The Overnight Report: April Inflation Awaits

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This story features AMCOR PLC, and other companies.
For more info SHARE ANALYSIS: AMC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

US markets gained again with Micron leading the memory chip sector and topping a US$1trn valuation.

The Australian market slipped yesterday ahead to today's April CPI reading, expected to come in at 4.4% from 4.6%.

Good Morning,

It is said US investors are suffering from heavy FOMO as the end of the war surely will trigger the next rally (?) and strong AI-led earnings cannot be ignored.

Not quite the picture that is dominating the market Down Under.

Yesterday, the Australian market fell -34.2 points or -0.39% to 8,657.80. Materials rose 0.15% and Fisher & Paykel Healthcare ((FPH)) rallied 9.15% post result with ASX ((ASX)) shares down -13.23% after updating on additional technology spend.

Nufarm ((NUF)) and Web Travel Group ((WEB)) are due to report earnings today, with the all important April CPI print due out at 11.30am AEST. 

For more details see https://fnarena.com/index.php/financial-news/calendar/

NAB forecasts Australia April CPI to fall to 4.4% from 4.6%, in line with consensus.

“A fall in fuel prices due to the -32c/l reduction in fuel excise (in place for 3 months from April) is the key driver.

“The path of headline inflation will remain highly sensitive to the evolution of retail fuel prices. For trimmed mean we pencil in 0.35% mom and 3.4% yoy with the risk skewed to a 3.5% print.

“The extent and speed of passthrough is a key uncertainty, but we expect some acceleration across goods, new dwelling construction and grocery prices to be evident in the April data.”

And to stay up to date on earnings season, check out the Corporate Results Monitor:

https://fnarena.com/index.php/reporting_season/

Today’s Big Picture, J.L.Bernstein

Micron Joins the Trillion Dollar Club 

Micron $MU became the first US memory chipmaker worth a trillion dollars, its best day since 2011.

The whole move came from one UBS note that more than tripled its price target, arguing AI has changed how memory gets valued.

The rest of the memory group rode along.

Memory is the new oil right now, but a move this big off a single note tells you sentiment is doing the work. 

The Hormuz Hangover

Oil was choppy as Washington and Tehran inch toward a deal, with US crude settling lower.

Even if the Strait of Hormuz reopens, do not expect cheap gas soon.

Around 1,500 ships are still stuck waiting, and rebuilding oil inventories runs well into next year.

Wall Street already has a name for it: the Hormuz hangover. 

The Rate Cut Bet Is Flipping

Underneath the record highs, the real action is in rates.

War-driven energy costs keep pushing inflation up, and consumer confidence slipped again in May as households point to prices at the pump and the grocery store.

A month ago traders expected Fed cuts; now they are betting on a possible hike. That shift matters more than any earnings report this week.

ANZ Bank Morning Focus extract

Markets in the US and UK had a positive tone as they caught up on positive Middle East developments since Friday, following public holidays there yesterday.

Markets in Europe were negative, as reports of military strikes between the US and Iran saw a partial pullback in yesterday’s optimism about a deal.

The S&P500 was up 0.6%, the EuroStox 50 was down -1.2% and the FTSE100 was up 0.2%.

The yield on the US 10y Treasury note fell -2bp to 4.49% and the UK 10y also fell, but European bond yields rose by around 3–5bp.

Oil prices were higher. WTI was up 2% at US$93.8/bbl. Brent rose 1.5% to US$99.7/bbl. Gold fell -0.4% to US$4,509.5/oz.

The Conference Board’s May measure of consumer confidence slipped -0.7ppt to 93.1. The present situation subindex fell 3.2pts to 121.2. Consumers’ plans to buy large-ticket items declined, while expectations of a recession over the next 12 months rose.

Two-thirds of consumers reported cutting back on overall spending because of rising prices, with many highlighting delays to spending on discretionary items. Consumer assessments of business conditions declined to 18.5% vs 22.3%.

Financial markets flip-flopped in response to comments from the US and Iran on progress towards ending their conflict. The fragility of the situation is underwriting elevated uncertainty and that is feeding the cautious short-term bias for the expected monetary policy path across developed economies.

Given central bank inflation mandates, that makes perfect sense; and near-term it is difficult to see where a dovish re-pricing can emerge barring a concrete resolution to the crisis or a sudden weakening in economic activity, including labour markets.

Fed Chair Warsh has succeeded Powell at a challenging time. Relative price shocks are driving up headline and core inflation, but there is little if any evidence of inflation pass-through to non-energy sensitive sectors of the economy.

With inflation expectations well anchored and firms struggling to pass on price rises, we think the appropriate stance in the US is to hold rates steady and affirm the FOMC’s commitment to price stability by signalling a willingness to respond if necessary.

The April PCE deflator data, due later this week, will provide the most up-to-date read on inflation and how various cohorts are behaving amid the energy price shock. Median expectations anticipate core inflation rose 0.3% m/m, in line with March.

AI’s Canary in the Coal Mine, Excerpt from Shelly Palmer, (shellypalmer.com)

Environmental activist Erin Brockovich launched a website this week asking Americans to report data center concerns in their communities. 

She’s positioning herself as the voice against AI infrastructure expansion across the United States. 

The website lists familiar complaints, including high energy consumption, water usage for cooling, noise from generators, and strain on local infrastructure.

Brockovich frames these as urgent community threats requiring grassroots resistance. She’s calling for crowd-sourced reporting to build a case against data center development. 

This feels like AI’s canary in the coal mine. Brockovich knows how to turn technical complaints into emotional narratives. She transformed hexavalent chromium contamination into a David-versus-Goliath story that changed environmental law. Now she’s getting ready to apply the same playbook to data centers. 

If her strategy works, communities will block data centers, delay permits, and demand environmental impact studies. Politicians will discover that opposing AI infrastructure polls better than defending it. 

We’ll see moratoriums, lawsuits, and zoning restrictions. But stopping data centers in Ohio won’t stop AI development. It will push American AI infrastructure to countries with fewer environmental regulations and weaker community oversight. 

China isn’t asking residents for permission to build AI training facilities. Brockovich either doesn’t understand or doesn’t care about the competitive implications. 

Her website treats data centers like isolated environmental hazards rather than critical national infrastructure. That framing worked for contaminated groundwater, but it misses the strategic stakes of AI development. 

This gambit won’t stop AI. It just foreshadows the scale of the upcoming fight.

Franklin Templeton: From the US Market Desk, Chris Galipeau

We are constructive on US equities and have established a target range of 7,000-7,400 for the S&P 500 (based on Franklin Templeton Institute’s Global Investment Management Survey) driven by 8%-13% year-over-year (Y/Y) earnings-per-share (EPS) growth. 

We are reviewing that target now as earnings came in significantly stronger than expectations. I have been expecting some consolidation of this move either in terms of price, time or both, and that seems to be occurring now.

I think that’s good news—and would suggest buying on pullbacks. We expect volatility to persist until the Strait of Hormuz is fully open.

We reiterate our “broadening” call on equities and emphasize our bullish call on US small- and mid-cap stocks and continue to favor emerging market equities and Japan. 

Additionally, risk/reward in the Magnificent 7 names looks more appealing today versus the start of the year. The earnings estimate for the S&P500 Index is currently at US$337.76, up another dollar on the week, and represents Y/Y EPS growth of 15%, above the high end of our forecast. 

The tape is now 22x 2026 estimates, cheaper than at the start of the year. Earnings estimates have steadily ticked up all year and in the long term, earnings drive stock prices—not geopolitics.

Outside the United States, the MSCI Emerging Markets Index is up 17.42%; the MSCI Latin America Index is up 14.32; the MSCI Japan Index is up 11.22%; the MSCI Europe Index is up 5.74%; and the MSCI India Index is up 12.64% (total returns are in US dollars).

A lot of questions have come up in the last few weeks on the old Wall Street adage, “sell in May and go away.” Does it work? It has not worked in nine of the last 10 years.

Over the last 10 years, from May 1 through to December 31, the S&P 500 Index has a mean return of 7%, with a 90% hit rate. The one down period from May 1 to December 31 was in 2022, with a -6% loss.

Midterm election years have historically been volatile with sub-standard returns. According to analysis by Franklin Templeton Institute Strategist Lukasz Kalwak, the average peak to trough decline in the S&P500 Index in midterm years was about -18%.

What you might not know is that in the third year of the presidential cycle, the market has bounced back. The average S&P500 rally from the midterm lows was about 32%. The hit rate of positive returns is 100%. 

Ergo, I would buy any significant drawdowns, similar to our call in March. 

Bottom line: We believe it’s prudent to have a diversified equity playbook that includes US large-, mid- and small-cap exposure, with a balance of growth and value.

The same can be said for ex-US equity exposure, with a mix of emerging markets and developed international markets. 

Reduce concentration and diversify. Use consolidation to your advantage.

Corporate news in Australia:

• Infratil ((IFT)) pivots toward data centres and renewables while preparing to sell non-core assets
• Nine Entertainment ((NEC)) targets exclusive NRL rights to drive Stan growth and challenge Foxtel’s long-held coverage
• Eli Lilly acquires three vaccine developers in a US$4bn infectious disease expansion push
• HSBC’s $26bn Australian mortgage book sale narrows to one bidder after weak offers
• I Squared Capital acquires US$225m in data centres to build an AI inference platform
• Tetratherix ((TTX)) launches equity raising supported by long-term revenue agreement
• CommSec prepares to offer Australian retail investors access to SpaceX IPO exposure for up to $1bn in stock
• Cars4Us founder Matt Wright invests $3m across three founders after $120m exit
• Goldman Sachs nears $1bn acquisition of NOJA Power after competitive auction

On the calendar today:

-NZ ANZ Business Confidence

-NZ RBNZ rate decision

-AU April CPI

-JP April PPI

-CH April industrial Prod’n

-AMCOR PLC ((AMC)) ex-div 91.00c

-EAGERS AUTOMOTIVE LIMITED ((APE)) AGM

-ENDEAVOUR GROUP LIMITED ((EDV)) investor briefing

-NEUREN PHARMACEUTICALS LIMITED ((NEU)) AGM

-NUFARM LIMITED ((NUF)) 1H26 earnings report

-WEB TRAVEL GROUP LIMITED ((WEB)) earnings report

-WEBJET GROUP LIMITED ((WJL)) 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…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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