Crispin Murray: What’s driving Aussie equities this week

Here are the main factors driving the ASX this week, according to Pendal’s head of equities CRISPIN MURRAY. Reported by portfolio specialist Chris Adams

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GLOBAL equity markets continue to rise, led by those with the most semiconductor exposure (e.g. US, Korea, Taiwan) – driven in turn by upgrades to AI capex and supply shortages.

The S&P 500 gained 2.4% and the NASDAQ +4.5% last week. The S&P/ASX 300 was up 0.4%.

Financial markets remain unconcerned that the Iran conflict will trigger a further significant rise in energy prices, suggesting some form of resolution is close.

The worst fears around supply shortages have not eventuated yet, due to adequate inventory and higher-than-expected demand reduction.

This availability of fuel has caused oil and refined-product prices to fall. Brent crude was off 6.4% last week.

The US earnings season has been strong, with broad-based earnings upgrades suggesting an economy in good shape. This was also reflected in their latest jobs data.

Other commodity prices benefitted from reduced fears of a global slowdown; resources was the best-performing Australian sector as a result.

Our market withstood the expected rate hike, and the focus was on several corporate results and updates.

The underlying message is that the economy and earnings are holding up well. Everyone is looking for signs of weakness, but very few have emerged to date – and those tend to be in more structurally challenged franchises.

Gulf crisis

Oil and refined product prices declined last week as the market continues to anticipate some form of deal to reopen the Strait – and the blockage’s impact on the global economy has been less than feared.

Jet fuel, for example, has declined 35% from its peak – albeit still up 65% from February – despite fear of shortages.

That said, there has been a partial rebound in oil following Tehran’s seeming rejection of the latest US peace offer and US President Donald Trump’s bellicose reaction overnight.

When the crisis started, the market would have expected that a nine-week closure of the Strait, with only 4% of product getting through, would lead to far higher oil prices than we have seen.

Reasons for the more benign reaction include:

1. Reserve/inventory drawdowns have been more significant. This has not just been in crude oil but also in refined products. In oil it is Asia which has worn the loss of supply, however in refined product this adjustment has been in all regions. It is believed this incorporates a material number of “invisible” stockpiles (i.e. held outside of official reporting by private industry, commercial traders or smaller producers).
2. Demand has fallen more than expected at a given oil price. Part of this is due to refined product price moves – which are 1.5x to 3x that of crude – that have destroyed demand (e.g. in jet fuel). But we have also seen weaker demand from China (which may be them drawing on reserves), petrochemicals (linked to availability of naphtha) and poorer Asian countries which have been outbid for product.
3. Higher crude exports from other regions – notably the Americas – running at around 3 million barrels per day.

The most recent easing of crude premiums and crack spreads is also linked to reduced panic buying of refined product, which inflated the initial reaction (notably in jet fuel spreads).

The market seems to have been quite efficient in adapting to the shock and this has given confidence to broader financial markets.

However, a large part of this reflects the ability to draw on stockpiles, both visible and invisible. We do not know where the tipping point may be which, if hit, would require far more material demand destruction.

The other observation has been that it increasingly looks like explicit rationing is less likely to happen, as market pricing does the work of allocating the scarce supply.

US economy

April payrolls and March JOLTS data last week suggested that the employment market is okay.

It is currently in the sweet spot of not being strong enough for the Federal Reserve to worry about wages responding to the energy shock, but also not weak enough to put pressure on the central bank to cut rates.

The employment data shows that the flow on effects of the fuel shock, while affecting confidence, is not impacting the economy. Nor is AI leading to meaningful labour shedding.

Payrolls came in at +115,000 jobs, well ahead of the 65,000 expected. There was a -16,000 revision to the previous two months.

Given data has been messy because of weather and the government shutdown, the six-month average is the best trend proxy – and that is rising and is now above the breakeven level to sustain the unemployment rate.

The mix of job gains was a positive one, skewing to private sector and less reliant on health care.

Unemployment itself was 8 basis points (bps) higher at 4.3%, in line with consensus. Should it break above 4.5%, then the Fed would likely start considering rate cuts again.

Hours worked were solid, rising 0.3%, and wage growth continues to moderate +0.2% versus 0.3% expected. This will give the Fed confidence that input price pressures will not lead to second round effects. It also reinforces the positive productivity trend and the rise of profit share relative to labour share.

JOLTS saw a small drop in job openings to +4.1%, hiring picked up from a softer February to 3.9%, while quits remain at very low levels at 2.0%.

ISM data also signalled no signs of emerging weakness – although it has been less efficient as a leading indicator recently.

The upshot is that the economy is holding up well so far despite the fuel cost impost.

Combined with strong corporate earnings, this has given the market confidence to look through the short-term input cost issues.

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Crispin Murray,
Head of Equities

US earnings and markets

Week four of US earnings season saw continued strong positive revisions.

The median stock was expected to grow earnings 8% year/year – and instead come in at 14%.

Overall earnings are tracking to 17% growth with revisions rising 5% from the start of April.

This means the S&P 500’s P/E ratio has fallen marginally year-to-date, despite the index being on its highs. 

The overall index is 21x and the median stock 16x.

Both are sustainable given liquidity and earnings trends, with the main risk being an input-cost induced slowdown.

One concern we have, but which has diminished, is a confidence-induced slowdown in consumption or investment. There is no sign of this.

Since the Iran war started the S&P 500 is up 7%, despite higher oil (43%) and bond yields (45bps), led by the technology sector (+20% equal weight).

Market breadth has been a concern, however the small cap Russell 2000 index (+8%) has performed better than the S&P 500.

Laggard sectors have been defensives like staples (-10% equal weight) and healthcare (-8% equal weight) as well as discretionary (-7% equal weight). 

The market’s key driver has been tech – and specifically semiconductors – on the continued wave of increased AI investment.

There has been a surge in company cash usage for reinvesting into capex and R&D (as opposed to dividend and buybacks) and the market has become more positive on this, believing that they can get reasonable returns.

This sentiment is helped by the enormous success of Anthropic, which is now up to a A$44 billion annualised revenue run rate, versus A$14 billion in December 25.

The growth in demand for compute has led to a further rise in hyperscaler capex. Between them Oracle, Microsoft, Meta, Alphabet and Amazon are expected to spend >US$800 billion in 2026 – this is US$100 billion more than expected at the start of April and $200 billion more than at the start of the year.

Amazon and Alphabet both announced significant increases in pipeline for their cloud services which is driven by Anthropic chasing capacity.

The largest bottleneck in supply is in semiconductors, driving up the price of both the chips and stocks.

The PHLX Semiconductor Sector ETF (SOX) is  up 58% since the end of March, led by Intel +183%, AMD +124% and Micron +121%.

The velocity of these moves (51% above its 200-day moving average) has only been surpassed once, which was a peak of +111% ahead of the tech bust of 2000.

From a factor perspective momentum has surged and breadth has been narrow.

Semiconductor strength has also driven the Korean and Taiwanese markets up 78% and 44%, respectively, in 2026.

Three years ago, they were a similar size in market cap to Australia – now they are double the size.

Such moves tend to see some degree of consolidation – but the strength of the momentum, combined with the fundamentals, suggests they will not see significant reversals.

Australian markets

The Australian market is very tame relative to these offshore markets.

One feature of our market is that it is becoming a funding source, as global investors chase returns in Korea and Taiwan.

The main macro news was the expected rate hike of 25bps to return to the previous cycle peak of 4.35%.

This was an 8-1 vote, driven by concerns of firms passing on costs given the tight labour market, the strength of the economy’s momentum prior to the Iran war, and domestic industry structures which gives corporates pricing power.

Reserve Bank of Australia Governor Michele Bullock did indicate that the board now sees policy as slightly restrictive and having risen three times in a row – and given the uncertainty – we would expect a pause.

The market is still expecting one further rise, potentially in August.

This was largely discounted by the market so prompted a limited reaction.

Instead, it eked out a small gain for the week helped by generally supportive corporate sentiment at the Macquarie conference.

Miners (Metals & Mining +4.5%) led the market followed by industrials (+1.2%), with energy (-7.6%) the laggard as oil prices fell and healthcare (-2.8%) continuing its underperformance, mostly driven by sentiment.

There were a few results last week. Observations included:

• The banks saw small downgrades reflecting margins trends not being as positive as expected. It is important to note that they see no signs of weakness or stress in the economy; credit growth remains firm and management are noting the increases in collective provisions are precautionary.
• Domestic industrials Ventia, Downer, SGH and Orica reinforced this message, all providing updates or results which were in-line with or better than expectations; again, there was no evidence of a slowdown.
• Consumer signals were more mixed. Qantas, Sigma Healthcare and Vicinity Centres were positive on sales trends, while Endeavour and Super Retail were not, reflecting the importance of category exposure. JB Hi-Fi fell, the issue being the underlying cost pressures and stock constraints crimping margins, rather than an issue with sales momentum.

About Crispin Murray and the Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

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