Devon Funds Morning Note - 14 October 2025

Wednesday 15th October 2025

Tariff Truce Hopes

Global

US equity markets have staged a strong rebound overnight, recovering over half of Friday’s steep losses after President Trump moderated his tone on the China trade dispute and signalled room for negotiation ahead of the November 1st tariff deadline. The S&P 500 surged by 1.59%, the Dow Jones gained 1.29%, and the Nasdaq advanced 2.21%, with technology and AI stocks leading the comeback, including significant gains for Nvidia (+2.88%), AST SpaceMobile (+10.33%), Broadcom (+9.88%), Oracle (+5.14%), and Tesla (+5.42%).

The rebound came as calmer rhetoric from both the White House and Beijing, helped investors feel more secure about the prospects for further talks and possibly avoiding the worst-case scenario of escalating tariffs. Trump posted online that “it will all be fine,” assuring the market that a mutually beneficial solution was still possible. Vice President Vance also confirmed that the US remains open to negotiations with China, although warning that the US retains significant leverage.

With the upcoming earnings season, a key inflection point for Wall Street, investors are waiting for profit results, however, caution persists regarding elevated asset prices (especially among AI stocks), ongoing government shutdown implications, and tariff-related economic uncertainty. Overall, the market’s resilience suggests that investor nerves are settling after a turbulent week.

At a stock level, Broadcom is the latest to join with OpenAI, adding around $150 billion in market capitalisation following the announcement of a landmark agreement to co-develop and supply custom AI accelerator chips and networking gear for OpenAI’s next-generation data centres. The deal will see OpenAI and Broadcom jointly deliver 10 gigawatts worth of advanced AI compute, starting in the second half of 2026 and completing rollouts by 2029. OpenAI will take the lead in chip design, embedding learnings from its AI research directly into the hardware, while Broadcom handles manufacturing, infrastructure integration, and global deployment.

Spot gold is up, smashing through the USD 4,100 per ounce mark and notching a fresh all-time high at USD 4,137. Oil, meanwhile, has seen only a modest recovery from last week’s heavy selloff. Brent crude rose just over 1% to USD 63.50 per barrel, as the energy market digested Middle East news and global demand signals. The focus overnight was on diplomatic breakthroughs: all remaining hostages in Gaza were released to Israel, and President Trump arrived in Israel before traveling to Egypt for a high-profile summit with regional and European leaders aimed at advancing his wide-ranging proposal to end the war.

European markets begun their partial recovery from the sharp selloff driven by the trade war. The Euro Stoxx 50 advanced 0.67% to close at 5,568.19, The FTSE 100 inched higher 0.16% to finish up at 9,442.87, while the German Dax added 0.55% to close 24,375.28. Looking ahead, investors are watching for German investor sentiment, UK unemployment, and French/Spanish inflation data in a week that could further clarify the region’s economic trajectory.

Looking towards Asia, the Hang Seng Index in Hong Kong dropped 1.52%, while mainland China’s CSI 300 slipped 0.50% despite September trade data showing exports surged by 8.3% year-over-year and imports rose at their fastest pace in more than a year. Japan’s markets were closed due to a public holiday.

New Zealand

The NZX 50 stock market fell sharply to start the week, dropping 0.86% to close 13,351.92, driven by the knock-on effects of the renewed US-China tension. There were notable losses for tech and infrastructure, among others, names including Gentrack (-4.52%), Eroad (-2.90%), Winton Land (-2.60%), Vector (-2.37%), Sanford (-2.27%), and Fletcher Building (-2.13%).

Precinct Properties (PCT) has launched a $310 million equity capital raise to strengthen its balance sheet and help deliver its ambitious $3.7 billion development pipeline, while also providing flexibility for future capital partnerships. The raise comprises a $285 million fully underwritten institutional placement and a $25 million non-underwritten share purchase plan, offered at $1.23 per stapled share, a 7.5% discount to the last closing price.

PCT has also announced the commencement of a $201 million, 638-bed purpose-built student accommodation development at 256 Queen Street, Auckland, expected to open for the 2029 academic year. This project brings Precinct’s total committed student accommodation pipeline to 1,602 beds and follows their recent real estate investment partnership at 22 Stanley Street, another major student housing facility.

Fletcher Building’s first quarter FY26 update revealed a material decline in aggregates sales compared to the previous quarter, primarily due to ongoing slowdowns in roading projects. Concrete volumes held steady, but steel showed a slight lift in activity despite continued margin compression. Pulse report data shows monthly sales remain consistently below the prior year across general building merchants (Placemakers, Carters, ITM), as well as concrete and electrical categories.

On a positive note, Fletcher has ramped up its cost-out programme, aiming for NZ$100 million in annualized savings, with NZ$50 million to be realized in the second half of FY26 and the remainder by FY27.

In economic news, New Zealand’s Performance of Services Index (PSI) nudged up to 48.3 in September from 47.6 in August, but remains well below both the crucial 50 threshold (which separates expansion from contraction) and its historical average of 52.9 and marking the 19th consecutive month of contraction for the sector.

While both the Performance of Services Index (PSI) and the earlier-released Performance of Manufacturing Index (PMI) showed marginally higher Q3 averages compared to Q2, economists warn this is no cause for celebration, collectively, the combined indices indicate that economic growth is struggling to gain traction and remains far from a convincing recovery.

In financial markets, the subdued domestic data, paired with a broader global risk-off tone, left New Zealand rates markets relatively quiet. Swap and NZ government bond yields fell 2–4 basis points across the curve, moving in line with global yields but showing scant local conviction for now. Later this morning NZ electronic card transactions data is set to be released to gage consumer spending.

Australia

The Australian share market followed trends, with the ASX 200 falling 0.85% to close at 8,882.80. Commodity prices have rebounded overnight, particularly in gold miners as the precious metal scaled to record highs. Elsewhere, rare earth peers Lynas (+2.27%) and Iluka (+2.26%) outperformed as beneficiaries of China restricting rare earth exports. Those most effected by the tariff concerns included Reliance Worldwide (-2.98%), Breville (-2.08%) and Lovisa (-1.54%), while Treasury Wine plummeted -15.0% upon withdrawal of their FY26 guidance.

ANZ Group Holdings’ CEO, Nuno Matos, unveiled the bank’s refreshed “ANZ 2030” strategy, a five-year transformation plan aimed at simplifying operations, accelerating growth, and materially improving returns. The plan includes halting ANZ’s remaining $800 million share buyback to free up capital, which will instead be redirected toward front-line investment, including recruitment of additional relationship bankers, enhancement of the ANZ Plus digital platform, and faster integration of the Suncorp Bank acquisition to achieve earlier synergy realisation.

Under the ANZ 2030 framework, the first phase (FY26–FY27) will focus on embedding leadership, cutting duplication, and achieving material productivity gains, while phase two (post-FY27) will accelerate revenue and market share growth driven by digital transformation and operational streamlining. The strategy has been well received by investors, with ANZ shares climbing over 3.30% following the announcement.

Treasury Wine Estates delivered a soft trading update, reflecting growing uncertainty across key markets, particularly China and the United States, which prompted management to withdraw its FY26 earnings guidance. The company acknowledged that first-quarter (1Q26) shipments for its flagship Penfolds brand were broadly in line with expectations globally, but China’s depletions, sales from distributors to retailers, remain well below planned levels despite a minor seasonal lift.

TWE cited “evolving consumption dynamics” in China, particularly slower banqueting and luxury gifting activity, as a key drag on volumes. Management said that if current trends persist, Penfolds is unlikely to meet its China sales targets for the year. The company is reallocating inventory to other premium markets to protect pricing integrity and avoid grey market re-exports back into China.

Lastly, something that caught our eye, queues are building outside popular gold trader ABC Bullion in Sydney’s Martin Place, with crowds lining up for hours at the gold dealer on the recent gold surge. The photo below was taken by our Portfolio Manager as Sydneysiders look to cash in.

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