The Overnight Report: Data Centre Sales Abound

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Another volatile session on Wall Street, as US/China trade concerns lingered, but the S&P500 and Nasdaq managed to close  higher.

After a robust rally yesterday, ASX200 futures are pointing to a slightly stronger start on Thursday ahead of the September employment data.

 Good Morning,

On Wednesday, the Australian share market rallied 92pts or 1% to close at 8,991 with healthcare up 2%, leading the rally, while energy was the only sector to lose ground.

On Thursday morning SPI futures have moved from slightly weaker to mildly stronger, suggesting the local market might open with small gains at 10am.

What happened overnight, NAB Markets Today Research extract

RBA Governor Bullock has just been speaking in Washington, where she described policy as currently ‘marginally tight’ but ‘not much’.

She said she sees the economy as close to balance in terms of the output gap, 4.2% unemployment now as ‘good’ but that her job is not done in regard to policy objectives.

Inflation is described as ‘a little bit volatile’. And echoing comments being heard from other central bankers of late, she says she disagrees with the rosy view from markets. 

Australian employment is due out today at 11.30am AEST Thursday. Trend employment growth has slowed this year even as private demand has picked up as exceptional employment gains in health and care industries have moderated.

NAB expects employment growth of 20k in September, and lean to a 4.3% on unemployment, but it is essentially a coin toss between 4.2% and 4.3% (it was 4.24% in August).

The data is unlikely to be soft enough to make the November meeting live, given our expectation for a material inflation surprise to be confirmed in Q3 data on 29 October.

The US Fed’s Beige Book prepared for the end October FOMC meeting released during US trading hours showed little changed on aggregate since the last report.

The opening sentence of the summary reading ‘Economic activity changed little on balance since the previous report, with three Districts reporting slight to modest growth in activity, five reporting no change, and four noting a slight softening”. 

On employment, it noted ‘employment levels were largely stable in recent weeks, and demand for labor was generally muted across Districts and sectors.’ It added ‘more employers reported lowering head counts through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies’. 

And on prices, it says ‘prices rose further during the reporting period. Several District reports indicated that input costs increased at a faster pace due to higher import costs and the higher cost of services such as insurance, health care, and technology solutions. Tariff-induced input cost increases were reported across many Districts, but the extent of those higher costs passing through to final prices varied’.

If the Fed left the September meeting disposed to further easing in October, there is little here to detract them from doing so, while continuing to emphasise the need for ongoing caution with reference to the inflation side of its mandate.

In this respect, the one other piece of (Fed constructed) economic news was the Empire (New York state) manufacturing survey. This showed a strong rebound to 10.7 from -1.8, supported by a surge in new orders and shipments.

Inflation pressures intensified, with both the prices paid and received indices rising by six points, the latter hitting its highest level since April.

Other economic news of note overnight was the September China credit and money supply data. Overall Aggregative Financing for the year to date came in close to expectations at Yua30.09tn, (consensus Yuan29.9tn) but New Yuan Loans at Yuan14.75tn fell short of expectations.

In annual terms, aggregate financing to the real, rather than financial economy, slipped to 8.7% y/y from 8.8% in August according to Capital Economics. M2 money supply growth slipped to 8.4% from 8.8%. Same old same old here –-soft credit supply and demand-– even in a month where the government launched a subsidy scheme for consumer loans, but also with some slippage in the pace of government bond issuance last month.

US Treasury Secretary Bessent was interviewed by CNBC at a forum in Washington and where he appeared to speak out of both sides of his mouth on trade. On one, negative, side, he called out of one of the lower-level China trade negotiators as “unhinged” and “disrespectful” and he said the US had lots of levers to pull that could damage China. 

On the positive side, he said he was optimistic on China, that he believed the Xi-Trump meeting will still go ahead and he suggested a longer US-China trade truce in return for China putting off it plans to tighten limits on critical rare earths.

On his other trade comments, US-Canada is “back on track” and the US is on the brink of finalising new terms on a trade deal with South Korea, Bessent said.

Fed Governor Stephen Miran, on temporary leave from his White House CEA role, used the latest development in the US-China trade war as a pretext to advocate his dovish view on policy.

He said, “there’s now more downside risks than there was a week ago (given China’s rare earth move) and I think it’s incumbent upon us as policymakers to lower interest rates quickly”. He wasn’t necessarily arguing for lower rates than previously, seeing no case for moving by more than 50bps clip(s) but said it’s the case that new tail risks make it “more urgent that we get to a more neutral place quickly”.

Earlier Wednesday night, and before European markets closed, came news that Sebastian Lecornu has succeeded in gaining the backing of France’s Socialist party after proposing a suspension of the pension law that raised the retirement age from 62 to 64.

It suggests the Socialists won’t now vote in support of any new non-confidence vote. The news saw the CAC-40 rise by 2% and French 10 year bonds slightly outperforming German bonds even though the news further dims the likelihood of large scale budget cuts being agreed in the 2026 budget, assuming one can be passed in coming weeks.

US equities were weaker in morning trade after an opening lift driven by jumps of around 5% and 7% respectively for Morgan Stanley and Bank of America after their FICC-related revenue drove earnings beats for both banks.

Morning weakness in the S&P500 has given way to afternoon gains with the index finishing the day up 0.4 and the Nasdaq 0.6%, both enjoying late ‘hour of power’ surge. US bond markets come into the New York close with 2 year Treasury yields 1.7bps higher an 10s up a mere 0.4bps.

In FX with the exception of an unchanged USD/CAD all G10 currencies after showing modest gains against the USD. AUD made a high of 0.6523 overnight and currently sits at 0.6511 (0.4%) outpacing once again the NZD, up just 0.1%. 

In commodities, gold remains on a tear, up another 1.5% to US$4,210 while base metals are mixed; aluminium up, copper down. Iron ore is flat and crude oil benchmarks down -0.4%.

Powell “playing catch up again” as Fed signals fresh cut, Nigel Green, DeVere

Federal Reserve Chair Jay Powell’s warning in Philadelphia is the clearest sign yet that another rate cut is coming and the US central bank is playing catch up again.

Powell cited a sharp rise in downside risks to employment, and acknowledged this week that the labor market is showing renewed weakness, with both hiring and job availability sliding.

The remarks, coming just weeks before the Fed’s October 28–29 policy meeting, have reinforced market bets on another -25bps cut in interest rates.

The S&P500 turned positive after Powell’s speech, closing 0.3% higher in New York on Tuesday as traders moved to price in fresh easing. It would mark the second consecutive cut following September’s decision to bring the federal funds target range down to 4 to 4.25%, the first move lower in almost five years. 

The comments arrived alongside new ADP data showing US companies shed -32,000 jobs in September, an unmistakable signal that the long era of uninterrupted job creation is ending. With official Bureau of Labor Statistics data still delayed by the government shutdown, the Fed is now relying on private indicators and internal models to assess the slowdown.

Powell’s comments confirm what the markets already suspected, that the central bank is behind the curve once again.

Powell is reacting to trends that have been clear for months, and states we had to wait for a so-called business-friendly administration before America began losing tens of thousands of jobs a month after four years of steady expansion. The reversal is sharp and telling, and it has forced the Fed to shift from patience to panic.

Powell’s record is defined by hesitation at key turning points. In 2018, the Fed tightened too long and too hard, only to reverse course months later when markets sold off.

In 2021, officials underestimated inflation for nearly a year before being forced into the most aggressive rate-hiking cycle in decades.

Now, the same pattern is seemingly repeating on the way down. Powell waits until the evidence is overwhelming, and by then the economy has already slowed.

The warning marks a turning point in tone for a central bank that, until recently, was still more concerned about inflation than employment. The narrative has flipped, and the focus is now on jobs and growth, and that means policy will have to become much looser. Every delay reduces the impact of the next move.

The signs of strain across the economy are unmistakable. Hiring freezes are spreading, consumer confidence is softening, and small businesses are feeling the squeeze of tighter financing and higher costs. The Fed’s earlier tightening, combined with tariff pressures and weakening global demand, has finally hit home.

Powell’s latest tone, cautious but reactive, could deepen uncertainty. Markets move on expectations. When policy lags, volatility rises. Investors want clarity and consistency. Right now, they are getting neither.

Despite that strategic investors are already positioning for opportunity.

When rates fall, capital searches for yield. The next phase of this cycle will reward those who act early. We are likely to see renewed appetite for equities, particularly high-quality growth stocks with strong balance sheets and exposure to technology and digital infrastructure.

Lower yields will also support global diversification and selective exposure to emerging markets.

The forthcoming easing cycle could spark a broader shift in asset allocation, and this is not the time for investors to sit still. When monetary policy is moving again, and liquidity is about to return to the system, investors who anticipate rather than react will define the next market phase.

Another cut this month looks almost certain. The real question is whether it will be enough to restore confidence before job losses deepen further.

Corporate news in Australia

-Macquarie Asset Management ((MQG)) has sold a network of 50 data centres across North and South American to Global Infrastructure Partners and the Artificial Intelligence Infrastructure Partnership, a consortium including BlackRock, Nvidia and Microsoft for US$40bn.

-The ACCC is investigating the Southern Cross Media Group ((SXL)) merger with Seven West Media ((SWM)) over competition and content concerns.

-Nine Entertainment is reported as looking at Quadrant’s QMS as it readies for sale.

-Supreme Court has ruled Cosette must go ahead with its $672m takeover of Mayne Pharma Group ((MYX)) despite its bid to withdraw.

-Barrenjoey is facilitating the $80m sale of equity in Generation Development Group ((GDG)) from Mark Carnegie for $7.38 per share.

-Blackstone has mandated Citi and CIMB to secure capital partners for its Malaysian 150MW data centre.

-WAM Income Maximiser ((WMX)) is raising $120m after the fund-raising target for the ASX listed hybrid fund missed by about $30m.

-Orthocell ((OCC)) launched a $25m placement at $1.30 per share to increase US manufacturing capacity and sales for Remplir.

On the calendar today:

-AU RBA Bullock Fireside Chat

-AU Sept Unemployment

-JP Aug Core machine orders

-UK Aug GDP

-UK Aug Industrial Prod’n

-UK Aug Trade Bal

-US Oct NAHB

-US Sept PPI (suspended)

-US Sept Retail Sales (suspended)

-AIC MINES LIMITED ((A1M)) Sept Quarterly/Investor Call

-ALCIDION GROUP LIMITED ((ALC)) AGM

-ARB CORPORATION LIMITED ((ARB)) AGM

-AURIZON HOLDINGS LIMITED ((AZJ)) AGM

-BANNERMAN ENERGY LIMITED ((BMN)) Sept Quarterly/Investor Webinar

-CHALLENGER LIMITED ((CGF)) Quarterly update

-COGSTATE LIMITED ((CGS)) AGM

-CHARTER HALL LONG WALE REIT ((CLW)) AGM

-ENERO GROUP LIMITED ((EGG)) AGM

-GENESIS MINERALS LIMITED ((GMD)) Sept Quarterly

-GENESIS ENERGY LIMITED ((GNE)) AGM

-IMDEX LIMITED ((IMD)) AGM

-K & S CORPORATION LIMITED ((KSC)) ex-div 8c (100%)

-STOCKLAND ((SGP)) AGM

-TREASURY WINE ESTATES LIMITED ((TWE)) AGM

-WAM MICROCAP LIMITED ((WMI)) ex-div 5c (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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