The Overnight Report: Technology Rallies

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

European indices rallied over 1% overnight with US markets coming off intraday highs post the release of Federal Reserve minutes.

Technology stocks moved back in favour.

After a third positive session on Wednesday, ASX200 futures are pointing to a rise above the 9000-index level.

Good Morning,

The Australian market rose for a third straight session, up 48 points or 0.5% with technology up 2.3% and materials the only laggard, down -0.2%.

As per today, see also the day’s calendar, the February reporting season is kicking up to another gear (or two).

The FNArena Corporate Results Monitor has 83 assessments to date (as per yesterday): https://fnarena.com/index.php/reporting_season/

What happened overnight, ANZ Bank Australian Morning Focus extract

Equity markets rose, led by tech stocks following strong US data. The S&P500 rose 0.56% while technology was back in favour pushing the Nasdaq up 0.78%. 

US indices did dip after the release of the Federal Reserve minutes.

The EuroStoxx50 ended its session up 1.4% while the FTSE100 gained 1.2%. The yield on the US 10y note rose around 1.1bp to 4.08%.

US Durable goods orders fell -1.4% m/m in December following a 5.4% m/m lift in November. Excluding transport equipment, orders rose 0.9% m/m. Core capital goods orders rose 0.6% m/m, with gains broad-based, although equipment tied to AI-related investment continued to be a key driver.

Data show there was robust capital investment to the end of 2025. Industrial production rose 0.7% m/m in January, the strongest monthly gain in a year. Production tied to the AI-driven investment boom saw strong growth, with computer equipment and semiconductors rising over 2% m/m.

UK headline inflation slowed -0.4ppt to 3.0% y/y in January, matching the consensus. Transport, reflecting lower fuel prices, and food were the largest contributors to the decline. The latter will be welcomed by the Bank of England, given the impact of food prices on household inflation expectations, about which some members of the MPC have expressed concerns.

Core inflation eased marginally to 3.1% y/y from 3.2% y/y, a touch above the consensus. Services inflation also eased slightly, to 4.4% y/y from 4.5% y/y

January’s UK inflation release alongside yesterday’s soft labour market release supports the case for a March rate cut. After disinflation progress stalled in the first half of 2025, the downtrend has re-established across components.

Disinflation is set to accelerate over the coming months, owing to base effects. While services inflation has proven sticky, rising labour market slack and slowing wage growth point to further progress.

We think concerns regarding inflation’s persistence among the hawkish members of the MPC are inconsistent with a forward-looking approach to policy. Economic growth is lacklustre, and the labour market is deteriorating.

The unemployment rate rose to 5.2% in the three months to December, its highest level in a decade, while the number of payrolled employees fell for the fifth straight month. We forecast three -25bp cuts delivered quarterly, starting from March, to take the bank rate to 3.0%.

Crude oil prices rose on investor concerns over the final agreement between the US and Iran, which hinges on a potential nuclear deal. Iran is expected to present a comprehensive proposal within the next two weeks, while a report suggested American military intervention could come sooner than expected.

Elsewhere, President Zelenskyy has accused Russia of delaying peace talks. Operations at Russian refineries have been disrupted by Ukrainian air strikes, resulting in increased crude oil exports.

Russian oil production also declined towards the end of last year following attacks on oil infrastructure. A prevailing risk-on sentiment in the market helped prices to move higher.

European natural gas pared recent losses, as traders fear disruptions to gas flows if Iran closes the Strait of Hormuz. While forecasts of warmer weather increase the prospect of softening demand, investors are watching depleted European gas inventories which are now at 34%, their lowest since 2022. Gas flows remain steady despite production outages in Norway.

Renewable power generation is picking up in Germany, with mild weather helping solar power generation, with strong winds supporting wind power generation.

Gold rose above US$5,000/oz amid renewed geopolitical concerns. Buyers took advantage of the price drop ahead of the release of the Federal Reserve’s meeting minutes. Strong economic data suggest a hawkish tilt, but the market will be closely watching the Fed’s stance on rates. Speculative positions are lean, and fresh longs can return as structural drivers are still in place.

Silver prices jumped to US$78/oz. Year-to-date, -69moz of silver moved out of COMEX to other trading hubs, easing spot market tightness.

Copper recouped losses by gaining more than 2%, as strong economic data bolstered market sentiment. US industrial production increased in January by the most in nearly a year. Housing starts rose to a five-month high, supporting demand prospects for industrial metals.

Aluminium traded above US$3,000/t. The US is considering to changing its broad tariffs on steel and aluminium, this will see trade flows normalising.

Iron ore fell to US$95/t in Singapore amid rising iron ore inventories and falling steel production. Steel output in China declined by over -4% to roughly 961mt last year. Domestic demand has been dented by the ongoing property crisis, but steel mills have increased exports in an effort to compensate for the downturn.

On the other hand, Australia and Brazil are boosting their production, while the start of Simandou project will add to production over the years.

Is that Ai-Super-Cycle just clearing its throat? Stephen Innes, SPI Asset Management

I walked into 2026 thinking we were at the end of the beginning phase of the artificial intelligence trade. It turns out we were not even through the warm-up lap.

The market is no longer debating whether AI matters. The debate is whether the payoff curve bends steeply enough to justify the most aggressive capital cycle since the post-war build-out of the interstate highway system.

The beginning phase is just starting. The game is accelerating. And the tape is now circling one central question on its probability pad. Is this a compounding flywheel or a capital sinkhole?

Start with the physical footprint. The data centre boom has moved from a thematic story to a macro variable. These are no longer industrial sheds with blinking lights. They are balance sheet devourers. Single campuses now carry price tags north of US$20 billion. Construction pipelines are tilting around them. Power grids are being stress tested. Transformers are becoming strategic assets.

Electricity is the new oil of this cycle. Goldman estimates power demand tied to AI growing at 17% annually through 2028. That is not incremental. That is structural.

The constraint is no longer imagination. It is amperage. Grid connection queues are stretching. Tier one hubs such as London, Dublin, Amsterdam and Frankfurt are congested. Capital is migrating to secondary markets across Europe as hyperscalers chase electrons the way shale drillers once chased acreage.

The United States remains the epicentre. Europe is playing catch-up with pipelines up sharply year on year. Yet here is the nuance the market is digesting. Data centres are a powerful construction impulse, but they do not immunize the broader sector from high rates, labour scarcity and stubborn input costs.

This is a capital-intensive build-out layered on top of a fragile financing backdrop. If liquidity tightens, the cranes slow.

Which leads directly to the second axis of risk. Revenues versus investment.

By some estimates, nearly US$2 trillion has already been deployed in this AI arms race. Big tech capex is set to exceed US$630 billion this year alone. For context, the Apollo programme that put a man on the moon cost less in real terms. We are funding the equivalent of a digital moonshot every twelve months.

For now, demand for advanced chips is described as sky-high. The order books are full. But free cash flow growth at the hyperscaler level is beginning to feel the strain. Debt-funded capex is rising. The market is making a forward bet that monetization will bend sharply higher.

If revenues outrun investment, the equity multiple expansion holds. If they lag, the market will start asking harder questions about return on invested capital.

This is where positioning matters. AI stocks have driven the bulk of index level performance since ChatGPT detonated onto the scene. The S&P has effectively become a referendum on silicon productivity. When three quarters of index returns are concentrated in one theme the index stops being diversified and starts being directional.

That does not mean the trade is wrong. It means it is crowded. And crowded trades do not collapse because the story fails. They wobble when the marginal buyer hesitates.

Now layer in the third dimension. Healthcare.

This is where the narrative shifts from capex spectacle to societal utility. The global healthcare system is short millions of workers. Billions lack access to essential services. Here AI moves from hype to tool. Diagnostic models that scan X rays and CT images. Retinal analysis that flags diabetic complications early. ECG pattern recognition that surfaces cardiac risk.

These systems do not replace clinicians. They compress time. And in medicine time is margin.

If AI meaningfully lifts productivity in healthcare the economic dividend is profound. Fewer administrative hours. Faster triage. Earlier detection. That is not just revenue. That is cost deflation in one of the most inflation-prone sectors on earth.

The market understands this intuitively. It is why the narrative has broadened from chips to applications. From infrastructure to outcomes. The first wave was shovel sales. The second wave is operating leverage.

So where does that leave us?

We are no longer pricing a technology story. We are pricing an ecosystem. Power grids, bond markets, labour markets, hospital workflows and sovereign balance sheets are now tethered to the AI cycle. This is not a sector rotation. It is a capital reallocation across the real economy.

The key question for 2026 is not whether AI is transformative. It is whether cash flow transformation keeps pace with capital formation. If revenues begin to outrun the spend, this becomes the defining growth engine of the decade. If debt rises faster than monetization, the market will begin to circle not the opportunity but the vulnerability.

For now the tape is not circling the drain. It is circling a launch pad. But launch pads are unforgiving places. They reward execution and punish miscalculation.

The AI supercycle has only just cleared its throat. The next move will determine whether it sings in compounding harmony or strains under the weight of its own ambition.

Corporate news in Australia

-Rio Tinto ((RIO)) moves forward with planned assets sale of up to US$10bn post failed Glencore talks

-Blackstone has commenced the search for investment banks for its $1bn sale of Nucleus Networks

-Energy Bay is seeking to raise between $150m-$500m from an institutional investor

-Marimaca Copper ((MC2)) has launched a US$300m equity raising

-SGH Ltd ((SGH)) has raised BlueScope Steel ((BSL)) offer to $15bn as a “best and final” bid

-CSL ((CSL)) has entered a licensing agreement with Eli Lilly for clazakizumab 

-Superloop ((SLC)) acquires Lynham Networks for -$165m

-Macquarie Group ((MQG)) is developing a debt restructuring plan for Bingo’s lenders

-Barrenjoey doubling profits a boon for Magellan Group ((MFG))

On the calendar today:

-AU Jan Unemployment

-US Weekly Jobless Claims

-AIC MINES LIMITED ((A1M)) earnings report

-AUCKLAND INTERNATIONAL AIRPORT LIMITED ((AIA)) 1H26 Earnings

-APA GROUP ((APA)) 1H26 Earnings

-EAGERS AUTOMOTIVE LIMITED ((APE)) FY25 Earnings

-ASPEN GROUP LIMITED ((APZ)) 1H26 Earnings

-ALLIANCE AVIATION SERVICES LIMITED ((AQZ)) 1H26 Earnings

-AUTOSPORTS GROUP LIMITED ((ASG)) 1H26 Earnings

-BEGA CHEESE LIMITED ((BGA)) 1H26 Earnings

-BEACON LIGHTING GROUP LIMITED ((BLX)) earnings report

-BRAMBLES LIMITED ((BXB)) 1H26 Earnings

-CODAN LIMITED ((CDA)) 1H26 Earnings

-COGSTATE LIMITED ((CGS)) 1H26 Earnings

-CHARTER HALL GROUP ((CHC)) 1H26 Earnings

-COG FINANCIAL SERVICES LIMITED ((COG)) 1H26 Earnings

-DOWNER EDI LIMITED ((DOW)) 1H26 Earnings

-ENERO GROUP LIMITED ((EGG)) 1H26 Earnings

-GREATLAND RESOURCES LIMITED ((GGP)) earnings report

-GOODMAN GROUP ((GMG)) 1H26 Earnings

-HUB24 LIMITED ((HUB)) 1H26 Earnings

-HUMM GROUP LIMITED ((HUM)) ex-div 1.50c (100%)

-INSIGNIA FINANCIAL LIMITED ((IFL)) 1H26 Earnings

-INFRAGREEN GROUP LIMITED ((IFN)) earnings report

-IGO LIMITED ((IGO)) 1H26 Earnings

-ILUKA RESOURCES LIMITED ((ILU)) FY25 Earnings

-IPH LIMITED ((IPH)) 1H26 Earnings

-LIFESTYLE COMMUNITIES LIMITED ((LIC)) 1H26 Earnings

-LOVISA HOLDINGS LIMITED ((LOV)) 1H26 Earnings

-LOVISA HOLDINGS LIMITED ((LOV)) earnings report

-MA FINANCIAL GROUP LIMITED ((MAF)) earnings report

-MONEYME LIMITED ((MME)) earnings report

-MEDIBANK PRIVATE LIMITED ((MPL)) 1H26 Earnings

-NRW HOLDINGS LIMITED ((NWH)) earnings report

-PEPPER MONEY LIMITED ((PPM)) FY25 Earnings

-PWR HOLDINGS LIMITED ((PWH)) earnings report

-REDOX LIMITED ((RDX)) 1H26 Earnings

-RIO TINTO LIMITED ((RIO)) FY25 Earnings

-REGIS RESOURCES LIMITED ((RRL)) 1H26 Earnings

-SANDFIRE RESOURCES LIMITED ((SFR)) 1H26 Earnings

-SONIC HEALTHCARE LIMITED ((SHL)) 1H26 Earnings

-SKYCITY ENTERTAINMENT GROUP LIMITED ((SKC)) 1H26 Earnings

-TRANSURBAN GROUP LIMITED ((TCL)) 1H26 Earnings

-TELSTRA GROUP LIMITED ((TLS)) 1H26 Earnings

-UNIVERSAL STORE HOLDINGS LIMITED ((UNI)) 1H26 Earnings

-VENTIA SERVICES GROUP LIMITED ((VNT)) FY25 Earnings

-WESFARMERS LIMITED ((WES)) 1H26 Earnings

-WHITEHAVEN COAL LIMITED ((WHC)) 1H26 Earnings

-ZIP CO LIMITED ((ZIP)) 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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