The Overnight Report: AI, Tech & Real Estate

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This story features PERPETUAL LIMITED, and other companies.
For more info SHARE ANALYSIS: PPT
The company is included in ASX200, ASX300 and ALL-ORDS

Technology stocks led by Oracle and Broadcom continued to weigh on the Nasdaq overnight as markets await November labour data on Tuesday and CPI data on Thursday.

After profit taking hit miners yesterday on softer Chinese economic data, ASX200 futures are suggesting a flat start for Tuesday.

Good Morning,

Miners dragged down the ASX200 on Monday with the index down -62pts or -0.7% to 8.635.

Ten of eleven sectors fell, with materials down -2.2%, followed by health care.

Consumer discretionary rose 0.5%, the only sector to post a gain on the day.

AI Stocks Continue Being Shakey, extract from J.L. Bernstein

Markets went nowhere but AI stocks kept falling.

A sleeper headline from today that could cause massive disruption: Google is testing real estate listings directly in search results.

Automated lockboxes and Google listing homes for sale would wreak havoc on the current real estate industry.

Shares in Zillow Group closed -8.59% weaker.

****

No double guessing as to why Citi’s research report this morning is titled: 

“Why we do not think Google real-estate ads will have a major impact on REA”

What happened overnight, NAB Markets Today Research extract

US equity markets opened the pre-Christmas week cautiously with all three major US indices showing modest declines. US Treasury yields have traded in tight ranges with the curve displaying a mild bull steeping bias. 

Governor Stephen Miran remained true to his dovish self, arguing “phantom inflation” has distorted policy and that the stance is unnecessarily restrictive, given an expected easing in shelter inflation and a cooling labour market. 

He warned about nonlinear deterioration in employment and advocated a quicker pace of easing to move toward neutral sooner, while noting statistical quirks in some services-inflation components. Miran also suggested he may remain on the Board past his January term-end until a successor is confirmed.

In contrast, NY Fed President John Williams said policy is now modestly restrictive and well-positioned heading into 2026, with risks to employment rising and inflation risks somewhat reduced. 

Williams’ baseline envisages growth accelerating to around 2.25% next year with inflation drifting slightly below 2.5% before returning to 2% by 2027. He characterised risks as roughly in balance ahead of delayed US employment data due this week

US data releases overnight didn’t trigger a notable market reaction. The NAHB housing market index rose to an 8-month high of 39 in November, still below its 50 long-run average, while the Empire Manufacturing survey softened, with pricing indicators at lows last seen earlier this year.

The week’s delayed releases (October/November payrolls, unemployment, and CPI prints) will fill the data void left by the government shutdown; consensus points to circa 50k November payrolls and 4.5% unemployment, though private gauges caution downside risk.

In other data releases, Canada’s CPI held at 2.2% y/y in November, with the BoC’s two preferred core measures cooling to 2.8% y/y. The print reinforces an extended hold narrative amid lingering slack, with markets little moved and Canadian rates modestly lower. 

Meanwhile, Euro-area industrial production surprised to the upside in October, up 0.8% m/m (sa) and 3.5% seasonally adjusted annual rate, setting Q4 GDP on a solid track and prompting expectations the ECB will revise up 2025–26 growth versus September. A Q4 GDP projection at 0.3% q/q (sa) would imply 2025 y/y growth around 1.5% and 4Q2025 at 1.3% on a year earlier, from 0.8% previously.

US Treasury yields traded in tight ranges with a mild bull steepening bias, The 2yr tenor eased -2bps to 3.503% while the 10y Note was little changed (4.179%, -0.6bp).

Fed pricing expectations for a January cut, edged up a little to 22% with a full -25bps cut still seen more likely at the June-26 meeting (-34bps priced by then). Earlier in the session, German Bunds 10y closed at 2.853% (-0.4bp d/d) while UK Gilts 10y closed at 4.496% (-2.1bp d/d).

US equities are trading modestly lower with the S&P500 down -0.9% while the Nasdaq is -0.59%. Tech stocks struggled last week, and they have now started the new week in the same mood, last week Oracle and Broadcom earnings disappointed and markets are seemingly still reassessing the outlook for AI although the Mag 7 are flat on the day (0.4%). 

Meanwhile, Europe was mixed-to-positive: EuroStox 600 up +0.74%; FTSE100  up 1.06%; DAX up 0.18%. Asia was softer: Nikkei50 down -1.31%, Hang Seng down -1.34%, CSI300 fell -0.63% on weaker consumer growth data.

The AUD starts the new day at 0.6640, a tad lower relative to levels this time yesterday. The aussie traded in a 0.6657 to 0.6632 overnight. Yesterday China’s activity data underwhelmed although the AUD stayed in a tight range.

Key China monthly economic indicators for November were weaker than expected, including a tepid 1.3% y/y gain in retail sales and fixed investment contracting at a faster pace. 

Market reaction was limited to the extent that China’s economic weakness is well-acknowledged, and the government policy will be supportive to counteract any further slide

Oil prices are lower amid oversupply concerns and the prospect of geopolitical de-escalation.

In news out a few minutes ago, the US has pledged to protect Ukraine from any future Russian attack, U.S. officials said, offering to support European security guarantees and seek Senate backing for Washington’s promised role, which it hasn’t yet publicly detailed.

Beyond Tech: The rest of the economy is waking up, Franklin Templeton extract

If the last 20 years in public equity investing have been dominated by the technology sector, the story of the next 20 years may be about the awakening of the rest of the economy.

This narrative is already taking shape. Even among the so-called “Magnificent Seven,” often considered synonymous with Big Tech, more than half are not classified within the technology sector.

In our more than 50 years of investing in innovation, we have continuously tracked which parts of the economy are bright spots for invention and progress. One of our three main investing tenants is that innovation is everywhere.

As our title for this piece suggests, innovation is now truly everywhere. Today, many of the largest market opportunities we see are in areas of the economy like transportation, industrials, financials, health care, retail and energy. These sectors are not just poised for transformation; the change is already happening.

As we enter the Fourth Industrial Revolution, we expect to see the influence of its general purpose technologies spread across the economy. Digitizing information into computer bytes defined the Third Industrial Revolution.

We anticipate the ever-more intelligent application of that information to the physical world, whether through atoms or genes, will drive the Fourth Industrial Revolution.

Sweeping innovation of this sort, by definition “brand new,” often resists correct categorization, at least initially. When the first version of “search” came out in 1997, it was not immediately apparent this technology would upend the advertising industry.

The first Harvard students who joined Facebook in 2004 probably did not anticipate the fledgling social network would disrupt the entire media ecosystem.

Because Google and Meta made use of the internet and software, the ratings agencies put both companies into the technology sector. Not until 2018 were they correctly recognized as media companies and moved from technology to communications services.

This phenomenon is still happening today. As we noted previously, Palantir, a defense company, is currently categorized in technology, but we do not think this is permanent.

Other firms engaged in innovative and misunderstood endeavors may also face this initial mis-categorization. Yet, we predict this will become less frequent.

This is not to say investment decisions should hinge on identifying proper and improper classifications. Rather, it is an argument for a flexible investing mandate. 

The fluid nature of innovation is best captured by managers who can pursue what is most interesting and promising in the economy, regardless of what sector, wrongly or rightly, those companies find themselves classified in.

Corporate news in Australia

-The sale of Perpetual Wealth ((PPT)) to Bain Capital is uncertain due to branding and adviser issues.

-Miners sell infrastructure assets to raise cash, aiming for $180bn in asset sales.

-Glencore acquires 5% stake in Endura Mining for $15m.

-ASX ((ASX)) faces -$150m penalty and major reforms after regulators found governance issues and operational failures.

-Bing Lee’s profits has fallen to less than $1m from $25m four years ago as the retailer has fallen behind JB Hi-Fi ((JBH)) and Amazon.

-Woolworths Group ((WOW)) and Coles Group ((COL)) warn proposed measures to prevent price gouging could cost price sensitive customers more.

-CDC Data Centres is seeking between $4bn-$5bn in debt funding to support its 1.6GW development pipeline and retain its credit rating.

-Saluda Medical ((SLD)), Epiminder ((EPI)) and Carma ((CMA)) are all trading more than -20% below their IPO listing prices.

-Fortescue ((FMG)) is acquiring Peruvian copper explorer for -$151.7m via Toronto-listed Alta Copper of which it already owns more than one third.

-Origin energy ((ORG)) and AGL Energy ((ALG)) are targeting private funding for renewable energy projects.

On the calendar today:

-AU Westpac-MI Consumer Sentiment

-US Nov Employment

-ORICA LIMITED ((ORI)) 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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