The Overnight Report: Good News Trifecta

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US markets roared back post Memorial Day holiday with across the board buying led by the Mag7 and ahead of Nvidia’s earnings release tomorrow after the close. ASX200 futures are set to follow with all eyes on April’s CPI print.

Good Morning,

Overseas markets rejoiced on the European tariiff delay to July 9, with other positive factors spurring on risk-on sentiment and robust buying. The Australian dollar fell as did the gold price, while Big Tech is back.

What happened overnight: Extract from Chris Weston, Pepperstone

Equity markets in the green with Nvidia’s earnings set to dominate. A solid risk on day in US markets with a ‘ buy US’ theme in play, driven by positive news on trade an in the US economic data flow. The result has been a solid bid coming into US equity and credit, with traders cutting back on gold exposures, covering USD shorts and seeing value in long-end US treasuries. 

The US consumer seemed to have been receptive to the tariff news flow seen through May, with a solid rebound in consumer confidence levels, while respondents to the Dallas Fed manufacturing survey also saw their operating environment in a less negative space. 

US durable goods orders fell -6.3%, although this was modestly less bad than feared and the aggregation of these economic data points resulted in minimal push back and headwinds for US risk appreciation. 

The US Treasury Department also issued US$69bn of 2-year paper, and while traders are more focused on demand for longer-dated maturities, and despite average demand at this auction, the US 2yr yield settled -1bps, with the 10yr Treasury -7bps at 4.45%, and the 30yr -9bps at 4.95%. 

Ultimately, the reduction in yield is less reflective of concerns about the data flow and indicative of the buyers, many of whom went missing last week coming back in the market and expressing improved confidence of holding longer-maturity paper.

Perversely, the USD has found solace in the rally in US duration and again this speaks to some improved confidence to hold US assets. 

Cross-asset correlations break down frequently, but with US equity rallying strongly and risk FX (AUDUSD, NZDUSD) down on the day, one can argue this move speaks to the flows into broad US assets, with international players presumably getting set without a currency hedge in place.  

Drilling into the moves in US equity, we see small caps have outperformed with the Russell2000 cash market closing up 2.5% and eyeing a push into the 15 May range highs (and 100-day MA) at 2114. 

The equity bulls will have noticed the 2.4% rally in the KRE ETF (US small and regional banks ETF), and this remains a decent guide on sentiment, as these financial plays are the epicenter of so much in the US economy. 

S&P500 futures smashed through the 5900 level once US cash equity trade opened and kicked in gear, with a strong intra day trend in play, with both the S&P500 cash and futures index closing at session highs. 

Volumes in both S&P500 cash and futures have been on the lighter side, and a touch below recent averages, while in the options space, 3.28m SPX500 options traded hands in line with the 20-day average with 1.4 puts traded to every call option, which is typical. 

The street covering NVDA shorts into earnings 

All S&P500 sectors have closed well in the green, although only consumer discretionary and tech outperformed the index, with Tesla up 6.6%, Nvidia rallying 3%, and the remaining MAG7 players finding form and putting in the bulk of the index points. 

Naturally, the focus shifts to Nvidia’s earnings, with the stock looking to break above the recent highs of US$137.40 and above US$140, the market clearly doesn’t want to go into earnings (after market in the session ahead) short, and there is renewed confidence that Nvidia can beat the consensus estimates for Q126 sales of US$43.33bn, and set to guide to Q226 sales above US$46.27bn. 

Margins matter, and investors want to hear conviction that margins have troughed at 71% and are set to push back towards 74% by Q426.

Nvidia’s options pricing implies a move of minus/plus 6.8% on earnings, which if this is realised on the buy side, gets the share price above US$140-plus. 

A 7% rally in Nvidia should see S&P500 futures test the 20 May high of 5993, and even 6000. 

NAS100 futures would gain at an even faster clip, and if Nvidia can be at the heart of the market move, and show real leadership, then all-time highs in the NAS100 will likely come into play soon enough. 

Of course, the risk of disappointing the market is there, but it feels as though the buy-side shops see earnings as the final big hurdle to be overweight this name; so a beat and raise in both sales and margins and the rally is on. 

The ASX200 looking highly constructive 

The ASX200 also looks strong, with our opening call putting the index just 2% from the high recorded on May 14. 

Tech should outperform at the open, while financials should push further higher, with yet another at the high likely to be seen in CBA, while the regional banks should also work. 

The combination of continued expectations of a -25bps cut in the July RBA meeting, low cross-asset volatility promoting demand for any asset that has a high yield and underlying momentum in equity offering tailwinds for the Aussie equity market. 

Welcome back: Extract from Steve Sosnick, Interactive Brokers

Traders in the US are back from the long weekend in a very happy mood.  

After a relatively quiet week that featured few exogenous catalysts with one glaring exception and a now-anomalous period in which major indices ceded ground, stock traders in the US and abroad are generally hitting the “buy” button on their screens.

There are three pieces of good news driving the activity today.  

First came the reports that the shock 50% tariffs on all goods from the EU will be delayed until July 9.

That is certainly better than the June 1 deadline that caught the world off guard last week.

Although stock markets were closed yesterday, index futures were trading, and those rose by about 1% in response. That wiped out Friday’s decline. 

Then we got news overnight that Japan’s Ministry of Finance might reduce the issuance of long-term government bonds (JGBs).  

That was welcomed warmly by local and international investors alike. Yields on 20- and 30-year JGBs fell by more than -10 basis points.  

Because longer-dated bond yields had been moving higher in general lockstep recently, that eased the pressure on global rates.  

We see yields at the long end of the US Treasury curve about -5-10bps lower.  

And because higher bond yields have been a source of trouble for stocks in recent sessions, that offered a second lift to US stocks.

The third piece of good news came from the Conference Board.  

We have been concerned with terrible consumer sentiment reports over the past few weeks, but the confidence number rose for the first time since November.

Frankly, it didn’t just rise it zoomed. The reading went to 98 from 85.7, a stunning 12.3-point jump that was more than 10 points above the 87.1 consensus.   

The improved sentiment was attributed to easing of tariff tensions, since the survey was taken after the May 12 moratorium on China tariffs. 

Indeed, that is quite a trifecta. It would have been stunning if we didn’t have a substantial rally today. 

It also appears that a message about tariffs has been reinforced.  

The market has been discounting the worst of the tariff threats as just that threats, not actions. How else should we interpret them if they continually get reduced or pushed back?  

Just as children learn very quickly that they can push boundaries if mom or dad threaten punishments that never fully materialise, traders have learned the administration will almost back off if either our trading counterparts negotiate or the markets revolt.  And the markets have been anything but revolting.

Thus, tariff-induced dips have become yet another in a series of perceived buying opportunities.  

As I noted in a media appearance today, this can be a bit akin to rewarding a firebug each time he reaches for an extinguisher.   

The curious problem, which we’ll need to deal with in the long-run, is whether we find ourselves better off after each of these bouts of volatility.  

Remember, we are still almost certain to end up with higher import prices once the tariff regime is established.  But for now, we might as well keep enjoying the relief rallies. 

Corporate news in Australia

-Seven has bought $40m of Coronado Resources ((CRN)) distressed debt, which has been reported as a possible precursor to a takeover.

-Mineral Resources ((MIN)) lowered the Onslow iron ore volume guidance (again) due to truck shortages with a full ramp up now anticipated by 1Q26.

-BHP Group ((BHP)) is opening an AI hub in Singapore to increase safety and productivity.

-ALS Ltd ((ALQ)) is raising $350m to fund growth and acquisitions.

On the calendar today:

-NZ RBNZ rates

-AU 1Q Construction work

-AU April CPI

-US May FOMC minus

-LIFE360 INC ((360)) AGM

-EAGERS AUTOMOTIVE LIMITED ((APE)) AGM

-CHAMPION IRON LIMITED ((CIA)) 4Q25

-DRONESHIELD LIMITED ((DRO)) AGM

-FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED ((FPH)) earnings report

-GOODMAN GROUP ((GMG)) 3Q25 Update

-INFRATIL LIMITED ((IFT)) earnings report

-LIGHT & WONDER INC ((LNW)) Institutional Conference

-MYER HOLDINGS LIMITED ((MYR)) investor briefing

-VULCAN ENERGY RESOURCES LIMITED ((VUL)) AGM

-WEB TRAVEL GROUP LIMITED ((WEB)) earnings report

-YANCOAL AUSTRALIA LIMITED ((YAL)) AGM

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

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.

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