The Monday Report – 07 April 2025

This story features NEXTDC LIMITED, and other companies. For more info SHARE ANALYSIS: NXT

With a grim sell off in US markets on Friday, the Australian market starts the week on a heavily risk-off tone. ASX200 futures are pointing to a steep sell off at the open, over -331 points or -4.29%.

World Overnight
SPI Overnight	7388.00	– 331.00	– 4.29%
S&P ASX 200	7667.80	– 191.90	– 2.44%
S&P500	5074.08	– 322.44	– 5.97%
Nasdaq Comp	15587.79	– 962.82	– 5.82%
DJIA	38314.86	– 2231.07	– 5.50%
S&P500 VIX	45.31	+ 15.29	50.93%
US 10-year yield	3.99	– 0.07	– 1.73%
USD Index	102.77	+ 0.86	0.84%
FTSE100	8054.98	– 419.76	– 4.95%
DAX30	20641.72	– 1075.67	– 4.95%

Good Morning,

China’s tariif retaliation set off greater fears of a global trade war with US markets sliding on Friday.

What happened on Friday: Extract from Chris Weston, Pepperstone

We look back at a truly historic week, where the biggest tax hike imposed on the US since the 1960’s, and the 34% tariff counter from China, resulted in some of the most violent moves across markets since March 2020. 

The repricing of a US and global recession seen in the coming 12 months rises sharply, highly anticipated IPOs are put on ice, perceived default risk among high-yield corporates accelerates and implied volatility in US equity reaches extremes.

Reports that on Friday hedge funds sold the highest level of global equity since 2010 won’t necessarily surprise given the incredible volumes traded across futures, options, ETFs and cash equity, where volumes were either near the highest on record or since March 2020. 

The extreme volatility and the sheer pace of price movement impact liquidity conditions and make the pricing of risk far more complicated and as a result, dislocations are becoming increasingly more apparent. 

Expectations for RBA policy easing are perhaps the most divergent, with the market pricing almost five -25bps cuts this year, when recent RBA communication has us questioning if rate cuts are even on the table for 2025.

But things have changed a lot in a short space of time and financial markets make dynamic assumptions of the future, while central banks typically react to facts. When certain market players start talking about inter-meeting rate cuts, you know things are truly breaking down.

RBA Gov Bullock’s speech on Thursday (at 8pm AEST) will get great attention and ironically a hawkish stance could feasibly accelerate the selling in the AUD.

Eyeing an Ugly Open for Asia 

Asia will face the music on the Monday open, where our calls suggest we see Asia equity cash indices open -4%-plus lower, with HK/China playing catch up after closing on Friday. 

A tough open for many, and markets also look to discount news that China has countered the US tariffs by an equal measure. What was truly ugly in US trade will spill over into Asia with blanket selling of equity to be seen early in the piece, margin calls and deleveraging playing will play a big role as to the extent of the moves, and what goes down, notably in Japan, could be pronounced.

Emotions run hot with the extreme volatility and the incredible daily high-low trading ranges testing even the most disciplined traders to adhere to their strategy and process.

The market needs to hear what it wants to hear and headlines that offer some belief that the 25% weighted tariff rate on US imports could be either paused or set to moderate. Headlines of a planned call between Trump and Xi could even be enough to promote a punchy intraday rally in risk.

Markets to Test Trump’s Resolve 

Whether any intraday rallies can be sustained is another factor, as both President Trump and Treasury Secretary Bessent seem unnerved by the reaction in markets, and the markets will look to test their resolve this week, while the Fed are yet to take a step towards market pricing. 

A dangerous game, especially when equity and corporate credit reflect increasing recession and default risk relief to one’s debt serviceability matters little if you’ve lost your job.

Clearly, the longer the current tariff rates remain in place the greater the impact on inflation, and deterioration in business confidence and subsequently the higher the probability that Trump’s tariff policy will be seen as responsible for causing a US and possibly global recession. 

Hence, the need for Trump et al to accelerate the timeline on tax cuts and other fiscal support levers.

Event Risks for the Week Ahead

While we’ve not heard anything through the weekend to further shake markets, headlines on the tariff talks will start to trickle in once again, and with volatility at such extremes really any headline, economic data point or Fed speaker could move the dial.

US core CPI (due Thursday) will be closely monitored and will have to moderate by a fair measure from the February print of 3.1% to cause any real relief to risk, as a hotter print, given it reflects price pressures prior to ‘Liberation Day’ which are only going to increase, will unlikely be taken kindly.

What’s more important for markets and our quest to price economics and recession risk is the incoming April economic data series that captures the fallout from new tariff rates on US imports. 

This puts Friday’s University of Michigan sentiment and inflation expectations survey as a potentially high impact risk, even if the data will likely be skewed by respondents’ political biases.

US 1Q25 Earnings in Focus 

US first quarter earnings also start to play a key role, with JP Morgan, Morgan Stanley and Wells Fargo kicking earnings into gear on Friday. 

We can almost assume the reported earnings, revenues, and margins for the reported quarter will be almost irrelevant, as it’s the guidance, outlooks and commentary about how companies are managing the tariff impact that will be far more important. 

Perhaps it’s too early to offer investors anything too explicit as the situation remains fluid, but US corporations are the first derivatives of the tariff shock and as many try to price recession risk and company earnings and revenue estimates, what companies say or don’t say matters to markets.

Nuts & Bolts: Extract from Stephen Innes, SPI Asset Management

The gloves are off. Tariff threats have officially turned into tariff reality, and markets are just beginning to price the fallout. This isn’t just a trade dispute anymore, it’s a full-blown systemic shock to the rules-based global order the U.S. spent 75 years building. That framework? It’s now being shredded, reshaped, and retaliated against in real time.

And if you think this is just headline noise for economists or policymakers, you’re about to find out otherwise. This hits everyone, it’s a global repricing of everything from goods and wages to risk premia and capital flows.

The Fed, for now, is stuck in tightrope mode. Cut too soon, and they pour fuel on inflation. Hike too much, and they send growth over the cliff. And with tariffs juicing CPI while choking demand, there’s no obvious off-ramp. Powell can’t rescue markets without sacrificing credibility, and markets know it. That’s why the Fed is standing pat despite Trump pushing for cuts. For now.

The probability of a recession within the next 12 months is surging, call it 65% and rising if the tariff structure remains intact. And unlike 2018 or 2019, when a dovish pivot could save the day, this time the Fed has no clean runway. Inflation is still well above target. Rates are stuck. Policy ammunition is limited. And the damage is no longer theoretical, US$5.4 trillion in equity market value just got vaporized in 48 hours.

Bottom line? This isn’t a dip. It’s not a cycle. It’s a macro regime change. The golden era of globalization is in retreat, and what’s rushing in to fill the void is volatile, protectionist, and inflationary by design. This is the pain before the reset,  and it’s already here.

Corporate news in Australia

-Craig Scroggie, CEO of Next DC ((NXT)) denied there is over-capacity in data centres following reports Microsoft is reconsidering projects.

-James Hardie Industries ((JHX)) chairwoman Anne Lloyd will meet major institutional investors on Monday to discuss a growing backlash among its Australian shareholders over the Azek takeover bid.

-BHP Group ((BHP)) chief commercial officer Rag Udd says Chinese steel makers will maintain current production rates for several more years and that iron ore prices should remain above US$80 a tonne.

On the calendar today:

-AU March ANZ job ads

-JP Feb earnings

-EZ Feb retail sales

-US Feb consumer credit

-SHINE JUSTICE LIMITED ((SHJ)) ex-div 1.5c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3035.40	– 95.41	– 3.05%
Silver (oz)	29.23	– 2.62	– 8.22%
Copper (lb)	4.40	– 0.41	– 8.53%
Aluminium (lb)	1.07	– 0.04	– 3.18%
Nickel (lb)	6.77	– 0.33	– 4.71%
Zinc (lb)	1.20	– 0.02	– 1.98%
West Texas Crude	61.99	– 4.77	– 7.14%
Brent Crude	65.58	– 4.36	– 6.23%
Iron Ore (t)	102.64	– 1.54	– 1.48%

The Australian share market over the past thirty days

Index	04 Apr 2025	Week To Date	Month To Date (Apr)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	7667.80	-3.94%	-2.24%	-2.24%	-6.02%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMP	AMP	Upgrade to Neutral from Sell	UBS
DLI	Delta Lithium	Downgrade to Hold from Accumulate	Ord Minnett
EMR	Emerald Resources	Upgrade to Lighten from Sell	Ord Minnett
GL1	Global Lithium Resources	Upgrade to Accumulate from Hold	Ord Minnett
LTR	Liontown Resources	Downgrade to Lighten from Hold	Ord Minnett
MFG	Magellan Financial	Upgrade to Neutral from Sell	UBS
MPL	Medibank Private	Downgrade to Accumulate from Buy	Ord Minnett
OPT	Opthea	Downgrade to Sell from Buy	Bell Potter
PDI	Predictive Discovery	Downgrade to Accumulate from Buy	Ord Minnett
PRU	Perseus Mining	Downgrade to Accumulate from Buy	Ord Minnett
TEA	Tasmea	Upgrade to Buy High Risk from Hold High Risk	Shaw and Partners
TWE	Treasury Wine Estates	Downgrade to Neutral from Buy	Citi

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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