ASX200 1H25 earnings increase in frequency this week.

Naturally, this could play a big role in the volatility and dispersions seen at a single stock level.

BHP Group ((BHP)), Rio Tinto ((RIO)), Fortescue ((FMG)), Wesfarmers ((WES)), Block ((SQ2)), Newmont Corp ((NEM)) and QBE Insurance ((QBE)) will likely be front of mind for equity and AUS200 index traders.

Gold Set to Test US$2850?

Gold continues to be well traded by clients, many of whom weighed into shorts on Thursday and Friday and were subsequently well rewarded.

The gold bulls will say a pullback into US$2860/50 and a solid flush out of extended longs after such a strong run is a good thing, with a cleaner position offering a more compelling entry point.

We shall see if Friday’s selloff increases in momentum, as gold remains above the short-term moving averages, which can be effective for holding a position in a strong trend and remaining unemotional.

US equity and bond markets will be closed on Monday for Presidents Day but ramp up from there.

Given the landmines stated above, and with evolving and in some cases mature trends in markets, the new trading week is shaping to be yet another lively week.

On the calendar today:

-Japan 4Q GDP

-Eurozone Dec Trade Balance

-US Public Holiday

-a2 Milk ((A2M)) earnings report

-Audinate Group ((AD8)) earnings report

-Aurizon Holdings ((AZJ)) earnings report

-Bendigo and Adelaide Bank ((BEN)) earnings report

-BlueScope Steel ((BSL)) earnings report

-Contact Energy ((CEN)) earnings report

-Freightways Group ((FRW)) earnings report

-GPT Group ((GPT)) earnings report

GWA Group ((GWA)) earnings report

(and more)

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

Corporate news in Australia:

-AFR reports Private equity house Oaktree Capital Management is trying to buy out Star Entertainment’s ((SGR)) lenders before administrators are expected to be called in

-KKR has returned with an improved all-cash bid for Perpetual’s ((PPT)) corporate trust and wealth units, offering over $8 per share

-Macquarie Group ((MQG)) seen as potential buyer for Tyro Payments ((TYR))

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.)

(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