The Overnight Report: Trade Talks In London

This story features NEW HOPE CORPORATION LIMITED, and other companies. For more info SHARE ANALYSIS: NHC

The company is included in ASX200, ASX300 and ALL-ORDS

US markets started the week on a sanguine note led by BigTech and small caps as investors await news from the US-China trade talks in London. 

ASX200 futures are signaling a slightly weaker to flat open on Tuesday.

World Overnight
SPI Overnight	8555.00	– 4.00	– 0.05%
S&P ASX 200	8515.70	– 23.20	– 0.27%
S&P500	6005.88	+ 5.52	0.09%
Nasdaq Comp	19591.24	+ 61.28	0.31%
DJIA	42761.76	– 1.11	– 0.00%
S&P500 VIX	17.16	+ 0.39	2.33%
US 10-year yield	4.48	– 0.03	– 0.62%
USD Index	98.99	+ 0.28	0.28%
FTSE100	8832.28	– 5.63	– 0.06%
DAX30	24174.32	– 130.14	– 0.54%

Good Morning,

After a long weekend in most Australian states, the local market looks like it will mark time as the world watches for any positive outcomes from the US-China trade negotiations to provide another leg up in momentum to all-time highs.

What happened overnight:  Extract from Chris Weston, Pepperstone

The eyes of the market fall on US-China talks in London, and while expectations of some sort of tangible deal were always low, the nearly 7-hour talks were described by Commerce Secretary Lutnick as “fruitful”. US Treasury Secretary Bessent coined the proceedings as a “good meeting”.

The bulls will layer into risk on any rhetoric that publicly keeps the two sides at the table, and with the meeting spilling over to a second day, the idea of some sort of loose agreement is enough to underpin the grind higher in US equity and risk exposures more broadly. 

At a high level, the market is now long on sentiment and while on the day the Nadaq100 and SPX500 have failed to really kick higher and keep the bull trend in check, the fact both SPX500 cash and futures have held 6000 is a small win, with Tesla, Nvidia, Microsoft, Alphabet and Amazon keeping the broader index pinned towards higher levels, with the risk of hitting all-time highs in either market still clearly there. 

We may hit this milestone soon enough if the US-China talks stay constructive which seems the base case, and we don’t see anything too troubling from the US core CPI report (tomorrow), or the US$39bn 10-year and US$22bn 30-year Treasury auctions this week. 

Long US smalls caps, Hang Seng and Kospi

The theme remains to buy high-quality tech and consumer discretionary, with increased exposure to cyclical plays and while the risk of a narrowing leadership/concentration risk increases, we see rotation into small caps, with the Russell2000 having a solid outperformance of late and looking technically very strong. 

For the breakout traders, as funds chase the laggards, the Russell2000 is a long position that could kick, and where the perimeters for one’s risk are well defined. 

Also on the equity space, the Hang Seng index has the wind to its back with momentum accounts buying the breakout of the 21 May range highs, with the index needing a little under 3% for a test of the March highs. 

The Kospi also looking strong and performing strongly, The ASX200 should benefit from a bid in materials plays but really needs the banks to fire up for new all-time highs, and while we won’t see that today, if the SPX500 can kick to new highs, the ASX200 will come along for the ride. 

Eyeing a bullish breakout in AUD:USD

In forex markets, the US dollar has been constrained on the day by the net buying in the US Treasury market, with US Treasury yields lower by around -4bps across the curve, which is also a net positive for equity risk appreciation. 

The AUD/USD is also grinding to the upside, and once again is testing the upper limits of the 0.6500 to 0.6350 range it has held since mid-April. A close above USD0.6515 would speak to USD weakness, just as it would using the AUD as a proxy for higher HK equity risk. 

Strong upside momentum in platinum, palladium and silver

The big focus in the metals space has shifted away from gold and onto the other precious metals platinum, palladium and silver. The attention towards platinum has notably picked up, which will typically happen for any market that has gained for six consecutive days and seen such an upbeat rate of change in price. 

We can also see the move in price backed by significant inflows into the well-traded platinum ETFs and a tight physical market fundamentally underpinning the explosive move higher. 

For those who have missed the recent rally, the question of whether to chase the upside is there, and many will wait for a retracement or a swing to initiate longs. 

This seems fair, but one also needs to be open-minded to the idea that these metals could kick in once China opens (from 11 am AEST), so buying strength through a buy-stop order may also be fruitful as these less liquid (relative to gold) markets can have very powerful and high-velocity trends when they become the vogue position. 

Bitcoin also feels the love and sits -1.1% from the all-time high printed on 22 May; hard to bet against the move here, and the bulls should take this through $112k soon enough. 

Deep Dive: Rare Earth Minerals, Ed Yardeni & Jackie Doherty

“People who live in glass houses should not throw stones”.

That’s a saying that President Trump should have taken to heart before slapping aggressive tariffs on Chinese imports, because China has one thing that the US lacks and needs: rare earth minerals. These minerals are necessary components of high-tech equipment like automobiles, robots, and military equipment.

China mines about 70% of the world’s rare earth minerals, and it processes about 90% of them. In the wake of Trump’s tariffs, China began to require exporters of rare earths to get licenses to sell their goods internationally and those licenses have been slow to come when they’ve come at all. 

So, the exports of these minerals from China have slowed to a crawl. There’s a growing concern that global auto manufacturers will have to pause production if they can’t get their hands on enough magnets made from rare earth minerals. The US is left to depend on a small company, MP Materials, to boost the production and processing of rare earth minerals domestically.

President Trump understandably is upset about the situation, and Secretary of State Marco Rubio countered China’s moves by announcing plans to cancel the visas of Chinese students inside the US. China’s response: Calling Harvard a “party school” and touting its own universities. Chinese AI company DeepSeek expressed pride that its founders were educated in China.

Such ridiculous tit-for-tat among world powers could easily have been avoided. The US government has long known that America’s dependence on China for rare earth minerals was a problem, but it never acted on the recommendations of the studies it had commissioned.

Most recently, the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, established in 2023, warned in a December 12, 2023 report the US was too dependent on China for rare earth minerals. Here are some of its suggestions that the US should have heeded:

-Identifying the problem. Robert Lighthizer, US Trade Representative during President Trump’s first term, explained to the committee how the US and much of the world was dependent on China for numerous critical minerals and their refining and processing.

China has leveraged its industrial policy including economic controls, trade protectionism, low environmental standards, and technology transfer to solidify its indispensable positioning. The committee believed China would use its position as leverage in a prospective conflict with Taiwan.

“Congress must decrease the United States’ reliance on the PRC [People’s Republic of China] for these critical materials”, the report concluded.

-Concocting a plan. The report also recommended creating a reserve of rare earth minerals to insulate US producers from price volatility and the US government from the PRC’s prospective weaponisation of the minerals. 

If China were to flood the market with these materials, the US reserve could purchase the excess and stabilize the prices. Having such a price stabilisation mechanism in place would entice more US companies to enter the rare earth mining industry.

The report suggested Congress and the executive branch work to source these minerals from countries that are friendly to the US and that they create incentives, like tax breaks and prizes, to encourage domestic manufacturing.

It recommended the Commerce Department investigate whether dumping or other practices that distort the market for rare earth minerals and magnets are going on, in which case the department should impose “material injury tariffs”.

Also recommended: Increasing recycling programs of government-owned products that have rare earths or magnets in them, working with colleges to increase the number of workers with the skills necessary to build a rare earth minerals industry, and studying deep seabed mining and its impact on the environment.

The report concluded: “Never before has the United States faced a geopolitical adversary with which it is so economically interconnected. The United States now has a choice: accept Beijing’s vision of America as its economic vassal or stand up for our security, values, and prosperity”.

Again, that report was dated December 12, 2023! Did Peter Navarro (a.k.a. Ron Vara), Trump’s Senior Counselor for Trade and Manufacturing, read the report before he recommended that the President start a trade war with China?

Corporate news in Australia

-Anchorage Capital Advisers, the New York-based distressed debt investor, is one of the firms that submitted a proposal to buy Rex Airlines.

–Government of Singapore Investment Corporation and Future Fund are acquiring 20% of Transgrid.

–New Hope ((NHC)) is in discussions around rescue options for Coronado Global Resources’ ((CRN)) debt restructuring.

-LifeStyle Communities ((LIC)) unlisted peer GemLife says it has a bigger pipeline than the $815m its competitor has, as the books are opened for a $700 million-plus initial public offering after locking in cornerstone bids last week.

On the calendar today:

-AU May NAB Survey

-UK April UK earnings

-UK April Unemployment

-US May NFIB

-PEPPER MONEY LIMITED ((PPM)) ex-div 12.50c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3346.72	– 29.78	– 0.88%
Silver (oz)	36.93	+ 1.12	3.13%
Copper (lb)	4.90	– 0.01	– 0.20%
Aluminium (lb)	1.13	+ 0.00	0.05%
Nickel (lb)	6.91	– 0.02	– 0.29%
Zinc (lb)	1.20	– 0.02	– 1.36%
West Texas Crude	65.38	+ 2.12	3.35%
Brent Crude	67.10	+ 1.86	2.85%
Iron Ore (t)	95.62	– 0.08	– 0.08%

The Australian share market over the past thirty days

Index	06 Jun 2025	Week To Date	Month To Date (Jun)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8515.70	0.96%	0.96%	8.57%	4.37%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ASB	Austal	Downgrade to Hold from Buy	Bell Potter
BET	Betmakers Technology	Upgrade to Buy from Speculative Buy	Ord Minnett
JDO	Judo Capital	Downgrade to Accumulate from Buy	Morgans
LYC	Lynas Rare Earths	Upgrade to Accumulate from Hold	Ord Minnett
MAF	MA Financial	Downgrade to Accumulate from Buy	Morgans
MP1	Megaport	Downgrade to Sell from Hold	Ord Minnett

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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