The Overnight Report: New Record Highs

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This story features ALCOA CORPORATION, and other companies.
For more info SHARE ANALYSIS: AAI
The company is included in ASX200, ASX300 and ALL-ORDS

US markets, notably the Nasdaq and the S&P500, rallied to record highs for the first time together since last October.

After a slightly positive session on Wednesday, led by tech shares, the ASX200 is pointing to a flat to weaker start ahead of the March Labour Force data at 11.30am AEST.

Good Morning,

The Australian market retained slight gains on Wednesday. The ASX200 rose 8 points or 0.1% to 8,979, led by technology, up 2.4%, while energy continued to decline, down -1.9%, and was the worst-performing sector on weaker oil prices.

Today’s Big Picture, J.L. Bernstein extract

Eleven Days Wiped the War Clean

The S&P500 erased the whole Iran war drawdown in eleven days to hit a new record. The Nasdaq flipped from oversold to overbought faster than at any time in four decades of data and extended its winning streak to 11 days, its longest since 2021. Investors are pricing in peace before anyone has signed a deal. This rally is running entirely on hope.

Peace Priced In, Nothing Signed

Trump told Fox Business the war is “very close to over.” Meanwhile, Iran’s foreign ministry says no date is set for talks and neither side has approved a ceasefire extension. Rystad Energy just doubled its infrastructure repair estimate to US$58 billion, with Iran alone facing up to US$19 billion in damage. The market is ignoring the actual math of this conflict for now.

Record Bank Earnings, Rising Food Bank Lines

Bank of America and Morgan Stanley both beat on earnings and revenue today. Consumer spending held up, trading desks posted records, and every CEO used the word “resilient.” The Fed’s Beige Book told a completely different story: rising food bank demand, widespread trading down, and low-income consumers getting crushed by gas prices. Watch what consumers do, not what bank executives say.

NAB Markets Today Research extract

Markets are finishing the overnight session with a positive tone, as optimism grows around a potential Middle East peace deal. The S&P500 traded above 7,000 to a fresh record high, boosted by a strong performance by tech and consumer discretionary stocks.

Markets have been steadily pricing out much of the risk premium that built up after the conflict began, as the US and Iran move toward a second round of negotiations.

It was reported the US and Iran are considering a two-week ceasefire extension to buy more time for negotiations, as mediators push for technical talks to resolve key sticking points such as reopening the Strait of Hormuz and determining the future of Iran’s nuclear program. President Trump has said the war is “close to over.”

There was a trickle of economic data overnight; in the US, data for April saw the NAHB index weaker, falling -3pts to a 7-month low. Higher mortgage rates, buyer uncertainty, and rising construction costs are headwinds to the housing sector at present.

The Empire manufacturing survey for April registered a more positive outcome, with the headline index rising a much stronger than expected 11pts.

However, the impact of the conflict was evident in prices paid, up 15pts, and weaker future business expectations, down -11pts.

US March import prices rose 0.8% m/m, a softer than expected outcome. The core measure rose a solid 0.6%, to be up 3.5% y/y, and likely reflecting some pipeline price pressures.

In Europe, Industrial Production for February (pre-conflict) rose 0.4%, better than anticipated.

In FX markets, the overnight session has delivered a weaker US dollar and a strong outperformance by the AUD/USD. AUD is now sitting just above the US$0.72c level.

AUD/EUR has rallied strongly overnight to reach 0.6080, its highest level in over three weeks.

US equity markets have recorded strong gains overnight; the S&P500 rose 0.8% to post a new record high in the session. Within the S&P500, the tech sector and the consumer discretionary sector were the best-performing sectors, with financials also doing well after some strong earnings results from banks. The Nasdaq posted a gain of 1.6% with reported short covering in sold down software and more speculative technology stocks.

European stocks were weaker overnight, with the EuroStoxx50 down -0.7% and the FTSE down -0.5%. Investors appear to be taking the view that European earnings will be negatively impacted by the conflict relative to the US.

Sovereign bond yields were modestly higher overnight. The US 10 Year yield rose 3bp, with similar moves in European sovereign bond markets. Moves were smaller at the front end of the curve, helping bond curves steepen a touch. Australian bond futures largely traded in sync with offshore markets; the 10 Year implied futures yield is up 4bp.

With the inflation / growth trade off worsening for most central banks in the wake of the Middle East conflict, market pricing for the Fed and Bank of England, who meet at the end of the month, remains relatively subdued.

Expectations for the ECB and BoJ, also scheduled to meet at month’s end, are a little more advanced, with investors pricing in 6-7bp of hikes at upcoming meetings.

In contrast, the market is pricing 16bp of hikes for the RBA’s next meeting in early May.

At 11.20am AEST, the March labour force data is due for release. NAB is forecasting the unemployment rate to remain unchanged at 4.3% and jobs growth of +25k.

ANZ Bank, Australian Morning Focus, Commodities extract

Crude oil prices fluctuated on the prospect of fresh peace talks between the US and Iran. The two parties are reported to be considering extending their ceasefire by another two weeks to allow more time to negotiate a peace agreement, according to a Bloomberg report.

Mediators are said to be pushing for a compromise on outstanding issues, including the reopening of the Strait of Hormuz and Iran’s nuclear enrichment program. President Trump also downplayed the prospect of renewed fighting, saying that the near seven-week conflict is “close to over”.

Nevertheless, the impact of the disruptions to oil supplies continues to emerge. The Energy Information Administration’s weekly inventory report showed widespread drawdowns.
Commercial crude oil inventories fell -913kbbl last week.

However, product stockpiles recorded even bigger falls. Gasoline stockpiles fell -6,328kbbl, while distillate fuel oil was down -3,122kbbl. Heightened demand also pushed US exports of crude oil and products to their highest level ever.

Oil importers in Asia are feeling a deeper crunch, with Japan launching a second release from its national stockpile from early May. Meanwhile, refiners in the region may choose to reduce their operations, which will tighten supplies of jet fuel and diesel.

Signs of tightness have been relatively scarce, despite the market experiencing the biggest supply disruption it has ever seen. This has left investors unsure about how to price in the impact of the Middle East conflict.

Even so, the oil market doesn’t need a worst-case escalation to justify higher pricing. Tight balances are sufficient to sustain the price of Brent near or above recent threshold levels. The longer the conflict drags on, the more persistent these price dynamics are likely to be.

European natural gas prices extended recent losses as optimism over a potential peace deal between the US and Iran boosted sentiment across the energy complex. Compounding the selloff has been the unwind of large net long positions recently accumulated by investment funds.

North Asia LNG prices also pushed lower, although traders remain mindful that supplies remain severely constrained while the Strait of Hormuz is closed. Asian LNG imports have fallen to their lowest level since 2020. China’s 30 day move average for LNG imports on 14 April was 108kt, -32% lower than a year ago.

Copper failed to benefit from increased risk appetite across markets, ending the session down -0.3%. Nevertheless, the prospect of an end to the Middle East conflict has eased concerns of slowing economic growth and a hit to demand.

In fact, signs have emerged of stronger demand in China. Imports of copper ore and concentrate rose 6.6% y/y to 7.5mt in March, suggesting strong demand from domestic smelters despite unfavourable treatment charges.

Chinese fabricators have also stepped up purchases after domestic prices fell below CNY100,000/t in recent weeks. This has led to copper inventories in China recording their biggest weekly drop this year, according to Mysteel Global.

Gold edged lower as concerns over higher energy prices leading to rising inflation offset hopes of an end to the conflict. Fed member Austan Goolsbee said higher energy prices may push back rate cuts. Traders have subsequently increased bets that central banks will hold interest rates steady for longer.

Morgan Stanley: A Bull Case for Latin America

Latin American equities are now trading near their lowest valuation levels in more than two decades. There are multiple factors that explain that underperformance, including policy missteps, global capital shifts, and persistent structural challenges.

However, the region could be approaching a turning point. Morgan Stanley economists, strategists, and sector analysts have outlined a bull case for Latin America, driven by potentially declining interest rates, the election of pro-investment policymakers, and supply-chain realignment that elevates the region’s strategic role.

This could play out in the shadow of the global capex cycle for AI, with investments in technology, electricity, copper, and lithium all linking back to Latin America. Although this scenario isn’t guaranteed, important elements are already taking shape.

“This trifecta of change could drive a shift to investment-friendly policy,” says Nikolaj Lippmann, Morgan Stanley Latin America Equity Strategist. “If that happens, the region could embark on a credible path of fiscal consolidation, monetary easing, and structural reform that would restore investor confidence and attract private capital.”

In Morgan Stanley Research’s bullish scenario, the MSCI Latin America Index could rise more than 90% by 2030. The region’s capital markets could almost triple in size from US$2.4 trillion in 2024 to US$6.3 trillion by 2035.

Corporate news in Australia

– Explosions at Viva Energy’s ((VEA)) Geelong refinery has firefighters battling a large blaze

-Tanarra Capital takes control of Landchecker to support expansion in proptech

-CleanPeak Energy, backed by KKR, to grow via acquisition of Sustainable Energy Infrastructure

-RadPartners emerges as bidder for I-MED ahead of potential $3b deal or IPO

-InterContinental Energy seeks new funding for $100b WA hydrogen project

-CommBank ((CBA)) exposed to risk after lenders reject Accolade Wines refinancing proposal

-Uber investing more than $10b in autonomous vehicles to compete in robotaxi market

-Virgin Australia ((VGN)) maintains FY26 outlook, hedging supports profits but fuel cost risks expected to rise after June

-Australian defense spending is being boosted by $53bn over the next decade

On the calendar today:

-AU Mar Unemployment Rate

-CH 1Q GDP

-EZ March CPI

-UK Feb GBP

-US Weekly Jobless Claims

-ALCOA CORPORATION ((AAI)) earnings report

-AMP LIMITED ((AMP)) Qtrly update

-GENESIS MINERALS LIMITED ((GMD)) Qtr Update

-NETWEALTH GROUP LIMITED ((NWL)) Qtrly update

-SANTOS LIMITED ((STO)) AGM

-TRANSURBAN GROUP LIMITED ((TCL)) Qtrly update

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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