The Overnight Report: Day Two Of The Rally

This story features NINE ENTERTAINMENT CO. HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: NEC

Post another positive lead from offshore markets overnight, ASX futures are pointing higher by 0.70% ahead of a big week including the upcoming FOMC meeting.

World Overnight
SPI Overnight	7909.00	+ 53.00	0.67%
S&P ASX 200	7854.10	+ 64.40	0.83%
S&P500	5675.12	+ 36.18	0.64%
Nasdaq Comp	17808.66	+ 54.58	0.31%
DJIA	41841.63	+ 353.44	0.85%
S&P500 VIX	20.51	– 1.26	– 5.79%
US 10-year yield	4.31	– 0.00	– 0.05%
USD Index	103.37	– 0.49	– 0.47%
FTSE100	8680.29	+ 47.96	0.56%
DAX30	23154.57	+ 167.75	0.73%

Good morning.

US markets settled off session highs but remained positive in a risk-off positive tone

Overnight price action featured a second-day rebound for US markets with a buy-the-dip positive bias throughout the day.

The Dow Jones rallied 0.85%, with the S&P500 up 0.65% and Nasdaq rising 0.31%.

Markets traded more broadly and to session highs in the afternoon following a Bloomberg report indicating the newly confirmed U.S. Trade Representative, Greer, aims for a more orderly rollout of reciprocal tariffs on April 2.

Mega-cap names boosted the recovery in the PM session, with Apple up 0.51%, having been down -1.6% at the day’s low. Ditto with Microsoft, up 0.14% against a decline of -0.8% earlier. These two stocks combined comprise 13% of the S&P500 in terms of market cap.

Traders and investors turned a blind eye to U.S. retail sales. While the headline was below expectations, the core control measure was stronger. Autos were the main miss and failed to recover from the January fall of -1.2%.

The New York Fed’s Empire Manufacturing Survey for March showed a contraction in business activity and a pickup in prices paid and prices received.

Ten of the 11 S&P500 sectors logged gains, led by energy, up 1.7% amid rising oil prices and Middle East tensions surrounding the Houthi attacks on US ships and supply disruptions.

Ahead of this week’s FOMC meeting, selling in US Treasuries continued as buying picked up in equities following the calming impact of the tariff-related headline.

The 10-yr yield settled the session unchanged from Friday at 4.31%, and the 2-yr yield settled three basis points higher at 4.05%.

In other news, OECD growth forecasts were cut to 3.1% in 2025 and 3% in 2026, down -0.2 to -0.3pp due to trade policy uncertainty and tariffs. Risks around the forecasts were also highlighted by the OECD.

The Australian dollar was stronger overnight, up 1% to US$0.6387, with China activity data slightly stronger than expected, although the policy briefing added little new information.

European and Asian markets were also stronger yesterday.

The RBA’s Chief Economist, Hunter, is speaking this morning at the AFR Banking Summit.

Extract from the Monthly Equity Update by Ross Cartwright, Lead Strategist at MFS

Navigating Market Uncertainties

Recent events have sparked concerns among investors regarding the potential implications of political and economic uncertainties surrounding the Trump administration’s policies and a rethink of the AI infrastructure buildout.

Economic data releases in the United States over the last couple of weeks have sent mixed messages, adding to the unease, while European markets have performed well but not without exogenous risks of their own.

Market Dynamics and the Trump Uncertainty Premium

The selloff over the last few weeks has primarily been driven by a reversal in momentum in expensive US stocks and growing risk aversion among investors, exacerbated by uncertainties surrounding the Trump administration’s fiscal policies, tariffs, and the uncertain prospects of a Ukrainian peace deal.

Additionally, a shift towards higher savings rates amid renewed inflation fears may be a sign of growing consumer unease.

Economic Indicators and Market Reactions

US 10-year note yields have fallen over the last month as the market grows increasingly concerned with growth prospects.

The equity market’s lack of response to falling yields underscores the importance for investors to focus on reported earnings rather than expectations, given the mixed signals from economic data, including the January effect, where inflation picks up early in the year, and the impact of external factors such as weather and the California wildfires.

Sector Performance and Investment Opportunities

There are signs of resilience. The S&P500 and MSCI World Equal Weighted indices are both in positive territory and have outperformed their cap-weighted counterparts year to date.

The performance of major indices such as the S&P and MSCI World is significantly influenced by the Magnificent Seven’ (Mag 7) stocks, which have recently shown a notable variance in performance, highlighted by a substantial 40% year-to-date difference between the top performer, Meta, and the worst, Tesla. 

Uncertainty around AI earnings growth, coupled with an earnings recovery beyond the companies in the AI ecosystem, presents an opportunity for fundamentally focused active managers. If correct, and the Mag 7 go through a period of digesting valuations, such a shift might remove a headwind to active management, leveling the playing field.

Against that backdrop, investors may want to rethink the level of concentration in their portfolios.  We continue to favour higher-quality, resilient companies, potentially providing a hedge against some of the uncertainties outlined above.

European Markets: Ugly Duckling to Swan

Since early 2025, European equities have shown remarkable performance, outpacing those in the US. Several factors have contributed to this trend, but the key has been earnings expectations, which have remained stable for Europe but have softened in the US over the last three months.

Europe is also benefiting from expectations that the European Central Bank has more room to ease monetary policy than the US Federal Reserve. This benefits European companies as they tend to show greater sensitivity to declining interest rates.

Lastly, Europe has been under-owned by international investors in recent years, suggesting that a normalisation of capital flows could provide the region with a tailwind. However, with trade tensions rising, the prospects for US tariffs are a potential stumbling block, as is a breakdown in Ukraine peace talks. Both risk factors remain elevated and could quickly reverse sentiment.

Investors are advised to weigh these factors when assessing their exposure to European markets, which may still offer some value.

Tariffs: Who Pays the Cost?

On 4 March, the US implemented 25% tariffs against imports from Canada and Mexico and increased tariffs on China to an average rate of nearly 30%. Beyond the broad effects on economic growth, the impact of tariffs on corporate earnings remains uncertain. Essentially acting as a tax, the burden depends on who ultimately bears the cost.

If companies can pass on tariffs to consumers without significant demand destruction, they likely will. To the extent they can’t, the costs will be shared between exporters and importers, compressing their profit margins. Currency depreciation may provide some reprieve, but perhaps only a short-term one. Tariffs magnify the importance of stock selection and knowing what you own.

This ambiguity in who pays has been reflected in recent price action. On a sector basis, it didn’t seem as though investors were specifically avoiding importers; rather, they were generally shunning risk.

Corporate news in Australia

-Nine Entertainment Group ((NEC)) to sell ads for Warner Bros Discovery’s Max streaming service in Australia.

-South Korea’s Hanwha has launched a $180m after-market raid for a 9.9% stake at a 16% premium for Austal ((ASB)).

-Nine Entertainment has delayed its response to CoStar’s $2.7bn Domain ((DHG)) bid

-Dexus Wholesale Airport Fund is raising funds to bid for a 9.7% stake in Melbourne and Launceston airports, allowing four existing investors to exit.

-Imricor Medical Systems ((IMR)) is seeking support for up to an $80m equity raising, with Morgans highlighted as the sole lead manager.

On the calendar today:

-EZ March ZEW

-US Feb Housing starts

-CREDIT CORP GROUP LIMITED ((CCP)) ex-div 32c (100%)

-NIDO EDUCATION LIMITED ((NDO)) ex-div 5.8c (35%)

-NZME LIMITED ((NZM)) ex-div 5.42c

-REECE LIMITED ((REH)) ex-div 6.50c (100%)

-SEEK LIMITED ((SEK)) ex-div 24c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3001.10	+ 3.70	0.12%
Silver (oz)	34.43	– 0.01	– 0.01%
Copper (lb)	4.90	– 0.02	– 0.39%
Aluminium (lb)	1.21	– 0.01	– 0.77%
Nickel (lb)	7.40	+ 0.01	0.16%
Zinc (lb)	1.34	+ 0.01	0.97%
West Texas Crude	66.91	+ 0.22	0.33%
Brent Crude	70.58	+ 0.67	0.96%
Iron Ore (t)	102.32	– 0.53	– 0.52%

The Australian share market over the past thirty days

Index	17 Mar 2025	Week To Date	Month To Date (Mar)	Quarter To Date (Jan-Mar)	Year To Date (2025)
S&P ASX 200 (ex-div)	7854.10	0.83%	-3.89%	-3.74%	-3.74%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AD8	Audinate Group	Downgrade to Underperform from Neutral	Macquarie
CHC	Charter Hall	Upgrade to Buy from Neutral	Citi
HLI	Helia Group	Downgrade to Underperform from Neutral	Macquarie
		Downgrade to Underperform from Neutral	Macquarie
LIC	Lifestyle Communities	Upgrade to Buy from Neutral	Citi
MIN	Mineral Resources	Upgrade to Buy from Sell	UBS
RMS	Ramelius Resources	Downgrade to Accumulate from Buy	Ord Minnett

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)

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