The Overnight Report: Markets Ignoring Risks?

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This story features MACQUARIE GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: MQG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets are looking through Middle East ceasefire concerns, with the S&P500 and Nasdaq Composite hitting new all-time highs.

The Nasdaq has now posted 12 consecutive gains, its longest winning streak since 2009.

After profit taking in financials weighed on the local market, ASX200 futures point to a softer start ahead of the weekend.

Good Morning,

The ASX200 declined -24 points or -0.3% yesterday, with six of the eleven sectors higher, led by technology shares up 7.4%, and offset by financials, down -1.3%, as major banks declined.

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

Lebanon ceasefire clears the last blocker

Trump announced a 10-day Israel-Lebanon ceasefire starting 5 PM ET tonight. That was Iran’s non-negotiable condition for restarting talks. The next round of U.S.-Iran negotiations is now likely this weekend. Stocks rallied on the news, Brent still sitting at US$99/bbl. Equities trust the deal, oil does not.

Apple is getting squeezed out of its own supply chain

TSMC’s print looked great on the surface but the mix tells the real story. HPC revenue up 20% quarter-over-quarter, smartphone down -11% and now just 26% of the business, the lowest in eight years. Tim Cook already warned on the January call that Apple is “currently constrained” on advanced chip capacity. Nvidia is eating Apple’s allocation. Apple stock down over -1% today while the rest of tech ran.

The Fed transition is getting messy

Former Cleveland Fed President Mester went on CNBC and told the Fed to wait and see on rates given Iran inflation risk. Kalshi cut Warsh confirmation odds by May 15 to 38 from above 50 yesterday. Senator Tillis is still blocking any Fed nominee until the DOJ investigation into Powell wraps. Trump threatened again to fire Powell from the board seat entirely. This is not going to be a clean handoff.

NAB Markets Today Research extract

While investors remain buoyed by talks of an extension in the US-Iran ceasefire and an announced Israel-Lebanon 10-day ceasefire, risk sentiment remains fragile as an immediate deal remains unlikely given that the countries remain far apart on key issues.

Highlighting the fragility of the situation in the Middle East, there was a report on Bloomberg noting that some Gulf Arab and European leaders believe that a US-Iran peace deal will take six months to be agreed, and that if the Strait of Hormuz is not opened in the next month, a global food crisis may develop.

The Washington Post also reported the US is sending thousands of additional troops to the Middle East to pressure Tehran to make a deal, while the commander of Iran’s joint military headquarters has said that prolonging the US blockade of the Strait of Hormuz was ‘a prelude to a breach of the ceasefire’. This, combined with headlines that Iran told Pakistan that the US must drop ‘excessive demands’, resulted in a move higher in oil prices, with WTI and Brent up around 4%.

There was a mix of economic data releases published overnight, with most on the stronger side of expectations. The UK economy grew by 0.5% in February, after an upwardly revised 0.1% in January. The result was well above expectations for a 0.1% rise and the strongest monthly read since January 2024. The strength appeared broad based, with services output rising 0.5%, while construction surged 1%. This read pre-dates the Middle East conflict.

For the US, the Philly Fed manufacturing index surged to 26.7 in April from 18.1 in March. This result was well above expectations, with a fall to -10 expected, and is the highest read since January 2025. Boosting the result was new orders, with the index jumping to 33.0 from 8.6, and a rise in shipments, with the index rising from 22.2 to 34.

US initial jobless claims fell -11k to 207k versus expectations of 213k. This was the biggest one-week fall since February. Continuing claims rose 31k. At face value, the claims report suggests the labour market has improved and layoffs remain at a low level, although the low hiring backdrop continues. Pantheon notes the Indeed measure of job postings has dropped by -2% since February and, while it is early days, there is some evidence that the rise in energy prices is starting to weigh on labour demand. Less positive was US industrial production, which fell -0.5% in March versus expectations of a 0.1% rise, although unseasonably warm weather was seen as a driver of the large 2.5% fall in utilities output.

For Australia, the unemployment rate remained unchanged at 4.3% in March as expected, while employment growth was a touch lower than consensus, coming in at 18k.

This report is not seen to shift the RBA’s assessment that the labour market remains a little tighter than is consistent with full employment. However, there was nothing in the report to suggest that the labour market was noticeably tightening again, something the RBA Board debated at its March meeting. Short-end Aussie rates were heavy post the release, with expectations of a rate hike at the May RBA Board meeting lifted slightly. The AU OIS curve prices 18bps, or a 73% chance of a 25bps rate hike to 4.35% in May, and has the cash rate at 4.65% by year end.

Finally, China’s economy was stronger than expected in Q1, rising 5% from a year ago versus expectations of a 4.8% expansion. Growth was supported by strong manufacturing and exports, while the consumer remains soft, with retail sales coming in below expectations.

In terms of central bank commentary, Fed Governor Miran said he still does not see a convincing reason to wait on rate cuts and still thinks the Fed could cut three or four times this year. In contrast, Fed President Williams noted that given the high degree of uncertainty, he does not think it is a good time for the Fed to provide forward guidance and believes the Fed is in ‘the right place for monetary policy’.

The account of the March ECB meeting showed that members of the Governing Council thought it was important to keep options open for future meetings and to be agile in terms of shifting policy if and when the outlook for medium-term inflation called for it.

Comments from Bundesbank President Nagel and ECB member Schnabel overnight reflected a balanced view, noting that the ECB needs to keep options open and it would be a mistake to provide forward guidance. Schnabel noted that the ECB was not in a rush to make a decision on policy and that the ECB was in a ‘relatively favourable position’ with policy settings neither stimulating nor restricting demand.

Equity markets posted small gains overnight, with optimism of a peace deal and positive earnings supporting sentiment. The S&P500 and Nasdaq Composite rose to new all-time highs, up 0.26% and 0.36%, respectively. For the Nasdaq, this was the 12th consecutive positive session, the longest winning streak since 2009.

The S&P500 and Nasdaq are up 3.3% and 5.2% so far this week, with the Dow Jones up more than 1%.

EuroStoxx600 was unchanged, while the FTSE100 closed up 0.3%. Technology stocks led gains, with sentiment supported by Taiwan Semiconductor Manufacturing Co. announcing it had raised its revenue outlook for 2026. Trading volumes were reported to be low.

Credit markets also reflected the improvement in risk sentiment, with a robust session in terms of issuance, although credit spreads edged wider.

Bond yields are higher and curves generally steeper, as stronger than expected data and a rise in the oil price weigh on sentiment. Bunds outperformed, with the 10-year closing down -1.1bps, while the US 10-year Treasury is currently up 4bps and the Aussie 10-year future price is down -5.5bps. Supporting Bunds were the minutes from the last ECB meeting and ECB commentary overnight, which supported the view that the ECB will keep policy rates steady at the upcoming meeting.

Yesterday, the AUD rose to its highest level since June 2022, touching 0.7197, but has fallen back to 0.7161. The USD is broadly stronger overnight. As mentioned above, WTI and Brent surged overnight, currently up 3-4% amid uncertainty as to how the conflict in the Middle East will be resolved, while the gold price has pared earlier gains to be unchanged.

Innovation Insights, Franklin Templeton, Matthew Moberg

An innovation can often build upon existing technology to make it more practical in the real world. From autonomous weeding systems that adapt on the fly, to engineered cells designed to evade immune system attack, to water infrastructure that harnesses the physics of the deep sea, this quarter’s selections remove bottlenecks to bring promising technologies closer to widespread use. While their applications differ, each reflects a broader pattern: innovation often advances by transforming abstract ideas into usable machines or systems.

Farm robots use artificial intelligence (AI) to “see” weeds           

An agricultural robotics company recently introduced a new AI model that enables its laser-weeding machines to identify plant species in real time, helping farmers discern crops from weeds. Earlier systems were more rigid. New weed species and shifting field conditions often required another round of labeling and retraining. The new system is built on a much more comprehensive plant-recognition model and can be adjusted in the field using a few example images, allowing the machine to adapt in minutes rather than undergoing a separate lengthy retraining cycle.

Why it matters:

Precision agriculture promises lower chemical use and less manual labor, but frequent retraining has made autonomous weeding harder to scale. That matters because uncontrolled weeds have the potential to cut corn yields by about -50% and soybean yields by about -52% in the United States and Canada, costing growers nearly -US$44 billion annually. Systems that use software to adapt in the field could make robotic crop management more practical.

Engineered cell therapy moves closer to a Type 1 diabetes cure

Researchers reported in early 2025 a result from a human trial showing that a person with Type 1 diabetes began producing insulin after receiving cellular therapy. In this case, insulin-producing cells, known as islet cells, were transplanted into the patient. These cells were specifically designed to avoid immune system attacks. That is notable because the cells appeared to work without the anti-rejection drugs transplants normally require.

Why it matters:

Type 1 diabetes affects 9.2 million people worldwide, but replacing the insulin-producing cells destroyed by the disease has usually required anti-rejection drugs that carry their own risks and limitations regarding who can receive treatment. A therapy that works without anti-rejection drugs would remove one of the biggest barriers to making cell replacement a practical path toward a functional cure.

Light-activated pacemaker dissolves after use

Researchers have developed a temporary pacemaker smaller than a grain of rice that can be injected by syringe and activated by light. Instead of wires and an external battery, the device uses tiny electrodes and the body’s own biofluids to generate power, while a soft wearable patch on the chest detects irregular heartbeats and sends near-infrared light pulses to trigger pacing. After a few days to a few weeks, the pacemaker naturally dissolves.

Why it matters:

Temporary pacemakers are often needed after surgery, but current systems require wires that can cause infection, bleeding and tissue damage when removed. That is especially important for newborns: congenital heart defects affect nearly 1% of US births, or about 40,000 babies each year, and about one in four cases are critical. A dissolvable device could make short-term cardiac care less invasive.

A new desalination plant works underwater

A subsea desalination system places reverse-osmosis infrastructure hundreds of meters below the ocean surface to produce freshwater. At those depths, the ocean’s own pressure helps push seawater through the filters and reduces the need for large high-pressure pumps and bulky land-based facilities. Developers say the design could reduce energy use significantly, shrink coastal land requirements and simplify filtration processes.

Why it matters:

2.2 billion people still lacked safely managed drinking water in 2024. Traditional desalination works, but its high energy use and coastal footprint have limited how broadly it can help address water scarcity. If subsea systems can lower the cost, energy burden and land footprint of desalination, they could make reliable water access more practical for water-stressed coastal regions and water-intensive industries such as semiconductors, data centers, and mining.

AI may help solve more crimes in the United States

A public safety technology provider is using AI to make license plate camera networks more searchable for investigators. Rather than simply reading plates, the AI tools let investigators search for vehicles using plain-language descriptions and unique visual characteristics, making camera footage much easier to use in real investigations.9 The company reported in 2024 that its platform helped solve more than 700,000 crimes annually, which would translate to roughly 10% of reported US crime.

Why it matters:

AI could turn camera networks from passive recording tools into active investigative search tools. In 2024, only 43.8% of violent crimes and 15.9% of property crimes were cleared nationwide. Systems that let investigators search for footage using plain-language vehicle descriptions could help turn more camera data into real leads and help solve more crimes.

Corporate news in Australia

-Private equity manager Axight is buying a stake in La Trobe Financial from Brookfield’s private equity arm, in a deal valuing the non-bank lender at $3bn.

-Grant Thornton Australia sale nearing completion with US-led bidders

-Gresham Partners prepares sale of One Investment Group amid buyer interest

-Macquarie Group ((MQG)) conference to feature 123 companies and major energy CEOs

-Blackmores invests in BiomeBank to expand into gut microbiome therapies

-PEP refinances Modern Star with $500m deal to reduce costs and return capital

-PwC Australia lifts partner pay supported by AI-driven efficiencies

-ANZ Bank ((ANZ)) offers incentives including cash and rate cuts to retain mortgage customers

-Calls increase for ACCC probe into Woolworths Group ((WOW)) and Coles Group ((COL)) over salmon sourcing practices

-Coal financing in Australia rebounds as lenders return and borrowing costs fall

On the calendar today:

-EZ Fen Current Account

-ALCOA CORPORATION ((AAI)) Qtr Update

-ZIP CO LIMITED ((ZIP)) Qtrly update

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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