The Overnight Report: Rally As Oil Steadies

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This story features NINE ENTERTAINMENT CO. HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: NEC
The company is included in ASX200, ASX300 and ALL-ORDS

US markets led by technology and software stocks advanced overnight on improved sentiment around possible US/Iran negotiations.

After two days of selling, ASX200 futures are pointing to a much better day ahead.

Good Morning,

The Australian market fell -176 points of -1.9% to 8,901 on Wednesday, a second down session amid ongoing Middle East conflict concerns.

Materials led the losses, down -3%, with weakness in gold and iron ore miners. 

NAB Markets Today Research extract

Early yesterday, President Trump’s promise of insurance guarantees and naval escorts through the Strait of Hormuz briefly saw Brent crude trade below US$80, but the dip was quickly reversed, the proposal is scant on key details.

Reporting by the New York Times early in the European session that Iranian intelligence agencies had made back-channel approaches to the CIA about ending the war gave risk appetite a lift. However, the article noted skepticism from American officials about the legitimacy of the approach, and the claims were later denied by Tehran, but oil didn’t retest the highs prior to that story.

The US ISM services index surged to 56.1 in February from 53.8, its strongest reading since April 2022 and well above expectations. The gain was driven by a sharp lift in new orders to 58.6 from 53.1 and business activity to 59.9 from 57.4, while the employment component improved to 51.8 from 50.3. 

Prices paid eased to a still elevated 63.0 from 66.6, and new export orders jumped to 57.2 from 45. 

The final US Services PMI for February, released just prior, was softer than the flash estimate at 51.9, reopening the gap between the ISM and PMI services measures. 

The ADP private employment report also beat consensus, rising 63k in February. Late in the session, the Beige Book showed little net change in economic conditions across Fed districts, with only three reporting outright slowing in activity.

US Treasury Secretary Scott Bessent said the 15% global tariff President Trump threatened shortly after the Supreme Court struck down the emergency tariff regime would be applied this week. The EU said it would not accept anything above 10%, and Bloomberg reported “people familiar with the matter” had received such assurances.

In Australia, yesterday’s Q4 GDP print showed growth of 0.8% q/q, two-tenths softer than our forecast. Weakness in household consumption, just 0.3% q/q, drove much of the market reaction, which the expected peak in the cash rate this year clipped by around -7bp to 4.28%.

Consumption has clearly picked up and broadened relative to 2024 levels, but the Q4 outcome suggests momentum may be leveling off. The focus will remain on capacity pressures and the quarterly trimmed mean CPI.

In China, February official PMIs underscored weak momentum, with the official manufacturing PMI at 49.0 (from 49.3) and non-manufacturing at 49.5, both below consensus. By contrast, the private manufacturing PMI rose to 52.1, pointing to firmer export activity even as domestic demand remains soft.

In bond markets, net moves were modest across most major sovereign curves. The US Treasury curve slightly bear flattened, leaving the 10-year yield around 4.08%. The US front end does not price a full -25bp FOMC cut until September. Larger moves were seen in the UK and France, though yields finished only -2 to –3bp lower.

Equity markets over the past 24 hours were marked by heavy deleveraging in South Korean stocks, with the Kospi down another -14%, or around -20% over the past two sessions. That move followed a 50% rally earlier in 2026, leaving the index still up around 20% for the year. 

The sell off spilled into other regional Bourses. Thailand was the next worst performer, down -5.6%, but the tone quickly improved in Europe, where Spain’s IBEX (rose 2.5%) and Germany’s DAX (up 1.7%) led gains. 

In the US, tech and consumer discretionary stocks drove the S&P500 up 0.8%, despite a drag from energy names. Nasdaq led the gains, rising around 1.3%.

In foreign exchange, the slightly warmer risk tone weighed on the USD, leaving the DXY softer and AUD/USD back above 0.70. USD/JPY slipped back below 157, while the biggest beneficiaries against the USD were the Scandinavian currencies.

In commodities, oil eased back from intraday highs to finish up slightly on the session. European natural gas (ICE TTF) fell more than -10%, while both base and precious metals were broadly stronger.

Software-as-a-Service sell off and the implications for private markets, Tony Davidow, Franklin Templeton extract

The global Software-as-a-Service (SaaS) market reached a valuation of US$315.68 billion in 2025 and analyst projections suggest it can grow to US$1,482.44 billion by 2034, exhibiting a CAGR of 18.7% during the forecast period. 

North America dominated the global market with a share of 46.9% in 2025.

Several factors have fueled the growth of the SaaS market, such as integration with other tools, the rise in adoption of public and hybrid cloud-based solutions, and centralized data-driven analytics. The COVID-19 pandemic was a catalyst for SaaS utilization as remote work required various SaaS solutions. 

According to industry experts, 73% of organizations used SaaS applications in 2023. This percentage is growing as more companies move to the cloud, driven by benefits such as cost efficiency, scalability and remote work capabilities. 

Furthermore, generative AI is accelerating the growth of SaaS, and companies are committing capital to further development of SaaS solutions.

Private credit and private equity funds built large allocations to software due to the sector’s blend of innovation, strong financial fundamentals and resilience against economic fluctuations. 

Software companies consistently drive technological advancements, enabling investors to capitalize on emerging trends. Their asset-light business models, predictable cash flows (with reliable revenue streams due to subscription-based, enterprise accounts) and flexibility in financing make them attractive targets for structured investment strategies.

Additionally, the high switching costs of changing software providers has meant that customers have typically kept coming back. Software’s vital role in modern operations facilitates greater stability, reduced risk and long-term growth, which are highly appealing to private market investors.

The recent sell-off in public market SaaS equities accelerated with Anthropic’s Claude release, which caused investors to fear that agentic AI could displace software workflows rather than merely augment them. However, we believe the magnitude of the drawdown reflected a broader valuation reset already underway, resulting from slowing growth and an increased emphasis on profitability.

The sell-off triggered a sharp reassessment of credit risk and valuations across the software and technology ecosystem, with implications for private markets. Many of the SaaS companies came to the market with a lot of debt and reached peak valuations (2021-2022). Software companies often sought capital from private credit managers.

The concern facing the software industry is not the extinction of software itself, but rather a fundamental shift in valuations and usage.

AI has fundamentally transformed the landscape by shifting how and where value is generated within these systems. Established software companies maintain advantages through strong customer ties, contracts and valuable proprietary data that enhance their products and AI features.

Switching to new providers is often costly and risky, so companies prefer established solutions with AI features as an augmentation. The most effective AI applications integrate seamlessly with existing software rather than operating as standalone tools.

As public software valuations reset amid fears of AI driven disruption, investors are now questioning potential risks in private markets, given the exposure to software companies. The current narrative argues that generative AI provides scale and efficiency, undermining traditional moats. Valuations may need to reset, or the disruption could be overblown in certain segments of the markets.

We believe that it is important to avoid overreacting and generalizing about the entire SaaS market. We believe that managers should carefully assess their software assets across vintages, entry points and market cycles.

There will likely be big differences in where the company sits in the software stack —the variety of front-end and back-end programming, databases and libraries used in software— and whether it is related to AI infrastructure or application software, which may be easier to disintermediate.

Managers should review the valuations and outlook for each asset rather than arbitrarily treating them all the same. As valuations reset, we think there could be opportunities due to market mis-pricing, much like we have experienced with other market-moving events.

According to Morgan Stanley, the estimated exposure of business development companies (BDCs) portfolios to software and IT services is approximately 26%, based on third-quarter 2025 data on 42 public BDCs.

This accounts for about 30% of the assets under management of the BDC universe, which includes public, private and perpetual BDCs. The Morgan Stanley report notes that the maturity schedule of the US software loans is more front-loaded than the broader market, with roughly 30% of software loans maturing by 2028, and 46% of the debt maturing in the next four years.

Software companies’ exposure to AI varies meaningfully across where they sit in the stack. Some operate as AI enablers, supplying infrastructure, data platforms or tools that support model training and deployment. Others deliver AI-enabled enterprise solutions, embedding AI into workflows to drive efficiency and automation. 

A third group focuses on end-user applications, monetizing AI directly through consumer or business products. These differences (among these stacks and within each of these stacks) translate into distinct growth profiles, margins and competitive dynamics, and they are increasingly shaping how investors differentiate winners and losers across the software sector..

We do not believe that there is a systemic problem with the SaaS sector. We believe that some funds will feel the impact of this disruption more than others, and seasoned managers will be best equipped to weather the impact over time.

Corporate news in Australia

-BlueScope Steel’s ((BSL)) CEO has signalled openness to bidders following a $34 per share takeover approach amid investor pressure and weaker trading conditions

-Macquarie Group ((MQG)) is planning to sell troubled waste company Bingo Industries, which carries around $1bn in debt, targeting opportunistic investors

-Deep Yellow ((DYL)) may raise equity to help fund uranium project development and support global growth plans

-TCorp is seeking bank advice as Foresight Group prepares to sell its 29% stake in Flinders Port Holdings.

-Australian Meat Group has revived plans to sell the business after acquiring the $196m Killara Feedlot

-Pendal Group is selling down its stake in Nine Entertainment ((NEC))

-Solaris Investment Management is planning a $200–300m ASX listed investment company float and has appointed six brokers to lead the IPO

-NSW may appoint receivers at Gupta’s Tahmoor coal mine over unpaid royalties

-Fast-food chain openings have reached a decade high, driven by population growth, cost pressures and demand for delivery services

-Stonepeak will only pursue an IPO once the infrastructure investment firm reaches sufficient scale, according to CEO Mike Dorrell

-IFM Investors may invest up to $10bn in Canadian infrastructure if tax settings remain favourable and governments continue to privatise assets

-The planned Greencross IPO, expected to value the company at more than $4bn, has been paused due to market volatility and geopolitical risks

On the calendar today:

-AU Jan H’Hold Spending

-AU Jan Trade Balance

-US ISM Services

-US Jan Trade Balance

-US Weekly Jobless Claims

-AUSTRALIAN ETHICAL INVESTMENT LIMITED ((AEF)) ex-div 8.00c (100%)

-EAGERS AUTOMOTIVE LIMITED ((APE)) ex-div 50.00c (100%)

-BHP GROUP LIMITED ((BHP)) ex-div 103.01c (100%)

-BEACON LIGHTING GROUP LIMITED ((BLX)) ex-div 4.10c (100%)

-EBOS GROUP LIMITED ((EBO)) ex-div 42.69c (95%)

-FREIGHTWAYS GROUP LIMITED ((FRW)) ex-div 17.88c (39%)

-ILUKA RESOURCES LIMITED ((ILU)) ex-div 3.00c (100%)

-KAROON ENERGY LIMITED ((KAR)) ex-div 3.10c (100%)

-L1 GROUP LIMITED ((L1G)) ex-div 1.00c (100%)

-LASERBOND LIMITED ((LBL)) ex-div 0.80c (100%)

-LOVISA HOLDINGS LIMITED ((LOV)) ex-div 53.00c (50%)

-MERIDIAN ENERGY LIMITED ((MEZ)) ex-div 5.28c

-MONADELPHOUS GROUP LIMITED ((MND)) ex-div 49.00c (100%)

-NIB HOLDINGS LIMITED ((NHF)) ex-div 13.00c (100%)

-PRAEMIUM LIMITED ((PPS)) ex-div 1.25c (100%)

-PERSEUS MINING LIMITED ((PRU)) ex-div 5.00c

-QBE INSURANCE GROUP LIMITED ((QBE)) ex-div 78.00c (30%)

-RIO TINTO LIMITED ((RIO)) ex-div 360.32c (100%)

-SOUTH32 LIMITED ((S32)) ex-div 5.48c (100%)

-SCHAFFER CORPORATION LIMITED ((SFC)) ex-div 45.00c (100%)

-SMARTGROUP CORPORATION LIMITED ((SIQ)) ex-div 12.00c (100%)

-SMARTGROUP CORPORATION LIMITED ((SIQ)) ex-div 21.50c (100%)

-SKS TECHNOLOGIES GROUP LIMITED ((SKS)) ex-div 3.50c (100%)

-SYMAL GROUP LIMITED ((SYL)) ex-div 3.30c (100%)

-TPG TELECOM LIMITED ((TPG)) ex-div 9.00c (30%)

-WOODSIDE ENERGY GROUP LIMITED ((WDS)) ex-div 83.44c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

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