Good morning. Wall Street recovered overnight from the previous day's hawkish Fed shock, with the S&P 500 up 1.1% to 7,501 and the Nasdaq up 1.9% to 26,518, led by chipmakers. The lift came less from a change of heart on rates than from oil. Brent eased a further 0.7% to US$79.00 and WTI fell 2.1% to US$75.18 as tankers began moving through the Strait of Hormuz following the interim US-Iran deal, taking Brent down 12.6% over five sessions. Cheaper energy reads through to softer headline inflation later, which is the offset investors leaned on against Kevin Warsh, whose first meeting as Fed chair left rates on hold but stripped the easing bias out of the statement and put a 2026 hike back on the table. The two-year yield rose 15 bps to 4.20% and the ten-year 6 bps to 4.49%.
The ASX 200 closed the prior session down 1.5% at 8,831, its first fall after four straight gains, as the rate-sensitive corners took the hit. Gold fell 3.5% to US$4,208 and dragged the local gold miners with it, while lithium names sold off as carbonate futures slid and uranium followed. Iron ore at US$101.28 and copper holding near record levels kept the largest miners steadier than the rest. The RBA held at 4.35% on Tuesday, and with April unemployment having risen to 4.5%, the highest since 2021, the domestic and US policy paths are now pointing in different directions, which is part of what has the Australian dollar soft at 0.7015.
Underneath the index moves, the corporate signal was about where demand is firm and where it is fading. Jabil lifted its full-year outlook on AI infrastructure orders and Broadcom's AI revenue is running well ahead of plan, the same build-out that powered the overnight chip rally. Against that, Accenture cut its revenue forecast and fell more than 18%, knocking Indian IT, a reminder that AI is a tailwind for the hardware layer well before it is one for the services that sit on top. At home, the live regulatory thread is ASIC's private-credit surveillance, which now touches a long list of the managers arcpoint holds, and that matters more to this reader than any single overnight tick.
This bears directly on a long list of managers arcpoint holds across the asset class, including Metrics, Ares, Pengana, Merricks, Keyview, KKR, MA and CVS Lane. The read-through is tighter scrutiny of valuation, fees and liquidity, which works as a quality filter rather than a sector-wide negative.
The softening jobs market keeps a domestic easing path alive even as the Fed turns hawkish, so the policy gap between the two is widening. That divergence is part of what has the AUD/USD soft at 0.7015.
The two-year yield rose 15 bps to 4.20% on the shift, the clearest market signal of the repricing. The read-through is that the bar for US rate cuts has risen, which weighs on rate-sensitive assets including gold and long-duration equities.
Cheaper energy is the offset markets are leaning on against the Fed, since it feeds through to softer headline inflation. The risk is that the deal is interim, and a reversal would put the geopolitical premium straight back into the oil price.
The read-through is a multi-year, capital-heavy reshaping of the network around 12 ultra-long-range aircraft. The opportunity is premium yield on routes no rival can fly; the risk is fuel cost and delivery timing on a fleet that has to earn its cost back over decades.
Most of these names still sit well above their all-in sustaining costs at this gold price, so the pressure is on margin and sentiment rather than viability. The read-through is that a higher-for-longer US rate path, via real yields and the US dollar, is the swing factor for the sector, not the local story.
The opportunity and the risk sit in the same place: these are leveraged plays on a commodity price that has yet to find a floor. A firmer US dollar and higher discount rates weigh on every pre-cashflow project, regardless of company-level execution.
With the RBA on hold and a softer jobs print behind it, the banks' role as a defensive yield holding within the index is intact. The risk for a reader is concentration: the majors, and CBA in particular, already carry a stretched valuation against book.
The read-through is that the hardware layer of AI is still seeing demand accelerate, not roll over. The risk is valuation and concentration: a handful of chip names are carrying the index, so a single disappointment would be felt broadly.
The contrast with the chipmakers is the story: AI is lifting the companies that build the infrastructure well before it lifts the consulting and services firms that deploy it. For a reader, it is a caution on the IT-services read of the AI theme.
The opportunity is a deeper foothold in a large emerging delivery market via consolidation rather than a price war. The read-through for the sector is that on-demand delivery is still being concentrated into the largest platforms.
The read-through is that brand damage in Europe is proving cyclical rather than structural, though Tesla's overall share of the EU market remains low. The risk is that the recovery is being measured against an unusually weak base.
“It is going to take time for markets to adjust. Our job is price stability, and with inflation where it is, we are not in a position to signal that the path for rates is lower from here.”
“We were impacted by the conflict in the Middle East, a revenue impact of approximately $100 million, with sales in the Middle East down by approximately $400 million and longer decision-making in EMEA.”
“AI infrastructure demand remained extremely strong, and our full-year AI-related revenue outlook is now meaningfully higher than what we laid out just 90 days ago.”
“Customers are being more deliberate with their spending and, at times, shopping us selectively. We're getting too many promotional trips and not enough of the full basket.”
“The pressure on the Fed to raise rates is easing now that the US-Iran deal has reopened the Strait of Hormuz and pulled oil lower, and that has sparked a rally in Treasuries.”
“Funds need to ensure that asset valuations are current, accurate and grounded in realistic assumptions, and we have put private credit on notice ahead of 30 June reporting.”
General advice only. This note does not consider your objectives, financial situation or needs. Consider its appropriateness and seek advice before acting. Past performance is not a reliable indicator of future performance.
Sources: Yahoo Finance, FRED, RBA, company filings.