The Overnight Report: A Bleak Friday Ahead

Array
(
    [0] => Array
        (
            [0] => ((MQG))
            [1] => ((NWS))
            [2] => ((REA))
            [3] => ((QBE))
            [4] => ((SUL))
            [5] => ((KMD))
            [6] => ((NXT))
            [7] => ((ARN))
            [8] => ((ORI))
            [9] => ((TLS))
            [10] => ((CCP))
            [11] => ((HUM))
            [12] => ((MQG))
            [13] => ((NWS))
            [14] => ((QBE))
            [15] => ((QBE))
            [16] => ((REA))
            [17] => ((TPG))
            [18] => ((WAF))
            [19] => ((WBC))
        )

    [1] => Array
        (
            [0] => MQG
            [1] => NWS
            [2] => REA
            [3] => QBE
            [4] => SUL
            [5] => KMD
            [6] => NXT
            [7] => ARN
            [8] => ORI
            [9] => TLS
            [10] => CCP
            [11] => HUM
            [12] => MQG
            [13] => NWS
            [14] => QBE
            [15] => QBE
            [16] => REA
            [17] => TPG
            [18] => WAF
            [19] => WBC
        )

)

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

The S&P500 reached a new all time high before pulling back as uncertainty around the Middle East lifted and oil prices bounced off lows.

After two solid gains on the Australian market, the ASX200 futures are pointing to a sharp retracement for the final session of the week.

Good Morning,

The ASX200 rallied for a second consecutive day, up 85 points or 0.96%, led by the resources sector.

SPI futures on Friday morning are indicating a rather large retracement might be on the cards.

Reporting season and quarterly updates continue today with Macquarie Group ((MQG)), News Corp ((NWS)), REA Group ((REA)) plus QBE Insurance’s ((QBE)) AGM plus quarterly update.

For more details, check out the FNArena Corporate Calendar:

https://fnarena.com/index.php/financial-news/calendar/

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

Oil Swings on Iran Deal Hopes 

Brent crude dipped almost -7% off Iran deal hope this AM but its back above green by this afternoon.

Iran is reviewing a US peace framework but a senior official said they won’t reopen the Strait of Hormuz without major concessions and reparations.

Saudi Arabia and Kuwait reopened their airspace and bases to the US military, clearing the way for ship escort operations to restart.

The AI Rally Is Reaching Historic Territory 

The semiconductor index ($SOX) is now trading further above its 200-day moving average than any point since March 2000.

Apple hit an all-time high. The Nikkei blew past 62,000 for the first time as SoftBank posted its best day since the pandemic.

Paul Tudor Jones said this feels like 1999 and warned the eventual correction could be “breathtaking”.

Roughly two-thirds of S&P500 stocks near 52-week highs are tied to the AI buildout.

Multiple Consumer Stress Signals Flashing at Once 

Whirlpool said appliance demand hit 2008 lows and suspended its dividend.

Planet Fitness paused price hikes because members are too cash-strapped.

Shake Shack posted an operating loss as foot traffic dried up.

The NY Fed survey showed inflation expectations rising and household finances deteriorating.  Mortgage rates climbed back toward 6.5.

These are different companies in different industries all saying the same thing.

Chris Weston, Pepperstone

Once again, the news flow on the geopolitical front has shown the path towards a lasting agreement is anything but linear.

Traders have had to rethink the assumptions on the trajectory of the conflict and the normalisation of vessel flows through Hormuz that had been made over the last couple of sessions.

President Trump brought back “Project Freedom”, while headlines came in liberally about the U.S. attacking Iran’s Qasr port and Bandar Abbas, with Iran countering through strikes on three U.S. destroyer vessels and claiming the U.S. had breached the terms of the ceasefire.

The news flow and the cross-asset moves in U.S. trade set up another lively Friday trading session, with our opening equity index calls suggesting a tough day at the ‘ASX200’ office for those leveraged long risk.

Investors and market participants are more broadly considering the prospect of gap risk across various markets on the Monday open, and the extent of any possible moves should headlines evolve further, which seems almost inevitable.

In U.S. equity markets, the cross-asset moves compelled players to reduce exposures and elevated weightings towards some of the market darlings, with AI power generation and infrastructure, memory, and broader AI winners all cut back.

Nvidia has been the main exception and has supported the NAS100 and S&P500, gaining 1.8% to US$211.50, but on the day 65% of S&P500 stocks closed in the red, with a number of heavyweight names continuing to find sellers in the after-market session.

The move in crude has been the backbone and epicentre of the broad market moves on the day.

We initially saw Brent crude trade down to session lows of US$96, but as U.S. trade ramped up, buyers took firm control, driving crude back to US$102.50 before undergoing a period of chop and two-way flow.

Buyers then stepped in once again in response to fresh headlines, and in the final hour of futures trade, crude pushed firmly above US$103 and onto session highs for the day.

The early move higher in WTI and Brent crude saw S&P500 futures crack below 7,400 before going on a one-way tear lower to 7,345.

This then triggered the chain of events we would typically expect to see, with lower equities, a firmer U.S. dollar index finding support at 98, EUR/USD offered into 1.1750, and AUD/USD pulled back into 0.7200.

Even so, the moves in FX markets remain gradual and somewhat glacial in nature.

Silver had initially looked strong, trading up into US$82, and we saw solid flows picking up on the intraday range expansion. However, the move quickly rolled over, and silver now trades at US$78.41.

Gold was whippy through most of the session before finally cracking in the last half hour, trading down from US$4713 to US$4687, as traders once again revisited pockets of strength in the U.S. dollar and, more importantly, higher real and nominal Treasury yields coming through at the back end of the curve.

This sets us up for an interesting open in Asia, with our opening index calls suggesting a more sinister tone, with the ASX 200 called down -1.7%, the Hang Seng down -0.9%, and the Nikkei 225 down -1.2%.

As investors and traders have seen so often, periods of divergence between the U.S. and Iran are frequently followed by more constructive headlines and signs of togetherness. As such, market participants are now conditioned for the trajectory to remain non-linear, and few genuinely see this situation completely falling apart.

However, a market that has moved aggressively and is showing signs of froth may require a more forceful reduction in risk exposure, and we may see some of that play out today.

In the current price action, the “buy the dip” mentality in risk assets remains very much alive, and that is unlikely to change. But risk management is the key theme of the day.

As we look towards today’s release of the US non-farm payrolls, the key question is how much influence this data release will really hold on markets. U.S. interest rate markets still need work, as traders effectively see the Fed sitting on its hands and doing very little over the next 12 months.

One payrolls report is unlikely to materially change that outlook, and therefore it may take an outlier number, particularly a sufficiently weak one, to really move the dial on U.S. dollar volatility.

Next week’s CPI print may ultimately prove to be the bigger driver of risk sentiment.

NAB Markets Today Research extract – UK Elections

Despite large parts of the UK going to the polls Thursday for regional or local elections, where the ruling Labour Party is widely expected to lose as many as -70% of its local council seats in England and suffer heavy losses in Scotland and Wales, which will likely lead to an internal party challenge to PM Keir Starmer’s position, Gilt yields have been well-behaved.

All this said, the Labour Party is expected to lose heavily in results that will trickle out over the next 24 hours, with a reasonably clear big-picture view anticipated sometime on Friday afternoon UK time (Friday evening in Australia and NZ).

The timing of any challenge to PM Starmer, and thereby also likely Chancellor Reeves, will depend on the extent of the losses and the fact the two main contenders seen in such a challenge are believed not to be quite ready to move.

Other challengers, who may also be able to command the required 80 parliamentary seats to mount a challenge, could make an early move, but one line of thought is they will wait until others also move, unless the local election news is even worse than expected and the favoured challengers do not come forward.

Global Equity Pulse: Conflict and Opportunity, Templeton Global extract

Increased European defense spending and greater strategic autonomy are growth drivers for the European aerospace and defense industry.

However, they also make it more challenging to identify the most compelling investment opportunities — particularly with constant “headline noise.”

We believe an active approach grounded in deep fundamental research can help target undervalued opportunities as a wave of rearmament progresses at a rapid pace, and not only in Europe but also across the globe.

In such an environment, we believe a focus on bottom-up stock selection and price discipline is key.

Despite a strong 2025 for equities, we believe markets have been overly fixated on near-term geopolitical events rather than the longer-term structural forces reshaping the European defense industry.

Any de-escalation of geopolitical tensions can drive swings in sentiment and short-term volatility — US President Trump’s U-turn on Greenland is one recent case.

When seeking long-term opportunities, we keep an eye on these short-term events to see if they impact multiples on stocks with long-term visible earnings drivers. 

Rearmament: A global phenomenon

United States: The Trump administration has proposed a historic US$1.5 trillion defense budget for fiscal year 2027, representing a roughly 42% increase over current funding levels.

Europe: As of May 2026, the European Commission is implementing a EUR150 billion loan scheme via the Security Action for Europe (SAFE) instrument to support member-state defense procurement. Concurrently, Germany has finalized its 2027 budget, raising defense spending to 3.1% of gross domestic product (GDP).

Japan: Japan’s Cabinet approved a record YEN9 trillion (US$58 billion) defense budget for the fiscal year beginning April 2026, marking a 9.4% increase from 2025.

The conducive policy backdrop and healthy growth prospects affirm our conviction in European aerospace and defense companies. However, we remain prudent in our investment approach, maintaining valuation discipline amid ongoing sector strength.

The MSCI Europe Aerospace and Defense Index has been on an extended run versus the broader European market, with a 26% five-year price return versus the MSCI Europe Index’s 6.0% (as of March 31, 2026).

Much of the increase in defense budgets is driven by equipment-related spending, which is the component directly feeding into the revenue of aerospace and defense companies, as compared to personnel or infrastructure-related spending.

So far, major US suppliers have been the key beneficiaries of this demand growth, but we think the recent cracks in the trans-Atlantic security partnership may lead to a partial or even significant pivot back to European suppliers.

From our bottom-up perspective, we look for companies with strong government backlogs, conservative balance sheets, consistent free cash flow and attractive valuation multiples.

We believe these firms are best positioned to benefit as rising defense budgets flow through to order growth and long-term earnings potential. Multi-year government contracts are important as they provide stable, predictable revenue regardless of economic cycles. 

We also look at the health of margins and sustainability of earnings power, among other factors. Some key considerations are: 

• Technological edge and the ability to adapt to new trends. The nature of warfare is changing, and military customers and adversaries are increasingly using offensive and defensive cyber and electronic warfare capabilities. One of our European favorites, a large UK-based aerospace and defense company, is already diverse, but it plans to continue to shape its portfolio toward these higher growth, technology-focused, and strategically important domains such as space, drones, counter-drones and electronic warfare.
• Exposure to increased defense spend: This company in our research universe is a strategic partner to the French military, deriving over 40% of defense sales from the French state, which is also a 26% shareholder in the company. Its electronics and sensors are on all France’s major defense platforms—fighter jets, frigates and air defense systems—and it has a around 25% share of France’s national defense budget.

Investors should also keep in mind that some European defense majors have diverse sales exposure to not just Europe, but also the United States and Asia-Pacific countries. Ultimately, defense as an investment theme is not exclusive to Europe.

At a time when a multi-polar world order is slowly but surely taking shape, nations spending more to build their own defense will likely be a permanent feature of the global security landscape, and a potentially lasting opportunity that investors can harness for long-term returns.  

In the United States, health care remains of particular interest given historically low valuations, stabilizing/improving fundamentals, and resolution of various macro-overhangs.

European equities face a near-term energy headwind as Middle East tensions lift crude oil, liquefied natural gas (LNG) and refined product prices, weighing on growth and inflation. Yet medium-term prospects are improving, supported by competitiveness reforms,

German fiscal stimulus and defense spending.

In Asia Pacific, the bellwether semiconductor names in Taiwan and South Korea have reported record-high first-quarter earnings. Driven by the technology sector, regional earnings growth at the index level continues to look robust.

We maintain our high conviction but will be selective in our allocations, focusing on the more resilient parts of the artificial intelligence (AI) value chain.

Corporate news in Australia

-Legora acquires Melbourne-based regtech firm Graceview

-Super Retail Group ((SUL)) remains open to acquiring KMD Brands ((KMD))

-Asahi Group leads the race to acquire coconut water brand H2coco

-NextDC ((NXT)) completes a $1.7b hybrid securities offering

-ARN Media ((ARN)) reports a -10% revenue decline following backlash involving Kyle Sandilands and Jackie O Henderson

-Orica ((ORI)) delivers its strongest earnings result in 20 years driven by technology improvements

-SkinKandy increases its IPO size to $160m amid strong investor demand

-Andrew Abercrombie challenges the Takeovers Panel in the High Court

-Federal Court rules TelstraSuper ((TLS)) breached internal dispute handling requirements

-Sharon AI increases public engagement efforts amid sector uncertainty

-Palisade Investment Partners markets its livestock exchange business to buyers

-Deloitte commits $1bn to back-office systems as AI automates up to 30% of consulting work

-Credit Corp ((CCP)) nears completion of due diligence on a potential Humm Group ((HUM)) acquisition

On the calendar today:

-JP March earnings

-US April Non Farm Payrolls

-US April Unemployment

-MACQUARIE GROUP LIMITED ((MQG)) FY26 earnings report

-NEWS CORPORATION ((NWS)) Qtrly update

-QBE INSURANCE GROUP LIMITED ((QBE)) AGM

-QBE INSURANCE GROUP LIMITED ((QBE)) Qtrly update

-REA GROUP LIMITED ((REA)) Qtrly update

-TPG TELECOM LIMITED ((TPG)) AGM

-WEST AFRICAN RESOURCES LIMITED ((WAF)) AGM

-WESTPAC BANKING CORPORATION ((WBC)) ex-div 77.00c (100%)

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms