The Overnight Report: Peace Dividend

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This story features DIGICO INFRASTRUCTURE REIT, and other companies.
For more info SHARE ANALYSIS: DGT
The company is included in ASX300 and ALL-ORDS

US markets hit record highs on Wednesday with Nasdaq up 2% as investors flocked to chip and semiconductor stocks.

Talks of a peace deal for the Middle East boosted sentiment. Oil fell.

After a robust rally in the top ten Australian stocks yesterday, the ASX200 futures are indicating a strong follow-through.

Can the rest of the market catch up to the leaders?

Good Morning,

The ASX200 rallied 1.3% or 113 points to 8,794 on Wednesday.

Banks and miners did the heavy lifting, with only five out of eleven sectors rising.

The Top 10 stocks reportedly accounted for 100% of Wednesday’s index rise (as most investors would have observed through their own portfolio).

On the local calendar today, Orica ((ORI)) and Block ((XYZ)) are scheduled to release financial performances, while Amcor’s (overseas listing) failed to please (as broadly suspected).

Here’s RBC Capital’s early take on the release:

“While Amcor’s 3Q26 result was in-line with the market, it was boosted by lower than anticipated depreciation, interest and tax expense ($43m).

“The company downgraded full year EPS and free cashflow guidance, and they appear to be stretch targets as the company requires Q4 EPS growth >20% (cf +6% Q3) and FCF of $1.64bn (cf Q3 -$39m) to reach the mid-points.

“The balance sheet remains stretched with company-defined leverage of 3.8x. We remain cautious given the challenging consumer and rising raw material cost environment, and we retain our Sector Perform rating.”

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

ANZ Bank, Australian Morning Focus extract

Equity markets rallied on increased hopes of a resolution to the Middle East conflict. The S&P 500 was up 1.46%, the EuroStoxx50 ended its session up 2.7% and the FTSE100 rose 2.1%.

The yield on the US 10y Treasury note fell -3.3bp to 4.35%. Oil was weaker, although off its intraday lows. Brent fell- 5.6% to US$102/bbl and WTI fell -4.4% to US$95.9/bbl. Gold rose 0.5% to US$4,688.2/oz.

US: April private sector ADP jobs rose 109k, the strongest gain since January last year. Education and health services led the rise, accounting for 61k jobs, and remaining the dominant sector for job creation. Wage growth for job stayers eased marginally to 4.4% y/y versus 4.5% y/y.

The updated ECB wage tracker reflected new collective bargaining agreements signed since March and showed no pick-up in wage growth.

Including unsmoothed one-off payments, settlements remained stable at 2.6% y/y. That was down from 3.0% in 2025, indicating the labour market is a source of disinflation. Higher energy prices were not reflected in stronger one-off payments, although persistent higher energy prices over coming months could have some future impact.

Middle East: Markets were driven by optimism about an agreement being reached in the coming days to end the Middle East conflict, although the degree of optimism oscillated through the day in response to various statements from both sides.

President Trump said it was too early to prepare for a face-to-face meeting with Iran, while Iran said the proposal was an American initiative with some exaggeration. The situation remains highly fluid, with intraday volatility likely to remain high until greater substance emerges.

US: The scheduled national data releases get underway this week. April nonfarm payrolls are expected to have risen 65k, in line with the 3m moving average (68k). Most jobs are expected to come from the non-cyclical education and health services sectors.

It will be interesting to see how a supply-side focused Fed chair interprets the data and influences colleagues on the FOMC. We know that strong productivity growth partly explains low hiring. Warsh has argued this is disinflationary.

The relationship between trimmed mean inflation and wage growth supports that assessment. This is contributing to underlying disinflation, supporting the case for lower interest rates later this year, although the FOMC will need evidence that inflation has peaked before resuming rate cuts.

Energy markets fell on the prospect of a US-Iran peace deal. The subsequent risk-on tone pushed industrial and precious metals higher.

Is Gold Still a Safe Haven, Morgan Stanley extract

Gold has stumbled in the wake of the Iran conflict after delivering consistent annual gains since 2021, including a striking 55% surge in 2025. The recent selloff, and the metal’s underperformance relative to other asset classes, is prompting investors to question gold’s traditional role as a safe haven.

In March, the first month of the conflict, gold fell -14.5%, while the FTSE All-World Index dropped -9%, the S&P500 lost -7.8% and the U.S. Treasury Total Return Index declined -3.6%. This marks a notable departure from prior geopolitical crises, when gold typically outperformed and provided protection during downturns.

The weak performance extended into April. While equities recovered to near pre-conflict levels in the first half of the month, gold remains down roughly -10% from where it stood before the conflict, recouping only about one-third of its losses.

Its performance has tracked more closely with U.S. Treasuries, suggesting gold is currently more sensitive to real interest rates and monetary policy than to geopolitical risk.

“With the conflict triggering an energy supply shock that has reduced hopes for lower U.S. interest rates, it is not surprising that gold has struggled to work as a safe haven this time,” says Amy Gower, Morgan Stanley Research’s Metals & Mining Commodity Strategist.

A key dynamic is behind this shift. Gold doesn’t always provide protection against inflationary shocks. Elevated oil prices and supply chain disruptions can push interest rate expectations higher, an environment that tends to hurt gold prices.

“Gold’s sensitivity to monetary policy has taken over as the key price driver,” Gower notes. “This has overshadowed its safe-haven status and reduced its effectiveness as a hedge against both geopolitical and inflation risks. Gold prices reflect not just the impact of a particular event but, more importantly, the policy response that follows.”

Additional downward pressure has come from changes in central bank activity. Having bought significant amounts of gold since 2022, central banks paused purchases in March. Turkey’s central bank, for example, sold -52 tonnes of gold between Feb. 27 and March 27 and arranged swaps totalling 79 tonnes. Meanwhile, India delayed approvals for bullion imports.

Exchange-traded funds (ETFs), another key buyer for gold, also turned into sellers, liquidating roughly -90 tonnes of the 150 tonnes accumulated in January and February.

However, there are early signs these pressures may be easing. ETFs have already repurchased nearly half of the gold they sold in March. China reported its largest monthly increase in gold reserves since January 2025. A weakening U.S. dollar is also providing support for prices.

With central banks and ETFs resuming purchases, and expectations for the Federal Reserve to remain on hold for the rest of 2026, Morgan Stanley Research forecasts gold prices could rise to US$5,200/oz in the second half of the year, about 9% above April 22 levels.

This outlook is less optimistic than an earlier projection of prices reaching as high as US$5,700/oz under a more bullish scenario.

“Gold is likely to remain sensitive to real yields, but we see room for further upside,” Gower says.

Morgan Stanley economists expect the Fed to cut interest rates in January and March of 2027, by -25 basis points each time.

This should benefit gold, with ETF purchasing decisions particularly sensitive to policy signals and gold now realigning with real rates.

“Gold prices may suffer if markets begin to anticipate prolonged rate holds or even hikes,” Gower warns.

“At the same time, upside in a resolution scenario could be limited, as already elevated prices may constrain demand from ETFs, central banks and consumers.”

Investors underestimating China leverage on Iran-Hormuz crisis, Nigel Green, deVere extract

Iran’s top diplomat visiting Beijing on Wednesday, as Donald Trump prepares for his meeting with Xi Jinping, underscores how central China is becoming to any diplomatic outcome involving the Strait of Hormuz.

Iranian foreign minister Abbas Araghchi met Chinese foreign minister Wang Yi in Beijing following the sharp escalation in the war between the US and Iran, and after Trump put “Project Freedom” on hold, the US naval operation launched to escort commercial vessels through the Strait of Hormuz.

China’s quiet emergence as the power broker in the Strait of Hormuz crisis could become one of the most important investment stories of the year.

While markets focused on Donald Trump’s reversal over military escorts in the Gulf, Beijing was meeting directly with Iran and positioning itself at the centre of diplomacy tied to global energy flows.

The timing of the visit highlights a geopolitical realignment taking place in real time. China is expanding its influence around the world’s most strategically important oil corridor without military intervention or a naval coalition.

The Strait of Hormuz handles roughly 20% of global seaborne oil flows and a large share of LNG exports.

Around 84% of crude shipments moving through the route are destined for Asia, with China remaining the world’s largest crude importer and one of the biggest buyers of Iranian oil despite years of US sanctions pressure.

Investors are still focused heavily on earnings momentum and AI-driven equity gains while underestimating the longer-term implications of Beijing’s growing influence over energy diplomacy and trade routes.

Strong corporate earnings, especially across AI and large-cap tech, continue supporting equity markets near record highs.

But underneath the headline indices, capital is, quite sensibly, moving more carefully. Investors are paying much closer attention to freight exposure, energy sensitivity, supply-chain resilience and pricing power.

China brokered the restoration of diplomatic ties between Saudi Arabia and Iran in 2023 and has steadily expanded its influence across the Gulf through trade agreements, infrastructure investment and long-term energy partnerships.

Beijing’s role is strengthening because every major economy remains dependent on stable Gulf energy flows.

Washington increasingly, it seems, needs China engaged if it wants diplomatic stability around Hormuz.

This represents a major change in geopolitical influence because Beijing now holds economic and political leverage with Tehran that Western governments do not.

The developments are likely to drive stronger investor interest toward sectors linked to energy security, strategic infrastructure, commodities, defence and cybersecurity.

This is becoming a battle for influence over energy routes, shipping flows and commodity stability at the centre of the global economy.

Longer term, investors should focus on how much geopolitical and economic leverage China is building by becoming increasingly difficult to bypass during global energy crises.

Moving forward, China will become an increasingly essential market factor.

Corporate news in Australia

-DigiCo Infrastructure REIT ((DGT)) sells a Chicago data centre for $1b and plans further US asset sales

-Atlas Arteria ((ALX)) rejects IFM Investors’ $7bn hostile takeover bid and appeals to the Takeovers Panel

-JPMorgan appointed to lead Atlas Arteria’s ((ALX)) Chicago Skyway selldown

-EMR Capital’s Ravenswood Gold Mine faces severe financial stress and potential insolvency

-Canva secondary sales lift staff wealth, but may be contributing to early executive exits

-Tanami Gold ((TAM)) launches $70.5m rights issue

-McKinsey & Company faces competitive pressure as banks balance external advisory work with internal strategy teams

-BWP Trust ((BWP)) seeks $228m to fund property pipeline expansion

-ARN Media ((ARN)) removes $3.2m worth of shares from Kyle Sandilands and Jackie O Henderson amid a contract dispute

-BHP Group ((BHP)) signals openness to renminbi-denominated bond issuance after China deals

-Rio Tinto ((RIO)) plans further cost cuts while sharpening focus on copper growth

-Chobani profits strengthen on surging high-protein yogurt demand

On the calendar today:

-AU March Trade Bal

-EZ March retail sales

-US March Qtr Nonfarm Productivity

-US May Jobless Claims

-ALCOA CORPORATION ((AAI)) AGM

-HELIA GROUP LIMITED ((HLI)) AGM

-OM HOLDINGS LIMITED ((OMH)) ex-div 1.00c

-ORICA LIMITED ((ORI)) 1H26 earnings report

-BLOCK INC ((XYZ)) 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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