Daily Market Reports | 8:49 AM
Equity markets fell on Friday with the Israeli attack on Iran leading to higher oil and gold prices, as a risk-off tone rose.
It’s a big week with the Fed’s FOMC meeting on Wednesday and the May labour data for Australia on Thursday, alongside Middle East tensions.
ASX200 futures are signaling a soft start to the week.
| World Overnight | |||
| SPI Overnight | 8532.00 | – 20.00 | – 0.23% |
| S&P ASX 200 | 8547.40 | – 17.70 | – 0.21% |
| S&P500 | 5976.97 | – 68.29 | – 1.13% |
| Nasdaq Comp | 19406.83 | – 255.66 | – 1.30% |
| DJIA | 42197.79 | – 769.83 | – 1.79% |
| S&P500 VIX | 20.82 | + 2.80 | 15.54% |
| US 10-year yield | 4.42 | + 0.07 | 1.54% |
| USD Index | 97.75 | – 0.11 | – 0.12% |
| FTSE100 | 8850.63 | – 34.29 | – 0.39% |
| DAX30 | 23516.23 | – 255.22 | – 1.07% |
Good Morning,
A potential escalation of the conflict between Israel and Iran has market participants on the back foot and firmly in a risk off mode.
Overlaying that is the G7 Meeting(s) in Canada with eyes on Prime Minister Albanese’s one-on-one meeting on Tuesday with President Trump with a focus on AUKUS and tariffs.
What happened last week, extract from Tony Sycamore, IG
US stocks closed lower on Friday as risk appetite evaporated after Iran retaliated against Israel’s attack with missile and drone strikes, which pushed crude oil up by 7%.
For the week, the Dow Jones slipped -1.32%, the Nasdaq fell -0.60%, and the S&P500 lost -0.39%.
Beyond the human aspect of these concerning events, if the conflict continues, it will further weigh on risk sentiment, which has only just recovered after the Liberation Day tariff fiasco.
Additionally, higher energy prices will cause headline inflation to rise which may limit central banks’ ability to cut interest rates, to cushion the growth slowdown anticipated from President Trump’s tariffs. This adds another variable for the Fed to consider when it meets to discuss interest rates this week.
At the last FOMC meeting in early May, the Fed kept the Fed Funds rate on hold at 4.25%-4.50%.
Since the May meeting, while the soft data, including consumer and business surveys, has been weak, the hard data, including last week’s Non-Farm Payrolls report, has held up better than expected given the impact of tariff and trade disruptions. On inflation, the Fed’s preferred measure, the core PCE price index, most recently at 2.5%, has yet to show any signs of tariff-related inflationary concerns.
Considering this, the Fed is expected to keep the Fed Funds rate unchanged at 4.25%-4.50%, reflecting its cautious “wait and see” approach. Fed Chair Jerome Powell is expected to emphasize data dependency in his press conference, avoiding firm commitments and resisting political pressure from President Donald Trump to cut rates. The US rates market finished last week pricing in an 83% chance of a -25bps Fed rate cut for September, with a cumulative -54bps of Fed rate cuts priced by year-end.
The ASX200 finished 31 points (0.37%) higher last week at 8547 retreating from the fresh record high of 8639 it made earlier in the week following Israel’s attack on Iran and President Trumps announcement the US will be sending out letters to trading partners setting new tariff rates over the next fortnight.
This week, the key event on the local economic calendar is Thursday’s labour force update for May. Last month (April), the Australian economy added 89k jobs in April, almost four times the 25k gain the market had expected. The unemployment rate remained at 4.1% as the participation rate surged to 67.1% from 66.8% prior. Notably, it was the 17th month that Australian unemployment rate has been within a 3.9% to 4.1% range.
Despite the robust April labour force report providing yet another reminder of the resilience of the Australian labour market, it didn’t prevent the RBA from cutting rates by -25bps at its Board meeting the following week. However, it likely helped influence the board away from a larger -50bps, which it might otherwise have delivered after inflation returned to the target band and given the risk of tariff and geopolitical uncertainty.
This month (May) the expectation is the Australian economy will add 20,000 jobs in May and the unemployment rate will remain at 4.1%. Assuming the actual numbers don’t significantly exceed expectations, we expect the RBA to cut interest rates by -25bps to 3.60% at its next Board meeting on July 8th. The Australian interest rate market starts the week pricing in an 80% chance of an RBA rate cut in July and a cumulative -78bps of RBA rate cuts between now and year end.
A make or break for risk assets, extract from Chris Weston, Pepperstone
It feels premature to give up on the well-subscribed ‘buy the dip’ mantra just yet, but there are clear reasons to trim back on risk exposures or to layer on portfolio hedges, either through short equity index positions (to offset core portfolio longs), increasing gold longs or buying volatility.
Futures markets have responded to the weekend developments, with Brent gapping up 5.5%, but sellers are coming into the mix here, S&P500 futures trade -0.2%, with gold up slightly, while the USD is stable; all perfectly manageable, at this stage.
The trading environment is morphing from a low volatility, tight trading range, upwards sloping grind, with minimal hedges in place, to one of increased dispersion from market participants on their respective short-term outlooks.
There is certainly been demand from market players to get set in volatility (vol) exposures, where on Friday, the VIX index closed back above 20% and a level that typically leads to a more active approach to trading. There is risk of a -5-10% drawdown in the SPX500.
On the daily chart, S&P500 futures closed below the prior 4-day consolidation lows, and while the intraday tape (on Friday) showed there are still buyers present in the market, the sell-off into the close was clearly indicative of traders reducing risk going into the weekend.
We see the risk picture developing in S&P500 equity factors and styles, with US cyclical, high beta, growth and small cap stocks sold down heavily through the back end of last week and I suspect that will be a theme we see early this week too.
Energy markets are front and centre and naturally, any legacy shorts in the energy sector have been and will continue to be managed dynamically. Initiating long positioning in energy equity or directly in crude is geared towards those with a higher tolerance for risk and the fast money crowd, as putting a theoretical fair value on crude and where supply could end up in such a rapidly evolving conflict is not for everyone.
Most importantly, we need to cut through heightened noise, emotions and misinformation, and specifically around the probability that Iran will influence logistical flows through the Straits of Hormuz, an outcome that would seemingly only occur in the most extreme circumstances.
The weak link across the equity index space falls squarely on the EU Stoxx50 and German Dax, with both indices falling far heavier than any of the major bourses, and both closing lower for five consecutive days. Scanning the universe of our tradeable markets there aren’t many that can match that run of poor form. A classic case of what outperformed on the way up, getting most impacted on the way down.
Gold is also working well with ‘the market’ seeing the near-term investment case for gold as relatively clear-cut. Spot gold settled out the week at a record closing high and will look to build on this platform today for a test of the the high of US$3500.10 (printed on 22 April), with gold futures not far off closing highs and trading a punchy 264k contracts on Friday.
Staying in the precious metals space, and while gold finds form, traders have cut back on profitable longs in silver, platinum and palladium, potentially to raise cash in the portfolio or even flipping the exposure into gold.
In FX markets, it was interesting to see the USD finding a small bid on Friday, perhaps driven by the rise in US Treasury yields and a modest covering of extensive short positions ahead of the new trading week and the known event risks in store.
The strong moves in crude have offered a modest tailwind to the Petro-currencies, but the fact there was no obvious flight to the safe-havens currencies in G10 FX (JPY, CHF and USD), has been another reason why the gold market trades long and strong.
Corporate news in Australia
-KKR has acquired Zenith Energy which develops remote power plants for miners.
-Media reports suggest Jarden is in talks for a strategic tie up with Evercore ISM in the US.
-Amazon has agreed to a $20bn additional investment to fund expansion of its data centers in Sydney and Melbourne as well as investment in solar farms.
-Greatland Gold’s IPO, a $490m-plus raising, is reported as being oversubscribed
On the calendar today:
-CH May Industrial Production
-CH May Retail sales
-CH May Unemployment
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 3452.80 | + 45.38 | 1.33% |
| Silver (oz) | 36.36 | + 0.00 | 0.01% |
| Copper (lb) | 4.81 | – 0.03 | – 0.57% |
| Aluminium (lb) | 1.14 | – 0.01 | – 0.62% |
| Nickel (lb) | 6.79 | + 0.01 | 0.20% |
| Zinc (lb) | 1.19 | – 0.01 | – 0.68% |
| West Texas Crude | 71.29 | + 2.50 | 3.63% |
| Brent Crude | 74.23 | + 4.06 | 5.79% |
| Iron Ore (t) | 95.38 | – 0.08 | – 0.08% |
The Australian share market over the past thirty days
| Index | 13 Jun 2025 | Week To Date | Month To Date (Jun) | Quarter To Date (Apr-Jun) | Year To Date (2025) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8547.40 | 0.37% | 1.34% | 8.98% | 4.76% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BPT | Beach Energy | Downgrade to Hold from Accumulate | Morgans |
| Downgrade to Neutral from Buy | UBS | ||
| CTT | Cettire | Downgrade to Speculative Sell from Speculative Hold | Bell Potter |
| JLG | Johns Lyng | Downgrade to Hold from Accumulate | Morgans |
| MTS | Metcash | Upgrade to Outperform from Neutral | Macquarie |
| QAN | Qantas Airways | Upgrade to Hold from Trim | Morgans |
| RDX | Redox | Upgrade to Accumulate from Hold | Ord Minnett |
| SEK | Seek | Re-initiation of coverage with Buy | Citi |
| WGN | Wagners Holding Co | Downgrade to Accumulate from Buy | 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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