The Overnight Report: Cautiously Optimistic

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This story features ADRAD HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: AHL

Equities traded modestly higher overnight as cautiously optimistic investors await further developments in the Strait of Hormuz and elsewhere.

US president Trump has postponed his meeting with Chinese president Xi. Israel has claimed two more scalps from Iran's top brass and the RBA yesterday delivered its second hike in two meetings.

The surprise from yesterday's meeting (and general talking point) is the narrow outcome behind the RBA's decision (5 against 4 votes).

Both bonds and oil relatively behaved overnight, which has allowed equities to post small gains.

Good morning,

Yesterday’s local session centred around the next RBA rate hike, which was truly delivered, but only on a narrow majority of 5 votes against 4 and that has economists, journalists and bond traders talking since.

What exactly happened there? Should we put a third hike in May on hold?

A heavily polarised share market did close higher on the day.

SPI futures are indicating a mildly positive start is on the cards for Wednesday –the Day After– following on from modest gains in overseas markets.

JL Bernstein:

The Energy Shock Is Deepening

Iranian drones took out the Shah gas field in the UAE, the Fujairah export hub, and Iraq’s Majnoon field in the same stretch. These aren’t symbolic strikes… they’re the first time active Gulf production facilities have been physically knocked offline.

The Strait of Hormuz is effectively closed still for Western tankers. A few India and China-bound vessels are slipping , that’s about it. ING is already calling $120 Brent if this drags another two weeks.

For context, the 2022 Russia shock was sanctions and logistics. This is actual supply destruction plus a closed chokepoint.

And diesel at US$5 isn’t just a headline. National trucking fleets are already warning of 15-20% rate hikes. That flows straight into freight, groceries, farming, and construction costs next month.

Powell’s Real Problem

Two months ago markets were pricing roughly -75 basis points in 2026 cuts. That’s now under -50 and falling.

The FOMC holds tomorrow, nobody disputes that.

What actually matters is whether Powell uses the words “not transitory” when describing the energy shock, or hides behind “we’ll wait for more data.”

One of those sentences ends the rate cut story.

Watch the press conference at 2:30.

AI Keeps Running

The war isn’t registering on hyperscaler earnings calls. Nvidia’s GTC keynote put US$1 trillion in chip orders on the board through 2027 yesterday.

Today Andy Jassy told Amazon staff internally that AWS is tracking toward US$600 billion in revenue over the next decade, double his prior target.

Amazon is guiding roughly US$200 billion in capex for 2026, mostly AI infrastructure.

S&P and Nasdaq are mildly green while the rest of the world burns.

The AI supercycle and the oil shock are moving in opposite directions, and right now the supercycle is still winning.

National Australia Bank:

Markets continued to trade with a constructive tone overnight, although gains were modest ahead of the FOMC meeting and no new developments in the Middle East conflict

Spot oil traded a tight range, but longer-dated contracts continue to make new price highs

Sovereign bond markets rallied overnight, with European government bonds out-performing their US counterparts

The US dollar is modestly weaker, with AUD out-performing overnight after the RBA decision yesterday; AUD/NZD now close to a 13-year high

Oil prices (Brent futures) traded a US$100-106/bbl range overnight, although the Dec-26 futures contract for Brent made a new high in the session, and now sits just below US$83/bbl.

This suggests investors are increasingly pricing in a “higher for longer” outlook for oil prices as the path to any resolution of the conflict remains unclear.

In other commodity markets, Gold was largely unchanged and is hovering just above the US$5000/oz level this morning. 

Iron ore futures have held onto gains earlier this week, likely boosted by stronger than expected Chinese activity data on Monday.

Benoit Anne, Senior Managing Director and Head of Market Insights Group, MFS Investment Management:

No place to hide. A look at the performance across asset classes since the beginning of the Iran war is particularly interesting. We are indeed observing a severe scarcity of defensive assets.

Obviously, the oil price has been the clear winner, up by over 40% since the beginning of the crisis. The US dollar has also staged a rebound, albeit a fairly modest one. The DXY index has gained about 2.6% during the period.

Only a couple of currencies have managed to be up against the dollar over the past two weeks, including the Colombian peso and, to a lesser extent, the Israeli shekel. Otherwise, every other major asset class was down, with some of them quite significantly.

EM equities, Euro equities and EM local currency debt stand at the bottom of that leaderboard. Gold, which for a while was the shining star of global markets, has suffered losses in excess of -5.5% since the beginning of the conflict.

Duration has not done well either, with both the UST and the Bund index down by about 2%, mainly to the upside pressure on government bond yields. 

Looking ahead, we are facing a highly volatile environment given the extreme level of geopolitical uncertainty. With that in mind, some sharp reversal of the recent moves cannot be ruled out, although it remains dependent on the duration of the geopolitical crisis.

At this juncture, the oil price has become the single most important global market barometer. A correction down to below US$80 per barrel will likely send a strong bullish signal for global markets, but that can only be achieved if the oil supply bottlenecks can be addressed. 

Corporate news in Australia

-BHP Group ((BHP)) has appointed Brandon Craig as its next chief executive from July 1, replacing Mike Henry after 6.5 years in the role

-Sims Ltd ((SGM)) has guided 2026 fiscal year’s underlying EBIT to between $350m and $400m on the back of strong non-ferrous metal prices and buoyant memory chip markets 

-Electro Optic Systems (EOS) CEO Andreas Schwer, and other members of the leadership team, will dispose of the vast majority of their shares in the company

-Macquarie Group ((MQG)) has pulled out of the bidding process for a stake in Kuwait’s oil pipeline network

-US startup Superpower is paying ASX-listed Tetratherix ((TTX)) USD3m a year to replace peptide injections with a nasal spray, funding research Big Pharma won’t

-Challenger Limited ((CGF)) cuts Pepper Money ((PPM)) bid amid weaker market conditions

-New Hope ((NHC)) profit drops -84% on bad weather and low coal prices

-West African Resources ((WAF)) profit jumps 130% on strong gold output

On the calendar today:

-NZ Q4 Current Account

-JP Feb Trade Bal

-EZ Feb CPI

-EZ Feb Inflation (HICP)

-US FEB PPI

-US FOMC rate decision

-ADRAD HOLDINGS LIMITED ((AHL)) ex-div 1.45c (100%)

-AUCKLAND INTERNATIONAL AIRPORT LIMITED ((AIA)) ex-div 5.52c

-BRISBANE BRONCOS LIMITED ((BBL)) ex-div 1.00c (100%)

-BRISBANE BRONCOS LIMITED ((BBL)) ex-div 2.00c (100%)

-CTI LOGISTICS LIMITED ((CLX)) ex-div 6.00c (100%)

-GOLDEN HORSE MINERALS LIMITED ((GHM)) earnings report

-LGI LIMITED ((LGI)) ex-div 1.25c (100%)

-NEW HOPE CORPORATION LIMITED ((NHC)) earnings report

-SUPPLY NETWORK LIMITED ((SNL)) ex-div 36.00c (100%)

-WEST AFRICAN RESOURCES LIMITED ((WAF)) FY26 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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