The Overnight Report: More Weakness

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US markets lost Wednesday's gains and some as sellers continued to push tech and the AI trade lower. 

After a positive day yesterday, Friday is set to open weaker, with ASX200 futures pointing to a soft start.

Good Morning,

On Thursday, a rebound in miners took the ASX200 higher by 26 points or 0.3% to close at 8.828.

Gold miners were some of the top performers, while consumer discretionary lagged.

What happened overnight, NAB Markets Today Research extract

Amid the ongoing government shutdown, the next-best labour market indicators were soft on Thursday, contrasting the stronger employment gains in ADP reported the prior day. Revelio labs reported a decline of ­-9k payrolls estimate, after a gain of 33k the prior month.

Challenger job cuts was the most headline grabbing, reporting -153k announced job cuts in October, the highest October month since 2003. Tech firms led the job cuts in the private sector, followed by retailers and the services sector. Cost-cutting was the top reason for the layoffs in October, followed by artificial intelligence, while “DOGE Impact” remained the leading reason for job cuts in 2025.

The S&P500 fell as much as -1.3% before slightly paring losses but closed lower by -1.12% unwinding yesterday’s gain. The Nasdaq and big tech led declines. US Treasury yields are down -5-8bps across the curve. The 10yr yield is -7bp lower at 4.09%, unwinding the prior day’s move higher. Similar the 2yr yield, which is back down to 3.56% after reaching 3.63% yesterday. Markets are back to 70% priced for a December cut.

In FX markets, the US dollar was weaker, down -0.5% on the DXY amid the risk off tone and fall in US yields. The yen led gains within the G10, up 0.7% to 153.11. GBP showed some short lived underperformance against the euro after the BoE’s dovish hold, but over day was 0.6% higher against the dollar, outpacing the euro’s 0.4% gain. The selloff in risk assets weighed on the AUD and NZD both lower against the broadly weaker USD. 

How the foggy labour market picture nets into estimates of spare capacity in the labour market remains opaque in the absence of data from the household survey. The Chicago Fed’s Labour Market Indicators best estimate is for an unemployment rate at 4.36% in October, little changed from their 4.35% estimate for September and the latest 4.3% August print.

Chicago Fed’s Goolsbee said he was uneasy about further cuts without data, “I lean more to the, ‘When it’s foggy, let’s just be a little careful and slow down,’” noting particularly that “if there are problems developing on the inflation side, it’s going to be a fair amount of time before we see that.”

Cleveland’s Hammack remained more hawkish than many colleagues, saying policy is ‘barely restrictive’ and that she remains more concerned about inflation.

The Bank of England held rates in a tight 5-4 decision. The statement repeated the line that rates are on a “gradual downward path” but removed the word “careful”.

The peak unemployment rate forecast was raised to 5.1% from 4.9% and risks from weaker demand were now more apparent, but more evidence was needed on inflation and demand. Greene, Mann, and Lombardelli all flagged concern about the inflation outlook. In the press conference, Bailey said the market curve at the moment shows a sensible path. There are -18bp priced for December and -56bp by mid next year.

In Japan, cash earnings data slowed a little to 2.2% from 2.4% in a same sample basis. BoJ Governor Ueda said last week he’s monitoring the “initial momentum” of the upcoming annual wage talks, and on that front, one of Japan’s largest labor union groups, UA Zensen, said it plans to target the same level of wage gains for regular workers in next year’s pay negotiations as it did for this year.

While the earnings news is constructive for further BoJ normalisation, the co-leader of Japan Innovation Party, the LDP’s coalition partner, said “our basic stance is that restraint needs to be exercised regarding the timing.”

Markets remain 50% priced for a December move [up, not down], with 22bp priced by January.

Challenging The Challenger Report, Ed Yardeni research extract

Bond prices rallied and stock prices fell this morning on news that layoffs rose sharply, according to the Challenger Report which was titled “JOB CUTS SURPASS 1 MILLION; HIGHEST OCTOBER TOTAL SINCE 2003. COMPANIES CITE COST-CUTTING, AI IN OCTOBER.”

That headline is somewhat sensational. It refers to the past 12 months through October. The actual number of layoffs during the month was -153,074, as the report notes in its first sentence.

So far, October’s jump hasn’t been confirmed by initial unemployment claims. The official data are available only through September 19 because of the government shutdown. But Bloomberg News estimates jobless claims decreased to about 218,000 in the week ended October 25 from a revised 231,000 in the prior week. Those are low readings.

Most of October’s announced layoffs occurred in the warehouse and technology industries. Automation and robotics are boosting productivity in warehousing. AI is doing the same in technology.

Announced technology layoffs have been high over the past two years. The industry might have hired too many workers in 2022 and 2023.

There was a big jump in October’s warehouse-related announced layoffs. That’s odd since the holiday season should keep warehouses very busy. Again, this spike is probably primarily attributable to productivity gains, especially in online retailers’ inventory management.

Meanwhile, announced hiring plans also spiked higher in October, according to seasonally adjusted data.

Yesterday, the Federal Reserve Bank of New York released its quarterly report on consumer debt. The good news is that delinquencies remain very low for mortgage and HELOC debt. However, delinquencies on credit card, student loan, and auto loan debt are signaling financial stress.

That’s mostly among low-income debtors. They may be forced to cut back on discretionary spending. However, we believe that Baby Boomers, who are retiring with a record net worth of US$80 trillion, will continue to boost overall consumer spending.

By the way, it’s also good news that the percentage of senior loan officers tightening lending standards remains low.

Corporate news in Australia

-Abercrombie Group has dropped its takeover bid for Humm Group ((HUM)).

-Aurizon Holdings ((AZJ)) is reconsidering its $3bn rail asset sale.

-Zen Energy, backed by Ross Garnaut, is for sale with a renewables portfolio worth around $400m.

-Advanced Energy Minerals has commenced its IPO book build for $307m.

-BrainChip ((BRN)) launched a $30m underwritten placement at 17.5c per share, with an additional $2m via a share purchase plan.

On the calendar today:

-AMCOR PLC ((AMC)) AGM

-AVITA MEDICAL INC ((AVH)) 3Q25 Earnings/Investor Call

-CARNARVON ENERGY LIMITED ((CVN)) AGM

-LINDSAY AUSTRALIA LIMITED ((LAU)) AGM

-MACQUARIE GROUP LIMITED ((MQG)) 1H26 earnings report

-NINE ENTERTAINMENT CO. HOLDINGS LIMITED ((NEC)) AGM

-NEWS CORPORATION ((NWS)) 1Q Earnings/Investor Call

-QANTAS AIRWAYS LIMITED ((QAN)) AGM

-REA GROUP LIMITED ((REA)) 1Q26 Earnings

-SPARK NEW ZEALAND LIMITED ((SPK)) AGM

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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