The Overnight Report: S&P & Gold Record Highs

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Weak ADP jobs data became a 'good news from bad news' event for US markets, leading the S&P500 to a new record high.

The ASX200 lacked direction on Wednesday with gold stocks supported while oil and materials weakened.

Futures are pointing towards a positive start on Thursday.

Good Morning,

What happened overnight, NAB Markets Today Research extract

With the US government shutdown taking effect at midnight on Tuesday Washington time, market are now looking to private sector data and central bank related developments for their lead.

This proved fertile ground overnight, with first a surprise negative ADP employment print, followed by a ho-hum ISM manufacturing survey and then the Supreme Court ruling that President Trump could not fire Fed Governor Cook, pending hearing oral arguments in January next year.

Bond yields are lower following the ADP report and pricing of Fed cuts through December has moved from -43bps to -47bps. US stocks are higher, the government shutdown having been well anticipated ahead of time while the US dollar is almost imperceptibly softer, AUD/USD unchanged at 0.6611.

Today, weekly jobless claims and Factory goods orders will be the first victims of the government shutdown, while locally focus is on the monthly household spending data.

The Supreme Court has refused to let Donald Trump immediately fire Lisa Cook, a victory for the Federal Reserve governor and (for now) the US central bank’s independence.

SCOTUS said in an order it had deferred the president’s application until the justices heard oral arguments in the case in January 2026, meaning Cook can continue her work at the central bank at least until early next year.

The news was greeted with a minuscule rise in front end US yields, already recovering a little from the earlier ADP employment-related hit, and small lift in the S&P500.

ADP reported -32k private sector jobs lost in September versus the consensus of a rise of 51K. The 54k August rise was revised to -3k, unsurprising in so far as ADPs methodology backfits subsequent non-farm payrolls outcomes to its earlier releases. Despite its poor track record, the error between ADP and the official private sector NFP data has narrowed somewhat of late, besides which its market importance is inevitably elevated until the Bureau of Labor Statistics (BLS) is back to work.

As an aside, President Trump’s pick for the new BLS chief EJ Antoni’s from the Heritage Foundation was withdrawn yesterday, to which professor Steve Hanke, a former Reagan advisor quipped, ‘Whatever you say about Trump, he knows when he’s riding a dead horse and he knows how to dismount”.

The S&P final manufacturing PMI for September was unchanged at 52, ahead of the ISM manufacturing index which edged higher to 49.1 in September from 48.7, aligning with the consensus estimate (49.0).

The index continues to paint a downbeat picture with the index remaining below 50 for the seventh consecutive month. Respondents still noted the impact of tariffs as a drag in many industries. The new orders index dipped to 48.9 while employment increased but remains at a subdued 45.3 level. The prices paid index dropped to an eight-month low of 61.9.

In other US (tariff related) news, according to Politico, the Trump administration has paused its plan to enact the threatened 100% tariffs on pharmaceutical imports from today ‘as it attempts to negotiate agreements with pharmaceutical giants to avoid higher tariffs in their name-branded products – like the deal it announced with Pfizer on Tuesday’.

In equities, the S&P500 opened -30-points lower following the overnight weakness in futures but quickly recovered and ground out gains throughout the session to finish up 0.34% amid a mixed sector performance but where Health Care jumped 3.0%, presumably boosted by the above pharma tariff news.

The NASDAQ finished up 0.4%. Earlier European stocks had a good day with the main indices all up one percent or thereabouts, while in Asia it was another day of HK and China gains but Nikkei slippage on a stronger Yen.

In bond market US treasuries are finishing with 2s down -7bps and 10s -5bps lower, the ADP report the main driver here, while in Europe Eurozone 10yr benchmarks were -3-4bps lower at 10-years while gilts finished 3bps higher.

FX has been fairly uneventful. The AUD/USD is unchanged but at least holding on to the move back onto a 0.66 handle post Tuesday’s RBA meeting. Another day another record for gold, up 0.7% to US$3866/oz.

Outside of the US, Eurozone preliminary August CPI came in line with expectations at 2.2% up from 2.0% in July, even though some of the national data released the day before had hinted at risk of slightly higher print. EZ money markets were unmoved on the news, still having no more than -2bps of easing priced by year end.

No UK data, though the BoE’s Catherine Mann, Sarah Breedon and Andrew Bailey have all made comments overnight. Governor Bailey’s were in regard to stablecoins where he opined in an FT article that it would be wrong to be against them in principle.

Mann and Breeden made comments in keeping with their prior dispositions and voting record, Mann saying she thinks rates are closer to neutral than people think and that she favours a longer pause on rates.

Breeden meanwhile said, “It may be tempting to wait to see the ‘whites of disinflation’s eyes’ before looking to reduce the restrictiveness of policy further.”

“But managing the upside risks to inflation in this way brings risk in the other direction: holding policy too tight for too long comes with costs to output and employment, which could then pull inflation below target.” She said, “I have not seen any evidence yet to suggest that the underlying disinflationary process from past shocks is veering off-track. So far so good.”

ANZ Bank Australian Morning Focus, Commodities extract

Ongoing supply disruptions continued to boost industrial metal prices, while gold extended its rally as the US government shutdown supported haven demand.

Gold hit a record high of US$3,885/oz as the US entered a government shutdown, raising risks of possible economic disruptions. The White House has directed federal agencies to “implement their plans for an orderly shutdown”.

This is the first such event in seven years. The suspension of federal activities threatens to put additional strain on the US dollar and will result in delays to critical economic indicators, such as the non-farm payroll data scheduled for Friday, which are an important guide for the Fed’s decision making.

Gold’s gains reached 48%, the biggest annual gain since 1979. Strong buying by strategic investors has triggered this rally. September alone saw inflows of 112t into gold-backed ETF holdings. Silver continued to rise in tandem with gold towards US$48/oz, while platinum pared its gains from its recent high. 

Copper continued to lead gains in the base metals sector, with prices rising to US$10,300/t. Weaker industrial activity is being outweighed by mounting supply risks in Chile and Indonesia. Chile’s copper production plunged by -9.9% y/y in August, the steepest drop since 2023.

Output fell to 423,643t, down from 470,696t in August 2024, according to statistics agency INE. The state-owned giant Codelco was hit hardest after a deadly accident in late July at its El Teniente mine that killed six workers, forcing a halt to mining and smelting.

Codelco has also cautioned that Chile’s copper output may stagnate at roughly 5.5mt, as the sector battles growing operational challenges. Supply challenges along with China’s anti-involution drive are adding to the bullish market sentiment. 

Iron ore prices fell marginally. Narrowing margins at steel mills continue to weigh on demand. Not only domestic demand is at risk, but headwinds are also increasing for China’s steel exports.

The European Union is planning to raise tariffs and halve quotas on imported steel to support local producers facing Asian overcapacity and new US trade barriers. Steel imports above these reduced quotas will face new tariffs, aligning with the US policy of a 50% duty on imported steel. 

Crude oil plunged to US$65/bbl amid concerns of increasing market surplus and softening demand. The EIA reported a 1.8mb rise in US inventories, exceeding expectations. Product inventories also increased, signaling weakening demand, while OPEC-Plus is planning to accelerate their supply hikes.

Saudi Arabia’s crude exports surged in September, reaching their highest level in 18 months. This is a sign the Kingdom’s increased OPEC-Plus production is making its way onto global markets. Exports rose to 6.42mb/d last month, an increase of over 600kb/d compared to August. 

Global gas prices continued to grind lower as weak demand from Asia alleviated concerns of geopolitically linked supply disruptions. European gas storage is approximately 83% full, which is significantly higher than the market expected a few months ago, but it still falls short of the five-year average.

Corporate news in Australia   

-ASIC has raised listing concerns over the Seven West Media ((SWM)) and Southern Cross Media Group ((SXL)) merger.

-Private equity firms are looking at nib Holdings’ ((NHF)) $200m travel insurance sale.

-Glencore is considering acquiring BHP Group’s ((BHP)) WA nickel assets.

-Eagers Automotive ((APE)) is raising $452m to acquire 65% of CanadaOne Auto for $1bn.

-Cochlear ((COH)) backed Epiminder is planning a $100m-plus ASX IPO after US approval.

-Gary Weiss is sending terse letters to Webjet Group ((WJL)).

-IFM Investors is winding down its private equity division as it cannot grow in line with the $4.3trn super system.

On the calendar today:

-AU Aug H/H Spending

-AU Aug Trade Bal

-AU RBA Fin Stability Review

-EZ Aug Unemployment

-US Aug Durable Goods

-US Aug Factory Orders

-ARB CORPORATION LIMITED ((ARB)) ex-div 35.00c (100%)

-COSOL LIMITED ((COS)) ex-div 1.17c (100%)

-IMPERIAL PACIFIC LIMITED ((IPC)) ex-div 7.00c (100%)

-LONDON CITY EQUITIES LIMITED ((LCE)) ex-div 1.00c (100%)

-LONDON CITY EQUITIES LIMITED ((LCE)) ex-div 1.50c (100%)

-WAM STRATEGIC VALUE LIMITED ((WAR)) ex-div 3c (100%)

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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