The markets are in a state of flux, with a mix of positive and negative trends across various sectors. The ASX 200 is expected to rise, while the S&P 500 and Nasdaq slip as tech selling resumes. Gold and oil prices are easing, and all eyes are on the US May CPI, which is expected to rise to 4.2%.
The overnight markets have been a mixed bag, with the S&P 500 and Nasdaq lower as the one-day chip rebound faded, while the Dow eked out a small gain. The S&P 500 briefly dipped 2.2% after Trump said the US "must respond" to Iran over a reported attack on a US helicopter, before recovering into the close. The breadth was strong, with nine sectors green, and the Dow in positive territory.
The volatile session for commodities has seen most giving back early gains or continued to trend lower. Copper is up 0.08% vs. the session high of 2.1%, while aluminium is on a five-day losing streak. Gold is down 1.6% to a fresh year-to-date low, and the risk/momentum-heavy Uranium Miners (-3.9%) led the decline.
The US and Iran have reached "hazy outlines" of a nuclear agreement, though it is unclear when more talks will take place. Iran's Quds Force commander said a "new security belt of the resistance" would stretch from the Strait of Hormuz to the Bab al-Mandab. JPMorgan analysts noted that despite the naval blockade and a steep fall in commercial traffic, surprising volumes of crude and products still appear to be transiting the strait.
The US trade deficit narrowed to $55.9bn in April from $56.6bn in March, with the year-to-date gap down 49.1% on a year earlier. The Section 122 global tariff remains in legal limbo after the Court of International Trade ruled it invalid on May 7, with the government appealing and collections continuing.
The US May CPI is due tonight, a key catalyst after April inflation accelerated to 3.8% year-on-year, the highest since 2023, driven by a 17.9% jump in energy costs. China's May exports rose 19.4% year-on-year and imports jumped 27.4%, beating expectations, with the trade surplus widening to $103.22bn.
Australia's Consumer Sentiment Index fell 2.9% to 80.6 in June, with house price expectations dropping 14.9%. Wesfarmers issued a WestCEF lithium project update at Strategy Day meeting, with 2H26 earnings to be higher half-on-half as higher pricing offsets lower sales.
The key events to watch today include a defensive rotation on Wall Street, with strong gains for defensive/value-oriented sectors. It will be interesting to see how sectors perform amid this semis/chip pullback. Hyperscaler capex is on pace to hit 100% of operating cash flow (vs ~40% in 2023). These megacaps will soon spend every dollar they make on AI infrastructure.
In terms of broker moves, Qualitas initiated a Buy with a $4.00 target (Citi), while REA was downgraded to Neutral from Buy; the target was cut to $165 from $213 (UBS). The ASX will also see stocks trading ex-dividend, including Infratil (IFT) and Whitefield Income (WHI).
Overall, the markets are in a state of flux, with a mix of positive and negative trends across various sectors. The key events to watch today include the US May CPI, the China Inflation, and the Bank of Canada Interest Rate Decision.
