The Overnight Report: AI Victim Whack-A-Mole

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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

A new AI wealth management tool dragged US financials down weighing on the S&P500, while some software stocks bucked the trend.

The Dow tweaked up to a new record high.

The Australian market finished flat yesterday. Ahead of heavyweight earnings from CSL ((CSL)) and CommBank ((CBA)), ASX200 futures are positive.

Good Morning,

CSL has sacked its MD ahead of yet another disappointing interim result release. CommBank, on the other hand, has yet again managed to outdo market forecasts.

Computershare ((CPU)) went one step further and upgraded FY26 guidance.

ASX’ ((ASX)) Managing Director and CEO Helen Lofthouse will step down in May.

The Australian share market finished flat on Tuesday, with tech leading the gains, up 2.1% and with health care the laggard, dragged down by CSL’s last-minute announcement (though that backfired in the aftermarket trading).

The session brought weakness upon banks and insurers; the latter sold down on AI disruption concerns.

What happened overnight, NAB Markets Today extract

US retail sales were flat in December (0.0% vs 0.4% expected), with softness across most categories and modest downward revisions to earlier months. The GDP-relevant control group sales edged down -0.1%. Cars and food services dipped and building materials rose 1.2%. The mix points to a period of more moderate consumption after strong mid-year growth.

Meanwhile, the Employment Cost Index rose 0.7% in Q4, slightly below expectations, the slowest pace since 2021 and consistent with a continued gradual easing in labour cost pressures. 

Expectations that immigration-sensitive sectors like construction or hospitality might see wage pressures did not find support in this data. The NFIB small business survey was also unexpectedly lower in January (headline down -0.2 pt to 99.3). Hiring and wage components of that survey are holding up but continued falls in the response rate make those measures less reliable.

Whilst not directly responding to the data, Fed officials were not immediately leaning into the weakness. Cleveland Fed President Beth Hammack said policy is in a good place for rates to stay on hold, while Dallas Fed President Lorie Logan noted she would only support additional cuts if inflation keeps improving or if the labour market shows material weakening.

In Australia yesterday the January NAB Business Survey reported business confidence up 1pt to plus-3 as conditions eased to plus-7 from plus-9. Softer sales and profitability signal a slight loss of momentum at the start of 2026 even as employment held steady. 

Cost pressures continued to ease, with labour and input cost growth at post-pandemic lows, helping to temper near-term inflation concerns. The closely watched capacity utilisation measures saw another decline too, coming back toward (but still above) the long-run average. 

Westpac–MI Consumer Sentiment fell -2.6% to 90.5, a third straight monthly decline to the bottom of its 18-month range, although sentiment still holds most of the improvement seen during 2024.

In rates markets the pricing of a Fed cut by June increased marginally but is still only just above 25bp. December year end Fed pricing now implies near -60bp of cuts. 

The UST curve bull-flattened on the data release, with the 10Y yield falling to a near four-week low below 4.15%. There were few local drivers in other bond markets, and they largely tracked the US, posting slightly smaller yield declines. The US Treasury 3Y note auction followed the data by several hours but still found good support at the lower yields clearing slightly through market. 

In foreign exchange the AUDUSD ebbed away from an intraday peak just shy of 0.71. The JPY continues to strengthen overnight, with USDJPY now down to 154.30. Political headlines in Tokyo remained in focus. Investors are weighing the certainty of a stronger governing mandate against the risk of more expansionary fiscal measures.

Officials yesterday reiterated the temporary nature of the food tax holiday and again flagged a preference to find non-debt funding options. 

In equities the S&P500 closed lower weighed down by financials, the weakest sector, underperforming tech, after release of an AI wealth planning tool dragging on some names in that sector, as the AI disruption trades rotates through more sectors. The Dow extended its record by 0.1% and the Nasdaq slipped -0.59%, although software names found buying support.

Precious metals moved lower along with oil and sellers moved into the crypto markets again with Bitcoin down over -2.5%.

The Dollar is Losing its Grip, Stephen Innes, SPI Asset Management

Markets are starting to trade as the stage lights have shifted. Not dramatically. Not yet. But enough that you can see the outlines of a new act forming. The dollar is not returning to center stage by default, and the yen is no longer being treated like dead weight chained to a broken bond market.

The anchor point is Japan. Stability in JGBs matters more than any campaign slogan or post-election optimism, and right now that anchor is holding. Yields have stayed contained even after the LDP’s resounding victory, and that alone changes the psychology.

When the bond market refuses to panic, the currency is allowed to breathe. Add to that a surge of foreign capital rotating into Tokyo equities, and suddenly the yen has a pulse again. This is not about rate differentials in isolation. This is about confidence in the plumbing.

Foreign investors are voting with size. Tokyo has become a live-rotation venue rather than a policy-risk discount. If the projected Yen10 trillion in inbound equity flows materializes over the next few months, it will prompt a rethink of comfortable yield carry USDJPY longs.

That kind of capital does not arrive quietly. It leans into the currency. It narrows the exits for dollar longs. A clean break below 155 stops looking ambitious and starts looking conditional. Sub-150 still likely requires a near-term unexpected BoJ hike, but the path to yen strength is no longer theoretical.

Meanwhile, the dollar is wobbling not because of the yen, but because the guardians of the narrative have stopped defending it. After the China-related Treasury headlines, the dollar took another leg lower when Kevin Hassett of the National Economic Council told markets not to panic about weaker jobs numbers.

Traders heard something else entirely. As in “what does he know that we don’t.” And then throw in a drop in Fed NY inflation expectations and the rate cut runway looks closer than it appears.

That leaves the dollar trading like a boxer without a corner shouting instructions. There is no visible collapse in foreign demand yet, but with diversification suddenly a dinner-table topic, any soft auction will echo directly into the FX market. The dollar no longer needs bad news. It just needs fewer buyers.

Against that backdrop, the euro is doing what pro-cyclical currencies do when the weather improves. It grinds higher without drama. Sentiment across the eurozone is quietly improving, and flows reflect this.

What matters more is the broader constellation forming around the dollar. The euro, the yen, and the renminbi are all leaning the same way. The yuan is now at its strongest level since 2023 as traders front-run potential reserve and portfolio flows following China’s Treasury signalling.

Beijing has no reason to fight that strength. A firmer currency, alongside gains in the euro and Swiss franc, quietly supports the idea of a less dollar-centric reserve system. The renminbi’s inclusion in the IMF’s Special Drawing Rights basket a decade ago was not symbolic. It was groundwork, and the payoff phase is starting to show.

Back in Japan, the funding debate around the Yen5 trillion consumption tax cut is sensitive but secondary.

This is how regimes shift in practice. Not with a crash, not with a proclamation, but with a series of small signals that stop being reversed. The dollar is no longer being reflexively defended. Japan’s bond market is no longer flinching. Capital is moving with intent rather than fear. When the anchor holds and the tide turns, currencies move not because they are pushed, but because they are finally allowed to float.

The signal from Washington is no longer subtle. Policy is being run hot on purpose. The idea is simple enough, even if the consequences are not. Push growth, push asset prices, keep financial conditions loose, and defer the bill.

This is not about fine-tuning the cycle; it’s about midterm vote harvesting. When politics starts caring more about the equity tape than the balance sheet, monetary restraint becomes optional, and credibility becomes expendable.

Markets have heard this kind of music before. It always starts with reassurance. Growth is manageable. Inflation is contained. Productivity will save us.

This time, the fig leaf is artificial intelligence. The story goes that technology will do the tightening for the Fed, allowing rates to fall without inflation consequences. That narrative gives policymakers cover to cut while insisting they remain vigilant. Traders hear something else entirely. They hear permission.

Kevin Warsh is being framed in some circles as the adult in the room, the hawk meant to calm nerves. But markets do not trade resumes; they trade incentives. If employment weakens and disinflation shows up in the data, nobody expects ideological resistance.

The message being priced is not stubbornness; it is flexibility. Flexibility under political pressure is not independence. It is optionality.

The more important shift is not about the front end of the curve. It is about the long end. Once the conversation turns to the Fed coordinating with the Treasury and the idea of moderating long-term rates is framed as a virtue rather than a taboo, the bond market changes character.

At that point, yields stop being a price-discovery tool and become a policy input. Traders do not argue with that in editorials. They reprice it in real time.

Call it a third mandate if you like. The market calls it monetization with better manners. If deficits are large enough that free markets would demand higher yields, and the central bank steps in to prevent that outcome, the cost does not disappear. It just migrates.

It shows up in the currency. It shows up in term premia. It shows up in assets that do not rely on trust to clear.

This is why balance sheet expansion matters more than rhetoric. Ending runoff and restarting purchases is not a technical footnote. It is the tell.

Every cycle follows the same rhythm. Tighten until something creaks. Pause. Ease. Expand. Promise it is temporary. Then leave the balance sheet permanently higher than before. The Fed has never successfully reversed this process. It has only renamed it.

Before the pandemic, the balance sheet was already bloated by historical standards. After the crisis response, it became structural. Today it remains vastly larger than the level once described as emergency only. And yet here we are again, adding liquidity before the last excess was ever drained. That is not countercyclical policy. That is system maintenance.

This is where the illusion finally breaks. The post gold standard promise was never price stability alone. It was stewardship. The idea is that even without an anchor, the currency would be managed conservatively enough to preserve confidence. Central bank independence was the theatre that made that promise believable. Once that theatre empties, markets stop applauding and start hedging.

Gold does not care about speeches or mandates. It does not respond to press conferences. It responds to erosion. When policy choices favor convenience over constraint, gold does not rally in protest. It rallies in recognition. It is not betting on disaster. It is marking the spread between narrative and reality.

The trade is not that inflation explodes tomorrow. The trade is that credibility decays quietly. Yield caps, coordinated issuance, balance sheet expansion, and politically timed easing all point in the same direction.

You can suppress volatility in bonds for a while. You can smooth the curve. You can anesthetize duration. But you cannot do all of that without something else telling the truth.

Once the Fed starts cushioning the bond market, gold becomes the only honest price left.

Corporate news in Australia

-CSL ((CSL)) shares fell -5% to a one month low after the company announced at 4.05pm that CEO/MD Paul McKenzie was retiring with immediate effect

-Macquarie Group  ((MQG)) holds over $5bn in AI-related equity and $29bn in private credit exposure on its balance sheet

-Jarden may attract acquisition interest from global banks, such as Evercore 

-Pacific Equity Partners looks to sell Cranky Health

-Retirement Communities is up for sale via Morgan Stanley

-Shell backed Corporate Carbon is looking for buyers

-Apax Partners is aiming for a $6.8m sale of Trade Me

-Revolution raises $60m for ASX-listed private credit trust

On the calendar today:

-AU RBA Dep Gov Hauser Speaks

-US Non-farm payrolls

-US Unemployment rate

-AGL ENERGY LIMITED ((AGL)) 1H26 Earnings

-ARENA REIT ((ARF)) 1H25 Earnings

-BRAVURA SOLUTIONS LIMITED ((BVS)) 1H26 Earnings

-COMMONWEALTH BANK OF AUSTRALIA ((CBA)) 1H26 Earnings

-CENTURIA INDUSTRIAL REIT ((CIP)) 1H26 Earnings

-COMPUTERSHARE LIMITED ((CPU)) IH earnings report

-CSL LIMITED ((CSL)) 1H26 Earnings

-DEXUS INDUSTRIA REIT ((DXI)) 1H26 Earnings

-EVOLUTION MINING LIMITED ((EVN)) 1H26 Earnings

-HOMECO DAILY NEEDS REIT ((HDN)) 1H26 Earnings

-JAMES HARDIE INDUSTRIES PLC ((JHX)) 3Q26 Earnings

-NATIONAL STORAGE REIT ((NSR)) 1H26 Earnings

-RESMED INC ((RMD)) ex-div 6c (0%)

-SGH LIMITED ((SGH)) 1H26 Earnings

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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