The Overnight Report: Software Comeback?

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This story features DRONESHIELD LIMITED, and other companies.
For more info SHARE ANALYSIS: DRO
The company is included in ASX200, ASX300 and ALL-ORDS

The S&P500 and Nasdaq reached fresh closing highs (again!) boosted by a stellar earnings report from software data company Snowflake. 

Nasdaq is going into the final session of May on pace for its best two-month performance since 2009 (Dow Jones Market Data).

After a sharp sell off yesterday, the ASX200 futures are signalling a positive start to closing session of the week and the month of May.

Good Morning,

The roller coaster ride for the Australian market continued yesterday, as concerns over an escalation in US/Iran tensions undermined sentiment and sent the ASX200 down -125points or -1.4$ to 8,593.

Miners and financials led the decline with defensive consumer staples outperforming.

In macro news, NAB noted, “yesterday on the domestic front we got CAPEX and Household Spending data. Household spending fell -1.1% m/m in April, a reversal of March strength, with transport (air travel) cited as a large drag; however, the NAB economist noted refunds likely exaggerated the apparent slowdown while spending outside transport looks “more benign.” 

“Separately, Q1 capex rose 6.5% q/q, driven by a surge in machinery & equipment investment (notably data-centre related), partially offset by a decline in building & structures.”

On today’s calendar, Droneshield ((DRO)) and Life360 ((360)) have AGMs with Finder ((FND)) scheduled to report a Q4 FY26 update.

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

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

Iran Deal Lifts Stocks, Cools Oil 

US and Iran negotiators reached a 60 day framework to extend the ceasefire and reopen the Strait of Hormuz to commercial shipping.

Oil handed back its morning gains once the report hit.

The catch is Trump still has to sign it, and he asked for a few days.

I’d want that signature before betting on calm.

The Software Trade Is Back 

Wall Street spent months betting AI would gut traditional software companies.

Snowflake blew that up with record growth and a US$6 billion deal to use Amazon’s chips, and the stock had its best day ever.

Anthropic, the maker of Claude, capped the mood by closing a funding round at a US$965 billion valuation, passing OpenAI for the first time.

Money is still pouring into anything tied to AI.

Inflation Cooled, Growth Slowed 

The Fed’s preferred inflation gauge, the PCE index, rose 0.4 percent in April, a touch under what economists expected, with the core reading softer still.

The same morning, first quarter growth got revised down to a 1.6 percent annual pace from 2 percent.

So prices are easing while the economy loses a step. That hands the Fed cover to sit still rather than cut or hike.

CBA Economics: Markets increase on a prospective 60-day ceasefire

Summary: News reports that the US and Iran have agreed a tentative deal to extend a ceasefire by 60 days and hold further negotiations on Tehran’s nuclear program drove US sharemarkets higher. US bond yields also fell on the reports. The US President is yet to agree the deal though, with the US Treasury Secretary saying Trump’s ‘red lines’ would need to be met in any agreement.

US sharemarkets extended gains on Thursday, briefly hitting intraday record highs, after reports said the US and Iran had reached a new ceasefire deal, while investors also digested key inflation data. The Dow Jones index finished up 0.1%, the S&P500 index was 0.6% higher and the Nasdaq index added 0.9%.

In US economic data, inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the Iran war, cementing economists’ views that the Federal Reserve would hold interest rates unchanged well into next year. The Personal Consumption Expenditures Price Index jumped 3.8% in the 12 months through April. Meanwhile, US GDP for the first quarter was revised lower to a 1.6% annualised increase, with momentum expected to slow this quarter.

European sharemarkets closed lower on Thursday, though they pared steeper losses on Iran deal hopes. Financials led the losses. The continent-wide FTSEurofirst 300 index ended down 0.5% and UK FTSE 100 lost 0.8%.

US government bond yields fell on reports of the Iran deal. The US 10-year Treasury yield slipped 3 points to 4.45% while the US 2-year Treasury yield dipped 1 point to 4.02%.

Currencies were higher against the US dollar on the peace deal optimism. The Euro gained 0.2% to US$1.1648, the Japanese yen added 0.2% to JPY159.27 and the Aussie dollar rose 0.3% to US71.60 cents.

Global oil prices were mixed after the deal news. Brent crude futures settled -0.6% lower at US$93.71 a barrel.

Base metal prices were higher on Wednesday on the proposed US-Iran deal. Copper futures rose 1.4% while aluminium futures advanced 0.7%. 

Gold futures rebounded following the Iran deal report. The futures settled 1.9% higher at US$4,532 an ounce.

Iron ore futures were steady, down -0.2% to US$109.04 a tonne.

Staying long risk as crude prints lower, Chris Weston, Pepperstone

Whilst the process has been far from linear, momentum towards an MOU between the U.S. and Iran continues to build, with Axios reporting the two sides have reached a tentative agreement that would extend the ceasefire for 60 days and allow unrestricted shipping through the Strait of Hormuz.

President Trump is expected to take several days to decide on the proposal, which once again puts the prospect of weekend gap risk firmly in play for traders. Overall, though, the development continues to provide tailwinds for risk assets.

The Axios headlines initially pushed Brent crude futures from US$96.17 down to US$92.60, before pricing rebounded and traded choppily into the futures close.

Taking a step back from the intraday flows and price action, Brent crude ultimately closed below Wednesday’s low of US$94.13, and the lower low on the daily timeframe and the trajectory of the trend are what matter most for risk markets, particularly with crude implied volatility continuing to fall as traders unwind volatility hedges and speculative positioning.

The decline in volatility has continued to support positive momentum in equities, aided by subdued volatility in Treasury and rates markets, with U.S. Treasury yields easing -1bp to 3bp lower across the curve. Both S&P 500 and NASDAQ futures pushed to fresh all-time highs, with the S&P500 cash index supported by strong buying in healthcare, technology, and discretionary names.

Semiconductors also performed well, gaining around 1%, although we are increasingly seeing signs of broader risk-taking behaviour, with high short-interest stocks rallying strongly, while non-profitable technology names also surged higher. Memory-related names lagged somewhat as traders pared back positioning, although there was still solid buying across a range of AI-related plays.

Dell particularly impressed investors in after-hours trade, reinforcing why the stock remains well-owned and is working well to broaden exposure within portfolios to the AI winners. The company upgraded full-year sales guidance, driving the stock more than 30% higher after the close. It is another example of a hardware name benefiting from strong AI-related demand dynamics and positive execution.

Gold has once again been heavily traded by clients. From a technical perspective, the broader daily chart setup remains highly interesting and highlights that buyers are willing to step in and provide support at key levels. After trading down to US$4366, a significant horizontal support level dating back to October 2025 and the 200-day MA, buyers stepped in and pushed price back above the range lows established on 9 May and 19 May.

To really accelerate upside momentum, the gold bulls now need to build positioning through US$4580, which could encourage another wave of buying. However, that likely requires long-end Treasury yields to move lower, and that may prove difficult given the current short-term inflation backdrop.

Asia is expected to open on a firmer footing, with the ASX200 called up 0.7% and the Hang Seng expected to open 0.4% higher. Once again though, the Nikkei remains the preferred market for momentum traders. Futures point to a 1.7% rise on the cash open, pushing the index to fresh all-time highs.

Momentum favours the bold, and for now momentum remains firmly with the bulls.

Gold Ready to Shine Again, Ed Yardeni, Yardeni Quicktakes

This is a quick QuickTakes on gold. Its price seems to be holding above its 200-day moving average on news that Iran and the US have reached an agreement on a memorandum of understanding to extend their ceasefire for 60 days, but President Donald Trump has yet to approve it, according to Reuters.

The price of gold peaked at a record US$5,318 per ounce on January 29.

It fell sharply during the war in the Middle East in March to US$4,375 near the end of the month. It rebounded through mid-April when a ceasefire was in place. Now it seems to be testing its March 26 low, its 200-day moving average, and its intermediate uptrend line.

That’s quite a bit of support, which should hold, in our opinion.

The drop in the price since the end of January has put it back within an upward-trending channel that began in late 2023. Traders may be anticipating that a 60-day extension of the ceasefire would confirm that neither side wants to resume the shooting war.

The rally in gold should resume once the war is over. We are currently targeting the gold price to reach US$5,500 by the end of this year, and US$10,000 by the end of the decade.

The war boosted the dollar’s foreign-exchange value, which is bearish for gold. It also put upward pressure on interest rates, which is also bearish for gold.

A few central banks were forced to sell their gold reserves to support their currencies as higher oil prices weighed on their currencies. The Fed is likely to turn more hawkish during the summer. That could stall any serious rally attempt by gold traders.

The end of the war should diminish those bearish factors.

Our long-term bullish stance on gold rests on the idea that the S&P500 could rally to 10,000 by the end of the decade. We expect that along the way, investors will rebalance into other assets, including gold.

The S&P500 and the price of gold tend to be inversely correlated on a cyclical basis, but in sync on a trend basis. 

So, if and when, the S&P500 reaches 10,000, then the price of gold should reach US$10,000.

Corporate news in Australia:

• Apax is exploring a sale of Pickles Auctions in a deal that could value the business at around $1.5bn following strong buyer interest
• Sexyland’s owner is considering a sale of the adult retail business after operating for several decades
• Danone is progressing towards an acquisition of Made Group, although negotiations over valuation remain unresolved
• Brett Blundy could reacquire Bras N Things as Hanes Australasia explores a sale of its retail portfolio valued at around $500m
• Modular Construction Masters has raised $40m to expand manufacturing operations and increase factory capacity
• KPMG is pursuing partnerships and investments in AI startups as the firm looks to stay ahead of industry disruption
• HESTA has backed a new $70m venture capital fund, Synthesis Capital, focused on Australian medtech startups
• FDC Construction is continuing preparations for an IPO despite softer conditions in Australian equity markets

On the calendar today:

-NZ ANZ Consumer confidence

-AU April private sector credit

-JP April industrial prod’n

-JP April retail sales

-JP April Unemployment

-US April Trade Bal

-US Chicago May PMI

-LIFE360 INC ((360)) AGM

-ACROW LIMITED ((ACF)) ex-div 2.00c (100%)

-DRONESHIELD LIMITED ((DRO)) AGM

-FINDI LIMITED ((FND)) earnings report

-PACIFIC EDGE LIMITED ((PEB)) earnings report

-STRAKER LIMITED ((STG)) 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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