The Overnight Report: Unconditional Surrender

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Markets were back to risk-on and then take profit mode overnight as President Trump seeks full surrender from Iran.

The world waits and watches whether the US will become involved in the Israel/Iran conflict.

All things considered, the reaction was fairly tame. ASX200 futures are looking at a softer open ahead of the Federal FOMC meeting tomorrow.

World Overnight
SPI Overnight	8527.00	– 18.00	– 0.21%
S&P ASX 200	8541.30	– 7.10	– 0.08%
S&P500	5982.72	– 50.39	– 0.84%
Nasdaq Comp	19521.09	– 180.12	– 0.91%
DJIA	42215.80	– 299.29	– 0.70%
S&P500 VIX	21.60	+ 2.49	13.03%
US 10-year yield	4.39	– 0.06	– 1.33%
USD Index	98.42	+ 0.73	0.75%
FTSE100	8834.03	– 41.19	– 0.46%
DAX30	23434.65	– 264.47	– 1.12%

Good Morning,

Markets slipped on uncertainty circling the possibility of US involvement in the Israel/Iran conflict with the US dollar rising and US defense stocks reaching an all time high. 

What happened overnight: Extract from NAB Markets Today Research

The S&P500 was down -0.8% with losses led by health care and consumer discretionary sectors. Energy outperformed as oil rose. WTI crude oil climbed more than 4% and closed at the highest level since January near US$75 a barrel. A gauge of crude-market volatility rose to a three-year high.

The US dollar was stronger, up 0.8% on the DXY. The gains were broad-based with the USD up 0.3-0.4% against CHF and JPY, and 0.7-0.8% against the AUD, NZD and euro. GBP underperformed, down -1.1%. The AUD is currently around 0.6481, remaining above its low of 0.6457 last week.

US yields are lower across the curve; 10yr yields are -6bps lower at 4.39%, outperforming the 2yr where yields were -4bps lower. Treasuries outperformed swaps as the Federal Reserve announced it will hold a public meeting on June 25 to discuss changes to the supplementary leverage ratio.

Yesterday, President Trump left the G7 summit in Canada a day early to focus on the situation in the Middle East. That meant several conversations on trade were scrapped, including with Australian PM Albanese. After a meeting between Trump and Canada’s Carney, Canada said there was an agreement to work toward a deal within 30 days. Japan and the US failed to reach a deal, but Ishiba said they will continue to ‘actively coordinate’ to reach an agreement.

President Trump is considering various options, including a possible US strike against Iran, while meeting with top advisers in the Situation Room on Tuesday, according to administration officials. Trump said earlier he was working on a “real end” to the conflict. On Truth Social, Trump said that the US knew the location of Iran’s leader but “We are not going to take him out (kill!), at least for now,” and also posted “UNCONDITIONAL SURRENDER!”

A third U.S. Navy destroyer entered the eastern Mediterranean Sea, and a second US carrier strike group is heading toward the Arabian Sea. The Pentagon says the military buildup is defensive. Israel’s defense minister said Israel will attack very significant targets in Tehran and warned residents to evacuate. Iran has warned it would launch “punitive” action against Israel, calling Israelis to evacuate Haifa and Tel Aviv immediately.

US data was consistent with some ongoing slowing in US growth momentum even as Q2 GDP data is set for a somewhat mechanical rebound. May retail sales fell -0.9% (consensus -0.6), led by a -3.5% fall in auto purchases after a surge ahead of tariffs. The core control group held up better, up 0.4% (consensus up 0.3) following a -0.1% fall in April.

Some of that resilience in core sales may reflect that tariff price rises were yet to show up meaningfully in end consumer prices in May. Not in the control group measure was a -0.9% fall in food service sales, unwinding part of recent strength. 

Industrial production fell by -0.2% in May, slightly below the consensus, 0.0%. The NAHB housing index, a measure of home builders’ sentiment, fell to its lowest level since the end of 2022.

The BoJ left the policy rate unchanged at 0.5% and unveiled a plan to decrease its monthly bond purchases from April 2026 to a quarterly pace of 200 billion yen (from 400 billion). Ueda said “It’s not appropriate for me to comment on the likelihood of a rate hike in the near future, but I’d like to see how hard data pan out.”

The market continues to see only a modest chance of further tightening this year.

Extract from Ed Yardeni, Quick Takes

The stock market held up remarkably well today considering that President Donald Trump abruptly left the Group of Seven meeting in the Canadian Rockies this morning. On his way home, he warned Tehran’s residents to get out of town immediately.

He also warned Iranian leader Ayatollah Ali Khamenei that he is an “easy target” and “our patience is wearing thin.” In a subsequent post, he then demanded “UNCONDITIONAL SURRENDER” by Iran.

His comments today suggest the US might enter the war against Iran by dropping bunker-busting bombs on the country’s nuclear facilities. The S&P 500 Aerospace & Defense stock price index is soaring in record-high territory.

Under the circumstances, the participants of the Federal Open Market Committee (FOMC) have lots to discuss during their two-day policy meeting that ends tomorrow. What’s not on the table is a rate cut anytime soon, in our opinion. That leaves Fed watchers focused on how Fed Chair Jerome Powell spins the range of views following the FOMC meeting at his presser tomorrow afternoon.

Fed watchers also will be focusing on the committee’s latest Summary of Economic Projections (SEP). Odds are that its median economic forecasts will show slow economic growth with a slight increase in the unemployment rate and a modest short-term uptick in inflation; all mostly consequences of President Donald Trump’s tariffs and now the war between Israel and Iran.

The SEP is likely to signal a couple of small cuts in the federal funds rate in coming months. But Powell will certainly reiterate the FOMC is in no hurry to do so.

Corporate news in Australia

-Tourism Holdings ((THL)) is expected to reject BGH’s bid with the market looking for a higher offer.

-CSL’s ((CSL)) Andembry is given FDA approval to treat hereditary angioedema, launching in the US straight away.

-Canva is planning a secondary share sale before the planned IPO in 2026.

-A group back by Janet Holmes-a-Court has started a Supreme Court overturn for the approval of Woodside Energy Group’s ((WDS)) plan to extend its North West Shelf operation.

-Dubber Corp ((DUB)) is suing BDO auditors around $30m of misappropriated funds.

On the calendar today:

-NZ 1Q BoP CA Bal

-JP April Core machine orders

-JP May Trade Bal

-EZ April ECB CA Bal

-UK May CPI, PPI

-US FOMC rate

-US May Building permits

-US May Housing starts

-AFT PHARMACEUTICALS LIMITED ((AFP)) ex-div 1.11c

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Spot Metals,Minerals & Energy Futures
Gold (oz)	3407.20	+ 3.90	0.11%
Silver (oz)	37.17	+ 0.80	2.19%
Copper (lb)	4.79	– 0.03	– 0.54%
Aluminium (lb)	1.16	+ 0.01	1.16%
Nickel (lb)	6.72	– 0.08	– 1.20%
Zinc (lb)	1.20	– 0.01	– 0.83%
West Texas Crude	73.64	+ 3.67	5.25%
Brent Crude	76.81	+ 3.85	5.28%
Iron Ore (t)	94.86	– 0.37	– 0.39%

The Australian share market over the past thirty days

Index	17 Jun 2025	Week To Date	Month To Date (Jun)	Quarter To Date (Apr-Jun)	Year To Date (2025)
S&P ASX 200 (ex-div)	8541.30	-0.07%	1.26%	8.90%	4.68%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ADT	Adriatic Metals	Upgrade to Hold from Trim	Morgans
ASX	ASX	Upgrade to Hold from Trim	Morgans
AX1	Accent Group	Downgrade to Hold from Buy	Morgans
CTT	Cettire	Downgrade to Speculative Sell from Speculative Hold	Bell Potter
EVN	Evolution Mining	Downgrade to Sell from Neutral	UBS
HDN	HomeCo Daily Needs REIT	Upgrade to Accumulate from Hold	Ord Minnett
NST	Northern Star Resources	Downgrade to Neutral from Buy	UBS
RRL	Regis Resources	Downgrade to Sell from Neutral	UBS
STO	Santos	Downgrade to Trim from Hold	Morgans
		Downgrade to Accumulate from Buy	Ord Minnett
VNT	Ventia Services	Upgrade to Hold from Trim	Morgans

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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