The Overnight Report: Fear Grips Markets

This story features TECHNOLOGY ONE LIMITED, and other companies.
For more info SHARE ANALYSIS: TNE
The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

US markets retreated again ahead of Nvidia's results after the close on Wednesday with sentiment around technology and AI-related stocks remaining definitively risk-off.

The Australian market fell sharply yesterday, the steepest decline since April.

ASX200 futures are pointing to another weak start ahead of 3Q wage index data at 11.30am (AEST).

Good Morning,

The Australian market stumbled on Tuesday with the worst fall since April. The ASX200 fell -167pts, or -1.9%, to 8,469. Technology led the declines, down by -6%, with Technology One ((TNE)) off -17% after missing earnings expectations. Miners and banks also saw profit-taking, while consumer staples held up.

The infotech sector is now down -20.42% over the last month and -15.48% over the last five days. Energy is the only positive sector over the last month, up 9.37%.

What happened overnight, NAB Markets Today Research extract

The Nasdaq, having been down over -2% in morning trade and the S&P500 more than -1.5%, both have recouped some of their losses in afternoon trade, but investors remain cautious ahead of Nvidia’s results tomorrow after the close of US markets.

The latest Bank of America survey of more than 200 investors released earlier Tuesday, titled “Cash poor, capex rich, rate-cut needy,” showed a net balance of 45% of those polled citing AI bubble fears as their biggest tail risk worry, followed at 17% by a disorderly rise in bond yields, closely followed at 16% by inflation. 

53% of those polled believe AI stocks are already in a bubble, down from 54% last month. The survey’s release may or may not have been responsible for the further weakness in the technology sector stocks from the open, though we’ve seen similar weakness in consumer discretionary stocks, led by Home Depot.

It missed its quarterly earnings estimate, citing weak demand for big-ticket items, with the weakness in the housing market cited as one of the proximate causes. The share price fell -6%. Walmart and Target are the next of the big US retailers to report. 

US data has been trickling in, including from ADP, whose latest employment report for the average of the four weeks ending November 1 showed a fall of -2,500 against -14,250 in the four weeks to October 25. 

Weekly jobless claims numbers for the week ending October 18 – but not the prior or subsequent three weeks’ numbers, apparently unearthed from some obscure corner of the Bureau of Labour Statistics website, showed initial claims at 232,000, against a range of 220-230k in the weeks leading up to the October 1 government shutdown. Really not much to see there. 

August Factory Goods Orders at 1.4% m/m was in line with the consensus and final Durable Goods Orders were unchanged from the preliminary 2.9%. Much more up to date, the November NAHB housing market index improved to 38 from 37, vs 37 expected, but in absolute terms, remains at depressed levels.

On the Fed speaking circuit, Richmond Fed President Tom Barkin said the labour market may be weaker than the available data signal, citing a drop in jobs growth and postings, as well as recent layoff announcements by large companies.

He said inflation remains somewhat elevated but isn’t likely to increase much, though offered no clues as to how he would vote in December. He described the current situation as “trying to bring a boat to shore in the pitch black and having the lighthouse go dark.”

Fed Governor Chris Waller, early in the Australian day Tuesday, said the central bank should lower interest rates by another quarter point next month to “provide additional insurance against an acceleration in the weakening of the labour market.”

He warned that recent private sector hiring data suggested job growth remained weak and near “stall speed” in September and October, with recent indicators showing further softening. 

“With the evidence of slower economic growth and the prospect of only modest wage increases from the weak labour market, I don’t see any factors that would cause an acceleration of inflation,” Waller said.

Polymarket has Kevin Hassett as the clear favourite to be nominated as next Fed chair at 46%, with Kevin Warsh at 16%, Waller at 15%, Rick Reider 12.1%, and Michelle Bowman at 3%.

Yesterday’s RBA Minutes included a discussion on the likely degree of restrictiveness of policy and the evolution of financial conditions. The minutes stated that “members judged that financial conditions were still slightly restrictive but that it was also possible this was no longer the case.”

The RBA also acknowledged that prior rate cuts in 2025 are yet to have fully flowed through to activity. There’s uncertainty about how restrictive monetary policy is and how much spare capacity there is in the economy.

These are hardly new news after the post-meeting Governor Michele Bullock’s comments and recent speech by Deputy Governor Hauser, and reinforce the notion the RBA can afford to be patient. At the same time, in the discussions about what could materially influence the path forward, the scenarios were holding at current level or easing further – there is a pointed reluctance to mention the possibility of a hike.

US bond markets are exhibiting minor bull curve steepening in conjunction with weaker US stocks. The US 2-year note was down -3bps and 10s down -1.5bps, after a narrowly mixed day for 10-year benchmarks in Europe. Aussie implied 10-year bond yields are down -3.5bps in overnight futures trading.

The Australian Wage Price Index (3Q) is due out at 11.30 AEST. NAB expects 3Q WPI at 0.8% q/q, and 3.4% y/y for the third quarter running (also the market consensus). 

That outcome would be in line with the RBA’s November forecast. WPI outcomes were boosted in 1Q by administered pay rises for aged care and childcare workers, and the commencement of new public sector agreements supported 1H 2025. 

The 2025 award wage increase of 3.5% was near the previous year’s increase and not far from pre-pandemic levels. Our forecast reflects a continuation of recent trends in private sector wages growth and is consistent with little change in measures of underutilisation into 2Q. Note that WPI data is not particularly timely, representing wages growth over the three months to August.

China’s Silent Gold Run, Stephen Innes SPI Asset Management

Gold isn’t trading like a commodity anymore. It’s trading like a confession, the closest thing markets have to a whispered admission that the old reserve architecture is buckling under the weight of a new geopolitical cycle.

The FT just confirmed the part everyone suspected but couldn’t publicly say: China isn’t buying a little more gold than it reports, it’s buying ten times more. Enough to move the global price structure, enough to distort every short-term signal, and enough to tell you that Beijing’s true hedge isn’t rhetoric, it’s tonnage.

This isn’t a tailwind for gold. It’s a structural rewiring of how sovereigns prepare for storms.

China’s “ghost flows” into bullion have been simmering in the background for two years, too large to ignore, too opaque to quantify cleanly. Last year, when the idea first surfaced that Beijing was accumulating ten times what it declared, the respectable strategist class rolled their eyes and asked for “evidence.” 

Now the FT is hand-delivering the receipts: official purchases of barely two tonnes a month… while the real flows likely push toward 250 tonnes annually. That’s over a third of global central-bank demand, executed quietly through Swiss and South African refineries, routed through London, and spirited into deep storage in Shanghai and Beijing.

When you see 400-ounce bars with consecutive serial numbers marching east, that’s not retail demand. That’s a sovereign re-stacking its balance sheet for the next chapter of global finance. And the old playbook, gold down when the dollar is up, simply doesn’t survive contact with this new reality.

Gold has stopped trading against the dollar; it now trades against policy fragility, geopolitical risk, and the credibility of the fiat regime itself.

Goldman’s original US$3,000/oz call, mocked as aggressive twelve months ago, turned out to be the conservative scenario. The logic was clear then and bulletproof now: it’s the policy rate, not the broad dollar, that drives investor gold appetite. Central banks buy with dollar reserves anyway, and gold and the USD can rally in tandem when geopolitical uncertainty spikes. China’s local demand is neutral to yuan depreciation because lower rates offset higher spot prices.

Corporate news in Australia

-Sandfire Resources ((SFR)) is looking at BHP Group’s ((BHP)) West Musgrave mine to expand its copper and nickel assets.

-New Zealand’s stock exchange is reported as appointing Barclays to look at options in Cboe bid.

-EY is reported as relaunching a capital partner search for Experteeth Dental Group, targeting $120m.

-CSL ((CSL)) will invest US$1.5bn to expand its North American manufacturing facilities over the next five years.

-Droneshield’s ((DRO)) CEO is apparently refusing to answer journalists’ phone calls and is cancelling public appearances.

-Super funds, banks and financial advisers face a potential $100m bill to Macquarie Group’s ((MQG)) customers over the failed Shield fund.

-Rio Tinto ((RIO)) is cutting 180 jobs at Qld’s Yarwun alumina refinery, with the asset likely to shut in 2025.

On the calendar today:

-AU 3Q Wage Price Index

-JP Oct Trade

-EZ Oct HICP Inflation

-UK Oct CPI and PPI

-US Aug Trade Balance

-US FOMC Oct Minutes

-AIC MINES LIMITED ((A1M)) AGM

-ACUSENSUS LIMITED ((ACE)) AGM

-CETTIRE LIMITED ((CTT)) AGM

-EML PAYMENTS LIMITED ((EML)) AGM

-EXPERIENCE CO LIMITED ((EXP)) AGM

-GBM RESOURCES LIMITED ((GBZ)) AGM

-HELIX RESOURCES LIMITED ((HLX)) AGM

-HMC CAPITAL LIMITED ((HMC)) AGM

-HORIZON OIL LIMITED ((HZN)) AGM

-IGO LIMITED ((IGO)) AGM

-JAMES HARDIE INDUSTRIES PLC ((JHX)) 2Q26 Earnings/Investor Call

-KMD BRANDS LIMITED ((KMD)) AGM

-LGI LIMITED ((LGI)) AGM

-LARK DISTILLING CO. LIMITED ((LRK)) AGM

-MICROBA LIFE SCIENCES LIMITED ((MAP)) AGM

-METEORIC RESOURCES NL ((MEI)) AGM

-MEDALLION METAL LIMITED ((MM8)) AGM

-MEDIBANK PRIVATE LIMITED ((MPL)) AGM

-NUFARM LIMITED ((NUF)) FY25 Result

-NUIX LIMITED ((NXL)) AGM

-ORA BANDA MINING LIMITED ((OBM)) AGM

-PARADIGM BIOPHARMACEUTICALS LIMITED ((PAR)) AGM

-PARAGON CARE LIMITED ((PGC)) AGM

-QUALITAS LIMITED ((QAL)) AGM

-RIDLEY CORPORATION LIMITED ((RIC)) AGM

-RUBICON WATER LIMITED ((RWL)) AGM

-SEEK LIMITED ((SEK)) AGM

-SANTANA MINERALS LIMITED ((SMI)) AGM

-SOVEREIGN METALS LIMITED ((SVM)) AGM

-TASMEA LIMITED ((TEA)) AGM

-WEBJET GROUP LIMITED ((WJL)) 1H26 Earnings

-WAM LEADERS LIMITED ((WLE)) 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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms