The Overnight Report: Cautiously Watching Bonds

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ASX futures are set to rise at the open after US markets ended flat (S&P500) to slightly higher (Nasdaq). Much of the attention has been focused on the US Treasury market’s response to the “big beautiful bill” which passed the House of Representatives.

The local market had a weak session yesterday.

World Overnight
SPI Overnight	8388.00	+ 22.00	0.26%
S&P ASX 200	8348.70	– 38.10	– 0.45%
S&P500	5842.01	– 2.60	– 0.04%
Nasdaq Comp	18925.73	+ 53.09	0.28%
DJIA	41859.09	– 1.35	– 0.00%
S&P500 VIX	20.28	– 0.59	– 2.83%
US 10-year yield	4.55	– 0.04	– 0.94%
USD Index	99.84	+ 0.36	0.36%
FTSE100	8739.26	– 47.20	– 0.54%
DAX30	23999.17	– 123.23	– 0.51%

Good Morning,

As the third week of May draws to a close, markets continue to err towards caution with jitters in global bond markets over rising debt and deficits pausing the rally. 

What happened overnight

The S&P500 was steady overnight, while the Euro Stoxx50 and FTSE100 both weakened by -0.5%.

The US session started with a degree of caution. There was some nervous tension emanating from the Treasury market following news the House passed the reconciliation bill early this morning in a 215-214 party-line vote. 

The “big beautiful bill” is expected to increase the US debt ceiling by US$4trn with the US Tax Foundation estimating an increase in longer term GDP of 0.6% and an additional -US$3.3trn to deficits over the next 10-years.

Selling in the Treasury market was offset later by the jobless claims report which revealed a 36,000 increase in continuing jobless claims to 1.903m for the week ending May 10.

Treasury yields weakened further with the Existing Homes Sales Report for April, which revealed the slowest annualised pace of sales for the month since 2009.

In contrast, US PMI May data proved better than expected, with the composite index at 52.1 vs 50.6 as both manufacturing (52.3 vs 50.2) and services (52.3 vs 50.8) improved. 

The manufacturing PMI has now been above 50 for five months. The services PMI at 52.3 is in line with its average for this year. 

US markets recovered with buying in the mega-cap stocks and growth stocks, with Alphabet shares up over 1%, Nvidia rising 0.8% and Snowflake rallying 13% on good results and a positive outlook.

The major indices were plodding along with modest gains, but most of those gains were relinquished after a sell program hit the market in the last 30 minutes of trading.

Year-to-date US indices performance:

-DJIA: -1.6%

-S&P500: -0.7%

-Nasdaq: -2.0%

-S&P 400: -4.4%

-Russell 2000: -8.3%

Deputy Governor of RBA, Andrew Hauser was quoted by Commsec as saying:

“Australia’s central bank is ready to respond with policy in the event of deepening global fallout from the Trump Administration’s tariff regime” adding “that there were few signs of any local impact at this stage”.

Commodities Overnight: Extract ANZ Bank Australian Morning Focus

Crude oil slumped amid fears of rising supply. Reports surfaced the OPEC-plus alliance is considering a potential increase in output of 411kb/d in July. 

This would be the third month in a row that the group has agreed to triple the initially scheduled amount. 

No final agreement has been reached yet, with this option being one of many being discussed, according to Bloomberg, which suggests OPEC may be testing the market’s reaction. 

What it does indicate is that leaders, including Saudi Arabia, are serious in their efforts to force members, who are overproducing against their quotas, to rein in supply.

It also spells the end of OPEC being a market stabilising force, with a projected oversupply likely to push prices lower in the coming months. 

This comes amid a challenging geopolitical backdrop. 

Earlier this week CNN reported Israel was considering a strike on Iranian nuclear facilities. The prospect of a broader conflict in the Middle East could have implications for supply from other producers in the region. 

Sentiment wasn’t helped by data showing rising inventories in the US. Commercial stockpiles rose by 1,328kbbl last week, according to the Energy Information Administration. 

Global gas prices came under pressure amid renewed concerns about demand. The recent rally in gas markets has seen alternative fuels become more economically attractive in certain regions, which could weigh on demand as utilities switch fuels. 

The economic backdrop is already challenging. In Europe, the PMI for May fell to 49.5 from 50.4 in April, suggesting Trump’s tariffs are impacting economic activity. 

European gas futures fell, although the losses were contained by recent supply outages. 

Exports from Norway were disrupted this week after the giant Troll field suffered power issues. That’s in addition to curbs at other global gas facilities including Israel and Malaysia. 

North Asian LNG prices also pushed lower with interest from large buyers such as China remaining subdued. 

A stronger USD created headwinds for the gold market. The precious metal recorded its first daily loss in three days amid subdued investor demand. 

Nevertheless, the spectre of a weak global bond market will remain supportive in the medium term. Concerns of a ballooning fiscal deficit in the US rose after Trump’s tax bill was passed by the House of Representatives. 

The bill could add about US$3.8bn to the federal government’s US$36.2trn debt over the next decade. 

Platinum hovered near a one year high as traders weighed up an impending market deficit against an uncertain demand outlook. 

The World Platinum Investment Council is forecasting a shortage of almost 1m ounces this year. 

However, the global rollout of electric vehicles could hinder demand for its auto catalysts, which are used to filter emission from internal combustion engines. 

Metals were broadly lower amid a risk-off tone across markets. Prices were also weighed down by concerns of weaker demand in China. 

Inventories of key metals including aluminium and copper have been rising in recent weeks, suggesting demand has waned. 

However, recent supply side issues may help limit the downside. Mercuria Energy warned this week that deficits in both the copper concentrate and refined market could develop this year.

The uncertainty created by Trump’s tariffs are also resulting in major resource companies delaying plans for investment in new projects.

Corporate news in Australia 

-Newmont Corp ((NEM)) could possibly sell down its 20% stake stake in London listed Greatland Gold, as the company prepares for an ASX listing.

-ACCC has given the go ahead of Insurance Australia Group’s ((IAG)) RACQI takeover in WA.

-American West Metals ((AW1)) is expected to launch a $4m-$6m capital raising, part institutional, part retail at 4c per share, a discount of -21.6% to the last close.

On the calendar today:

-NZ 1Q Retail sales

-JP April CPI

-UK April retail sales

-US April New home sales

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3295.00	– 22.37	– 0.67%
Silver (oz)	33.18	– 0.55	– 1.62%
Copper (lb)	4.68	+ 0.02	0.43%
Aluminium (lb)	1.12	– 0.01	– 0.69%
Nickel (lb)	6.92	– 0.04	– 0.52%
Zinc (lb)	1.23	+ 0.01	0.56%
West Texas Crude	60.80	– 0.52	– 0.85%
Brent Crude	64.01	– 0.63	– 0.97%
Iron Ore (t)	99.89	– 0.16	– 0.16%

The Australian share market over the past thirty days

Index	22 May 2025	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8348.70	0.06%	2.74%	6.44%	2.32%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
CLW	Charter Hall Long WALE REIT	Upgrade to Buy from Neutral	Citi
DXS	Dexus	Downgrade to Hold from Buy	Ord Minnett
GTK	Gentrack Group	Upgrade to Neutral from Sell	UBS
MVF	Monash IVF	Upgrade to Speculative Buy from Hold	Morgans
PGC	Paragon Care	Upgrade to Buy from Hold	Bell Potter
SKO	Serko	Downgrade to Neutral from Outperform	Macquarie
SYR	Syrah Resources	Downgrade to Neutral from Outperform	Macquarie
TWE	Treasury Wine Estates	Downgrade to Hold 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.)

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