Good morning. The selling in semiconductor shares that began in Seoul rolled through Tokyo and Europe and reached New York overnight, and for a fourth session it did not take the rest of the market with it. Money left chip and AI-infrastructure names and went into industrials, consumer and financial stocks, so the Dow Jones Industrial Average and the Nasdaq Composite finished the same session on opposite sides. A report earlier this week that China has begun making its own deep-ultraviolet lithography machines started the rout, and questions about who is actually funding the AI build-out have kept it going.
Crude fell for a third session as Oman put a Gulf-backed plan to Iran for managing the Strait of Hormuz, which pulled United States Treasury yields lower two days before the Federal Reserve decides. The statement lands at 4am AEST tomorrow and chair Kevin Warsh speaks half an hour later. Apple's market value touched US$5 trillion during the session, the second company to get there, and it reports June-quarter results on Thursday United States time.
Closer to home, Reserve Bank governor Michele Bullock used a Sydney lunch on Tuesday to put the question of whether the tightening already delivered is enough, one day before the June-quarter consumer price index lands at 11.30am. The market moved on the speech; the number is what settles it. ASIC was in the news twice over, publishing a review of how eight banks have handled mortgage offset accounts and securing a record Federal Court penalty against Harvey Norman and its credit partner.
The ASX 200 finished yesterday's session at 8,948, up 0.6 per cent and its highest close in six weeks. The rate-sensitive and consumer-facing sectors carried it after Reserve Bank governor Michele Bullock's lunchtime speech: consumer discretionary rose 2.2 per cent, real estate 1.6 per cent, telecommunications 1.5 per cent, health care 1.4 per cent, staples 1.3 per cent and financials 1.0 per cent. Materials fell 1.5 per cent, the only sector lower, with energy names under pressure from the overnight fall in crude. The Australian dollar bought US69.78 cents, down 0.1 per cent.
The Dow Jones Industrial Average closed overnight at 52,747, up 1.0 per cent, and the S&P 500 at 7,429, up 0.2 per cent, while the Nasdaq Composite fell 0.2 per cent to 24,877. The Philadelphia semiconductor index dropped 4.5 per cent for a fourth straight fall, having been down as much as 6.5 per cent during the session, and the Nasdaq 100 now sits about 9 per cent below the record it set on 2 June. The 10-year Treasury yield fell 4 basis points to 4.60 per cent and the 2-year to 4.31 per cent as crude slid. Gold fell 1.1 per cent to US$4,029 an ounce and the US dollar index eased 0.1 per cent to 101.38.
The Stoxx Europe 600 closed at 647, up 0.4 per cent, the FTSE 100 at 10,871, up 0.8 per cent, and the DAX at 25,464, up 0.4 per cent. Earnings-driven gains in consumer-facing stocks, including Unilever and Man Group, offset declines in banks and energy shares, Reuters reported.
At yesterday's Asian close the Nikkei 225 fell 4.0 per cent to 62,365 and the Shanghai Composite 1.2 per cent to 3,813, while the Hang Seng rose 0.4 per cent to 25,311. South Korea's Kospi fell about 10.8 per cent to 6,024, its lowest close since April, and the exchange halted trading twice, once for 20 minutes after losses passed 8 per cent. Samsung Electronics closed about 13 per cent lower and SK Hynix about 14 per cent lower, and Bloomberg's gauge of Asian semiconductor shares fell 7.5 per cent, its largest drop since April 2025.
Governor Michele Bullock's speech to the Anika Foundation on Tuesday pushed the market's expected timing of the next 25 basis point increase out to March 2027, from before the end of this year beforehand, and no cut is priced across that horizon. She said the key question is whether the tightening already delivered is enough to slow inflation, that underlying inflation has evolved as expected but is still too high, that the housing market has softened by more than the Bank anticipated in May, and that the unemployment rate has risen by somewhat more than forecast. The Australian 2-year government bond yield fell 6 basis points to 4.61 per cent after the speech.
The regulator examined how eight banks, among them Commonwealth Bank, Westpac and ANZ, set up, linked and managed offset accounts, drawing on data from 204,000 unique home loans, and identified problems in hundreds of cases, including accounts never linked to the loan they were meant to offset. In one case a customer paid more than $3,500 in extra interest in a single month. Because repayments stayed the same, affected borrowers also took longer to pay down their loans.
Independent director Patty Akopiantz resigned at the end of June, following former NSW premier Mike Baird off the board that governs the firm's Australian, New Zealand and Singapore operations. KPMG audits a large share of ASX-listed accounts, and the firm's partners were fined up to $180,000 over work for Telstra and Optus earlier this month.
The Oman plan includes collecting voluntary fees for use of the strait. Brent closed above US$100 a barrel a week ago at the height of the fighting, and has fallen in each session since the United States paused its air strikes over the weekend.
The present situation index fell 3.6 points to 114.9, a third consecutive monthly decline, while the expectations index was unchanged at 74.7. Consumers' assessments of both current business conditions and the current labour market softened.
Fitch said United States corporate bond issuance rose 26 per cent in the first half of 2026, driven largely by AI-related fundraising, with Amazon, Alphabet, Nvidia, Meta, Oracle and SpaceX together issuing US$182 billion of investment-grade bonds. Capital spending by Alphabet, Amazon, Meta and Microsoft is projected to rise more than 75 per cent this year to US$700 billion, and the S&P 500's cyclically adjusted price-to-earnings ratio has climbed close to its late-1990s levels.
That would be a fifth consecutive hold, and the effective federal funds rate is printing at 3.63 per cent. Chair Kevin Warsh, who took office in May, gives his press conference half an hour after the statement and has said he intends to offer less forward guidance than his predecessor.
China is the largest maker of inverters, led by Sungrow Power Supply and the already-sanctioned Huawei, and has been taking Western market share by cutting prices. Officials framed the measure as protecting the AI build-out's supply chain from disruption, data theft and cyber attack, citing the Volt Typhoon intrusion campaign disclosed in 2023.
The administration rebuilt the regime under Section 301 and other statutes, and a federal lawsuit filed days earlier accuses it of misusing those powers. Section 301 duties of 10 to 12.5 per cent took effect on more than 80 trading partners, including Australia, on 24 July.
The combined $55 million is the largest penalty ASIC has obtained for misleading conduct and false or misleading representations relating to financial products and services. The advertisements ran thousands of times in newspapers, on radio and on television between January 2020 and August 2021, and required customers to take out a Latitude GO Mastercard carrying monthly account service fees. Justice O'Bryan found the two equally responsible for the advertisements but set the higher penalty against Harvey Norman, citing a lower level of contrition and public statements by its chairman. Both must publish corrective advertising on their website home pages for 90 days.
The data may include names, addresses, phone numbers, dates of birth, account details and either the last four digits of a credit card or the last three digits of a bank account. A significant proportion of the 900,000 are former customers. Chief executive Frank Calabria apologised and told customers to watch for scam activity. The Australian Federal Police, the Australian Cyber Security Centre and the Office of the Australian Information Commissioner are assisting. Origin first disclosed that it was investigating a potential breach last week, when its shares fell 2.3 per cent.
Greenbushes produced 387,000 tonnes of spodumene concentrate in the quarter at a realised price of US$2,286 a tonne. No published consensus exists for a quarterly activities report, so the comparison is with the March quarter. The shares closed 1.8 per cent higher at $6.87 on a day when the materials sector fell 1.5 per cent.
Cash and gold on hand rose $25.7 million over the quarter to $206.4 million, and the company cut its forward sales hedges, removing mandatory deliveries until mid-2027. Head grade was 4.5 grams a tonne and metallurgical recovery 96.0 per cent. The shares fell 2.2 per cent to $1.35 on the day.
Hut 8 had disclosed the leases only as being with an existing investment-grade customer. Nvidia shares fell 5.0 per cent to US$196.51. The disclosure fed the day's selling in semiconductor shares, where investors have been questioning arrangements under which a chip supplier underwrites the data-centre capacity its own customers buy.
Free cash flow was a positive US$631 million on the highest quarterly delivery volume since 2018, and the shares rose 4.3 per cent to US$220.58 as investors looked past the charge. Chief executive Kelly Ortberg said 737 production is ramping to 47 aircraft a month and that the 737-7 and 737-10 remain on track for first deliveries in 2027. Boeing's delivery rate sets the pace for fleet renewal at airlines including Qantas and Virgin Australia.
Optical communications sales rose 32 per cent to US$2.07 billion, with enterprise networks up 65 per cent. Chief executive Wendell Weeks set out a plan to lift the annualised sales run rate to US$20 billion by the end of 2026, US$30 billion by 2028 and US$40 billion by 2030. The guidance dragged other optical suppliers lower, with Marvell, Lumentum and Coherent each falling more than 10 per cent.
Adjusted free cash flow guidance rose to US$6.0 billion to US$7.0 billion from US$5.0 billion to US$6.0 billion, and automotive revenue was US$44.89 billion against a US$44.72 billion consensus. The shares rose close to 7 per cent after hours. Chief financial officer Sherry House attributed the upgrade to pricing, mix and net tariff exposure, which is one of the clearer reads available on how much of the tariff cost United States manufacturers are passing on.
Comparable currency-neutral earnings growth guidance, excluding acquisitions and disposals, rose to 7 to 8 per cent from 6 to 7 per cent. Both revenue and earnings came in above consensus. Volume growth came from India, China, the United States and Brazil, giving one of the broadest reads on household demand available in the reporting season.
It is the second company to reach the mark, after Nvidia, which Apple overtook as the most valuable listed company earlier this month. The Financial Times attributed the run to Apple's comparatively light AI capital spending and to investors seeking shelter from the chip sell-off. Apple reports June-quarter results on Thursday, United States time, and John Ternus succeeds Tim Cook as chief executive in September.
United States domestic operating profit rose more than 20 per cent and consolidated operating margin was 9.2 per cent, up 40 basis points on a year earlier and 300 basis points on the first quarter. GAAP results carried US$891 million of after-tax transformation charges from the completed Driver Choice separation programme. Chief executive Carol Tomé said China to United States volumes returned to year-on-year growth from May, a useful read on trade flows under the new tariff schedule.
The shares led the Stoxx Europe 600 in early trade on Tuesday. The inflows come as hedge funds run toward a second consecutive strong year on the AI trade, and are a rare positive flow datapoint for a listed active manager.
“The Board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed.”
“Because of bank failures to properly record and link offset accounts, loan repayments stayed the same and customers paid more interest and took longer to pay down their loans. Customers are doubly hit, not only losing promised interest savings but also the opportunity to use that money elsewhere.”
“We continue to see strong demand for our Gen AI products and enterprise networks and our orders are accelerating.”
“Across much of the world, we see an uneven consumer environment. The economy is strong in many places, yet many consumers face inflationary pressures, geopolitical uncertainty and economic challenges.”
“We also announced an 8 per cent price increase effective September 1st to offset raw material and other cost inflation. Because of our strong supplier relationships and disciplined supply chain execution, we were able to delay this increase for customers.”
“Across the commercial market, we continue to see exceptional demand and market conditions as evidenced by our record backlog of more than 6,200 airplanes and a market outlook of nearly 44,000 new aircraft over the next 20 years.”
For wholesale clients only. Prepared by Arc Point OCIO Pty Ltd (ACN 693 569 765), Corporate Authorised Representative (CAR 1319046) of Capella Advisory (AFSL 550125), for wholesale clients within the meaning of the Corporations Act 2001 (Cth); it is not intended for, and should not be relied on by, retail clients. This note is factual market reporting and general information, with any arcpoint view clearly labelled as such. It is not personal advice and does not take into account any person's objectives, financial situation or needs. Information is drawn from sources believed to be reliable but its accuracy and completeness are not guaranteed. Past performance is not a reliable indicator of future performance.
Sources: Yahoo Finance, FRED, RBA, company filings.