The Overnight Report: Whiplash Rebound

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

European and US signals to remove energy supply chain contraints in the Strait or Hormuz, plus indications from the US President the war would not be much longer, sent oil prices sharply lower.

US markets rebounded sharply off intraday lows to finish in the green.

After the worst trading day since April last year, the ASX200 is poised for a robust rally on Tuesday.

Good Morning,

Yesterday, the Australian market fell the most since April 2025.

The ASX200 declined by -252points or -2.9% to 8,599 with some buying emerging towards the end of the session.

Materials and technology fell the most, with energy up 1.9% on the oil price spike above US$100bbl.

Extreme Moves and Reversals, Chris Weston, Pepperstone extract

It has been an incredibly wild ride for traders and investors to navigate the price action put to them over the past 24 hours, with breathtaking reversals taking place across many parts of the financial markets.

Pricing in certain parts of the financial system, particularly in the optionality channels, reached extreme levels through the Asian session. Liquidity had clearly thinned and reduced to such an extent that efficient price discovery deteriorated, with dislocations beginning to emerge.

At that point, the idea of a positive reconciliation between leaders appeared remote.

Traders were seeing no obvious signs of coordination that could act as a circuit breaker, restore transportation and logistical channels, and allow crude and gas production to return to some sort of normal output levels.

Several Gulf states had reportedly curtailed production, Iranian fuel depots had been impacted, and the Strait of Hormuz was no closer to functioning normally.

With storage facilities operating near maximum capacity, there were growing concerns further production curtailments could emerge across the Gulf region.

Crude prices surged as a result. Brent crude traded to a high of US$119.50, with WTI reaching US$119.48. However, the real extremes were seen in crude volatility markets — WTI 1week at-the-money implied volatility surged to 206%, while 1-month implied volatility reached 152%.

The structure of the crude futures curve also reflected the stress in the system, with an increased backwardated state. The prompt spread, the premium of the front-month crude futures contract relative to the six-month contract, blew out to US$33.

At the same time, the crack spread rose to US$41 at one stage.  WTI front month futures were trading at an impressive 36% premium to the five-day moving average, highlighting just how impulsive the short-term price move had become.

The shock was not contained to energy markets.

One-year US inflation swaps pushed up 25bp on the day to 3.10%, and the markets’ pricing of inflation expectations across major economies moved sharply higher.

Government bond yields sold off aggressively, particularly at the front end in the UK. Risk assets came under pressure, equity futures fell heavily, and safe-haven demand drove strength in the US dollar and Swiss franc.

Then the tone shifted and the markets received their signal… 

First came news that G7 nations were scheduling a call to discuss releasing strategic oil reserves to offset potential supply constraints — that alone set off strong interest to cover crude longs, and cut back on volatility hedges.

Soon after, President Trump and Marco Rubio addressed markets, saying the US had a clear plan in place. Trump later added the conflict could end sooner than previously expected, suggesting the timeline could be shorter than the earlier four-to-five-week guidance and claiming Iran may be running low on missiles.

Trump also stated the US could soon take control of the Strait of Hormuz and that vessels were already beginning to move more freely through the channel.

This combination of developments was enough to spark hopes of some normalisation in supply and logistical dynamic. Traders moved quickly to sell crude and equity volatility.

The VIX index fell sharply to 25.5% from 36%. In energy markets, Brent crude traded progressively lower through European and US sessions, at one stage reaching a low of US$83.66 before settling a touch higher into the close. The reversal represented a move of roughly -25% from the highs.

The prompt spread also narrowed significantly, falling back to US$12.61. While this still reflects a meaningful degree of near-term tightness in the market, much of the extreme stresses has clearly eased. That said, the spread remains elevated and signals that markets continue to price a substantial geopolitical risk premium.

Equity markets also staged an impressive recovery. S&P500 futures rallied sharply from the lows and finished roughly 3.2% higher from the trough. The S&P500 closed the session up 0.8%, while the NASDAQ gained 1.3%. Technology stocks led the rebound, with communication services also performing well, while energy stocks lagged slightly and closed down around -0.4%.

Foreign exchange markets reflected the shift back toward risk. Traders sold US dollars as the crude price declined and rotated into higher beta currencies. The Australian dollar performed strongly as a pro-risk tactical trade, gaining against the Swiss franc, the Canadian dollar, and the US dollar.

Inflation expectations also retraced part of the earlier surge. One-year inflation swaps in the US have now fallen to around 2.73%, roughly 27 basis points below the earlier highs. Treasury markets attracted renewed buying as yields moved lower.

Does this mean markets are out of the woods?

Well, the pressure valve has clearly been released for now. However, volatility across energy markets remains exceptionally elevated.

One-week at-the-money WTI implied volatility is still around 150%, the OVX volatility index sits near 100%, and the prompt spread remains well above levels considered ‘normal’…

Essentially, we can expect continued significant intraday volaility and moves that may not always make immediate sense. 

In other words, while the most extreme stress has eased, markets are still pricing a significant degree of uncertainty and risk.

The geopolitical backdrop remains fluid, and traders should expect volatility to remain a defining feature of the trading environment in the days ahead.

NAB Markets Today Research extract

Risk sentiment improved overnight as a statement from G7 Finance Ministers noted the possibility of a release from strategic oil reserves. 

The statement said “We will continue to closely monitor the situation and developments in the energy markets and will meet as needed to exchange information and to coordinate within the G-7 and with international partners…We stand ready to take necessary measures, including to support global supply of energy such as stockpile release.”

The communication from G7 Finance Ministers was enough to reverse what had been a significant move higher in oil prices in yesterday’s APAC trading session; after reaching an intraday high of US$119.50/bbl yesterday, Brent moved steadily lower overnight and is now trading around US$92/bbl this morning.

This still leaves prices higher than where they closed at the end of last week, but the moves are far more modest. Media reports suggest the release will be in the order of 300-400m barrels of oil and suggest that action will likely be agreed on Tuesday.

Elsewhere in the commodity complex, Gold was down -1%, while Iron Ore prices are up a little over 2%.

Early this morning, risk assets received an additional boost as the US President was reported as saying in a phone interview with a CBS reporter the war could be over soon and that the US was running well ahead of its previously outlined 4-5 week timeline.

Data are taking a backseat at the moment, but a quick rundown of overnight/yesterday’s releases: German industrial production for January fell -0.5%, against expectations for a 1.0% rise.

Chinese inflation data for February was stronger than expected, with the headline measure at 1.3% yoy (vs. 0.9% expected). The statistician put the strong result down to a recovery in demand and some timing differences around the occurrence of Chinese Lunar New Year.

In Japan, the BoJ’s preferred measure of labour earnings rose 1.9% yoy in January, vs. 3.0% expected. This is unlikely to be overly consequential for the next BoJ meeting on 19 March.

In FX markets, the overnight session has delivered out-performance from the Antipodean currencies. AUD/USD is now back above the USD0.70c level, trading just above the USD0.7070 level.

The NZD/USD cross has also rallied, and sits comfortably above the USD0.5930c level this morning.

The Japanese Yen was weaker in yesterday’s session, trading up towards the 159 level. Overnight USD weakness has seen USD/JPY back below 158. EUR/USD has rallied overnight, with the cross now back above 1.16.

Equity markets were lower overnight in Europe but up in the US, although the moves were modest compared to the losses registered in yesterday’s APAC trading session. In Europe the EuroStoxx50 was down -0.6% while the FTSE 100 declined -0.3%. The German DAX was a notable under-performer, down -0.8%.

After some large moves higher in yield in yesterday’s session, interest rate markets traded more constructively overnight. The UST 10Y yield reached 4.21% yesterday in Asian trading, but declined to 4.11% overnight. This is a touch lower in yield from Friday’s close. 

European sovereign bonds registered small moves overnight; the UK 10Y gilt yield rose 1.8bps, while the German 10Y yield was down 0.4bp.

Corporate news in Australia

-Pro Medicus ((PME)) secures $40m in US contract nenewals

-Koala is preparing for an IPO valued at around 10.5x FY26 earnings, with institutional bids due Wednesday and the retail offer opening March 24

-Gas buyers have declined Origin Energy’s ((ORG)) discounted LNG offer as weak demand and policy uncertainty continue to weigh on purchasing decisions

-Pornhub has been blocked in Australia after failing to comply with new age verification requirements, triggering a surge in VPN downloads as users attempt to bypass the restriction

-Glencore is considering a secondary listing on the ASX following the collapse of its proposed merger with Rio Tinto ((RIO)), in an effort to improve its valuation and broaden investor access

-The new US Centers for Disease Control and Prevention chief has called for stronger data sharing and improved public trust to prevent a repeat of mistakes made during the COVID-19 pandemic

-AirTrunk has secured a $1.7bn loan in Tokyo and continues to pursue expansion in the Middle East despite escalating regional tensions

-Singapore sovereign wealth fund GIC is targeting additional Australian real estate investments through new joint ventures after its $4bn National Storage transaction

On the calendar today:

-AU NAB Business survey (Feb)

-AU Westpac Consumer Confidence

-JP Q4 GDP

-CH Feb Trade Bal

-US Feb NFIB

-ADAIRS LIMITED ((ADH)) ex-div 5.5c (100%)

-BIG RIVER INDUSTRIES LIMITED ((BRI)) ex-div 2.00c (100%)

-COG FINANCIAL SERVICES LIMITED ((COG)) ex-div 3.50c (100%)

-COLES GROUP LIMITED ((COL)) ex-div 41.00c (100%)

-CSL LIMITED ((CSL)) ex-div 183.75c

-DUSK GROUP LIMITED ((DSK)) ex-div 4.00c (100%)

-GENERATION DEVELOPMENT GROUP LIMITED ((GDG)) ex-div 1.00c (100%)

-HITECH GROUP AUSTRALIA LIMITED ((HIT)) ex-div 4.50c (100%)

-HELIA GROUP LIMITED ((HLI)) ex-div 16.00c (89%)

-HELIA GROUP LIMITED ((HLI)) ex-div 67.00c (89%)

-IRESS LIMITED ((IRE)) ex-div 13.00c (100%)

-LIBERTY FINANCIAL GROUP LIMITED ((LFG)) ex-div 7.50c

-NIDO EDUCATION LIMITED ((NDO)) ex-div 2.20c (100%)

-NEWS CORPORATION ((NWS)) ex-div 10.04c

-PENINSULA ENERGY LIMITED ((PEN)) earnings report

-PRL GLOBAL LIMITED ((PRG)) ex-div 2.00c (100%)

-QANTAS AIRWAYS LIMITED ((QAN)) ex-div 19.80c (100%)

-SERKO LIMITED ((SKO)) Investor Day

-VAULT MINERALS LIMITED ((VAU)) ex-div 7.00c

-VAULT MINERALS LIMITED ((VAU)) ex-div 7.00c

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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