The Overnight Report: The Day After No Rate Cut

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A late stage rally led US indices into the green for the highest rise in the S&P500 since 2010, up 3.53% and 7.79% for the quarter.

So much for scary September. 

A hawkish hold from the RBA put the ASX200 on the back foot yesterday. Futures are suggesting a flat to slightly negative start into the final quarter of 2025.

World Overnight
SPI Overnight	8869.00	– 4.00	– 0.05%
S&P ASX 200	8848.80	– 14.00	– 0.16%
S&P500	6688.46	+ 27.25	0.41%
Nasdaq Comp	22660.01	+ 68.86	0.30%
DJIA	46397.89	+ 81.82	0.18%
S&P500 VIX	16.28	+ 0.16	0.99%
US 10-year yield	4.15	+ 0.01	0.17%
USD Index	97.51	– 0.13	– 0.13%
FTSE100	9350.43	+ 50.59	0.54%
DAX30	23880.72	+ 135.66	0.57%

Good Morning,

The ASX200 fell post the RBA’s no cut rates decision, which was widely expected.

The ASX200 fell -14pts or -0.16% to 8848.8 pulling the decline over September to -1.39% with the quarter up 3.59%. 

Total return for the ASX200 was 4.70% for the quarter and -0.78% for the month of September.

What happened overnight, NAB Markets Today Research

US equities were directionless for most of the session, but did stage a late rally into month end, the S&P500 up 0.4% on the day and the Nasdaq was 0.3% higher.

Gains on the day were led by healthcare. Pfizer secured a reprieve from pharmaceutical tariffs by agreeing to cut some of its drug prices and selling directly to the American public, a move other major drugmakers are reportedly expected to follow.

Tech stocks tended to lead gains in September. Over the month, the S&P500 was 3.5% higher and the Nasdaq was 5.4% higher.

US yields were little changed but the curve a little steeper. The 10yr yield was 1bp higher at 4.15% while the 2yr fell 1bp to 3.61%.

US data did little to move the needle. JOLTS openings were near expectations at 7227k vs 7200k expected. The quits rate fell back a tenth to 1.9%, the bottom of its range over the past year. The data won’t challenge those emphasising fragility in the low hiring low firing labour market, but for now it is still a message of broad stability in openings and turnover indicators.

More worrying is the further deterioration in the net balance of consumer saying jobs are plentiful vs those saying they are hard to get in the Conference Board’s Consumer Confidence release.

That balance slipped to just 7.8% in September from 11.1% in August, and is at its lowest since February 2021. Overall confidence fell to 94.2 from 97.4, a little weaker than expected. The survey continues to provide a weaker signal of household spending than has been evident in the hard data.

The US remains on track for a government shutdown from midnight tonight (2pm today Sydney time) absent a last minute deal, which would likely delay Friday’s Payrolls release.

Senate Democratic Leader Chuck Schumer said “They want to try to bully us … That’s why we are heading into a shutdown.” Asked about the prospect of a shutdown, President Trump said “nothing is inevitable, but I would say it’s probably likely.”

Trump also said ‘a lot of good’ could come from a shutdown and “we can get rid of a lot of things that we didn’t want and they’d be Democrat things.” Polymarket puts the odds of a shutdown at 90%. On tariff watch, Trump set a 10% tariff on softwood timber and lumber imports.

German CPI was higher than expected, up 2.4% yoy on the harmonised measure, two tenths above consensus. That suggest some upside risk to the 2.2% consensus estimate for the preliminary euro area release today. There was limited reaction in European rates markets though. 10yr German yields were steady at 2.71%.

In China, PMIs were mixed, although official and RatingDog manufacturing indices did rise in September and export orders highlight the resilience of external demand is providing a support even as earlier support for the domestic economy from fiscal stimulus will fade a little further over coming months and domestic demand remains sluggish. On that front, China’s Golden Week holiday begins today, and any indications of the robustness of consumer’s holiday spending will be watched closely.

In FX, the USD was down less than -0.1% against the euro, but was -0.4% lower against the JPY. The AUD outperformed, up 0.5% and back above 66c, currently near 0.6612 after touching an intraday high of 0.6628. The RBA helped, as did the backdrop of a second evident protest, in the form of a strong daily fix, from the PBoC against any RMB depreciation ahead of Golden Week holiday. The NZD was 0.3% higher.

Yesterday, the RBA was on hold as expected in a unanimous decision. The context for the decision even putting the inflation data last week to the side, was labour market conditions that were characterised as broadly stable and domestic activity growth that was seen a little stronger than they had been expecting.

The statement acknowledged that “recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy,” and “indications that inflation may be persistent in some areas.” 

NAB’s expectation is that underlying inflation in the third quarter will be materially stronger than the RBA had expected, and that some of the market services detail especially will give them pause about the strength of domestic inflationary pressure, leaving them on hold for a good while from here, with the next move not pencilled in until a final cut in May 2026.

Market pricing for a November cut has pared further, from about a 1 in 2 chance of a cut ahead of the statement to a 1 in 3 chance. There are now -30bp of cuts priced by mid next year, from -35bp prior to the meeting and -47 prior to the CPI data last week.

3 year futures imply yields around 3bp higher over the past 24 hours, having grinding back near their intraday lows after an initial selloff post statement largely unwound.

Best September in 15 years, Stephen Innes SPI Asset Management extract

The quarter closed not with expected rebalancing drama but with a slow exhale, markets drifting higher as though walking a tightrope strung across late-summer skies. The S&P500 ended September with its best showing in fifteen years, an unlikely triumph in a month that usually carries a curse for equities.

This time, investors got exactly what they wanted, the Fed easing back into rate cuts, without the darker trade-off of collapsing growth. That cocktail of relief carried stocks through a season that so often punishes complacency.

The gains were not evenly shared. Nasdaq surged again, powered by the same seven titans that have carried the global market’s weight for much of the past two years. The “Magnificent 7” acted less like stocks and more like pylons, propping up an entire bridge while the rest of the market trudged behind.

The S&P493 barely kept pace, transports lagged, and materials sagged. It was another month where investors crowded onto the same narrow planks, preferring to test familiar ground rather than spread risk across weaker timbers.

Treasuries notched their third consecutive winning quarter, the long end leading as traders priced in a durable easing cycle. The curve flattened into month-end, underscoring that Fed easing remains the market’s central anchor.

The dollar closed the month almost unchanged after slipping for several sessions, a portrait of indecision, neither abandoned nor embraced. Oil, meanwhile, lost altitude as OPEC-Plus hinted at accelerating supply. In the energy sector, the politics of barrels outweighed geopolitics, keeping crude oil heavy despite the usual autumn bid for winter demand.

Yet under the calm surface, anxiety lingers. Washington’s shutdown brinkmanship risks delaying the one report that anchors every trading desk’s calendar: nonfarm payrolls. Without it, the Fed would be forced to navigate October’s decision by starlight rather than compass, relying on smaller surveys and anecdotal signals.

The October cut looks assured —the dot plot practically guarantees it— but beyond that, the path becomes guesswork. Traders hate nothing more than an information vacuum. In its absence, every tick of secondary data looms larger than it should, amplifying volatility.

The labor market is already cooling, though not collapsing. Job openings are stagnant, hiring is subdued, and wage growth has eased. Inflation has moderated but still hovers above target. That leaves valuations stretched against a backdrop of uncertainty, markets perched on a high wire with little margin for a slip.

Short shutdowns barely dent performance, but drawn-out ones erode confidence, and this time equities carry less insulation than they did during earlier episodes.

The larger question is forward-looking. If tariffs, tighter immigration policy, and housing weakness bite harder, growth could stumble, forcing markets to price recession cuts rather than the current “insurance” variety. Equities would buckle, volatility would spike, and bonds would catch a safe-haven bid.

On the other hand, if growth steadies, if consumers continue to spend and corporations press on, easing bets could unravel. That shift would push long yields higher and strip equities of their policy cushion. It’s the paradox of this cycle: good news may prove bearish, bad news bullish, leaving traders to price not outcomes themselves but the Fed’s reaction to them.

Gold delivered the month’s loudest signal. Its rally to record highs, the strongest since 2011, was more than just momentum. It was the market strapping on a safety net, a hedge against cracks forming beneath the tightrope. Bitcoin found a late bounce, but it was gold that defined September’s mood: caution wrapped inside optimism.

Fed speakers only sharpened the tension. Some warned tariffs were freezing corporate decisions, others leaned dovish on labor weakness, while others pointed to upside inflation risks. It was a chorus out of tune, leaving traders to pick which voice would carry. For now, the market has chosen to dance with the dovish tune but the music can change quickly.

So September ends with markets suspended between confidence and caution, investors gliding across a narrow line where balance feels effortless until a gust of wind arrives. The tightrope holds, but the rope is thin, and the valley beneath is deeper than it looks.

The American labor market is beginning to lose its edge, and with it, the economy’s most important engine of momentum. Today’s run of U.S. data carried a distinctly dovish undertone: consumer confidence fell harder than expected, house prices slid for the fifth straight month, and though job openings ticked slightly higher, the quits rate dropped to just 1.9%.

That last detail is more than a number — it’s the clearest tell on wage dynamics. A quits rate is like a pulse check on worker confidence: when people feel they can easily find a better job, they walk; when they stay put, pay pressures vanish.

At these levels, the market is flashing a move toward sub-3% wage growth. For a service-led economy where wages dominate the cost structure, the implications are profound. With rents easing and energy prices rolling over, softer wage inflation would act as a powerful counterweight to tariff-driven goods inflation.

But the malaise isn’t confined to the job market. Consumers, who account for 70% of U.S. growth, are treading more carefully. The Conference Board’s expectations index points to real spending growth closer to 1.5%, not disastrous, but a long way from the 3–4% norm that sustained prior expansions.

The psychology is shifting. Prices remain sticky, incomes are less secure, and wealth feels shakier. Even with equity markets at record highs, most households take their financial cues from home values, and five consecutive declines in housing prices are becoming too visible to ignore.

Perceptions around jobs tell the same story. Surveys show the gap between Americans who say jobs are plentiful and those who say they’re hard to get is narrowing rapidly. History suggests this measure leads the unemployment rate and workers sense the shift before it shows up in official statistics.

That deterioration deepened in September, echoing the drop in University of Michigan sentiment last week. Suppose Friday’s payrolls release is delayed by a government shutdown. In that case, traders may be forced to navigate without their most reliable compass, but the whispers from households are already clear: the labour market is losing altitude.

Put together, the picture is one of unease beneath the surface of respectable activity data. Consumers are nervous, workers are less confident, and housing has stopped offering its usual comfort. Inflation fears tied to tariffs haven’t materialized, and the offsets, lower energy, weaker rents, softer wages are starting to take hold.

For the Fed, that’s not a problem; it’s permission. The central bank has the runway it needs to keep cutting, trimming -25 basis points in October and likely again in December to lean against the threat of a sharper jobs downturn.

Markets are quick to price in the obvious: equity bulls cheer liquidity, bond buyers anchor around easing, and the dollar feels heavy when growth is soft and the scissors are out.

But beneath it all, the real story is about confidence ebbing away. Wage growth is slipping, consumers are tightening belts, and perceptions of job security are eroding.

That’s not collapse, but it’s drift. And drift, in markets as in economies, is what gives central banks the cover to act.

Corporate news in Australia

-Chinese commodities firm Mysteel refutes media reports that China has temporarily banned purchases of iron ore from BHP Group ((BHP)).

-Led by Tamboran Resources ((TBN)), gas from the Beetaloo Basin will be sold on the NT markets from mid-2026 for the first time.

-Seven West Media ((SWM)) will be merged into Southern Cross Media ((SXL)) to form a $415m group.

-Star Entertainment Group ((SGR)) is in new talks to replace its debt with a new lender syndicate which may involve major shareholder Bruce Mathieson.

-Macquarie Group’s ((MQG)) share of home lending has grown further, surpassing $150bn; it also plans to remove hundreds of investment options on its superannuation platform.

-OpenAI has become a member of the Tech Council of Australia.

-Challenger ((CGF)) continues to assess taking a stake in Pepper Money ((PPM)).

-Spee3d, a 3D metal printer, is warming up investors for an ASX listing in November.

On the calendar today:

-NZ Aug Building Permits

-AU Sept Dwelling Prices

-JP Tankan Index 3Q

-EZ Sept CPI

-US Sept ADP Employment

-US Sept ISM Manu

-XX Global PMIs

-CEDAR WOODS PROPERTIES LIMITED ((CWP)) ex-div 19.00c (100%)

-NICK SCALI LIMITED ((NCK)) ex-div 33.00c (100%)

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

Spot Metals,Minerals & Energy Futures
Gold (oz)	3887.40	+ 26.38	0.68%
Silver (oz)	46.84	– 0.21	– 0.45%
Copper (lb)	4.88	– 0.03	– 0.59%
Aluminium (lb)	1.22	+ 0.00	0.11%
Nickel (lb)	6.84	+ 0.00	0.07%
Zinc (lb)	1.34	+ 0.00	0.30%
West Texas Crude	62.54	– 0.60	– 0.95%
Brent Crude	66.09	– 0.65	– 0.97%
Iron Ore (t)	105.29	– 0.06	– 0.06%

The Australian share market over the past thirty days…

Index	30 Sep 2025	Week To Date	Month To Date (Sep)	Quarter To Date (Jul-Sep)	Year To Date (2025)
S&P ASX 200 (ex-div)	8848.80	0.70%	-1.39%	3.59%	8.45%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
29M	29Metals	Downgrade to Sell from Hold	Ord Minnett
A11	Atlantic Lithium	Downgrade to Neutral from Outperform	Macquarie
BGL	Bellevue Gold	Upgrade to Buy from Hold	Ord Minnett
CSC	Capstone Copper	Downgrade to Hold from Buy	Ord Minnett
CTD	Corporate Travel Management	Downgrade to Neutral from Buy	Citi
DRR	Deterra Royalties	Upgrade to Buy from Hold	Ord Minnett
EMR	Emerald Resources	Downgrade to Lighten from Hold	Ord Minnett
IGO	IGO Ltd	Upgrade to Accumulate from Hold	Ord Minnett
PDI	Predictive Discovery	Upgrade to Buy from Hold	Ord Minnett
PNR	Pantoro Gold	Upgrade to Hold from Sell	Bell Potter
RIO	Rio Tinto	Downgrade to Accumulate from Buy	Ord Minnett
RSG	Resolute Mining	Upgrade to Accumulate from Hold	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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