The Overnight Report: No Good News, Yet!

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US markets continued to retreat into a defensive mode as concrete tariff deals remained elusive, despite some positive signals out of the UK. The Australian market is expected to open lower yet again today.

World Overnight
SPI Overnight	8138.00	– 31.00	– 0.38%
S&P ASX 200	8151.40	– 6.40	– 0.08%
S&P500	5606.91	– 43.47	– 0.77%
Nasdaq Comp	17689.66	– 154.58	– 0.87%
DJIA	40829.00	– 389.83	– 0.95%
S&P500 VIX	24.76	+ 1.12	4.74%
US 10-year yield	4.31	– 0.04	– 0.81%
USD Index	98.99	– 0.64	– 0.64%
FTSE100	8597.42	+ 1.07	0.01%
DAX30	23249.65	– 94.89	– 0.41%

Investors continued to shift to more defensive positioning with the gold price back in rally mode and the utility sector well bid.

Energy stocks rose on higher oil prices. A new head of the FDA saw vaccine, biotech and pharmaceutical stocks fall sharply due to Dr Prasad’s criticism of the former FDA head and the industry at large.

What happened overnight in markets:

“Markets plunged back into full-on risk aversion Tuesday, with the S&P500 marking back-to-back slides as clarity around the U.S.-China trade saga remained as elusive as evercompounded by Trump’s fresh tariff grenades. With the 90-day negotiation window tightening, investor sentiment evaporated faster than hopes of waking from a great dream coming true”, dixit Stephen Innes, SPI Asset Management.

Lack of Trade Deals, Fed Angst, Drive Investors to Safety: Jose Torres, InteractiveBrokers

Stocks are continuing to lose ground this week as several firms have signalled profitability concerns in light of tariff pressures. 

Heightening trade tensions certainly aren’t helping either as Beijing approached the European Union to strengthen ties and undermine Washington’s influence. 

Meanwhile, President Trump is hosting Canadian Prime Minister Mark Carney at the White House today and investors will be looking for a reason to buy dips if the two sides appear closer to a deal. 

For now, though, market participants are tilting toward a risk-off posture against the backdrop of an uneventful economic calendar featuring a reminder that March’s trade deficit was the deepest on record due to consumers and businesses frontrunning early April levies. 

In response to the news, folks are reducing exposures to equities and the greenback in favour of Treasuries, cyclical commodities, forecast contracts, volatility protection instruments and index put options.

The US’s trade deficit for March deepened to US$140.5 billion, beneath the anticipated US$137 billion and the US$123.2 billion from the prior month. 

Imports were supported by orders of pharmaceutical products, motor vehicles and capital equipment. 

April data suggest that the surge in foreign purchases have declined significantly, a result of inventories being built up. 

Exports also rose to a fresh all-time high, however, to US$278.5 billion, led by industrial supplies, durable goods, medical merchandise and energy commodities.

All major equity benchmarks are retreating amidst negative sectoral breadth with investors only reaching for utilities and energy stocks. 

The Nasdaq100, S&P500 and Dow Jones Industrial gauges dropped -0.87%, -0.77%, and -0.95%. 

Weighing on performance most are health care, technology and consumer discretionary sectors

The utilities and energy segments are the only two positive components of the 11 majors, defensive demand and on a meaningful 4.3% climb in WTI crude oil prices. .

WTI is trading at US$59.60 per barrel and other commodities are bullish as well, with silver, gold, copper and lumber advancing.

Softer borrowing costs and increased pessimism regarding cross-border commerce are impeding the greenback though, as the US currency depreciates relative to the euro, pound sterling, yen, yuan, loonie and Aussie tender but appreciates against the franc. The Dollar Index is down -34bps in reflection of the broad weakening.

As we approach the middle of the week, internal dynamics signal that the animal spirits from the heroic nine-day winning streak entering the month have dissipated. 

But things could change especially if President Trump nails a trade deal or two in short order. 

Strong support can also come from the Federal Reserve, if the central bank highlights its elevated attentiveness to labour market health while pointing to decelerating wage pressures. 

Also, another mention of transitory tariff inflation from Chair Powell will likely bolster investor sentiment, as a front-and-centre debate takes place concerning whether Trump levies offer a one-time price jump or a permanent 0.5% to 1% hike to annualized cost figures. 

Either way folks, a return to bullishness in the near term depends on the Commander in Chief closing agreements and the US monetary policy authority propelling confidence in the economic landscape while tilting towards an accommodative posture.

In other overnight news: Extract NAB Markets Today Research

The FT reported UK and the US are close to agreeing a trade pact (this week). 

The deal would grant lower-tariff quotas for British car and steel exports, spare some UK exports from the full brunt of the additional 25 per cent tariffs that Trump levied on steel and car imports in February and March, albeit UK officials cautioned that disagreements remained over pharmaceuticals. 

The UK’s “offers” reportedly include concessions to Washington on Britain’s digital services tax levied on international technology companies, cuts on tariffs imposed on US car exports, and a reduction of tariffs on American agricultural products.  

The UK government said it will not accept US food production standards, such as chlorine-washed chicken and hormone-treated beef, which would make it impossible to conclude a so-called veterinary agreement with the EU, a key plank of Britain’s impending “reset” with the bloc (the latter promises to be a major sticking point in US-EU trade negotiations, as well as digital services taxes).

Separately, the UK and India – the world’s sixth and fifth largest economies – are said to have struck a Free Trade Agreement after three years of negotiations, which includes easier access for Indians to the UK’s employment market and reduced tariffs on UK car and whisky exports to India).

Canadian PM Mark Carney met with President Trump in the White House. 

“The USMCA is a good deal for everybody,” Trump said. “It was actually very effective and still very effective, but people have to follow it, and that’s been a problem.” 

Carney said: “[The USMCA] is a basis for a broader negotiation. Some things about it are going to have to change.” But Trump made clear that he remained sceptical of free trade with his Canadian neighbours, especially in certain sectors, such as cars and metals. “We want to make our own cars. We don’t really want cars from Canada,” Trump said. “And we don’t want steel from Canada because we’re making our own steel, and we’re having massive steel plants being built right now as we speak.”

In Germany, the Euro and German stocks took a temporary hit after Friedrich Merz failed to secure the necessary 316 votes to be elected Chancellor at the first time of asking, meaning a handful of CDU and/or SPD parliamentarians failed to endorse him. 

A few hours later a second vote did secure the necessary majority and Merz is now confirmed as chancellor, though the earlier spectacle does raise question marks over the stability of the new CDU/SPD coalition and the speed and aggression with which Germany will be able to proceed with its fiscal expansion plans centred on defence and infrastructure.

Last night’s 10-year US bond auction went well, clearing 1bps through the when-issued or pre-auction yield. 

Indirect or non-competitive bidders, often viewed as a proxy for the strength of foreign demand, took down 71.2% of the total (down on 87.9% in April but close to prior months averages, as was the bid-cover ratio of 2.60). the US treasury yield curve has seen a broadly level shift down, with 2yrs currently -5.3bps lower in the last 24 hours and 10yrs down -4.8pbs. European 10-year benchmarks in contrast are mostly higher (e.g., Bunds +2.3bps)

Corporate news in Australia

-Tabcorp Holdings ((TAH)) has launched live in-play betting in pubs and clubs.

-Seven West Media ((SWM)) is acquiring Southern Cross Austereo’s TV assets.

-Nib Holdings ((NHF)) is looking at divesting its travel insurance business with speculation Zurich Insurance for $200m.

-Spark New Zealand ((SPK)) is looking to sell a 50% stake in its data centre business for as much as $1.2bn to pursue growth opportunities.

-Platinum Asset Management ((PTM)) reported outflows in April including a withdrawal of -$985m from Colonial First State First Choice.

On the calendar today:

-NZ 1Q Unemployment

-JP April PMI

-EZ March retail sales

-NATIONAL AUSTRALIA BANK LIMITED ((NAB)) earnings report

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3438.94	+ 100.00	2.99%
Silver (oz)	33.44	+ 0.84	2.56%
Copper (lb)	4.77	+ 0.06	1.27%
Aluminium (lb)	1.10	– 0.01	– 0.66%
Nickel (lb)	7.01	+ 0.07	1.01%
Zinc (lb)	1.19	+ 0.01	0.77%
West Texas Crude	58.97	+ 1.78	3.11%
Brent Crude	62.01	+ 1.75	2.90%
Iron Ore (t)	98.63	+ 1.22	1.25%

The Australian share market over the past thirty days

Index	06 May 2025	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8151.40	-1.05%	0.31%	3.93%	-0.09%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMC	Amcor	Upgrade to Add from Hold	Morgans
ARX	Aroa Biosurgery	Speculative Buy from Add	Morgans
BBN	Baby Bunting	Upgrade to Buy from Accumulate	Ord Minnett
BDM	Burgundy Diamond Mines	Downgrade to Speculative Hold from Buy	Bell Potter
CPU	Computershare	Downgrade to Sell from Neutral	UBS
CTD	Corporate Travel Management	Upgrade to Buy from Neutral	UBS
		Downgrade to Equal-weight from Overweight	Morgan Stanley
EDV	Endeavour Group	Downgrade to Neutral from Buy	UBS
HLI	Helia Group	Downgrade to Underperform from Neutral	Macquarie
SGH	SGH Ltd	Downgrade to Hold from Buy	Bell Potter

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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