United States
Wall Street paused overnight as investors took stock of stretched valuations and looked ahead to the next US corporate earnings season. The S&P 500 fell 0.3%, the Dow 0.5%, and the Nasdaq 0.2%, with the recent rally showing the first signs of fatigue after a 36 per cent surge since April’s lows.
The market’s strong run has lifted valuations to levels associated with periods of exuberance, leaving investors cautious about the potential for a short-term pullback. While enthusiasm for artificial intelligence remains a key driver of market strength, some investors are questioning how sustainable this trend will be, given the pace of capital expenditure and the time it will take for widespread commercial adoption.
Despite these concerns, equity positioning data indicates investors are not excessively exposed, and sentiment remains broadly constructive. Hedge fund exposure remains close to historical averages, suggesting there is room for participation should markets consolidate rather than correct sharply.
With few major data releases amid the US government shutdown, attention is shifting to corporate earnings. Consensus forecasts suggest another solid reporting season led by technology and communications companies, with profit margins expected to remain resilient. Market volatility is likely to rise as traders recalibrate expectations for growth and central bank policy in the months ahead.
In corporate developments, major technology firms continued to dominate headlines. Nvidia received approval to export AI chips to the UAE, Microsoft flagged prolonged supply constraints in its data-centre operations, and Alphabet launched its “Gemini Enterprise” AI platform to challenge Microsoft and OpenAI. Amazon, Apple and OpenAI each announced fresh AI-related initiatives, reflecting the ongoing competition to capture enterprise software demand.
Europe
European markets eased from record levels, with the Stoxx 600 falling 0.4 per cent as weakness in banks and autos offset gains in defensive sectors. Ferrari’s disappointing long-term outlook triggered its sharpest single-day fall in nearly a decade, dragging down peers across the automotive sector. Banking shares also came under pressure following restructuring news from HSBC and fresh provisioning concerns at Lloyds.
Energy and utilities outperformed as oil prices stabilised and investors sought yield and stability. Siemens Energy rose after an analyst upgrade, while Engie and Enel advanced as utilities reached their highest levels since 2008. Telecommunications also gained ground, supported by Deutsche Telekom and Nokia.
The basic-resources sector was little changed as copper prices rose on optimism following the return of Chinese traders after a week-long holiday. Anglo American and Glencore led gains among miners, though overall sentiment remained cautious as European equities paused after weeks of record-setting performance.
Australia
Australian shares are set for a softer open, with ASX 200 futures down 0.4 per cent to 8,957 following the global pullback.
Mining and energy stocks will be in focus after oil prices declined and iron ore inched higher to USD 105 a tonne. Rio Tinto plans to close its metal-powder plant in Quebec, while Ford has delayed its lithium supply deal with Liontown Resources amid challenges in the electric-vehicle market. Fortescue Metals faces renewed scrutiny after calling out US hydrogen policies that it says leave the country behind China in clean-energy investment. Meanwhile, BHP’s stalled iron ore negotiations with Chinese buyers could extend into 2026, maintaining uncertainty around contract pricing.
Broker activity was mixed across sectors. Goldman Sachs reinstated “Sell” recommendations on Macquarie Group and Bank of Queensland, while Canaccord upgraded Netwealth to “Buy.” Morgans Financial adjusted its gold-sector calls, upgrading Ramelius to “Buy” and cutting Regis Resources to “Hold.”
Attention will also turn to Canberra today as Reserve Bank Governor Michele Bullock and Assistant Governor Christopher Kent appear before Senate Estimates. Economists expect the RBA to reaffirm a cautious stance, balancing the risk of persistent inflation against uneven household spending data. August figures showed a patchy recovery in consumption, suggesting growth momentum remains fragile.
Australian bond yields were steady, with the 10-year yield at 4.35 per cent and the 3-year near 3.56 per cent.
Commodities and currencies
Bond yields rose modestly, with Germany’s 10-year at 2.70 per cent. The euro weakened 0.6 per cent to USD 1.1563, and the pound fell 0.8 per cent to USD 1.33 as the US dollar extended its advance. In the UK, the FTSE 100 fell 0.4 per cent, dragged lower by consumer and industrial names.
Commodity markets softened overnight, with gold falling below USD 4,000 an ounce and silver giving back some of its recent gains. Oil prices continued lower amid easing geopolitical risks and renewed confidence in a Gaza ceasefire deal. Brent crude closed at USD 65.14 a barrel, while WTI settled at USD 61.47.
Iron ore edged higher by 0.9 per cent to USD 105 a tonne as Chinese mills resumed restocking after the holidays. The Bloomberg Dollar Spot Index rose 0.4 per cent, pushing major currencies lower, with the euro at USD 1.156, the pound at USD 1.33, and the yen at 153.07 per dollar.
Cryptocurrencies weakened, with Bitcoin down 2 per cent to USD 121,000 and Ether falling 3.6 per cent to USD 4,340. Bond yields rose slightly across major markets, with the US 10-year at 4.14 per cent, Germany’s at 2.70 per cent, and Australia’s at 4.35 per cent.
Economic Calendar
No major announcements
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
