The Overnight Report: Sell Software, Buy Gold

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

US markets recovered in afternoon trade off intraday lows, with gold and silver continuing to recover/rally.

Concerns over Anthropic disruption triggered (yet another) software and tech sell off.

The ASX200 absorbed the RBA's 25bps cash rate hike yesterday, and rallied.

SPI futures are pointing to a soft start for the day after.

Good Morning,

The ASX200 broadly maintained its positive gains post the RBA lifting the cash rate by 25bps yesterday, largely as expected by the market. 

The market rose 79 points or 0.9% to 8,857 led by tech, miners and the banks.

What happened overnight, NAB Markets Today Research extract

It was a light overnight session in terms of macro news. The US JOLTS report was delayed due to the partial US Government shutdown but we did get the Johnson Redbook retail sales report for the month of January. 

This report which covers sales at stores that have been open for at least a year rose 6.3% on a year-on-year basis in January. While buying was a bit slower in the latter part of the month due to stormy weather, the report is seen to suggest that retail activity remained robust into the start of 2026.

The partial US government shutdown is set to end with the House early this morning passing the funding deal (votes were 217 to 214) President Donald Trump negotiated with Senate Democrats. The package now goes to Trump for his signature, with the Department of Homeland Security funded through Feb. 13 and the rest of the government funded through the Sept. 30 end of the fiscal year.

There were a couple of Fed speakers overnight but there has been limited impact on US financial markets. Richmond Fed President Barkin said the rate cuts in 2025 have helped to support the labour market. The focus now is on bringing inflation back to target – “I think of these cuts as having taken out some insurance to support the labor market as we work to complete the last mile to bring inflation back to target.” 

Barkin appeared positive on the outlook for the US economy, noting tariff uncertainty is fading and he expects tax refunds, lower gas prices and looser monetary policy to support the economy. Unsurprisingly, Governor Miran thinks the Fed needs to ease policy further, suggesting just over -100bps for this year.

There were some sizable moves in the Aussie dollar and Aussie rates post the RBA meeting yesterday. Immediately post the announced decision and published statement the AUD rose to 0.7033 from 0.6966, extending the rally in the earlier part of the overnight session reaching a high of 0.7050 and currently trading around 0.7020.

Bond yields also re-priced (3-year bond future gapping from 95.71 to 95.595 on the statement, recovering some of that move on the press conference (to 95.665) but overnight prices have drifted lower. Ultimately the market was priced for more than one RBA rate hike for this cycle, but the issue now is around the timing. 

In the press conference Governor Bullock’s comments made it clear the RBA Board is uncomfortable with inflation being persistently above target (hence the rate hike) but is cautious and watching data. 

The commentary suggested the Board was waiting for quarterly inflation prints (in the absence of significant upside surprise on the economic data) and this comment saw the market unwind expectations for back-to-back rate hikes while firming rate hike expectations for May (May OIS at cumulative 20bps). 

The OIS curve prices cumulative 40bps of rate hikes by year end – or cash rate at 4.246%. NAB expects the RBA to deliver another 25bps rate hike in the cash rate at the May meeting and while Governor Bullock did not want to signal this was the start of a series of rate increases, NAB recognises the risks are biased towards more than 50bps of hikes.

In the bond market space, Aussie futures and Bunds are the under-performers amongst global peers overnight with Gilts out-performing. The 30-year German bond reached its highest level since 2011 overnight.

At the margin the USD issuance pipeline weighed on treasuries early in the session with expectations of a cluster of issuers on Tuesday given five potential borrowers delayed issuance on Monday following Oracle’s jumbo deal to start the week.

Treasury yields drifted higher through most of the overnight session, but yields have dipped lower in the last hour,  it is unclear what has driven the late rally, but it could be some risk off flow as equities soften. 

The latest JP Morgan investor survey shows a reduction in longs and a small increase in shorts in the US treasury market, leaving the net long position at its lowest level since early October last year. 

Equity markets are generally weaker with earlier gains unwound. Shares in data service and legal software companies were under pressure following Anthropic’s release of a new AI automation tool which is seen to compete against providers of professional analytics.

Chipmakers and software stocks led a fall in the Nasdaq down -1.4% moving off intraday lows . The S&P500 fell -1%, dragged down by the IT sector which has fallen around -3%. The Euro Stoxx600 index closed up 0.1%.

In the commodity space, oil prices are higher amid concerns over US/Iran relations with the US saying it shot down an Iranian drone which had approached an American aircraft carrier in the Arabian Sea.

Adding to concerns on oil were reports an oil tanker which is part of a US-military fuel procurement program was challenged by Iranian gunboats as it moved through the Strait of Hormuz.

Tanker rates have risen over the past week as concerns over the shipment of oil through Hormuz rise (around a third of the world’s oil flows through the strait of Hormuz). 

Gold and silver rebounded – with spot gold up over 6% and silver up over 6% with dip buyers returning to the market as the fundamental drivers of the shift higher in precious metal prices is seen to remain in play. 

RBC Capital Australian Rates Strategy

The RBA hiked rates 25bp as per consensus and RBC expectations. This was a unanimous decision, with overtly hawkish overtones to the statement which come through even more prominently in the forecast revisions. 

Despite a materially stronger currency and an around 90bp swing in cash rate assumptions since the Nov statement feeding into their models, their trimmed mean inflation path lifts to a peak of 3.7% mid-year (now slightly above our recently revised forecasts) and only dips below 3% next calendar year (similar to our expectations). 

The new mid-28 trimmed mean inflation forecast is 2.6%, still above mid-point signaling the RBA’s long-term assessment of risks remaining to above-target CPI. 

Labour market and consumption forecasts were also both revised stronger in the near-term in line with the flow of recent data, though lower later in the profile given higher cash rate assumptions. Wages were lifted by 0.1% out to end-27.

Compounding the pain for households (and the Federal Government), the RBA’s forecast for real wages is now negative for the next 18 months reaching a low of -0.9% in December 2026.

The RBA warns their assessment of inflation remains “very uncertain” with “a risk that we have misjudged the extent of excess demand in the economy.” And as the RBA continually reminds us, monetary policy can take quite some time to filter through to various economic parameters and inflation outcomes.

The Governor emphasised again that monetary policy takes a good 1-2 years to be effective, and hence we’re still seeing some easing from those cuts filter through to the real economy even as the bank turns back to tightening.

This is an unusually fast swing from cuts to hikes from the RBA after easing 3 times last year (the last of which was in Aug-25). The bank’s assessment of the neutral nominal cash rate also appears to have crept higher, with 3.60% at best not clearly restrictive, and perhaps merely in the middle of neutral estimates, with broader financial conditions also likely only “around neutral” according to the Governor.

While rates markets initially felt some sharp pain (and the AUD more love), we think a hawkish hike was the right thing for the bank to do. Inflation is clearly becoming a problem, addressing it head on was the prudent course of action, and the RBA now isn’t risking falling further behind the curve by relying on hope when faced with a solid 6 months of above-target inflation. 

The Governor was clear in ruling out temporary or seasonal factors as drivers of the last 6 months of elevated inflation, which some have tried use as an argument against hikes. Rather, she pointed to rising prices across a “broad range of components and sectors” with a particular emphasis on housing, market services (driven by wages) and durable goods.

We retain our profile with a follow-up 25bp hike on May 5th, taking rates to 4.10%, but note back-to-back hikes are probably not on the cards. 

Our reading of the SoMP suggests the RBA itself essentially has a May hike as their base case if inflation pans out as they project (“The central projection assumes the quarterly rate of underlying inflation in the first quarter of 2026 is roughly unchanged”).

This same statement and the Governor’s response to a specific question around a March follow-up lead us to believe their focus remains heavily enough on the quarterly data that they’re unlikely to lift rates again in March. The next quarterly CPI report is due on the 29th April.

Market reaction: The hawkish hike initially saw a classic set of market reactions – higher yields, flatter curves, wider cross-market spreads, stronger currency and lower equities.

But much of the initial moves across asset classes have been partly or fully reversed over the course of the press conference (though not, we think, as a function of anything Bullock actually said).

We’ve hence seen 10y bonds (including cross-market) and AU equities return to around their pre-RBA levels, and the currency and front-end yields both backed off quite some way from their intraday high-water marks.

Market pricing for follow-up hikes remains (rightly) high in the near term though, with about 19bp cumulatively priced by May (this was almost 24bp at one stage) and 38bp by the end of the year.

Corporate news in Australia

-Sydney-based childcare management app, OWNA is eying a $100m-plus IPO

-Pure Environmental, a $200m waste management company is up for sale, led by UBS

-$1.3bn in Defence property including Sydney and Victoria barracks are slated to be sold after audit

-CEFC and River Capital will invest more than $80m in an indigenous-led native forestry project in the Tiwi Islands

-Neuren Pharmaceuticals ((NEU)) shares fell -10% after its US partner Acadia Pharmaceuticals received a negative trend vote from European regulators

On the calendar today:

-US ADP Jan Employment

-AMCOR PLC ((AMC)) 1H26 Earnings

-CENTURIA OFFICE REIT ((COF)) 1H26 Earnings

-CHARTER HALL SOCIAL INFRASTRUCTURE REIT ((CQE)) 1H26 Earnings

-NUFARM LIMITED ((NUF)) 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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