The Overnight Report: No RBA Cut & Month’s End

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US markets shrugged off potential government shutdown concerns, with all indices ending higher despite a weaker crude oil price.

Gold set a new record high and Bitcoin rallied.

After a strong performance yesterday, ahead of today's RBA meeting and both month and quarter end, ASX200 futures are slightly positive.

World Overnight
SPI Overnight	8906.00	+ 12.00	0.13%
S&P ASX 200	8862.80	+ 75.10	0.85%
S&P500	6661.21	+ 17.51	0.26%
Nasdaq Comp	22591.15	+ 107.09	0.48%
DJIA	46316.07	+ 68.78	0.15%
S&P500 VIX	16.12	+ 0.83	5.43%
US 10-year yield	4.14	– 0.05	– 1.10%
USD Index	97.63	– 0.19	– 0.19%
FTSE100	9299.84	+ 15.01	0.16%
DAX30	23745.06	+ 5.59	0.02%

Good Morning,

The Australian market rose for a third day, the ASX200 up 75.1pts or 0.85% to 8862.80.

Energy and technology stocks fell while all other sectors rose.

Gold miners continued to rally.

What happened overnight, NAB Markets Today Research

With no top tier data or market moving central bank speak overnight –just US pending Home Sales which rose 4% against 0.4% expected– markets are trading with a degree of caution in the absence of reason to believe that a US government shutdown starting at mid-night Tuesday Washington time is likely to be avoided.

Equity markets have closed in New York with the S&P500 up quarter of a percent and the NASDAQ 0.5%, the under-performance of the former due to a -1.9% drag from energy stocks on the aforementioned drop in oil prices.

Communication services were down-0.46% are the only other sub-sector in the red, with IT and consumer discretionary sectors both up around 0.5% and top performers. Earlier it was Hong Kong and China stocks that punched the lights out (again) with Shanghai up 1.5% and the Hang Seng 1.9%. The Nikkei in contrast didn’t care much for the BoJ’s Noguchi’s comments and stronger JPY, off -0.7%. European stocks were very slightly higher.

The USD was modestly weaker, with yesterday’s APAC day gains for JPY and AUD slightly extended overnight and leading the USD moves. Oil prices are off some -3.5% or -US$2.50/bbl on reports OPEC-Plus members are thinking of raising oil output by another 137k barrels a day in November on top of the recently agreed 13k increase to take effect in October.

Also not helping oil, the IEA has been out with its latest forecast suggesting a 1.9 million barrels per day surplus in 2025 and 3.3 million in 2026.

Fed speakers overnight included Cleveland Fed President Beth Hammack, who most observers think was the lone dot that wanted no change in rates this year in the September dot plot. She said inflation, that could stay above target until 2028, is a concern for her.

She noted the Fed has missed its 2% goal for more than 4 1/2 years, and is likely to keep doing so for some time.

“I continue to see that we have pressure in inflation, both in the headline, in the core, and particularly where I’m worried about it is, I’m seeing it in services,” Hammack said.

“My forecast is that we’re going to remain above target for probably the next one to two years, and not really getting back down to our objective of 2% until the end of 2027 or early 2028.” .

The St Louis Fed President Musalem also said while he was “open minded to future reductions in interest rates”, adding “I do believe we need to tread cautiously”. Musalem is also seen as one of the more hawkish FOMC members.

In other central bank speak, BoE MPC Ramsden, a noted dove, said there is still scope to cut rates saying price risks are ‘balanced’ but expressed confidence pressure from service sector and wages will continue to ease to bring inflation back to target.

As for the ECB, chief economist Lane opined he didn’t see any major risks to inflation either way, comments deemed consistent with a steady as she goes ECB stance, while earlier in the day Irish CB head Makhlouf said the ECB was ‘near the bottom’ of the rate cutting cycle.

Coming Up, Locally, it’s all about the RBA today.

The RBA will be on hold at 3.6%. The data flow since August would have had to be particularly weak to make the September meeting live. Instead, ahead of the CPI data last week, Governor Bullock speaking Wednesday said “Since the August meeting, domestic data have been broadly in line with our expectations, or, if anything, slightly stronger.”

Expect Bullock to repeat that message in the press conference with respect to activity and labour market data but also to acknowledge upside risk on inflation and some signs of strength in services components.

Even so, she will likely defer to the full CPI ahead of the November meeting for confirmation.

NAB expects that Q3 underlying inflation data to be sufficiently strong that the RBA remains on hold for some time until it rebuilds confidence in the trajectory for inflation, penciling in a cut in May 2025

What comes next? Steve Sosnick, Interactive Brokers extract

The next few weeks, and this one in particular, offer the potential for some market moving volatility.  As has become typical, the markets either don’t perceive it, or more likely, don’t care. 

With the prospect of a government shutdown looming and a key employment report due on Friday, not to mention earning season later this month, one might expect VIX (Cboe Volatility Index) to have something above a 15 handle.  As usual though, there are some subtleties underneath that headline statistic.

Note – Just before I sent this to be published, a headline stated that if the government was under a shutdown, the BLS would not be releasing jobs data on Friday.  That could cloud the analysis below, which was written when there was some debate about the topic.

It is important to once again remember a few things about VIX specifically, and volatility measures overall. If we combine the following two concepts, we find a reasonable explanation for the seeming paradox.

First, VIX is not constructed as a fear gauge, but instead is designed to measure expected volatility over the coming 30-days.  All things being equal, the lower the level of VIX, the lower the expectations for volatility.  All things of course are never equal, but traders typical project that periods of low volatility persist in spite of the potential for items to disrupt the calm.

Second, a key determinant of index volatility is the amount of correlation between an index’s components. If correlations are high, then so is the index’ volatility, relatively speaking; if correlations are low, so is the index’ volatility.  As the Cboe’s Mandy Xu described it to me,

… take it to the extreme and simplify it to an index of just two stocks equally weighted. If one stock goes up 20% in a day and another stock goes down 20% in a day, at the index level that’s unchanged. So, high stock volatility, but very low index volatility in an environment of extreme dispersion or low correlation.

Thus, even though it appears that traders are shrugging off the potential for future volatility, they are not. 

One could certainly argue they are not putting enough emphasis on the upcoming events, “known unknowns”, that could induce volatility. But they are not oblivious to the potential either. 

Corporate news in Australia

-Optus faces a government probe after fresh outages and triple-zero call failures.

-Kerr Neilson backs L1’s takeover of Platinum Asset Management ((PTM)).

-Mineral Resources ((MIN)) has finished its upgrades to the Onslow iron ore haulage road.

-Star Entertainment Group ((SGR)) is likely to win six-month debt relief from lenders.

-ASIC to crackdown on unlisted asset valuations for the superannuation industry.

-Flight Centre Travel Group ((FLT)) has hired Grant Samuel to review options for its 47% owned Pedal Group (99 Bike Stores)

On the calendar today:

-NZ ANZ Business Confidence

-AU Aug Building Approvals

-AU Aug Private Credit

-AU RBA Rates

-JP Aug Industrial Prod’n

-JP Aug Retail sales

-CH Mfg PMI

-CH Non-Mfg PMI

-UK 2Q C/A

-UK 2Q GDP

-US Aug Jolts

-US July House Prices

-US Sept CB Consumer Confidence

-GENUSPLUS GROUP LIMITED ((GNP)) ex-div 3.60c (100%)

-STAUDE CAPITAL GLOBAL VALUE FUND LIMITED ((GVF)) ex-div 3.3c (100%)

-SIMS LIMITED ((SGM)) ex-div 13.00c (100%)

-TASMEA LIMITED ((TEA)) ex-div 6.00c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3861.02	+ 52.02	1.37%
Silver (oz)	47.05	+ 0.40	0.85%
Copper (lb)	4.91	+ 0.16	3.37%
Aluminium (lb)	1.22	+ 0.01	1.01%
Nickel (lb)	6.84	+ 0.01	0.20%
Zinc (lb)	1.34	+ 0.02	1.78%
West Texas Crude	63.14	– 2.58	– 3.93%
Brent Crude	66.74	– 2.48	– 3.58%
Iron Ore (t)	105.35	– 0.09	– 0.09%

The Australian share market over the past thirty days…

Index	29 Sep 2025	Week To Date	Month To Date (Sep)	Quarter To Date (Jul-Sep)	Year To Date (2025)
S&P ASX 200 (ex-div)	8862.80	0.85%	-1.23%	3.75%	8.62%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A11	Atlantic Lithium	Downgrade to Neutral from Outperform	Macquarie
CQR	Charter Hall Retail REIT	Upgrade to Outperform from Neutral	Macquarie
CTD	Corporate Travel Management	Downgrade to Neutral from Buy	Citi
PLS	Pilbara Minerals	Downgrade to Sell from Neutral	UBS
PNR	Pantoro Gold	Upgrade to Hold from Sell	Bell Potter
SCG	Scentre Group	Upgrade to Neutral from Underperform	Macquarie
VCX	Vicinity Centres	Upgrade to Neutral from Underperform	Macquarie

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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