The Overnight Report: Risk Off Rumbles On

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US markets recovered off intraday lows but all major indices finished lower on China trade tensions and commentary on Russian oil sanctions.

After a weak day yesterday, ASX200 futures are pointing to a soft start for Thursday.

Good Morning,

The Australian market pulled back from record highs on Wednesday with the ASX200 down -65pts or -0.7% to 9,030.

Seven out of eleven sectors fell with gold miners weighing on materials.

Energy outperformed, assisted by Woodside Energy’s ((WDS)) positively received market update.

What happened overnight, NAB Markets Today Research

It was a sour day for risk sentiment overnight with global equities mostly lower. Trade fears remained a drumbeat, with news reports saying the Trump administration is weighing restrictions on software exports to China. 

Across equity markets, major indexes generally declined. The EuroStoxx50 was -0.8% lower though the softer than expected UK CPI data helped the FTSE100 buck the broader trend to be up 0.9%.

In the US, the S&P500 pared earlier losses of as much as -1.2% to finish -0.5% lower. The Nasdaq was down -0.9%. Netflix was -10% lower with profit growth undershooting forecasts and with an expense stemming from a dispute with Brazilian tax authorities meaning margins were below expectations.

Tech stocks underperformed, while energy, consumer staples and healthcare sectors managed gains. After the close, Tesla posted third-quarter profit that fell short of expectations despite record electric-vehicle sales. EV sales were supported in the third quarter as buyers brought forward purchases to take advantage of a subsidy that was going to end.

News in the past couple of hours is that Scott Bessent said the US will announce a “substantial pick up” in sanctions against Russia. That comes after moves away from a meeting between Trump and Putin soon. The WSJ reported the Trump administration has lifted a key restriction on Ukraine’s use of some long-range, though Trump called the report “FAKE NEWS!.”

There was limited movement across most global government bond markets. 10-year US treasury yields were 1bp higher at 3.95%, consolidating near the lowest level since early April. The US$13 billion 20-Year treasury auction saw decent demand and cleared around 1.5bp through the prevailing market levels.

UK headline CPI rose 3.8% yoy, below consensus for a 4.0% increase. Core and services inflation were also below expectations. Market pricing for a cut as soon as the November meeting has moved to -9bp from -3bp ahead of the data, and there are now -18bp priced by year-end, from -10bp. UK 10yr gilts outperformed, with yields down 6bp against a 1bp increases for 10yr yields in Germany and France.

GBP was the worst performing of the G10 currencies, but with currency moves generally small was still down only -0.1% against the dollar. AUD and NZD were both little changed, with AUD ranging between an intraday high of 0.6512 and low of 0.6479 and currently sitting around 0.6490.

Elsewhere, Japan’s newly appointed Prime Minister, Sanae Takaichi, ordered a package of economic measures aimed at easing the burden of inflation pressures.

Detail will follow and a supplementary budget will be compiled to finance the measures, which are set to include subsidies for electricity and gas charges during the winter, along with regional grants to ease price pressures.

It also encourages small and medium-sized businesses to raise wages and increase capital investment. There was little market reaction to the announcement.

ANZ Bank Australian Morning Focus, Commodities Extract

Crude oil gained after a government report showed a decline in inventories. US commercial stockpiles of crude oil fell -4.2mbbl last week, according to the Energy Information Administration. This brings the total stockpile to 422.8mbbl, the lowest level in a month.

Sentiment was buoyed by signs of stronger demand for fuel products. Gasoline inventories fell -2,147kbbl while distillate fuel oil stockpiles were drawn down by -1,4789kbbl. The gains were broadly in line with a private sector report earlier in the week. The market also found support from easing trade tensions.

India and the US are said to be nearing a trade deal that could lower tariffs on Indian exports to 15-16% from about 50%. India may agree to gradually reduce its imports of Russian oil and allow the US to export more non-genetically modified American corn and soymeal, according to a report in the Mint newspaper.

A deal could be announced when President Trump and Prime Minister Modi attend the Association of Southeast Asian Nations summit in Malaysia next week.

Adding to the bullish sentiment, European Union leaders are expected to approve a package of sanctions on Russia this week. Global gas prices edged lower amid signs of weak demand. Buyers in the North Asian LNG market remain on the sidelines, despite prices trading around US$11/MMBtu for the past two months.

Chinese firms have been absent from the spot market, with most looking to optimise supply portfolios. The 30-day moving average for Chinese LNG imports slumped to 156kt on 20 October, about -25% lower than a year ago.

LNG stockpiles held by Japanese power generators increased by 10% w/w to 2.13mt on 19 October. European natural gas held within the tight range it has traded in for weeks, as an increase in supplies helped meet higher demand amid cooler weather.

Easing trade tensions helped boost sentiment in the base metals market. US President Donald Trump predicted an upcoming meeting with China would yield a good deal on trade. US Treasury Secretary, Scott Bessent, is expected to meet with his Chinese counterparts to discuss a de-escalation of trade tensions ahead of the Trump-Xi talks.

Zinc rose for a third day as a decline in steel inventories on the London Metal Exchange leaves buyers exposed to the most severe squeeze in decades. Stockpiles have been failing for months as smelters have dialled back production.

Spot prices have subsequently surged to trade US$323/t above the three-month contract price. This is the highest spread since at least 1997. Inventories on the LME are now down to 24,425t, enough to service demand in the 14mt global market for less than a day.

Reports of another mine disruption in the copper market also raised concerns of supply tightness. Approximately 80 miners were trapped when a mine partially collapse in the Dominican Republic. Copper has been well supported by supply side disruptions that tightened market fundamentals.

Gold extended losses in a choppy session, a day after suffering the worst single day rout in more than 12 years. The retreat has brought an abrupt end to a rally that has been underway since the start of September, pushing prices up by more than 26%.

The profit taking amid the strong gains was exacerbated by easing trade tensions. However, the rest of the precious metal sector fared better. Silver, platinum and palladium all managed to end the session higher, suggesting investors are still seeking to diversify portfolios with precious metals.

Corporate news in Australia

-Multiple buyers including Bega Cheese ((BGA)) are looking at the sale of Capilano, the iconic Australian honey brand business, by parent Hive and Wellness.

-Major shareholder in Qualitas ((QAL)), Redrock has sold -30m shares ($108.6m) or -10% of the company’s issued capital after MD, Andrew Schwartz sold -15.1m shares, lowering his stake to 19.1%.

-Pinnacle Investment Management ((PNI)) is buying a $92m stake in Japan’s Advantage Partners.

-Goldman Sachs is in early stage discussions for the $1bn sale of over 50’s lifestyle developer Lincoln Place.

-San Remo’s Crotti family has acquired 13% of Maggie Beer Holdings ((MBH)).

-OpenAI has hired more than 100 ex-investment bankers to help train its AI on how to build financial models.

On the calendar today:

-US Oct Kansas Fed Mfg

-ALCOA CORPORATION ((AAI)) 3Q Earnings/Investor Call

-AUSTRALIAN CLINICAL LABS LIMITED ((ACL)) AGM

-AUCKLAND INTERNATIONAL AIRPORT LIMITED ((AIA)) AGM

-ASX LIMITED ((ASX)) AGM

-BAPCOR LIMITED ((BAP)) AGM

-BCI MINERALS LIMITED ((BCI)) Sept Quarterly/Investor Call

-BHP GROUP LIMITED ((BHP)) AGM

-BRAMBLES LIMITED ((BXB)) AGM

-COCHLEAR LIMITED ((COH)) AGM

-CORONADO GLOBAL RESOURCES INC ((CRN)) Sept Quarterly

-DETERRA ROYALTIES LIMITED ((DRR)) AGM

-FORTESCUE LIMITED ((FMG)) Sept Quarterly

-HELLOWORLD TRAVEL LIMITED ((HLO)) AGM

-INSURANCE AUSTRALIA GROUP LIMITED ((IAG)) AGM

-INSIGNIA FINANCIAL LIMITED ((IFL)) 1Q26 Update

-JANISON EDUCATION GROUP LIMITED ((JAN)) AGM

-KAROON ENERGY LIMITED ((KAR)) Sept Qtr Activity

-NORTHERN STAR RESOURCES LIMITED ((NST)) Sept Qty Activity

-PERPETUAL LIMITED ((PPT)) AGM

-REGIS RESOURCES LIMITED ((RRL)) 1Q26 update

-RELIANCE WORLDWIDE CORP. LIMITED ((RWC)) investor briefing

-SOUTH32 LIMITED ((S32)) AGM

-SUPER RETAIL GROUP LIMITED ((SUL)) AGM

-VITRAFY LIFE SCIENCES LIMITED ((VFY)) 1Q26 Investor Briefing

-ZIMPLATS HOLDINGS LIMITED ((ZIM)) AGM

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

The Australian share market over the past thirty days…

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