The Overnight Report: ‘Good’ Friday

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This story features PENINSULA ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: PEN

IPO Cerebras and AI enthusiam took US markets higher (again) overnight.

The Dow cracked through 50,000, the first time since Feb 11, with the S&P500 and Nasdaq hitting new closing highs.

The ASX200 eeked out a small gain yesterday thanks to BHP and Commbank. SPI futures are pointing to a positive start for Friday.

Good Morning,

The Australian market edged higher on Thursday, snapping a four-session losing streak.

The ASX200 rose 10pts (0.1%) to 8,641, with financials up 1%,  boosted by a recovery in CommBank ((CBA)) shares and with BHP Group ((BHP)) shares rallying too.

Claude AI concerns dragged Tech lower by -2.2%, including shares in Xero ((XRO)) which otherwise released a robust set of financials.

Analysts’ appraisal is in stark contrast to the sagging  share price on the day.

Today’s calendar is a lot quieter with Alkane Resources ((ALK)) scheduled to enlighten shareholders about its H1 performance.

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

Today’s Big Picture, J.L.Bernstein 

Cerebras Lands The Biggest IPO Of The Year

The AI chipmaker priced at US$185 last night and opened at US$350, trading around US$317 in the afternoon.

That puts the valuation near US$70 billion on a company taking direct aim at Nvidia.

It’s the largest US tech IPO since Uber in 2019, and it cracks the door open for OpenAI, Anthropic, and SpaceX later this year.

The Bond Market Is Sending A Warning

For every US$100 you have in the S&P500, the underlying companies are earning about US$3.40 in annual profit.

A 10-year Treasury bond pays you US$4.47, risk-free.

So right now, boring government bonds pay you more than stocks actually earn, and that gap is the widest it’s been since 2003.

I think this is the chart that matters today, not the Dow milestone.

The point being: investors are taking on stock risk for less return than they could lock in with Treasuries.

That math has only been this lopsided a handful of times, and it usually doesn’t end well for stocks.

Trump And Xi Day One Was Mostly Photo Ops

The two sides agreed the Strait of Hormuz stays open and Iran can’t toll the waterway.

Trump told Fox News that Xi committed to 200 Boeing jets.

Analysts were modeling up to 500, so the stock sold off.

Friday’s working lunch is where actual trade deliverables would land.

NAB Market’s Today extract

President Trump’s visit to China made headlines but did little to trouble markets. President Xi said, “the Taiwan issue is the most important issue in China-US relations,” according to the official Xinhua News Agency.

“If mishandled, the two nations will experience collision or even clashes, pushing the entire China-US relationship into a highly dangerous situation.”

The US readout made no mention of Taiwan. The Chinese readout said simply that ‘views were exchanged on the Middle East’ while the US readout said the two side agreed the Strait of Hormuz must remain open, that China opposed militarisation and efforts to charge a toll, and that the two sides agreed Iran can never have a nuclear weapon.

Both readouts noted investment opportunities and US Treasury Secretary Bessent said Beijing and Washington are discussing a mechanism for fast-tracking some Chinese investment deals, along with a reduction in tariffs on a number of non-critical goods

US retail sales showed the consumer was resilient in the face of higher gas prices in April. Retail sales was 0.5% after 1.7% prior, in line with expectations. Weekly initial jobless claims remained low at 211k, but were a little above consensus for 205k.

UK GDP rose 0.6% q/q, in line with expectations, and the March monthly outcome of 0.3% m/m was above expectations for -0.1%.

Many analysts, reportedly including Bank of England officials, suspect challenges with seasonal adjustment mean the strength may be overstated. Data since the pandemic show healthy growth in the first half that stalls or contracts in the second.

From the BoE, chief economist Pill said the economy needs more restriction than it did before the conflict, that he prefers a “modest but prompt” increase in rates, and that uncertainty was not a reason for inaction.

The remarks were hawkish but not a surprise. Pill was the sole dissenter in favour of a hike at the previous meeting.

Instead, it was political machinations that remained in the driver’s seat for UK markets. Manchester Mayor Andy Burnham said he is seeking to run for Parliament and Labour MP Josh Simons announced plans to step down from his seat to allow Burnham to run.

Earlier in the day, Wes Streeting resigned as health secretary, paving the way for him to also challenge the PM job.

In rates, US 10yr yields are 2bp higher at 4.48%, while 2yr yields are 4bp higher at 4.01% reversing earlier declines.

As well as supportive US data, Kansas Fed President Schmid, a known hawk, said the labour market is functioning effectively and inflation is the most pressing concern. Yields were generally lower elsewhere.

German 10yr bunds were -6bp lower amid quiet trading with the Acension day holiday. Australian 10yr yields slipped -4bp yesterday but futures-implied yields are 1bp higher overnight. UK 10yr gilts were -7bp lower yesterday, with the market closing just ahead of the Burnham headlines that drove GBP weakness.

US Equities rose. The S&P500 was 0.8% higher with gains led by tech. IT stocks in the index were 1.9% higher even as 5 of 11 sectors showed declines.

The Nasdaq rose 0.9%. Cisco shares rose 13% saying it’s cutting jobs so it can pour more resources into AI.

Cerebras jumped nearly 70% on its first day of trading, with the WSJ noting it kicked off a year for AI-related IPOs that could include the likes of OpenAI, Anthropic and Elon Musk’s SpaceX.

In commodities, Brent oil was 0.9% higher at US$106.54 but within the US$102.80 to US$108.54 range that has prevailed this week.

Tehran allowed 30 vessels to pass through the Strait of Hormuz since Wednesday evening, according to the IRGC, although transit remains limited.

Axios, citing senior officials, reported Trump is unlikely to take any dramatic steps on Iran during his China trip, but the next move could follow immediately afterward.

Rethinking US equity exposure through sectors, Dina Ting, Franklin Templeton

US equities continue to march higher in 2026 despite geopolitical uncertainties, supported by resilient economic data and strong corporate earnings.

Much of the market narrative remains focused on mega-cap technology and artificial intelligence (AI). Yet increasingly uneven performance across sectors suggests the opportunity set is wider, and more complex, than the headline index return may imply.

Looking beyond broad market exposure, investors are increasingly attracted to sector strategies as a complement to their core US equity allocations or to better align portfolios with the macroeconomic forces shaping returns.

US labor market data recently exceeded expectations, while unemployment held steady, reinforcing a risk-on tone. That, in turn, has helped drive one of the S&P500 Index’s strongest monthly gains in recent years.

Some uncertainty may reflect a familiar disconnect, however, between headlines and fundamentals, Main Street and Wall Street.

US consumer confidence recently hit record lows even as spending remains somewhat resilient and markets have climbed. This gap highlights a key dynamic in today’s environment—one where differences beneath the surface are playing a larger role in shaping outcomes.

Over the past year, the communication services and information technology sectors have delivered returns in the mid-20% range, while financials have been mostly flat.

Over a three-year horizon, communication services returned roughly 35%, compared to about 14% for financials. Even over five years, the spread remains notable, with technology delivering close to 20% annualized returns versus high single digits for more cyclical areas.

This growing divergence suggests equity investors may want to take a more tactical approach. As dispersion rises, the difference between sector exposures can be more impactful.

Another important consideration is how much the US equity market itself has evolved.

Two decades ago, sectors such as financials and energy played a much larger role in driving index returns. Today, information technology and communication services dominate, reflecting the rise of digital platforms, software-driven business models and asset-light growth companies.

Rather than moving in lockstep, sectors have recently diverged in response to economic forces. In fact, sector dispersion—the spread between the best- and worst-performing sectors—has widened meaningfully in recent years and remains elevated.

The widening reflects the uneven impact of higher interest rates, shifting consumption patterns and rapid technological change, and highlights how much sector positioning can influence outcomes.

Market weights are not the only thing shifting. We have also increasingly seen earnings growth resulting from certain digital transformations. This has particularly been the case with business models that benefit from scale—where larger platforms can serve more users at lower cost, and where growing user bases reinforce their competitive advantage.

Communication services are a clear example.

Today, nearly 70% of the global population uses social media, and close to 90% of adults are connected in some form. Digital advertising has become the primary channel for reaching consumers, while streaming, gaming and the broader creator economy are still rapidly expanding.

Rather than viewing these as short-term trends, we believe they reflect deeper shifts that are shaping where growth and market leadership come from.

In this environment, sectors can be considered a transmission mechanism for macroeconomic forces. Higher interest rates, for example, have supported bank profitability through stronger margins, but have also weighed on loan growth and valuations.

Meanwhile, innovation cycles, particularly around AI, have continued to support technology and communication services. On the consumer side, spending patterns have become more selective, with US households cutting back in some discretionary categories while continuing to prioritize experiences such as travel, entertainment and live events.

Recent surveys suggest Americans are seeking value rather than simply reducing spending, opting for shorter trips, discount retailers or fewer non-essential purchases to preserve spending on experiences and convenience.

At the same time, online retail continues to gain share, accounting for roughly 17% of total US retail sales late last year, up meaningfully from pre-pandemic levels.

These crosscurrents mean different sectors can perform very differently, even within the same overall market.

For investors, this raises an important question: How should portfolios adapt?

Broad US equity exposure remains a core building block for many portfolios. However, given the growing importance of sector-level dynamics, investors are increasingly looking to complement that core with more targeted exposures.

Sector strategies can offer a more precise way to express views—whether leaning into structural growth, adjusting rate sensitivity or balancing cyclical and defensive exposures.

For investors already holding broad US equity exposure, sector strategies may be used not only to increase exposure to specific structural themes, but also to offset areas where the broad index may already be heavily concentrated.

Importantly, this is not about short-term timing. Instead, it reflects a shift from simply “owning the market” to more intentionally accessing the drivers of the market.

The dynamics we see today suggest a one-size-fits-all approach to US equities may be less effective, with opportunity lying in looking beyond the index and using sector-level exposures to complement core allocations and better align portfolios with the forces shaping returns.

US: From ample to agile – the Fed’s path to a leaner balance sheet, Oxford Economics extract

New Federal Reserve President Kevin Warsh wants to shrink the Fed’s balance sheet, but he’ll run into hurdles, and we haven’t made any changes to our assumptions.

Assuming he can build a consensus among Federal Open Market Committee members, the process would likely take years and may occur only in fits and starts depending on financial market conditions.

Fed officials have been hesitant to shrink the balance sheet further because of the risk of pushing Treasury and mortgage rates higher and increasing funding market volatility.

Meaningful Treasury security reduction is constrained by the Fed’s ample-reserves policy framework and elevated bank holdings.

Without regulatory easing and a shift away from the ample-reserves framework, a further runoff risks repo-market strains and rate volatility. Outright mortgage-backed security sales are unlikely to occur soon because of the risks to housing affordability.

Increased volatility in funding markets due to reduced reserves will require the Fed to normalize use of the discount window and its standing repo facility or build new backstops, but stigma and policy lead times make this difficult.

Coordination to shrink the Treasury General Account is uncertain, and deploying TGA cash in repo is likely to offer only a marginal benefit.

Corporate news in Australia:

-Ausgrid’s $3bn smart meters business and ES unit has attracted six bidders

-Albemarle booked a -$1.1bn charge after shutting its WA Kemerton lithium hydroxide refinery amid ongoing losses

-Metcash ((MTS)) resolved a dispute with senior executives over dismissals

-Worley ((WOR)) announced a $300m share buyback and executive leadership changes

-Atlassian was removed from rankings of Australia’s best tech employers

-Peninsula Energy ((PEN)) launched a US$40m capital raising

-Barbeques Galore will emerge from receivership while remaining under the same ownership

-Australia’s Federal Court ruled Coles Group ((COL)) misled shoppers with deceptive discount pricing practices

-Zip Co ((ZIP)) lost its trademark battle with Firstmac and must stop using the “Zip” name in Australia

-Resolute Mining ((RSG)) entered a trading halt ahead of an announcement on its Cote d’Ivoire scoping study

-Jeremy Raper significantly reduced his stake in Humm Group ((HUM)) following board changes

-Perth biotech Syngenis is expanding its AI-driven drug discovery efforts

-UBS benefited from trading activity during Commonwealth Bank’s ((CBA)) record share price decline

-Deutsche Bank arranged a $365m securitisation funding deal for MoneyMe ((MME))

-KPMG admitted a partner used confidential Lendlease Group ((LLC)) files in a pitch to Westpac Bank ((WBC))

-Ken Griffin’s Citadel is quietly becoming more influential in Sydney’s fast-growing trading market

On the calendar today:

-NZ April Manu PMI

-JP April PPI

-CH 1Q BoP

-US April industrial Prod’n

-AUCKLAND INTERNATIONAL AIRPORT LIMITED ((AIA)) Qtrly Update

-ALKANE RESOURCES LIMITED ((ALK)) FY26 earnings report

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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