The Overnight Report: Nasdaq Up, Oil Down

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The Nasdaq rallied as Tesla shares hit a new all time high while oil prices continued to fall on growing oversupply concerns.

After a second weak day on the Australian market yesterday, SPI futures are suggesting a flat start for the ASX200 on Wednesday morning.

Good Morning,

Technology and energy sectors led the ASX200 lower on Tuesday by -36pts of -0.4% to 8,599.

National Australia Bank ((NAB)) and CommBank ((NAB)) penciled in an RBA 25bps rate hike for the February meeting.

What happened overnight, NAB Markets Today Research extract

NAB published an updated RBA View yesterday, now seeing a February and May hike. In our view, the shift in the distribution of risks to both growth and inflation requires the RBA to deliver a modest recalibration of monetary policy in the next six months.

We think this recalibration is probably in the order of 50bps of hikes and will help to restore the real cash rate to more suitable levels. Acting early will maximise the chance that policy makers can return inflation towards the appropriate trajectory while keeping growth at trend and the labour market close to full employment.

Overseas, US October Payrolls fell -105k and November Payrolls rose 64k, not far from the plus 50k consensus. The October fall was due to a -162K drop in federal payrolls, as deferred resignations associated with earlier DOGE cuts deals hit the numbers. Private payrolls growth averaged 75k over the past 3 months, from a low of 12k in the three months to August.

The unemployment rate rose to 4.6%, vs 4.5% expected. The bleed higher in the unemployment rate plays to the FOMC’s concern about the labour market, which has supported the adjustment over the past three meeting, but is unlikely to be enough to push them to further near-term easing.

The unemployment rate was close to the rounding barrier, at 4.56%, the lift was driven by temporary layoffs that can probably be attributed to the government shutdown and may reverse, and the BLS noted wider than usual error bands due to a shift in the survey timing. There was no Household Survey for October.

Overall, the FOMC median projection had the unemployment rate around 4.5% in Q4, and the data are broadly in line with that. It would take another jump next month to shift things much on a January cut.

In an essay published in the last hour, Bostic, who retires in February, said he sees structural reasons behind the rising unemployment rate, the labour market is cooling but not at a negative inflection point, and that aggressive fed policy is not a remedy for jobs decline. 

Elsewhere, US retail sales were flat, a tenth below the consensus, for plus 0.1% growth, but core control group sales jumped 0.8% m/m, against expectations for a 0.4% m/m increase.

PMIs in the US showed manufacturing down -4 tenths to 51.8 but services dropping -1.2pts to 51.9. Services employment indicators were soft, and price components were hot. Services output prices rebounded to 59.2, its highest since August 2022, with cost increases mostly blamed on tariffs, as well as rising labour costs.

Fed Pricing is little changed with -6bp for January and -60bp over the year. After some volatility out of the release 2yr yields are -2bp lower over the day at 3.48%. 10yr yields were also -2bp down at 4.45%. German 10yr yields were -1bp lower at 2.85%.

In Europe, the services PMI was 52.6 from 53.6, and manufacturing fell to an eight monthly low of 49.2 from 49.6. There was only modest growth in Germany and near stalling in France, with both underperforming the rest of the eurozone.

In the UK, unemployment ticked up to 5.1% as expected, to its highest level in nearly five years while wages data showed growth slowing less than expected. Even so, the private sector index excluding bonuses did slow to a near five-year low of 3.9% y/y.

Against the grain of the eurozone and US PMIs, UK PMI data showed a slightly better recovery than expected in December. Overall though nothing to change expectations for a -25bp cut form the BoE later this week.

In FX markets, the USD is -0.2% lower on the DXY, losing -0.4% against JPY and GBP. The AUD is little changed around 0.6640, having traded a range of 0.6618 to 0.6661 over the last 24 hours.

Equities were lower. The S&P500 slipped -0.24% lower. Energy underperformed alongside the slide in oil prices.  Oil prices fell and WTI dropped below US$55 for the first time since Feb 2021.

The Nasdaq is outperforming, up 0.23% on the Day. Tesla shares closed at a record high around optimism for the transition of existing electric vehicles being turned into robotaxis.

 Earlier, European indexes were also generally lower, with the Euro Stoxx50 losing -0.6% and the FTSE100 down -0.7%.

ANZ Bank Australian Morning Focus, Commodities Extract

The selloff deepened in the oil market, with Brent crude falling below US$60/bbl for the first time since February 2021 amid oversupply concerns. Signs of weakness have emerged in recent weeks, such as Middle Eastern spot crude prices falling below longer date futures (known as contango). 

The same structure has also appeared in the US Gulf Coast market. Premiums for gasoline and diesel have also eased in recent weeks. Support from supply risks is also evaporating. 

Earlier this week, Ukrainian President Zelensky said there had been real progress made in peace talks with the US and an agreement may be reached soon. The end to the Russia-Ukraine war brings with it the prospect of Russian crude flowing onto a market that is already seeing rising supply from major producers such as OPEC. 

This is mitigating rising risks to Venezuelan supply. The US seized an oil tanker last week and positioned warships, aircraft and troops near its coast. 

North Asia LNG prices fell to a two-year low as mild winter temperatures ease heating demand. At the same time, inventories remain near comfortable levels. Asian consumers are more sensitive than regions like Europe to weather swings, due to limited storage capacity. 

At the same time, new LNG supply continues to enter the market. Strong export volumes have emerged from Qatar and the US in recent months. The weakness is spreading to other gas markets, such as Europe, where benchmark natural gas futures are also under pressure.

Higher-than-normal temperatures in Europe are weighing on demand. The latest weather forecasts are pointing to persistent mild temperatures during the holiday season. 

Copper edged lower amid a risk off tone across markets. Three-month futures on the London Metal Exchange fell toward US$11,600/t after strong gains on Monday. Investors were cautious heading of key US economic data.

Stocks and other risk assets weakened ahead of the release. Nevertheless, the outlook for the red metal remains positive. Copper demand has been relatively strong, with China’s imports remaining elevated on strong growth from sectors such as electric vehicles and energy infrastructure. 

In the US, an AI-related investment boom is also boosting consumption. This comes as the market continues to fret about a possible tariff on US imports. These trade concerns continue to draw copper out of the international market and into the US. 

Zinc prices fell sharply amid signs the recent shortage of metal is easing. The spread between spot and 3mth futures has eased in recent days, signaling conditions for buyers have improved as inventories rebound. 

Gold steadied after a five-day gain amid mixed economic data. Jobs data in the US suggests growth is sluggish, according to the Bureau of Labor Statistics. However, it wasn’t enough to lift traders’ expectations of further Fed rate cuts. The central bank is seen as less likely to put much weight on the data due to disruptions. 

The resilience of iron ore prices appears to be cracking amid a barrage of weak economic data. Fundamentals weakened in recent weeks. Inventories of iron ore at Chinese ports expanded for a fifth week to the highest levels since March. Chinese steel mills are slowing output, with November volumes down -10.9% y/y to 69.87mt

Corporate news in Australia

-Droneshield ((DRO)) shares rallied strongly after the counter-drone tech company announced a $49.6m contract with an unnamed European customer.

-Ivanhoe Atlantic delays its IPO plans until mid-2026 due to political scrutiny and questions around governance.

-HMC Capital ((HMC)) in advanced talks to sell/lease Healthscope hospitals with Epsworth reported as targeting several sites.

-Ausgrid plans to sell its smart metering business Plus Es with scope to raise $2-$3bn.

-Rio Tinto ((RIO)) has commenced the feasibility study for Pilbara iron ore project.

-Regal Funds Management ((RGL)) backs airframes supplier for combat drones, KTECK Systems $2.5m pre-IPO raise for 2026 ASX listing.

-Metrics ((PNI)) is growing co-lending with big banks in 2026 as commercial property lending rebounds.

-Hydroponic grower and fresh food producer, Comfresh is looking for a strategic partner as it targets a $250m valuation.

-Firmus is targeting a US$7.5bn IPO valuation by June 2026 and is backed by Regal Funds Management ((RPL)).

-ACMA rose its estimate for telco spectrum licenses to $7.3bn.

-ACCC sues HelloFresh for allegedly misleading more than 100k customers over subscriptions.

On the calendar today:

-AU Westpac-MI Leading Index

-JP Nov Trade

-UK Nov CPI and PPI

-CENTURIA INDUSTRIAL REIT ((CIP)) General Meeting

-DYNO NOBEL LIMITED ((DNL)) AGM

-HARMONEY CORP LIMITED ((HMY)) AGM

-OPTHEA LIMITED ((OPT)) Investor Briefing/Webinar

-ROX RESOURCES LIMITED ((RXL)) General Meeting

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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