The Overnight Report: Just A Bad Dream (?)

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Monday saw buyers move back into US markets, buying the dip as President Trump and Vice President Vance sought to ease China trade tensions.

After yesterday's fall, ASX200 futures look set to follow overseas market higher.

Good Morning,

The ASX200 fell -76pts or -0.8% to 8,833 on Monday.

Technology and financial stocks performed the weakest, while property managed to stay positive and gold stocks continued to perform.

SPI futures are signaling a better start awaits on Tuesday.

What happened overnight, NAB Markets Today Research

US equities rebounded sharply, led by a surge in technology shares and renewed optimism around US-China negotiations.

Commodities also gain, with copper and precious metals surging on supply concerns and a short squeeze, while bond markets reflected a cautious uptick in yields. 

US-China trade tensions remained front and centre, with Treasury Secretary Scott Bessent warning that “all options are open” in response to China’s export restrictions on rare earths, but also expressing hope for continued dialogue.

In an interesting contrast to the early phase of US trade tensions where the US antagonised many of its allies, Bessent noted, “This is China versus the world — they have pointed a bazooka at the supply chains and the industrial base of the entire free world, and we’re not going to have it,”.

The US is set to meet with allies this week, seeking broad support, while staff-level meetings with Chinese officials are expected to continue. Both sides appear to be keeping the door open for a Trump-Xi summit later this month, with markets taking comfort in the prospect of further negotiations.

In the Middle East, President Trump declared an end to the Gaza war after more than two years, hailing a historic peace agreement brokered with the help of regional partners.

The deal, which saw the release of all remaining hostages, marks a significant diplomatic achievement, though major challenges remain in securing a lasting settlement and rebuilding Gaza.

In what was a quiet Monday in terms of economic data releases, China’s latest trade data accentuated the resilience of its export sector.

Exports rose 8.3% year-on-year in September, far exceeding expectations and marking the fastest growth in six months. While shipments to the US plunged -27% —the sixth consecutive month of double-digit declines— robust demand from the EU and Southeast Asia more than offset the weakness.

Notably, rare earth exports surged nearly 100% year-on-year, even as Beijing tightens control over the sector. Imports also surprised to the upside, driven by strong demand for chips and industrial metals, highlighting China’s ability to adapt to shifting global trade dynamics.

Optimists on US-China de-escalation fueled a surge in risk appetite across the board. In the US, the S&P500 jumped 1.5%, its best session since May, while the Nasdaq surged over 2%, buoyed by a 10% gain in Broadcom after OpenAI agreed to a multiyear chip and networking deal.

The US government shutdown remains in place increasing the focus on the US earnings reporting season which starts in earnest tonight with several big US banks reporting.

European equities also advanced, with the Euro Stoxx600 up 0.4%. In Asia, Chinese equities showed resilience, with the CSI300 down just -0.5% despite ongoing trade tensions, while Japanese markets remained closed for a holiday.

Bond markets were subdued, with the US Treasury market closed for Columbus Day. However, futures pointed to a rise in 10-year yields towards 4.06%. 

Philadelphia Fed President Paulsen gave her first public speech since taking on the position and on policy said she was in line with median projection, which is consistent with two more rate cuts this year. For 2026, when she becomes a voter, she was more circumspect, and her view was one of proceeding cautiously on policy.

In Europe, Bunds yields drifted lower, led by shorter-dated notes, while French and Italian spreads over Germany were little changed. Focus remains on France after President Macron announced a new cabinet as Prime Minister Sebastien Lecornu prepares to present the budget to the National Assembly.

The outcome of the budget process will be closely watched as a barometer of political stability in Europe’s second-largest economy. UK gilts also posted small gains (decline in yields), despite cautious commentary from the Bank of England on the outlook for interest rates.

BoE Megan Greene signaled that she is considering holding interest rates until at least March next year on concerns that policy is not restrictive enough to squeeze out lingering price pressures.

Currency markets saw a notable reversal of Friday’s risk-off moves, with the Australian dollar leading G10 gains after being the worst performer at the end of last week. The AUD rebounded strongly, up 0.7% to 0.6518 currently after trading to an overnight high of 0.6533. reflecting its heightened sensitivity to risk appetite. 

Commodities saw significant moves, led by a dramatic short squeeze in copper, which surged over 4%, approaching record highs. Spot prices spiked to a US$224 premium over three-month contracts, the second-largest daily move since 1994.

Gold rallied more than 3% to fresh record highs, while silver set a new all-time high, surpassing levels last seen in 1980. Iron ore and metal prices also gained, but in smaller magnitudes circa 1.5%.

Elsewhere, President Trump offered to intervene in the escalating conflict between Pakistan and Afghanistan, signaling his willingness to mediate amid deadly cross-border clashes.

The situation remains fluid, with leaders from both countries expected to attend a peace summit co-chaired by Trump in Egypt.

ANZ Bank Australian Morning Focus, Commodities update extract

Crude oil rebounded amid signs of easing trade tensions. Trump struck a conciliatory tone towards China on Sunday, after threatening to apply an additional 100% of tariffs. 

Vice President Vance called on Beijing to choose a path of reason in the spiraling trade fight between the world’s two biggest economies. Trump later posted a statement that hinted at a possible off-ramp for Xi. 

The new US tariffs were in retaliation to China’s new export curbs on rare earth minerals.

Exporters of items containing these will now require export licences, while certain equipment and technology will also be subject to controls. This includes electric vehicle batteries, which will have major implications for the global market as China dominates that sector.

The oil industry continues to navigate geopolitical issues. China announced it would levy US-owned ships arriving at its shores, including oil tankers. That sparked several last-minute cancellations and a jump in shipping rates.

OPEC kept its outlook for the oil market unchanged as the group continues to add additional supply to the market. It expects oil demand to grow by 1.3mb/d this year and by 1.4mb/d in 2026.

The projected demand for OPEC-Plus crude was unchanged from last month’s report at 42.5mb/d. That’s expected to rise to 43.1mb/d next year. 

European gas futures fell as more LNG cargo continues to arrive at the region’s terminals. Traders appear relatively confident the region will have enough supply to meet winter demand.

Imports of LNG have increased in recent weeks, with exports from the US hovering close to an all-time high. Norwegian flows to northwest European terminals also ticked up following unplanned maintenance over the weekend.

Rising LNG supply weighed on North Asian LNG prices. Sentiment has been weakened by subdued buying for winter. Easing trade tensions lifted the base metals sector, aided by new signs of tightness. 

Copper benchmark three-month prices rallied more than 3% to above US$10,800/t, coinciding with an even greater move in the spot market. This has pushed spot prices into a premium over future-dated contracts.

This pattern is also evident in the zinc market, with the cash-three month spread trading a premium of US$89/t. Such levels haven’t been seen since a supply squeeze in 2022, when smelting output plunged during the energy squeeze. Sentiment was supported by renewed strength in demand from China.

Refined copper imports climbed to 485kt, marking the highest level this year. This occurred despite rising stocks and declining spot premiums, indicating strong underlying demand.

Imports of copper concentrate remained strong at 2.59mt, even with unfavourable treatment charges. This comes amid ongoing supply side issues. Chile’s Codelco warned its El Teniente mine will run below capacity for the next several months due to a deadly mining accident. 

Strong investor demand for precious metals, such as gold and silver, continue to lift prices to record highs. Gold hit a record US$4,115/oz, while an historic short squeeze in London raised silver to its highest price in decades.

Silver lease rates, which represent the cost of borrowing metal, surged to more than 30% on a one-month basis. 

Corporate news in Australia

-Palantir noted it uses AI to assist Coles Group ((COL)) to gather data on staff hours and preferences to help improve worker satisfaction and customer churn.

-JPMorgan attributed a rush to sell levered ETFs for magnifying Friday’s steep market sell off.

-Pacific Equity Partners is looking at Alliance Aviation ((AQZ)) with Qantas Airways ((QAN)) considers selling its stake.

-Solomon Lew adds a further 2% to his equity ownership in Myer Holdings ((MYR)) through Blue Ocean Equities.

-Brazilian Rare Earths ((BRE)) launched a $120m equity capital raising .

-Australia’s largest super funds are visiting Britain next week to boost awareness of the $4.3trn system’s capacity to invest in infrastructure and growth in UK.

On the calendar today:

-AU Citi AU/NZ Conference

-AU Sept NAB Business Survey

-AU Sept RBA minutes

-EZ Oct ZEW survey

-UK Aug Earnings

-UK Aug Unemployment

-US Sept NFIB

-AUSSIE BROADBAND LIMITED ((ABB)) AGM

-ATTURRA LIMITED ((ATA)) AGM

-BABY BUNTING GROUP LIMITED ((BBN)) AGM

-BEACON LIGHTING GROUP LIMITED ((BLX)) AGM

-PALADIN ENERGY LIMITED ((PDN)) 1Q26 Result

-RIO TINTO LIMITED ((RIO)) 3Q Update

-STAR COMBO PHARMA LIMITED ((S66)) ex-div 0.37c (100%)

-SMARTPAY HOLDINGS LIMITED ((SMP)) Shift4 Scheme Meeting

-SANDON CAPITAL INVESTMENTS LIMITED ((SNC)) ex-div 0.47c (100%)

-SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED ((SXE)) AGM

-TELSTRA GROUP LIMITED ((TLS)) AGM

-WAM INCOME MAXIMISER LIMITED ((WMX)) ex-div 0.30c (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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