the COB: seven-week low

Added: 2026-05-18

[00:00:10]From Berangaroo Studios, the Osbiz COB is the key stuff you need to know about the day in business and finance.

[00:00:20]Welcome to the COB. I'm Nadine Blaney and it's a Monday afternoon. Really nice to be here with you, the 18th of May and we've got this global bond route deepening.

[00:00:31]So we've got inflation really triggering, triggering those fears that we could see central banks right around the globe have to hike, let alone cut as had been widely anticipated in the world's largest economy in particular, but yeah, Tokyo, New York extending that route today and we're watching at the same time the price of oil continued to gather pace. So what's that meant for our local market? I don't think you need me to break the news to you, but we've gone sort of from bad to worse.

[00:01:05]Yeah, flatlining around this afternoon, but down by 1.2%.

[00:01:10]What is noticeable today is that it's not just an Australia story. We have seen indices, you know, take the the Japanese index for example, it is down by about a percentage point. The Kospi in Seoul came out really weak, although it has sort of turned around mildly positive now.

[00:01:30]And yeah, taking a look at US futures, they are both negative for the Nasdaq and the S&P 500. They did have their worst day since March on Friday and I'm just looking at some of the data coming from China as well. And I mean, oil output or throughput I should say, hit the lowest level since August of 2022.

[00:01:56]So there are some big cracks starting to form in relation to this war in the Middle East. China's economy really losing steam at the beginning of the second quarter. So, we've got output disappointing in April and also consumption as well.

[00:02:13]So, all roads lead to the bond market.

[00:02:16]That's what I'm told. Uh let's take a look at some of our key themes. This is actually a 7-week low for the Australian market. So, as I mentioned, we've still got the last trades going through the ASX, but down by 1.4% to 8,500 and 11. Uh you know, we've been reliant so reliant on the commodity complex to save us from ourselves, but that didn't work out well today. Uh for example, BHP is down by 2.6% the gold miners all being sold off. I guess one exception there was Linus. Um look, we did see industrial stocks all industrial stocks lower, a bit of an implosion you could say for those industrial names. And we've also, as I mentioned, had the dragon disappointing. So, China's April industrial output growth the slowest since July of 2023. Retail sales as well, rising just 0.2% So, here it is. Let's take a look at these industrial stocks. And a lot of it might be traced back to Brambles. It did downgrade its profit expectations this morning. Shares taking a really steep tumble off by about 19%. And look, that was the way things went for any company that had some bad news out. Um it wasn't necessarily company uh specific news um when it comes to these big miners on the next page. Um but uh again, we've got global growth concerns big time. And so, that has really put pressure on, you know, the likes of some of those metals, you know, the metals complex. You've got uh Rio off by 3 and 1/2%.

[00:03:58]Um but China, you know, agreeing to address US concerns over rare earth shortages, and that's what's behind Linus's. It's not on that page, I know, but Linus's big push higher.

[00:04:07]So, let's get across some of the corporate stories, and that takes us back to Brambles, so downgrading for FY26. It's talking about repair capacity constraints in parts of its US network, which led to increased costs, which also Excuse me.

[00:04:23]Excuse me. Limited its ability to meet stronger than expected customer demand.

[00:04:27]Revenue growth has been revised lower as well, so an extra $60 million earnings hit from the disruption.

[00:04:33]Singapore's telco regulator suspended its review of TPG Telecom's proposed acquisition of M1. The suspension follows the discovery that its Simba service may have been using radio frequency bands it was not authorized to use in breach of Singapore's Telecommunications Act. Look at that fall. 62% lower, incredible. Also, Elders, I mean, it was out with its half-year, lifted net profit after tax by 17%.

[00:05:01]Revenue rose by 31%.

[00:05:03]However, it did warn on diesel prices and how that could flow through. And again, really, really steep falls, down by close to 21 and 1/2%. We did see rising after securing a 7-year $90 million contract with a US healthcare group, Beth Israel Lahey Health. Um but, I think some of the cream was taken off of the of the top um because I had a really good chat with Claude Walker from A Rich Life. Look, he said that the announcement that came around the resignation of a long-serving executive, former CFO, current head of IR and operations taking uh resignation. Uh steps will be leaving the company in August. He reckons that that that was probably a bigger story than that contract win. He's not saying it's destroyed the thesis, but he is running the ruler over that company in the wake of it. And it was the stock of the day.

[00:05:54]Not everybody necessarily sees it that way, so stick around and we'll get you across that. All right, welcome to the COB, Josh Gilbert from eToro. Long time between drinks, Josh. Nice to have you back. Um, could you just talk to us about today because I did mention, you know, that bond route and that really seems to be telling us something.

[00:06:15]Yeah, great to be with you, Nadine. Um, look, it really is. Um, I think the bond market is ultimately telling us that the market is is worried about inflation and it's not beating yet and that's ultimately coming down to what we're seeing from from oil prices. Um, I think when this sort of conflict started, I think back in in February and we we sort of sit where we are now, I think it's sort of dragged on longer than many I think expected. We've had, you know, many times where we've we've had hopes of, um, you know, the the ceasefire.

[00:06:45]Obviously, that lasted for about 2 weeks. We've had a, you know, a start in communications and a breakdown um in those talks as well. So, I think this has dragged on I think longer than a lot of market participants expected, you know, especially analysts. Um, and I think that's starting to really show through in in oil prices. We've now had, you know, Brent what really elevated above that hundred-dollar mark for for a strong period now and I think that's why we're we're seeing the bond market react and then ultimately that's all coming from this idea that that the Fed is looking likely to to, you know, have to hike rates in the back end of the year and that's a big big change, almost a handbrake turn from where we were, um, you know, at the start of this year, absolutely. So, um, you know, what do you think that may mean for equity markets going forward because of course we were being so bolstered, not here locally, but, uh, in the US in particular by that whole AI trade and we've got a big test of it coming this week.

[00:07:41]Absolutely. Look, I mean, so far what we're seeing is really the US consumer holding up better than all people expected, but also what's driving markets is earnings, right? Q1 earnings growth of of over 27% and that's the highest that we've had in in years. It's the sixth straight quarter of double-digit growth and obviously tech is is really leading the way.

[00:08:00]Um, and although we're hearing companies talk about that Middle East conflict, we're not seeing really many companies downgrade um, or lower guidance on the back of that and I think that's the the real standout for us. Um, but as you say, yeah, a real big test to sort of finish off this week with with Nvidia.

[00:08:19]Um, you know, that's the obviously the big name. It's the the last big ticket name on the earnings calendar, but the bar is high, right? Coming into this every quarter the expectation is massive, um, you know, for Nvidia, but the signals heading in I think are pretty solid, right? AMD delivering a massive beat, lifting full-year guidance. Um, Intel and TSMC as well also coming through with with really strong results. And then you also had those hyperscalers all sort of really reaffirming and and lifting their capex guidance, um, as well. So, look, I think that sets up a constructive backdrop for Nvidia, but also at the same time it also means that a lot of good news is is also priced in as well, right? we've seen that from how well the tech sector has performed and particularly Nvidia. So, look, a lot of eyes going to be on Jensen Huang this week to deliver, you know, raise that bar once again and I think the key thing here is if if he doesn't and we don't get that from Nvidia, the market's really in a position that this isn't just Nvidia that takes a hit, you know, it's the whole AI market as well as the broader market as well. That's not just ripple effects for the US now, that plays much broadly, right? Across into South Korea and those sort of AI markets. Nvidia is is the poster child, five and a half trillion-dollar market cap, right?

[00:09:31]That's double the ASX 200, um, as a market cap. So, it just goes to show how big this company is, not just, you know, for the US market, for just broader equities in general. Yeah, okay. So, if we've got solid earnings there, um is there anything that we need to really know um in terms of like the data? I mean, we're we're still that we're sort of shifting from a data-dependent Fed uh to something else under new chair Warsh.

[00:09:59]Uh what will we be looking at in terms of uh macro in the US to start?

[00:10:04]Yeah, I think the big Fed event is likely to be the minutes coming through um you know, midweek. You know, as I say, markets now pricing that December hike. I think 75% chance almost now of of that December hike. So, I think really minutes going to be scrutinized for any sign that we are really starting to see the committee, you know, shifting towards that sort of hawkish tone. Um or if the bottom bond market is ultimately getting ahead of itself. We know that there's a lot of pushback ultimately from Trump um you know, to cut rates.

[00:10:35]We're clearly not in a position from a macro perspective to be able to do that.

[00:10:39]And we know that, you know, there are a few officials that are are clearly pushing back on the idea of of hikes, but also, you know, the idea of even just keeping rates on hold as well. So, I think that will be a real key number um to sort of keep an eye on um you know, during the week. I think for for us, that's really important. And also, I think just in general, any sort of, you know, continuance of talks from between um you know, the US and and Iran, I think that's going to play massive part of that. Everything that we're looking at in markets at the moment continues to to sort of really come back to sort of the Strait of Hormuz and and and sort of if we're seeing, you know, anything flow through there, right? Because supply chains, etc. are all, you know, you know, at at sort of risk here and that plays a massive part into sort of inflation. That comes back to everything that we're looking at in markets right now. So, I think you know, any conversations there um you know, ceasefire talks, etc. will be big in markets, but those Fed minutes I think are probably the biggest macro focus um from the US this week. Yeah, and we've got minutes here locally from the last RBA meeting in which they raised rates once again. So, what will we be parsing those minutes for?

[00:11:44]Yeah, I think the difference this time out is is the almost um you know, overarching decision to uh to hike, right? I think it was eight votes to one last time out. Before that, we had, you know, a bit of a split vote, five to four. So, I think it was a very clear sign that the the board, you know, felt it was it was necessary to to raise rates for the third consecutive meeting.

[00:12:06]Uh and, you know, ultimately, telling us hawks have pulled across those doves, right? Um I think what's important from that what we're going to look at is what changed, you know, who held out, why they why did, you know, they hold out, why did that one um you know, official not decide to to move towards the hike.

[00:12:21]Um and I think that we're clearly seeing that that Middle East conflict is is playing a bigger part of the board's thinking. And I think, you know, I think ultimately where where we're seeing oil at at the moment is warranting probably the decisions that we're seeing from the board so far.

[00:12:36]Obviously, we know that fuel prices are a big part of that so far and it's having an effect, you know, on the consumer in general.

[00:12:43]Um and, of course, you know, the growth, you know, ultimately is is looking lower on the on the back of that. So, I think really what we're looking for is how the board is thinking about this cycle. With three hikes in, right? Are we now looking at the conversation for a pause?

[00:12:57]Because I really think that, you know, a pause at this point until later in the year is is probably very likely. Um I think, you know, we mentioned it a bit earlier, the the sort of the the idea now, I think, is moving towards that data dependency uh and probably, you know, have a bit of leeway now to be able to sort of sit on their hands. I think Michelle Bullock sort of really alluded to that um in her press conference after that sort of third hike as well. Um and then from there, I think it's going to be a case of we're looking towards those data points. We've got, you know, unemployment numbers this week as well.

[00:13:26]Um you know, so I think the point from it is going to be okay, are we seeing signs of them sitting on their hands and what carries the most weight from here?

[00:13:33]Is it going to be the labor market, inflation expectations, or ultimately is it going to be that Middle East conflict? Mhm. Oh, there is so much to take into consideration. I'm just struggling with my laptop a bit, but what's Bitcoin been doing amongst all of this?

[00:13:48]To be honest, I think you know, really during this whole cycle of what we've seen going on in the Middle East, it it's played a relatively, you know, quieter period.

[00:13:58]And I think that's unlikely or unusual, I should say, for us to say during periods of uncertainty.

[00:14:06]It's sort of really sat around about the 80, 80,000 dollar market at the moment and holding up. We've seen a little bit of weakness today coming in, you know, down about sort of two or three percent.

[00:14:16]That's coming from, I think, you know, broadly what we're seeing in the bond market and a bit of risk off. seeing gold lower as well.

[00:14:22]But yeah, it's held up pretty well.

[00:14:24]And I think that's just coming from, you know, a number of factors. We're seeing sort of big regulation changes in the US. We've obviously got a very pro-crypto president coming in the US as well.

[00:14:34]And ETF flows continue to be pretty solid as well. We're not seeing sort of really any massive changes. I think the reason we're at 80,000, I think back at the end of last year we were at 120,000.

[00:14:45]So we we saw a pretty significant drawdown coming into this year as well.

[00:14:49]And for the time being, I don't think we're seeing too much on the downside.

[00:14:53]When we think about equity markets and how they rallied in this year, we haven't seen the same coming from from crypto assets and and particularly Bitcoin, which is why I think we're sort of seeing it hold up better than the most assets. So, this is unusual for me to say, but it's been a pretty boring time for for Bitcoin at the moment. But I think that does start to change in the back end of the year, particularly when we see those regulations coming through and it being much easier for for sort of companies to hold Bitcoin on balance sheets and things like that. Um, especially when we're seeing big corporations as well continuing to want to to add this asset to um, you know, that their global allocations. All right. Well, um, look, we really appreciate your time today, Josh. Thanks so much for bringing us your insights.

[00:15:35]My pleasure. Thanks, Nadine. Joining us from eToro. Yeah, I hope you have a good one, too. Uh, look, I said that the stock of the day was Medicus. I spoke with David Novak from Wealthwise Education and Luke Laretive from Seneca Financial Solutions.

[00:15:53]The turnover is 48 million average per day. So, it's no problems getting in and out, but it's a very tightly held shareholder register. So, it can move up and down very quickly uh, from from where it is. So, but right now the trend is not saying don't it's not your friend. You know, I mean, they keep coming up with these positive results of contracts like today. This morning they announced. But yeah, just on valuation, um, it doesn't scream at me as a buy right now.

[00:16:19]You know, the core business is still going really well. They got 220 million bucks in cash, no debt, got a buyback they can deploy.

[00:16:27]Um, you know, while yeah, you know, you're probably right it's not excessively cheap in a vacuum. Probably got to look at that in the context of, you know, cash flow return on invested capital and kind of the quality and growth and predictability of earnings growth here that um, you probably can't really get with almost any other company on the ASX.

[00:16:46]Um, so yeah, it'd be a buy for mine. Um, it looks pretty good to me at the moment and um, you know, it's on half the valuation um, it's been on in the past or even even less to be honest.

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[00:17:52]So, just a bit of breaking news actually. Anglo American, so the London listed firm, has said that it will be selling off all of its Australian steel making coal mines to a UK based miner called Dilmar for up to $3.9 billion. That London listed Anglo selling its Australia coal mines as it simplifies its portfolio.

[00:18:16]So, listen, let's take a look at some of the companies that moved this market to the upside, Linus. So, we've got Yeah, China and the US talking on rare earths enough to help boost this miner higher.

[00:18:29]Computershare [clears throat] up by close to 4%. I'm not seeing any news, so that's an interesting move there. Woodside Energy, Santos, no big surprise while we're watching those guys move higher. And Medicus in the wake of that contract win. It wasn't all good news as we can see reflected in the moves the index made. So, some pretty incredible sell-offs happening with that regulatory concern coming through in Singapore for 2 S down by 62%.

[00:18:57]Elders warning on diesel fuel prices down by 21%. Brambles cutting its outlook down 18%. Catalyst Metals and West African Resources was really bad day in the gold space as well. Okay, in the small cap world, Island Pharma was higher Pacific Edge and energy world flipping the page though and we do see what Wade being Comet Ridge Strickland Metals Cauldron Energy and StarPharma.

[00:19:26]Tonight as Josh Gilbert from eToro was saying we're going to be looking very closely at what's gone on in terms of the Middle East. We also have the Italian trade balance due. Going to be setting my alarm for that one. We've got G7 meetings day one of that happening and we also get the new US housing market index which is an interesting one to watch. I was chatting with Jeremy Schutz from ClearBridge who's the chief economist there and on his you know chance of recession dashboard he's pointing to strength in the US market.

[00:19:58]He's not anticipating a recession in the short to medium term in the US. Tomorrow we do have RBA Deputy Governor Hauser speaking. We'll see if he drops any insights into what we'll read in the minutes at 11:30.

[00:20:13]Also, you won't see Juliet Sally at 11:00 tomorrow because she's going to be in the room with Treasurer Jim Chalmers.

[00:20:19]He is speaking at a Bloomberg event in Sydney.

[00:20:23]And we get uh producer prices from New Zealand. So looking forward to all of that but particularly Hauser and yeah reading those RBA meeting minutes.

[00:20:34]Okay, so um final check-in on this local market. It's not a great setup for the overnight session. Not going to lie.

[00:20:41]We've got uh bonds breaking down, global stocks skidding.

[00:20:46]Um you know really as we're watching this price of oil rise because that meeting with China's Xi Jinping um President Trump came home without any sort of a real push to um you know alleviate some of the tension in the Middle East and we've still had drone attacks one near a nuclear facility in the UAE. Not good news. And so uh when we look at the S&P ASX 200, that's the Cboe Australia index on your screen, by the way, deeper losses, uh down by 1.45% to 8,500 and five. So, yeah, drone incidents in the UAE and Saudi as this Iranian war deadlock really does drag on.

[00:21:29]Look, you may have missed a number of really great interviews on Ausbiz throughout the day today.

[00:21:35]If so, I really encourage you to catch up online, ausbiz.com.au. If you usually listen to us in podcast form, there's a lot you're missing out on on the uh website.

[00:21:45]So, listen, I hope you have a healthy and a happy evening. Stay warm, and uh we look forward to seeing you 9:45 tomorrow.