The Overnight Report: Ceasefire Extension

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This story features INGENIA COMMUNITIES GROUP, and other companies.
For more info SHARE ANALYSIS: INA
The company is included in ASX200, ASX300 and ALL-ORDS

Good Morning,

The Australian market closed relatively flat on Tuesday, down a mere -4 points to 8,949 with consumer staples leading the gains and some buying supporting the banks.

Amidst contrarian signalling from Iran and the US, the local market is projected to start Wednesday’s session on the back foot.

US President Trump has decided to extend the ceasefire, giving Iran and mediator Pakistan more time to agree on a counter proposal to end the war.

US equities traded weaker, bond yields rose, as did oil futures and the USD.

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

Tim Cook Steps Down After 15 Years

Apple named hardware chief John Ternus as CEO starting September 1.

Cook stays on as executive chairman to handle government relations.

Apple has already slipped to the third-largest company behind Nvidia and Alphabet because the Street sees it as an AI laggard.

Picking a hardware guy tells you Apple is betting on AR glasses and AI devices to climb back.

Warsh Hawkish, But Still Might Not Get Confirmed

Kevin Warsh told Senator Kennedy he’s “absolutely not” going to be Trump’s sock puppet.

He also floated a real Fed overhaul: killing forward guidance, fewer press conferences, shrinking the US$6.7trn balance sheet.

Problem is Senator Tillis is still blocking the vote over a DOJ probe of Powell, and Kalshi bettors give Warsh only a one-in-four shot of getting confirmed before Powell’s term ends May 15.

NAB Markets Today Research extract

The overnight session has been one of broadly deteriorating risk sentiment with lower stocks, higher yields, oil and the USD as the late Wednesday deadline to the US-Iran ceasefire nears and the two sides continue the brinkmanship that with each passing comment gives the impression a deal is ever further away.

Media reports suggest even if US Vice President,  JD Vance is back in Washington, he could leave for Pakistan Wednesday, have helped keep markets believing an extension to the ceasefire will come. 

President Trump has done just that, responding to a request from Pakistan mediators to, “hold off attacks on Iran until such time as their leaders and representatives can come up with a unified proposal.” 

That sees a very modest reversal of prior asset moves.

Stronger US economic data helped push up US bond yields. Fed Chair nominee Kevin Warsh’s confirmation hearing on Capitol Hill provided little new news, with Warsh maintaining he’d be independent, and repeating he would like to see regime change at the Fed with respect to a new inflation framework, policy tools, communication and more divergent views at Fed meetings.

While stocks began Tuesday in positive territory, the mood soured through the European and US sessions. Iran’s Parliamentary speaker said Iran would not accept negotiations under the shadow of threats. 

President Trump’s response was typical, saying he had ‘no choice’ and with the US in a strong position is ‘ready to go’ with a resumption of bombing if a deal isn’t reached.

In US economic data, March retail sales were stronger than expected, reflecting both the rise in gasoline prices and some resilience in consumer spending seen in a higher control group measure. 

Headline sales rose 1.7% m/m after an upwardly revised 0.7% rise in February and against a forecast 1.4% gain. A 15.5% rise in gasoline sales –-the most since 1992 when records began-– driving the move.

However ex-auto sales also rose 1.9% m/m, with a two-tenth upward revision to February and above a 1.4% consensus estimate. 

The Philadelphia Fed non-manufacturing activity survey improved marginally in April to -16.5 from March’s -23.9, which was better than forecast. The ADP weekly employment change revealed private payrolls rose 54, 750 per week in the four-week period ending 4 April. That followed a 62k rise in the prior four-week period.

March pending home sales rose 1.5% m/m, above a 0.5% consensus estimate, for 1.8% y/y after a revised 0% in February. Business inventories rose 0.4% in February, above a 0.3% forecast.

The USD was broadly stronger, rising 0.4% on the DXY (off session highs), with AUD/USD -0.4% to 0.7150, but after rising to 0.7186 at one stage. The EUR slipped from 1.1790 to 1.1720, before reclaiming 1,1750.

Macro Talking points, Benoit Anne, MFS Investment Management

The Strait of Hormuz remains a major focal point for global markets. The Strait briefly reopened on Friday, then closed again as tensions rose over the weekend. Uncertainty is high, but diplomacy is still active, which is an encouraging sign. Markets have moved on at different speeds.

In our view, global equities, and US indices in particular, are trading as if the conflict is close to resolution, pushing through pre-war highs. Put simply, there are no obvious signs of dislocation in the equity world.

That is not true in global fixed income, however. In discussions with our global multi-sector fixed income team, several tactical opportunities have emerged. We are seeing dislocations at the front end of government curves in selected markets, where local curves appear to have overpriced future policy tightening.

Our preferred markets on that score are Canada, the UK and the Eurozone. Our investment team also sees scope for the dollar to weaken in the period ahead.

Credit is less forgiving. Spreads have retraced a meaningful portion of the recent widening, leaving less cushion at the index level. Going forward, security selection is likely to drive outcomes, as some credit fundamentals look mispriced at the single-name level.

Overall, this is a challenging market backdrop, but we believe that the current volatility is creating opportunities.

There is an interesting paradox in markets at the moment. Most investor sentiment indicators signal a bearish bias, and yet, the recent equity price action has been remarkably bullish. On the sentiment side, we have observed two interesting signals.

First, the well-regarded BofA Global Fund Manager Survey displayed the most bearish reading among asset managers in April since June 2025. Meanwhile, the data produced by the American Association of Individual Investors (AAII) has shown a clear bearish bias over the past six weeks among the US retail investor community.

So the next question becomes: who is going to be right, Mr. Market or Mr. Investor?

We generally take comfort in that bearish sentiment bias, as it suggests that there may be room for stronger risk appetite looking ahead. The most dangerous market backdrop is euphoria, which typically combines extremely high investor sentiment with bullish price action, in our view, but fortunately, we are clearly not in that territory.

So as long as diplomacy prevails, there may be further upside for risky assets. 

U.S. earnings are proving more resilient than many expected, even as markets whipsaw on fast-moving geopolitical headlines. Recent Middle East developments have driven sharp, short-term swings: when tensions appeared to ease, investors rotated back toward more growth-sensitive areas; when tensions flared, oil rose and European equities weakened.

Yet, disruption around the Strait of Hormuz is affecting far more than energy, and the underlying U.S. picture remains solid. Morgan Stanley’s earnings season chartbook suggests profits are picking up, not slowing.

Both trailing and forward EPS growth have re-accelerated (roughly up 15% and up 22%).

Importantly, analysts have not meaningfully cut estimates despite geopolitical risk, and early 1Q prints are delivering positive surprises. Companies are also showing better cost control and improving margins.

Encouragingly, strength is broadening beyond a small group of names; more consistent with an early-cycle earnings recovery than a late-cycle peak.

U.S. banks remain a useful real-time read on the economy, and results so far have been supportive. Last week, most large U.S. banks reported solid earnings and steady guidance: trading and investment-banking activity improved, lending income held up, costs remained disciplined, and bad-debt charges stayed low.

The takeaway: credit and earnings still look healthy. But with markets increasingly headline-driven, it makes sense to prioritize quality and consistency over chasing peak profitability – and to stay anchored to fundamentals when price action is being set by the headlines cycle (contribution from Ross Cartwright, Lead Strategist – Strategy and Insights Group).

With uncertainty clouding the global monetary-policy outlook, it pays to focus on what central bankers are saying right now. The consistent message in recent days has been prudence and patience: officials stand ready to respond if inflation pressures build, but they see little need to rush.

In Europe and Canada, speakers have cautioned against tightening too quickly as growth risks rise.

In the US, Fed officials have signaled that holding rates may be appropriate while they assess how long the energy disruption persists — whereas hiking could upset a low-hire/low-fire labor market that already looks finely balanced.

Bottom line: we will keep tracking the signals, but our view is that rate markets have overshot in many places (contribution from David Peterson, Insights Analysis Lead Analyst).

Energy: A Buying Opportunity, Ed Yardeni & Elias Griepentrog, Yardeni Quicktakes extract

We gave up on the S&P500 Energy sector a couple of years ago. It has been underperforming the S&P500 since late 2022. As a result of the latest war in the Middle East, it has been an outperformer since the beginning of this year through Friday, March 27.

The sector has been underperforming again since then, when President Donald Trump suggested the war would end soon. We are inclined to use the recent selloff to overweight the sector.

That’s because we reckon the price of a barrel of Brent crude oil will fluctuate between US$75 and US$95 once the war ends.

We don’t think it will fall back to the pre-war range of US$55-US$75 anytime soon. Importantly, physical damage to energy infrastructure in the countries around the Arabian Gulf, combined with fundamental changes in maritime insurance and transit confidence, means that even a full reopening of the Strait of Hormuz would not immediately restore normal flows.

The supply shock is likely to have a long tail.

Of course, if the war isn’t over, then overweighting the S&P500 Energy sector makes even more sense. 

Let’s consider the implications of a US$75-US$95 oil price to the US economy, the domestic oil industry, and oil stock prices:

(1) The US economy is far better equipped to absorb oil price shocks than it was many years ago. The ratio of US petroleum products supplied (a measure of physical demand) to US real GDP has been in a secular downtrend since the early 1990s. The economy now requires roughly half as many petroleum inputs to generate the same unit of output as it did in the early 1990s.

(2) The US energy sector has undergone a quiet structural revolution over the past four decades. The active rig count peaked in the early 1980s and has never come close to those levels since, reflecting a fundamentally leaner and more technologically advanced industry that today wrings far more production from each well than at any prior point in history.

US domestic production has climbed relentlessly, exceeding domestic petroleum consumption in 2023. This has reduced US vulnerability to geopolitical supply shocks. US production is best measured as oil field crude output (currently 13.6 mbd) plus natural gas plant liquids and renewable fuels (currently 10.0 mbd)

The US energy trade balance has undergone a significant reversal. The country that once imported lots of foreign crude oil and petroleum products is now a significant net exporter.

(3) After moving mostly sideways since mid-2022, energy stocks rebounded sharply since the start of the year as the US deployed military forces to the Middle East and then launched the war on February 28.

The stocks fell last week in response to the ceasefire and optimism that diplomatic discussions were underway to end the war. We doubt that it will be that easy to end the war. So, overweighting Energy stocks might be a good hedge against a resumption of the war. Many of them also offer good dividend returns.

The Oil & Gas Equipment & Services industry tends to be the most leveraged play on oil prices. It might continue to work if investors perceive that this industry will have plenty of orders to rebuild damaged infrastructure.

It’s very easy to overweight the S&P500 sector, since it accounts for only 3.3% of the S&P500’s market cap. We recommend a 5% to 10% weighting.

4) In the US, natural gas production has exceeded domestic consumption since 2019, with the surplus channeled into rapidly growing exports. This highlights how the US has shifted from being a gas importer to a leading global LNG exporter.

Electric power has emerged as the dominant source of domestic gas demand. Meanwhile, industrial, residential, and commercial consumption have remained broadly flat. The shift has been driven by the electrification of the economy and, increasingly, by the insatiable power needs of AI data centers.

Corporate news in Australia

– Ingenia Communities ((INA)) joins bidders for Peet Ltd ((PPC))

– Stanmore Resources ((SMR)) plans structured payments to support a coal acquisition bid

– National Storage REIT ((NSR)) advances a $4bn deal to support growth strategy

– Rio Tinto ((RIO)) progresses borates sale but faces challenges exiting titanium

– EQT Holdings ((EQT)) raises a record $21.7bn Asia-Pacific fund, highlighting strong investor demand

– Omega Oil and Gas ((OMA)) seeks $50m funding to advance its Queensland project

– MYBOS targets a 2027 IPO as it scales operations

– Wise Specialist Emergency Services draws private equity interest

– Future Fund launches an investigation into whistleblower complaints

– Qantas Airways ((QAN)) cuts fares to counter weakening travel demand

– Corporate Travel Management ((CTD)) faces an overcharging scandal exceeding $220m

– Dexus ((DXS)) under pressure over a controversial airport stake sale plan

– Multiplex returns to profit but continues recovery from Queen’s Wharf losses

On the calendar today:

-UK March CPI & PPI

-ATLAS ARTERIA ((ALX)) Qtrly Update

-BHP GROUP LIMITED ((BHP)) Qtrly update

-BANK OF QUEENSLAND LIMITED ((BOQ)) earnings report

-BEACH ENERGY LIMITED ((BPT)) Qtrly update

-ILUKA RESOURCES LIMITED ((ILU)) Qtr Update

-NORTHERN STAR RESOURCES LIMITED ((NST )) Qtrly update

-PALADIN ENERGY LIMITED ((PDN)) Qtr Update

-RESMED INC ((RMD)) earnings report

-SOUTH32 LIMITED ((S32 )) Qtrly update

-SCENTRE GROUP ((SCG)) AGM

-SHRIRO HOLDINGS LIMITED ((SHM)) ex-div 2.00c (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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