The Overnight Report: Gold, Silver, Copper Fall

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

US markets recovered from earlier selling before fading again in the afternoon session, with ongoing AI concerns hitting software stocks (yet again).

A potential US/Iran agreement saw profit taking in precious metals and energy sectors.

After a second positive day, the ASX200 futures are pointing to another good start as earnings season moves up a gear.

Good Morning,

The ASX200 rose 22 points or 0.2% to 8,959 for a second straight day on Tuesday, although early gains faded into the afternoon session.

BHP Group ((BHP)) was the stand out market heavy weight, its shares up 4.7% on better than expected interim earnings and dividend.

The property sector lagged.

CommBank ((CBA)) shares trade ex-dividend today.

Reporting season sees Fletcher Building ((FBU)) releasing another lower-than-forecast result, as is the case for Suncorp ((SUN)), while Mirvac’s ((MGR)) result looks stronger. Plenty more to follow today and into month’s end.

https://fnarena.com/index.php/reporting_season/

What happened overnight, NAB Markets Today extract

Iran said it has reached a preliminary understanding with the United States on the guiding principles of a potential nuclear deal that could lead to sanctions relief and reduce the risk of conflict in the Middle East. 

Iranian Foreign Minister Abbas Araghchi said both sides will now draft and exchange proposed texts ahead of a third, more detailed round of talks, cautioning negotiations will become more complex. Signs of progress weighed on oil prices, with WTI crude falling below US$63bbl while an US official also indicated Iranian negotiators would return in two weeks with detailed proposals to address American concerns.

As for economic data releases, UK unemployment rose to its highest level since the pandemic at 5.2% in late 2024, while wage growth slowed sharply, signalling a weakening labour market and strengthening expectations for further Bank of England rate cuts. 

Private sector pay growth fell to a five-year low of 3.4%, payroll employment declined again in January, and total job losses over the past year reached 134,000, easing concerns about inflationary pressure. The softer data pushed the pound down -0.5% against the dollar and led markets to fully price in two interest rate cuts this year (April now almost fully priced). 

The figures also pose political challenges for PM Starmer’s Labour government ahead of upcoming elections. Youth unemployment worsened notably, rising to 14%, its highest since 2015. CPI figures are due for release later today with the headline reading expected to fall to 3% for January from 3.4% previously.

There were only second tier US economic data, with homebuilder sentiment measured by the NAHB housing market index falling to a five-month low of 36. The Empire manufacturing survey showed little change in business conditions for NY manufacturers while future business conditions, capex and employment indicators all continued to trend higher, consistent with other regional indicators for the sector.

The S&P500 finished slightly positive, up 0.1% as ongoing declines in software stocks weighed on the index. Nasdaq closed up 0.14% and the Dow Jones was basically flat on the day. Markets faded last afternoon having recovered from an earlier sell off. 

The US Treasury curve is mildly flatter with the move led by the front end of the curve. Yesterday during our session US-Iran tensions alongside a decline in US equity futures weighed on UST yields with the 10y trading down to an intraday low of 4.016%.

The overnight session was a reversal of the previous session with the 2y gaining 5 bps to 3.43% and the 10y up by 3.4bps to 4.05%.

Earlier in the session UK gilts led a decline in European yields supported by the softer than expected UK labour data. 10y Gilts closed at 4.38%, down -2.3bps while 10y Bunds fell -1.7bps to 2.74%. AU Bond futures followed the overnight move in UST with the 3y down -2.5bps to 95.72 and the 10y down -2bps to 95.28.

The USD is a tad higher with the DXY index up by 0.35% and staying above the 97 mark. Gains in the USD were driven by a -0.6% decline in both GBP and NOK. The former on softer labour market data while the latter followed the decline in oil prices.

The AUD followed the initial move lower in US equities, trading down to an overnight low of 0.7028, but the improvement in sentiment (US-Iran news) triggered a reversal with the AUD now trading at 0.7084 close to its overnight high of 0.7090 and 0.18% higher relative to this time yesterday. 

ANZ Bank, Australian Morning Focus extract

The upcoming FOMC January meeting minutes will shed light on the divergence of opinion on the FOMC over monetary policy strategy. Market pricing for a March cut has closely followed cautious guidance from FOMC speakers on when it may be appropriate to resume cutting. 

Given an absence of “dual mandate” data releases this week, we expect it will take a dovish tone from the minutes to force a dovish repricing. Our assessment is that “on hold” guidance is at odds with recent data releases. Excluding the two categories of “education and health services” and “hospitality and leisure”, jobs for the remaining 72% of nonfarm payroll employment fell 49k in January, the 11th consecutive month of decline. 

Underlying measures of inflation are converging on target (January trimmed mean CPI inflation 2.3% y/y, chained CPI-U 2.2% y/y) and short-run inflation expectations have fallen. We think the FOMC needs to cut rates further. 

It is likely that recent price action in the US Treasury market is also reflecting that assessment. 

We expect the ECB to resume rate cuts this year, and recent data point to a growing need to do so. Euro area December industrial production fell -1.4% m/m, December retail sales volume fell -0.5% m/m, November services production fell -0.6% m/m and the German Chamber of Commerce estimates Europe’s largest economy will grow 1.0% this year. 

These data point to disinflation, rather than stable inflation. 

UK labour market data also point to the need for the Bank of England to rate cuts. 

Commodities Risk-off market sentiment gripped commodity markets. Prices fell across sectors, with investors struggling to find direction amid thin liquidity due to the Lunar New Year holidays. 

Crude oil prices fell to US$67/bbl after the US and Iran made progress in nuclear talks, easing the geopolitical risk premium. Iran’s Foreign Minister, Abbas Araghchi, said the two countries reached a “general agreement” based on a potential nuclear deal that would lift sanctions on Tehran, easing the risk of wider tension in the Middle East.

Yet, there are a lot of details to discuss, and Iran is expected to present a detailed case to the US over the next two weeks, according to an Axios report.

Negotiations between Russia and Ukraine are also happening in Geneva over the next two days. Ukrainian drone strikes on Russian oil refineries are impacting refined production, leaving more crude oil available for exports.

Russian oil exports rose to 3.39mb/d for the week ending 15 February.

European natural gas continued to edge lower, with prices falling to a one-month low. Forecasts of warmer weather are helping ease concerns over low inventories. European gas inventories have fallen sharply during the winter heating season. Current inventories are 34% full, which is the lowest since 2022.

Gas flows remained steady despite production outages in Norway. Windy weather is supporting wind-power generation. And strong LNG imports into the region weighed on prices.

Asian demand remained subdued during the Lunar New Year holidays and end-of-winter restocking.

Gold prices dipped below US$4,900/oz as a stronger USD weighed on the market, with declining US Treasury yields providing little support. Investors remained uncertain amid subdued trading in Asia.

Prospects of easing geopolitical tension with positive outcomes from the Iran-US talks in Geneva weighed on haven demand for gold.

Nevertheless, gold ETF holdings continued to edge higher, and retail demand has been resilient in India and China. Notably, India’s gold imports surged in January, as buyers sought to secure supplies ahead of a potential import duty hike in the 2026–27 Budget.

Silver prices fell sharply to US$72/oz, moving in tandem with gold. Unlike gold, silver ETF holdings showed net outflows following the recent sharp price fall. Industrial metals traded in a tight range amid thin volumes.

Copper fell to US$12,700/t, as exchange stockpiles have grown to a multi-year high. Supply dislocation (more than 60% of inventories sitting in COMEX warehouses) is normalising, with inventories replenishing at LME and SHFE.

Spot premiums in China have been retreating, showing weaker demand ahead of the Lunar New Year holiday. Record high prices weighed on the restocking by manufacturers.

BHP’s earning rose more than 20%, as more than 50% of the profit was contributed by its copper division, offsetting headwinds facing its iron ore business.

Aluminium prices stabilised near US$3,000/t, as a cap on Chinese smelting capacity will limit production growth, while demand from the renewables sector remains robust. LME inventories continue to fall, supporting prices.

Corporate news in Australia

-Bain Capital can divest its stake in Virgin Australia ((VGN)) from March 16 after interim results

-The Living Company and Invesco are competing to acquire Lincoln Place retirement business

-Seek ((SEK)) is selling its stake in Employment Hero post a legal settlement

-Private health insurance premiums are set to rise 4.4% from April

-Permira plans I-Med IPO and is seeking an extra bank for the syndicate

-WCM Global Growth ((WQG)) begins an $80m equity raising

-CommBank ((CBA)) to sponsor the Brisbane Olympics in a $200m-plus deal

-MA Financial ((MAF)) and CMBI launch $850m leverage buyout credit fund

-HMC Capital ((HMC)) is looking for operators of Healthscope sites amidst pushback on not-for-profit plan

-Pay.com.au plans $800m April IPO 

-Atlassian freezes global hiring post AI-driven stock price sell off

-Carbon Revolution is delisting from Nasdaq after and EV slowdown impacts on its value

-ASIC has identified 44 groups using lead generators in an investigation linked to the collapse of Shield Master Trust and related firms

On the calendar today:

-NZ RBNZ OCR Decision/MPS

-AU 4Q Wage Price

-UK Jan CPI

-COMMONWEALTH BANK OF AUSTRALIA ((CBA)) ex-div 235.00c (100%)

-CONTACT ENERGY LIMITED ((CEN)) ex-div 12.73c

-DETERRA ROYALTIES LIMITED ((DRR)) earnings report

-DEXUS ((DXS)) 1H26 Earnings

-FLETCHER BUILDING LIMITED ((FBU)) 1H26 Earnings

-GRAINCORP LIMITED ((GNC)) AGM

-GQG PARTNERS INC ((GQG)) ex-div 3.57c

-HEALIUS LIMITED ((HLS)) 1H26 Earnings

-HANSEN TECHNOLOGIES LIMITED ((HSN)) 1H26 Earnings

-IGO LIMITED ((IGO)) earnings report

-MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) 1H26 Earnings

-MIRVAC GROUP ((MGR)) 1H26 Earnings

-NATIONAL AUSTRALIA BANK LIMITED ((NAB)) 1Q26 Update

-NETWEALTH GROUP LIMITED ((NWL)) 1H26 Earnings

-SONIC HEALTHCARE LIMITED ((SHL)) earnings report

-SUPERLOOP LIMITED ((SLC)) 1H26 Earnings

-SPARK NEW ZEALAND LIMITED ((SPK)) 1H26 Earnings

-SANTOS LIMITED ((STO)) FY25 Earnings

-STEP ONE CLOTHING LIMITED ((STP)) 1H26 Earnings

-SUNCORP GROUP LIMITED ((SUN)) 1H26 Earnings

-SOLVAR LIMITED ((SVR)) earnings report

-SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED ((SXE)) 1H26 Earnings

-LOTTERY CORPORATION LIMITED ((TLC)) 1H26 Earnings

-TECHNOLOGY ONE LIMITED ((TNE)) AGM

-VICINITY CENTRES ((VCX)) 1H26 Earnings

-WEST AFRICAN RESOURCES LIMITED ((WAF)) earnings report

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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