The Overnight Report: AI Fuels New Highs

Daily Market Reports | Jul 25 2025

This story features MACQUARIE GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: MQG

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The AI trade took the S&P500 and Nasdaq to new highs (again) with markets in Japan and Europe rallying also.

The Australian market stumbled on Governor Bullock's hawish tone yesterday. ASX200 futures are pointing to another day of net weakness.

World Overnight
SPI Overnight 8639.00 – 37.00 – 0.43%
S&P ASX 200 8709.40 – 27.80 – 0.32%
S&P500 6363.35 + 4.44 0.07%
Nasdaq Comp 21057.96 + 37.94 0.18%
DJIA 44693.91 – 316.38 – 0.70%
S&P500 VIX 15.39 + 0.02 0.13%
US 10-year yield 4.41 + 0.02 0.46%
USD Index 97.23 + 0.30 0.31%
FTSE100 9138.37 + 76.88 0.85%
DAX30 24295.93 + 55.11 0.23%

Good Morning,

The ASX200 declined on Thursday by -28pts or -0.3% to 8709. Ten out of eleven sectors fell with industrials and property leading the declines.

Macquarie Group’s ((MQG)) disappointing AGM update led the financial sector down, while investors continued to rotate into healthcare. Miners were mixed with lithium stocks continuing to rally.

NAB Markets Today Research extract

RBA Governor Bullock spoke at the annual Anika Foundation Fundraising Lunch yesterday. The most interesting aspect of the speech was the Governor’s assessment that the May SoMP’s conclusion of “some tightness in the labour market” remained. Bullock noted “the ratio of vacancies to unemployed people remains high” and “unit labour costs have been increasing strongly”. 

June’s two-tenth’s lift in the unemployment rate to 4.3% was largely downplayed, Bullock noting in the Q&A that in July 2024 the unemployment rate also rose by two-tenths to 4.2% before ticking back down, and had the Board had the data for the July meeting, the outcome might not have been any different. This strongly suggests next week’s Q2 CPI data is what the Board is waiting for above all else when the decision was made to hold rates steady.

Bullock re-emphasises a continued “measured and gradual approach” to policy easing.

US stocks have closed with the S&P500 showing a minuscule rise but nevertheless a new closing high, though the Russell2000 is down -1.4% and the worse performing of the various global indices we track. The Nikkei is the best performer Thursday. The market is still basking in the sunshine of a US-Japan trade deal that is not nearly as bad as markets were fearing at the start of the week, or indeed that there would be no deal and 25% across the board tariffs.

The USD has recovered a bit of its poise after stronger than expected jobless claims and services PMI data; Treasury yields are modestly higher at all tenors for the same reasons. Eurozone benchmark yields are up more so, after the as-expected ECB no change but some paring back of expectations for additional cuts from here. AUD/USD has slipped back to just below 0.66 having made an earlier high of 0.6625.

Flash PMI data for the Eurozone, UK and US pained a mixed picture. The services PMI jumped to 55.2, well above the consensus estimate, while the manufacturing PMI dropped to 49.5. This meant a decent increase in the composite index to 54.6 compared with 52.6 in June.

The Eurozone composite reading was also up, but only to 51.0 from 50.6, with both manufacturing and services showing small improvements for both Germany and at the pan-Eurozone level. In contrast UK services fell to 51.2 from 52.0 and 52.9 expected with manufacturing up to 48.2 from 48.7, so still deep in contraction territory. The UK numbers took a bite out of GBP which is the G10 FX underperformer of the past 24 hours.

The other notable data point was US Initial jobless claims, dipping further to 217K in the week ending July 19, from 221K, below the consensus, 226K and lowest since mid-April. At the same time continuing claims (lagged one week) ticked up to 1,955K from a downwardly revised 1,951K, in line with the consensus, 1,954K and so remaining at a level consistent with weaker payrolls growth that witnessed of late/potential a lift in the unemployment rate next month.

ECB pricing for further cuts came in post the ECB meeting and press conference where the central bank indicated it was ‘in a good place’ now comfortably on hold for now while not ruling out anything regarding future actions.

In other news, headline from President Trump have just been crossing the wires – he has been touring the Fed with Chair Powell – and claims no tension between them (suggesting it is more with Scott Bessent and Powell) and reiterates his preference for -300bps of Fed rate cuts.

He says firing Powell is unnecessary (because) ‘he’ll do the right thing’. More pertinent, Trump says the US is in the process of making a deal with Europe.

Ai in the sky: Stephen Innes, SPI Asset Management extract

The market continues to sail through calm but watchful waters, buoyed by a fresh gust of trade optimism and a tailwind from AI-powered earnings. Thursday’s action saw the S&P 500 and Nasdaq etch new record closes, not with fireworks but with quiet conviction — a nod to Alphabet’s solid quarter and growing belief the U.S.-EU trade standoff may be heading for a managed de-escalation.

Alphabet’s earnings served as both catalyst and confirmation the AI arms race isn’t just a money pit, but an engine of real returns. The company’s modest 1% post-earnings pop may not have set off champagne corks, but it was enough to keep the risk-on tide gently rising.

In a tape where every megacap is a pillar holding up sentiment, Alphabet’s results gave the bulls something tangible to hang onto, a reminder that AI isn’t just a narrative, it’s beginning to translate into reminders that not every tech name is flying on the same thermals. Old-line firms are still battling structural headwinds, and anything short of perfect execution gets punished in this market.

More broadly, the tape is a study in cognitive dissonance. Investors are cheering progress on trade deals even as the fine print reveals a less-than-rosy reality: tariffs on EU goods may be capped at 15%, but that’s still a tariff, and Trump’s Aug. 1 deadline looms large. There’s little appetite for a game of tariff roulette, and markets are essentially pricing in a soft landing on trade — not because of policy clarity, but because chaos fatigue has set in.

The ECB, for its part, held rates steady and remained diplomatically quiet, a nod to the broader macro choreography as Brussels and Washington try to hammer out a deal. The euro barely flinched. Traders instead focused on U.S. data, which pointed to resilient services activity and a drop in jobless claims — a combo that argues against aggressive Fed easing.

Which brings us to the political theatre of the day: President Trump’s unscheduled visit to the Fed. While unlikely to yield anything concrete, the optics of a president storming the temple of monetary orthodoxy is enough to put Powell watchers on edge. The risk isn’t immediate policy change, it’s longer-term erosion of independence, and the signal that Powell may not be sitting as comfortably as markets assume. Traders won’t get a press conference, but they’ll be watching for leaks, tone, and any sign that Powell’s seat is wobbling.

Under the hood, the divergence between AI winners and the rest of “The Street” continues to widen. Earnings season so far has made it clear: firms selling code, cloud, and compute are sprinting ahead, while those selling calories or car seats are stuck in a grind. This isn’t just a sector rotation — it’s a wholesale repricing of relevance in the age of algorithms.

In sum, markets are whistling past multiple storm clouds with an umbrella of hope. Trade relief is priced in — but fragile. The Fed is assumed stable — but rattled. And AI is assumed profitable — for now. It’s a rally built on “good enough” news and a shared belief that Trump’s economic brinkmanship won’t go nuclear.

The risk? If that belief cracks, if tariffs jump, the Fed is forced to turn Hawk, or if the subsequent AI earnings miss lands hard. This tightrope walk could quickly turn into a plunge tank affair. Until then, the bulls remain in control, eyes on the clouds, feet on a wire.

Corporate news in Australia

-Regis Healthcare ((REG)) acquired Rockpool for -$135 bringing forth 600 aged care beds in QLD.

-DroneShield ((DRO)) has won a $5m contract from the ADF to supply portable anti-drone technology.

-Calix ((CLX)) announces a $44.9m ARENA grant to build a zero emission green steel plant.

-Treasury Wine Estates ((TWE)) has appointed a new California distributor.

-Ramsay Health Care ((RHC)) is closing -17 out of 20 psychology units by September as demand flags.

-Macquarie Group’s ((MQG)) CFO Alex Harvey announced his departure at year end after 28 years at the group.

-BP has abandoned plans to invest in a large green hydrogen project in WA as the energy giant moves back to investing in its core oil and gas businesses.

On the calendar today:

-JP June Services PPI

-EZ June M3

-UK June Retails Sales

-US July Kansas Fed survey

-US June durable goods

-NEWMONT CORPORATION REGISTERED ((NEM)) Qtr report

-WHITEHAVEN COAL LIMITED ((WHC)) Qtrly update

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

Spot Metals,Minerals & Energy Futures
Gold (oz) 3371.25 – 27.05 – 0.80%
Silver (oz) 39.34 – 0.20 – 0.49%
Copper (lb) 5.83 – 0.02 – 0.26%
Aluminium (lb) 1.20 + 0.00 0.24%
Nickel (lb) 6.96 0.00 0.00%
Zinc (lb) 1.29 – 0.01 – 0.79%
West Texas Crude 66.11 + 0.69 1.05%
Brent Crude 69.34 + 0.67 0.98%
Iron Ore (t) 98.58 + 0.31 0.32%

The Australian share market over the past thirty days…

market price bar

Index 24 Jul 2025 Week To Date Month To Date (Jul) Quarter To Date (Jul-Sep) Year To Date (2025)
S&P ASX 200 (ex-div) 8709.40 -0.55% 1.96% 1.96% 6.74%
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMP AMP Downgrade to Neutral from Outperform Macquarie
CGF Challenger Downgrade to Underweight from Equal-weight Morgan Stanley
EDV Endeavour Group Downgrade to Underperform from Neutral Macquarie
GGP Greatland Resources Upgrade to Buy from Neutral Citi
IAG Insurance Australia Group Upgrade to Buy from Neutral UBS
ILU Iluka Resources Downgrade to Neutral from Buy Citi
IMD Imdex Upgrade to Buy from Hold Bell Potter
ING Inghams Group Downgrade to Neutral from Outperform Macquarie
JBH JB Hi-Fi Downgrade to Neutral from Outperform Macquarie
MEI Meteoric Resources Downgrade to Speculative Hold from Buy Bell Potter
MTS Metcash Downgrade to Neutral from Outperform Macquarie
PNR Pantoro Gold Upgrade to Hold from Sell Bell Potter
Upgraded to Buy from Speculative Buy Ord Minnett
PRN Perenti Downgrade to Hold from Buy Bell Potter
RRL Regis Resources Upgrade to Neutral from Sell UBS
Downgrade to Sell from Neutral Citi
SIG Sigma Healthcare Upgrade to Accumulate from Hold Ord Minnett
WDS Woodside Energy 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.)

(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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CHARTS

CLX DRO MQG NEM REG RHC TWE WHC

For more info SHARE ANALYSIS: CLX - CTI LOGISTICS LIMITED

For more info SHARE ANALYSIS: DRO - DRONESHIELD LIMITED

For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED

For more info SHARE ANALYSIS: NEM - NEWMONT CORPORATION REGISTERED

For more info SHARE ANALYSIS: REG - REGIS HEALTHCARE LIMITED

For more info SHARE ANALYSIS: RHC - RAMSAY HEALTH CARE LIMITED

For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED

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