The Overnight Report: Markets Hold On Hope

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

While most global markets were on closed on Monday, US markets traded up on hopes of negotiations between Iran and the US to break the conflict stalemate ahead of President's Trump's Tuesday deadline threats.

After a sell off last Thursday, ASX200 futures are suggesting a flat to slightly positive start to another shortened trading week.

Good Morning,

The Australian share market reversed early gains to finish lower last Thursday ahead of the Easter long weekend.

The ASX200 fell -92 points or -1.1% with technology leading the declines, down -3.9%, as well as miners, while consumer staples outperformed.

Today’s Big Picture Tuesday, J.L. Berstein extract, Market Overview

Night Deadline 

Iran rejected the US ceasefire plan but countered with their own proposal through Pakistan.

Trump called it a significant step but still threatened to level power plants and bridges if they don’t reopen the Strait by 8 PM Tuesday.

Gas is already at US$4.12 nationally, and JPMorgan warns we could see US$5 if the Strait stays closed by mid-April. 

Dimon Warns on Inflation 

The JPMorgan CEO used his annual letter to caution that oil shocks could lead to stickier inflation and higher rates than markets expect.

He compared this setup to the energy crises that triggered deep recessions in 1974 and 1982.

He also flagged that private credit losses are already running higher than they should be given the current environment. 

Jobs Look Fine, Services Don’t 

Markets finally got to trade Friday’s 178,000 jobs number, but the real story is the ISM services report.

Prices paid hit their highest level since October 2022, while the employment gauge dropped to a multi-year low.

That’s the stagflation combo.

NAB Markets Today Research extract

Market moves have generally been modest to start the new week, struggling for direction as escalatory rhetoric from the White House fails to clarify whether the war in the Middle East was more likely to pause or intensify this week as Trump’s latest deadline of 8pm Tuesday (10am Wednesday Sydney time) approaches. 

On Friday, Payrolls was much stronger than expectations, but saw a reasonably muted reaction in yields. Pricing for Fed policy was back to flat by the end of the year, taking out -5bp of cuts, and 10yr yields were 4bp higher at 4.34%.

President Trump’s latest deadline to reopen the Strait of Hormuz expires Tuesday night at 8 pm. Trump spoke around 4am Sydney time this morning and said “the entire country can be taken out in one night, and that night might be tomorrow night” and threatened to destroy all Iranian bridges and power plants “in four hours” if no deal is reached.

Earlier, Iran rejected a 45-day ceasefire proposal on Monday, demanding instead a permanent end to the war with guarantees against future attacks, while Israel escalated military operations by striking Iran’s largest petrochemical facility, multiple airports, and coming within 82 yards of Iran’s nuclear power plant.

The immediate focus now centres on whether Trump will follow through on his threats if the Tuesday deadline passes.

Payrolls were up 175k in March, sharply outpacing consensus for 65k. February was revised down to -133k (from 92k) but the 2-month net revision was just -7k.

The timing of strikes, unusually good weather in March, combined with some residual seasonality likely added to volatility over the past few months. 3-month average payrolls growth was 68k, and 6-month average was 15k, both enough to keep unemployment from rising given low labour supply growth.

Dallas and San Francisco Fed researchers recently estimated break-even payrolls growth may have slowed from about 250k in 2023 to -3k in late 2025.

San Francisco Fed President Daly highlighted those estimates in a blog post Friday and said “conveying that a zero-job growth economy is consistent with full employment is not easy” and emphasised ratios rather than jobs numbers. On that front, the unemployment rate unexpectedly fell to 4.3% (4.26% unrounded).

The household survey didn’t show the same strength in February employment as the establishment survey, and the fall in unemployment was alongside a drop in participation, but regardless it takes the unemployment rate to its lowest since June and around the middle of its 4.0-4.5% range it has been in since June 2024.

The Fed isn’t likely to see that as a particular source of inflation pressure yet, average earnings did cool to 3.5% yoy, the slowest since May 2021, but with still elevated inflation downside labour market fears would need to see some confirmation in the data to bring a prospect of cuts back into view.

The Services ISM Monday did flag the prospect of a weaker labour market ahead, with the employment index in contraction for the first time in four months, falling -6.6 points to the lowest level since 2023.

The overall index was 54.0 from 56.1. New orders and export orders held up, in contrast to the more broadly downbeat signal from the Services PMI, but both surveys showed softer employment and a stark jump in prices.

US 2yr yields were briefly 6bp higher on the Payrolls before setting back to around 3bp above their levels prior to the data. On Monday, they were little changed at 3.85%. 10yr yields were 4bp higher Friday, and 1bp lower at 4.33% on Monday. Fed pricing for the end of 2026 pared from about -5bp of cuts before the Payrolls data to unchanged now.

Currency markets have generally fluctuated alongside risk sentiment and Iran headlines, but have been broadly range bound over the past couple of days. The AUD is 0.4% higher to start the new week and currently sits around 0.6919. Since our last Markets Today on Thursday morning, it is -0.1% lower.

The lows around 0.6860 came on Thursday as oil rallied and risk markets fell as Trump’s address Wednesday evening (US time) offered no off ramp to the conflict, but it rallied back alongside optimism about ceasefire talks, and has broadly held onto those gains despite the lack of agreement, sitting a little off its intraday highs of 0.6938 as US equities hold their gains.

US equities rallied on Thursday, were closed on Friday, and held onto gains at the start of the new week with the S&P500 up 0.4%. Gains were broad-based, with 8 out of 11 sectors rising, let by 0.8% gains in energy and consumer discretionary stocks. Monday was a holiday in much of Europe.

In oil markets, Brent was 0.3% higher at US$109.37 and WTI 0.8% higher at US$112.48.

The WSJ notes the apparent premium for WTI reflects the backwardation amid physical supply shortfall. For WTI, the nearby contract expires in April, for oil that will be delivered in May. Brent futures in London expire two months before delivery. The next contract in line is for oil transferred in June.

Supply disruptions have also been reflected in physical premiums that show Brent near US$110 understate physical tightness. Dated Brent (representing physical cargo with specific loading dates) rose to new highs above US$140/bbl, the highest since 2008.

In other news, Saudi Arabia, raised the price of its main oil grade to Asia to a record premium of US$19.50 over regional benchmarks.

OPEC-Plus warned that damage to energy assets would have a prolonged impact on oil supply even after hostilities ended. The group approved an increase in output quotas, but that remains theoretical while flows remain throttled.

Some ships are transiting the Strait. Bloomberg reports 21 ships transited over the weekend, but that compares to about 135 a day before the war.

ANZ Bank, Australian Morning Focus, Commodities Extract

The prospect of another escalation in the Middle East conflict saw crude oil prices edge higher. Trump warned Iran might be “taken out” by Tuesday if no deal to end the conflict was reached.

That came after the Wall Street Journal reported the US military was preparing for potential strikes on energy infrastructure in Iran, such as key power plants. 

Iran rejected a US ceasefire proposal over the weekend. Instead, it countered with demands that include the permanent lifting of sanctions, according to the state-run Islamic Republic News Agency.

The gains were somewhat muted by signs that traffic through the Strait of Hormuz has climbed to its highest since early March. The waterway has seen 21 ships transit over the weekend, according to ship tracking data. However, Iranian vessels continue to dominate traffic.

The prospect of Iraqi oil finding its way through the strait rose after Iran announced it wouldn’t stop exports of Iraqi oil. However, Iraq doesn’t have its own shipping fleet. Its oil is sold as free-on-board, meaning cargoes are delivered at Basra ports, with Asian buyers covering shipping and insurance costs.

That will likely prevent any significant volume of oil from finding its way onto international markets. In the meantime, consumers are scrambling for cargo, pushing up spot oil prices, with Dated Brent reaching US$140/bbl, the highest level since 2008.

The difference between the nearest two futures contracts for Brent has also risen to more than US$15/bbl.

Global gas markets remain on edge amid the heightened tension in the Middle East. Two vessels carrying fuel from Qatar’s export plant appear to be attempting to transit the Strait of Hormuz, after an empty ship was successful in making the journey over the weekend.

Despite the current disruptions, the market’s attention is turning to the long-term implications.

The global LNG market has shifted from a short-lived disruption to a period of structural tightness. The effective closure of the Strait of Hormuz, through which more than 20% of global LNG normally transits, initially created a logistics-driven dislocation.

More recently, physical damage at Qatar’s Ras Laffan export hub is assumed to have removed around -13mt/year of LNG supply for several years, transforming the shock from a transitory issue into a sustained loss of volume.

With spare liquefaction capacity scarce and new supply largely back-end loaded, the next three years have become the most fragile part of the LNG cycle. Even if shipping routes reopen, Qatar’s missing output cannot be replaced quickly, leaving the market to clear through higher prices, inventory drawdowns and demand rationing.

The US is increasingly acting as the swing supplier, but constraints on export growth and domestic market pressures raise the global price floor. Europe and Asia both lose flexibility, with tighter inventories heightening sensitivity to weather and outages, while spot liquidity thins as buyers favour long-term contracts for security.

Overall, the conflict shifts the outlook from gradual easing to prolonged tightness, with limited downside for LNG prices.

Gold prices fell as risk appetite was impacted by Trump’s threats to attack Iran’s energy infrastructure. An escalation of the Middle East conflict saw the USD regain some strength and Treasury yields push higher.

This weighed on investor appetite. Base metals were also lower across the board. Copper has become a lightened rod for the market’s concern over the economic impact the Middle East conflict may cause.

Aluminum found support after Emirates Global Aluminum said it may take a year before its operations are restored following an Iranian strike.

The Tug of War Between P/E and E, Yardeni Quick takes extract, Ed Yardeni & Toby Hearts

Last Monday saw the S&P500 down -9.1% from its January 27 high, which we believe marks the trough of the latest pullback, for now. That was our call on Tuesday. The next two days could make or break our call.

Today, President Donald Trump issued a final, profanely worded ultimatum, setting a firm deadline for what he is calling “Power Plant Day.”

He specified on Truth Social that Tuesday will be “Power Plant Day, and Bridge Day, all wrapped up in one.” He warned the Iranian regime they would be “living in Hell” if the blockade of the Strait of Hormuz isn’t lifted by 8:00 p.m.

Today, Trump also told Israeli media (Channel 12) and the Wall Street Journal the US is currently engaged in “deep” negotiations and there is still a “good chance” a deal could be reached before the Tuesday night deadline.

Our call of a market bottom doesn’t come with a money-back guarantee, of course. However, history offers some reassurance: The S&P500 has been higher two years after the past four major US military engagements, with gains of 31% to 44% following the Korean War, the Iraq War, the Gulf War, and World War II.

We think there is good value in the stock market at current levels. The forward P/E of the S&P500 peaked last year at 23.0 on October 27. It fell -17.8% to 18.9 through Monday of last week. Over that same period, S&P500 forward earnings rose 12.7%, reaching record-high territory.

The valuation multiple initially dropped due to concerns about AI companies’ profitability, then fell more quickly amid fears the war would trigger a global recession. However, industry analysts didn’t blink and continued to raise their collective earnings outlook.

Despite the typical pattern of analysts’ estimates drifting lower as the reporting season approaches, their Q1 estimates stayed remarkably steady despite the war, and they have increased their forecasts for Q2-Q4.

 S&P500 forward earnings continue to rise rapidly, while S&P400 and S&P600 forward earnings are also moving higher. The broadening breadth of forward earnings in recent months is a bullish development.

The wide breadth of forward earnings among S&P500 sectors is also bullish. Information Technology continues to lead the way, despite concerns about AI’s negative impact on the profitability of companies in this sector.

The same applies to Communication Services. The forward earnings of Consumer Discretionary, Consumer Staples, Financials, Industrials, and Utilities are all at record highs. So far, Energy isn’t much of a contributor to the bull market in forward earnings!

The S&P500’s forward profit margin has continued to rise to a record high of 15.0%, led by IT at 31.4% and supported by a broad-based expansion across sectors. Many of these metrics are also at or near record highs this year, including Financials, Communication Services, Utilities, and Consumer Discretionary.

Total forward earnings for the S&P500 has continued to climb, even excluding the Magnificent-7.

On December 7, 2025, we lowered our rating for the Mag-7 from overweight to underweight. A couple of weeks ago, we moved back to equal-weight. The forward P/E of the Mag-7 is down from 31.2 on November 3, 2025, to 23.7 currently.

Energy has re-rated from 15.7 to 19.3 as the market priced in the oil price shock. The more interesting story is Financials at 14.3, down from 16.4, despite carrying the second-highest forward profit margin in the S&P500 at 21.4%. The de-rating looks overdone if private credit stress proves contained.

The  IT sector’s forward P/E at 20.7 has now converged with the S&P500’s 19.9. For investors with a multi-year horizon, this is an attractive entry point.

The share of the S&P500’s market capitalization represented by the IT sector plus the Communication Services sector, at 43.6% currently, exceeds the dot-com era’s peak. That’s been the case over the past 12 months or so.

But there’s arguably more earnings support for such a high concentration of the market in these two sectors now versus back then. Today, the forward earnings share of the two sectors, at 42.0%, is only 1.6ppts above the market-cap share.

At the dot-com peak, the gap between market-cap share and earnings share exceeded 15ppts. Today’s concentration is well deserved.

We asked Michael Brush for an update on insiders: “Insiders had turned cautious (in week three of the war) ahead of the declines in the past two weeks.

“Insiders turned more bullish in the past two weeks as stock prices declined further.”

Corporate news in Australia

-Barrenjoey’s $45m pre-merger dividend reduces the value of the Magellan Financial ((MFG)) tie-in

-BlueScope Steel ((BSL)) prepares potential sale of its US business valued at more than half of group earnings

-RBA card fee cuts may reduce credit card reward travel perks

-CEFC and Australian Ethical launch $600m private equity fund with investments including Neoen and Repurpose It

-Ellerston Capital takes $100m pre-IPO stake in Winning Group

-Whiteoak invests in Zeus Street Greek to support expansion

-NSX upgrades its platform to compete with ASX and Cboe Australia

-ACCC calls for tighter mortgage checks following fraud concerns

-Former COO at Accolade Wines pushes for board changes at Treasury Wine Estates ((TWE))

-Nvidia increases investment as Firmus approaches $7b pre-IPO valuation

-HSBC’s Australian retail banking business sale draws interest from Blackstone and other bidders

-Lincoln Place halts planned $1b sale due to market conditions and cost pressures

-KKR explores sale of $1b Synergis disability housing portfolio

On the calendar today:

-AU ANZ Job Ads

-AU Feb Household Spending

-US Feb Consumer Credit

-US Feb Durable Goods

-XX March PMIs, AU, UK, EU

-GOWING BROS. LIMITED ((GOW)) ex-div 3c (100%)

-SHINE JUSTICE LIMITED ((SHJ)) ex-div 1.50c (100%)

-SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED ((SXE)) ex-div 2.50c (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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