The Overnight Report: So Much Noise

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This story features MACQUARIE GROUP LIMITED, and other companies.
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US markets managed to rally despite the looming threat of (yet another) US government shutdown and multiple factors driving risk-off narratives, plus another surge in precious metals.

After a long weekend, ASX200 futures are pointing to a positive start ahead of this week's December quarter CPI print tomorrow at 11am AEST.

Good Morning,

Australia was closed on Monday for Australia Day and finished last Friday with the ASX200 up 11 points or 0.1% to close at 8,860.

Eight of eleven sectors declined, led by consumer staples while tech and gold miners supported the index.

The market finished the week down by -0.5%.

What happened overnight, NAB Markets Today Research extract

US policy concerns over Fed independence have been compounded by President’s Trump’s quickness to threaten new tariffs on Europe and Canada.

They have been joined by domestic US events and the weekend killing of a US citizen by an ICE agent, that has been followed by Democrats threatening a second government shutdown at the end of the month by blocking a massive spending package unless Republicans strip funding for the Department of Homeland Security.

The spending legislation needs at least seven Democratic votes and several Republicans are reported to be wavering, suggesting Democratic support may need to be larger. While not all government departments would be affected by a second shutdown, data collection and publication could be affected.

A powerful snowstorm has blanketed the US East coast, with New York, New Jersey and Connecticut all under states of emergency and their respective governors urging people to stay at home. Almost a foot of snow fell in New York, with an Arctic chill and below zero temperatures sending Nat Gas prices surging to above $6, leaving many businesses and schools closed.

The JPY remains in focus, with USD/JPY extending Friday’s drop from above 159 to a three-month low of 153.31, before giving back some of the move.

After market rumours of price-checking in Asia on Friday, market participants reported the New York Fed doing the same during afternoon trade in the US on Friday. The New York Fed has not commented publicly, but were the Fed to be involved, the JPY’s rise would likely have further to go, at least in the short-term.

To be clear, FX intervention without Japan policy changes to address the underlying source of the JPY weakness is unlikely to be successful.

However, were the US to be involved it could play into the narrative the Trump Administration is prepared to back a view of a weaker USD. While any (New York) Fed assistance in JPY intervention could still be the Fed simply assisting the BoJ and by utilising Japan FX reserves, any use of US reserves would be much more instructive for the broader USD.

For the moment this is all conjecture. Data from the BoJ Monday on reserves and cash balances did not give a strong indication of Japan FX intervention last Friday. On Friday this week the Japanese MoF will release FX intervention data for the period 27 December – 29 January.

The USD fell across-the-board, with AUD/USD climbing to a three-year high of 0.6931. Against the NZD, EUR, GBP the USD fell to its lowest since the prior cycle low on 17 September last year. 

In bonds, yields were modestly lower, with US2s -1bps, 10s -2bps and where German bonds outperformed with the 2-year -2bps and 10s -4bps.

In stocks the S&P500 rose 0.5%, the Nasdaq up 0.4%, with European stocks up 0.2%. 

In economic news, US durable goods orders were stronger than expected, continuing the positive US dataflow of late. The headline gain of 5.3% m/m in November was inflated by aircraft, but even excluding transport equipment, orders were up for a seventh straight month and up 4.4% y/y, its strongest gain in more than three years.

Tax changes in the Big Beautiful Bill come into effect this year which will help support the positive momentum in business investment.

Germany’s IFO survey for January showed an unchanged business climate index, with slightly lower confidence in the outlook offset by a tick up in the current assessment index.

While the latest survey broadly supports a sideways move, investors are still looking for evidence Germany’s spending increases are coming through.

ANZ Bank Australian Morning Focus extract

Polymarket odds of a partial US government shutdown from 31 January rose to 80% over the weekend after US Democrat senators said they would not support a bill extending funding for several agencies unless appropriations for the Department of Homeland Security are removed.

The bill must be passed in its current form to avoid being sent back to the House, which is currently in recess. 

Australian Q4 CPI this week. We expect Q4 trimmed mean inflation to print at 0.8% q/q, with the risks around our forecast broadly balanced. If these forecasts are realised, we anticipate the RBA will keep the cash rate on hold in February. 

On a 0.9% q/q outcome, a rate hike would now appear a little more likely than not given the decline in the unemployment rate in December (pending the detail of the CPI). 

The unprecedented rally in the precious metals sector gained momentum. Gold broke through the US$5000/oz level while silver recorded its biggest one-day gain to a record US$117/oz. 

A massive sell-off in the Japanese bond market last week triggered the most recent rally. This was exacerbated this week after it was reported the US may help Japan support the yen. Such coordinated intervention has not occurred since 2011, instilling greater concern in markets.

Worries over US Federal Reserve independence has also generated strong demand for alternative safe haven assets. With geopolitical, political, economic and financial risks at their highest in decades, the investment case for gold has broadened across investor types (retail, institutional and central banks) and regions, with countries such as China and India actively promoting gold investment.

Silver’s gains have been so strong that retail investors in Turkey are willing to pay as much as US$9/oz above global benchmark prices in London to get their hands on it. A weaker USD also helped boost investor appetite in the base metals sector.

However, gains were limited amid some concerns the sharp price rises are not fully aligned with underlying fundamentals. 

Stockpiles of copper in Shanghai Futures Exchange warehouses rose last week to their highest seasonal level on record, suggesting demand has been soft. The prospect of a regulatory crackdown in China also tempered enthusiasm for metals.

The SFE announced restrictions on positions in the tin market for some clients suspected of not properly disclosing their ultimate ownership.

Therefore, investors will be subject to one-month limits on opening new positions. This saw tin futures fall more than -6% in London.

The rapid rise in prices across the sector could also see margin requirements raised in other metal contracts.

Crude oil prices ended the session relatively unchanged as traders took stock of a multitude of issues impacting fundamentals. A winter storm in the US is likely to spur increased heating demand amid snow, ice and freezing temperatures.

It is also raising concerns about disruptions to energy supply, with refineries struggling to operate in the conditions.

At the same time, risks to supply disruptions eased elsewhere. A key Black Sea oil terminal that accounts for most of Kazakhstan’s exports has been brought back into service. Output from the country’s giant Tengiz oil field is also set to restart shortly.

However, supply risks haven’t totally evaporated. Tension in the Middle East persists after President Trump dispatched naval assets to the region.

Global gas markets remained on edge as falling temperatures across several regions raise the spectre of stronger demand. US natural gas futures rose more than 40% as freezing weather swept across the country.

The winter storm is also estimated to have knocked offline around -12% of US natural gas production. This could impact US exports of LNG, with pipeline deliveries to export terminals falling to their lowest level in year.

This comes as consumption across parts of Europe and Asia rises amid persistently cold temperatures. Gas-fired power generation in Tokyo has risen to its highest level since March 2024.

However, the gains were limited by relatively high levels of inventories, particularly in Asia.

Renewed tariff threats-implications for trade & markets, Stephen Dover, Franklin Templeton Institute

On Saturday, President Trump threatened 100% tariffs on “all Canadian goods and products coming into the U.S.A.” , linking the warning to Canada’s China engagement and the risk of Canada becoming a “drop-off port” for Chinese goods into the U.S.

These developments will likely increase market uncertainty and volatility in the near term. Large market moves, however, are unlikely. Since US-Canada trade is crucial to both nations, tensions are likely to ease.

Having observed multiple sudden changes in US tariff policy, investors have grown used to these fluctuations and are now focusing on the primary objective of de-escalation.  

Notably, this resilience has already been evident in Canada’s financial markets: the Canadian stock market handily outperformed the U.S. and most other global markets in 2025 despite persistent trade noise.

The S&P/TSX Composite Index finished the year up 31.7%, reflecting its heavy weighting toward Financials, Energy, and Materials companies that benefited from strong resource demand and elevated commodity prices.

For long-term investors, an important consideration is the potentially volatile period leading up to the mandatory United States-Mexico-Canada Agreement (USMCA) review on July 1, 2026, as well as the possibility of continued tariff threats being employed as leverage.

Should the USMCA not be renewed, significant disruption to investment across North American supply chains may result.

-USMCA renegotiations remain an underappreciated market risk, particularly for Canada, and Trump’s latest rhetoric is a reminder about how difficult the discussions may be. The July 1, 2026 USMCA joint review will decide if the agreement is extended for 16 years or ends in 2036, as required by its terms.

-Trade between Canada and the US is the largest bilateral trade relationship in the world. The US is the top global destination for Canadian exports and the third largest source of Canada’s imports. Bilateral trade in goods and services amounted to nearly US$1 trillion last year.

-Trade is highly asymmetric: Canada’s exports to the US comprise about one fifth of Canadian GDP, whereas US exports to Canada amount to only about 1.5% of US GDP.

-The largest traded sectors include energy (oil, gas, electricity), automotive parts, machinery, agriculture, and timber. The latest threat of tariffs therefore could have significant economic impacts on Canada’s economy and key sectors in both countries.

A blanket 100% tariff would be costly for the U.S., leading to disruptions in US automobile production and raising prices on many goods sold in the US where consumers are already concerned about affordability (e.g., the costs of electricity, lumber, building materials, and cars).

-The tariffs would pose a major negative shock to Canadian GDP due to a probable sharp fall in US demand for Canada’s exports.

-Accordingly, it is probable that both sides will seek a de-escalation path, while still claiming leverage in the upcoming USMCA talks.

-This is not just about Canada. A more “surgical” US approach would be for the US to target any re-exports via Canada of Chinese goods. Recent research, however, suggests that such trans shipments are small from Canada, though they are larger for Mexico. Sectors that are considered most relevant for Chinese transshipment include electrical machinery, automotive parts, and metal products (and potentially EVs).

-One major uncertainty is how the Supreme Court will rule regarding the use of IEEPA for tariff authority. If the plaintiffs’ case is upheld, the threat of country tariffs will recede. But the threat of tariffs will not completely be removed. The Administration could still shift to sector-based tariffs as well as duties ultimately requiring Congressional approval.

-The recurring re-escalation of trade and investment tools of US policy will reinforce concerns that other countries could use economic or financial leverage against the US. Dumping US Treasuries can backfire by raising global interest rates or depreciating the dollar. The dollar and Treasury market remain unmatched in legal status, liquidity, and investment benefits. Currently, there is no viable alternative.

-Nevertheless, limited diversification and hedging may have an impact at the margins—occasionally leading to increased volatility and potentially moderate rises in US risk and term premia, especially in the event that trade or other disputes escalate.

-Finally, with Democrats now threatening to withhold their Senate support for a funding bill (due to Immigration and Customs Enforcement actions), the odds of another US government shutdown are rising.  The most likely market impact would be a risk-off move (higher volatility, bid for Treasuries). But such shutdowns typically have only modest and short-term impacts on market prices.

Investors should watch:  USD/CAD currency and Canada risk proxies (banks/credit), North American autos/industrials with cross-border supply chains, gold, treasuries and term-premium sensitivity in rates.

Corporate news in Australia 

-Ausgrid and the NSW government have started the $3bn sale of Plus Es smart meters business

-Macquarie Asset Management ((MQG)) is looking to exit Paraway Pastoral Company after 18-years of ownership

-Citi is looking for non-binding indicative offers for HSBC Australia’s loan book by Feb 3

-Quadrant Private Equity is launching a $400m-plus recapitalision for the healthcare equipment provider Aidacare.

-Airtrunk secures $1.8bn debt package for its Johor Bahru 1 data centre in Malaysia

On the calendar today:

-AU NAB Dec Business Survey

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

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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