The Overnight Report: Dead Cat Bounce?

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This story features MACQUARIE GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: MQG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

After last Friday's sharp sell off, notably in chip stocks (Nasdaq) and high flyers, the S&P500 and Nasdaq rebounded with investors buying the dip (again!).

The Semiconductor Index or SOX rose 6.5%, its best day since May 12, 2025.

After Friday's sell-off, ASX200 futures are pointing to a positive start to the week.

Good Morning,

The Australian market fell for a second straight session on last Friday. The ASX200 retreated by -61 points or -0.7% to 8,625.

Materials led the fall by -2.3% while healthcare rose 3.5%. 

The ASX was closed on Monday for the Kings Birthday.

After the close of US markets, OpenAI has reportedly filed with the SEC for an IPO a week after Anthropic announced its plan to go public.

Today’s Big Picture, J.L.Bernstein

Chips Bounce Back 

Friday was the Nasdaq’s worst day since April 2025, and the chip names wore it.

Today they are out front on the way back, with Micron $MU leading and Nvidia $NVDA higher on a fresh memory deal with SK Hynix.

History likes this setup too. After a drop that size, the Nasdaq has closed green the next day about seven times out of ten.

Nothing about the AI buildout actually broke on Friday, which is the part worth holding onto.

Iran And Israel Trade Strikes, Then Back Off 

Iran fired missiles at Israel overnight and Israel hit back hard.

By this morning Iran said it was done, with a warning it would restart if Israel keeps hitting Lebanon.

Brent oil pushed up near US$98 at the open, then gave most of it back once the all-clear came.

That fade tells you the market is reading this as theater, not the start of something bigger.

Energy names held their gains, airlines slipped on the fuel scare.

Rate Cuts Got Pushed To 2027 

Here is the engine under the bounce. Friday’s jobs report ran hot, and the market flipped from waiting on cuts to fully pricing a rate hike by year-end.

Goldman now sees no cuts in 2026 and moved its next ones out to 2027.

Higher rates squeeze the priciest growth names first, which is exactly the crowd that sold off Friday and is bouncing today.

ANZ Bank, Australian Morning Focus

Equity markets recovered some lost ground following last Friday’s fall.

The S&P500 was up 0.3%, Nasdaq rose 0.86%, while the EuroStoxx50 and the FTSE100 closed flat.

The yield on the US 10y Treasury note was little changed at 4.56%. Oil prices rose on the open but then eased with WTI at US$91.35/bbl. Gold changed little at US$4,325.9/oz.

The NY Fed’s May survey of consumer expectations showed inflation expectations remain well anchored. The 1yr expectations fell -0.1% to 3.5%, whilst the 3yr and 5yr gauges were unchanged at 3.1% and 3.0% respectively.

In February, the 3yr and 5yr expectations were both 3.0%. The mean expectation of losing one’s job rose to 15.1%, up from 13.8% in February.

Following the 172k rise in US May nonfarm payrolls (NFP), the market is again fully pricing a 25bp rise in the federal funds rate by the end of this year.

Although much of the NFP gain was in leisure and hospitality and local government, sectors that may reflect hiring ahead of the World Cup, the data highlight a stabilisation in the labour market for now.

As such, the Fed has time to focus more on the inflation side of its mandate.

Elevated inflation risks are clearly skewing market pricing towards a hawkish outcome. The data will be critical in determining the eventual path for fed funds.

US May CPI and PPI data will be released this week and will help to clarify the inflation picture. Owing to energy prices, headline CPI is forecast to rise 0.5% m/m, 4.2% y/y, while the consensus expects core inflation to rise 0.3% m/m and 2.9% y/y.

Clearly such an outcome will provide a rationale for the Fed to remain cautious in the near term. We will be watching to see if the rise in energy costs is filtering to other components of inflation beyond energy-sensitive sectors.

To date, there is scant evidence of a broadening in inflation pressures and pick-up in second-round effects. Wage pressures are easing, real consumer expenditures have been softening, and medium- to longerrun inflation expectations are well anchored.

Members of the Board of Governors have been signalling patience, with a bias towards inflation coming down if the Strait of Hormuz reopens in the foreseeable future.

However, the Fed is data-dependent, and the data will help to either endorse or push back against current market pricing.

ANZ Bank, Commodities extract

Crude oil surged on the open, as hostilities between Israel and Iran ratcheted up. Over the weekend, the two sides traded fire. Israel intercepted Iran’s fire while striking targets in Tehran and the Karun petrochemical company in Mahshahr.

Iran also warned that it would target oil and gas facilities linked to Israel, the US and their allies in the region if the attacks on its own infrastructure continue, according to the semi-official Fars news agency.

The flare-up threatened to derail peace talks between the US and Iran and raise tensions across the broader Middle East. Compounding these fears was the announcement by Yemen’s Houthis that there would be a complete ban on Israeli shipping in the Red Sea.

While there is some conjecture over what constitutes an Israeli vessel, it raises risk around one of the key alternative routes for Saudi Arabian crude oil to make its way onto the international market.

The Saudis have used their east-west pipeline to export more than 4mb/d via its Yanbu port in the Red Sea. Crude oil prices pulled back late in the session as tensions eased. Israel and Iran signalled they would refrain from further escalation.

Prime Minister Netanyahu said Israel is holding fire against Iran for now. President Trump earlier said both countries are looking to agree to an immediate ceasefire.

In the meantime, According to the Bloomberg ship tracking data, 16 commercial vessels transited the Strait of Hormuz over the weekend. However, the US continues its blockade of Iranian ports. US Central Command said it disabled an oil tanker in the Gulf of Oman that allegedly attempted to sail to an Iranian port.

European gas futures held near a two-week high on the escalation of fighting between Israel and Iran. Compounding matters were other supply side issues. Workers at Inpex’s Ichthys LNG plant in Australia filed a complaint about the company’s operations with the country’s offshore energy regulator and are planning to increase strike action after talks between union members and management stalled.

The Ichthys plant accounts for 2% of the world’s output, with a planned capacity of 9.3mt/y.

North Asia LNG prices were also higher. However, the gains were limited by reports that another LNG tanker from Qatar made its way through the Strait of Hormuz.

Copper rebounded as Israel and Iran pulled back from renewed fighting. The Middle East remains fragile, which helped stem the losses from last Friday’s selloff triggered by a partial bursting of the AI-fuelled equity rally. Technology stocks suffered sharp declines as investors started to doubt the profitability of the sector.

Copper has been supported by a view that the infrastructure required to fuel the AI investment boom would boost demand. Sentiment was further dented by a strong US jobs report that fuelled expectations that the Federal Reserve will likely raise interest rates this year.

Nevertheless, ongoing supply side issues are likely to persist. The escalation of the conflict in the Middle East and the effective closure of the Strait of Hormuz have triggered cascading disruptions across the copper supply chain, particularly via their impact on sulphur and sulphuric acid markets.

The Middle East is a major global supplier of sulphur, a by-product of oil and gas processing. This is a key input into solvent extraction and electrowinning copper processing.

Gold steadied after Iran and Israel eased strikes against each other

The Year the Fed Pauses. Now what? Taylor Topoussis, Chris Galipeau, Franklin Templeton extract

• We remain constructive on equities and believe that the market will continue to broaden, with small caps, value and emerging markets all having the opportunity to outperform. We maintain this call but also see opportunities in growth-style stocks. After the recent run, we do not think it is wise to chase highs but would use pullbacks to add to the broadening theme. We agree with the sentiment, “Buy the dips and sell the rips!”
• Last week, the S&P500 Index completed its ninth straight positive week, with a cumulative gain of about 19% over that stretch. However, this winning streak ended there. It is worth noting that over the past 50 years, that was only the fourth time that a positive streak extended beyond eight weeks, with the longest reaching 12 in 1985.
• Almost every S&P 500 company has reported first-quarter earnings, and it was a strong quarter across most metrics. Per Bloomberg data, 84% of companies beat earnings estimates, with the average beat on earnings-per-share (EPS) at 16.3%. The S&P500 EPS grew 27% year-on-year (y/y), led by the information technology sector, which grew EPS 49%. Roughly 81% of companies surpassed revenue estimates.
• Earnings estimates for the rest of the year have also moved higher. The S&P 500 estimate for 2026 is 9% above where it stood on January 1. At the sector level, technology estimates are up 18%, materials 16% and energy 57%. Higher forward EPS explains much of the equity rally since March.
• Emerging markets (EMs), as measured by the MSCI Emerging Markets Index, are up 25% this year, beating the S&P500 by 14%, after doubling the S&P’s return in 2025. Strong earnings expectations for EM companies drive our constructive view on the asset class. So far this year, earnings expectations have increased, with the 2026 estimate now 26% above where it started the year, according to Bloomberg data.
• A couple of weeks ago, SpaceX filed its S-1 for a public listing for this summer. OpenAI and Anthropic are also expected to go public this year. Investors will scrutinize the financials of these companies as they fail to gain greater insight into the path of AI spending and revenues. Per Pitchbook data, SpaceX last raised money in February at a post-money valuation of US$1.25 trillion, OpenAI in March at US$850 billion, and Anthropic on May 28 at US$975 billion. If the companies list near those last valuations, they rank numbers 9, 14, and 12 in S&P500 market capitalization, respectively. Their financial disclosures and IPO demand could become broader market catalysts in either direction.
• Bottom line: We think the fundamental backdrop for equities remains strong, particularly for US equities across size and style, and for emerging markets. We believe it is prudent to reduce concentration, stay diversified, dollar-cost average, periodically rebalance and use consolidation to one’s advantage.

Corporate news in Australia:

• Cargill in discussions to sell its metals business to Macquarie Group ((MQG))
• SCX.ai, led by former Bigtincan founder David Keane, is preparing an ASX IPO by the end of the September quarter after completing a circa $5m pre-IPO raising
• Allianz to acquire nib Holdings’ ((NHF)) A&NZ travel insurance operations for up to $50m
• Perpetual ((PPT)) purchases a 70% stake in Interfi Systems to support growth in corporate trust services
• Calvary and Pacific Equity Partners progress due diligence on Healthscope as expectations for a transaction increase
• Ontario Teachers leads bidding for StraitNZ, with limited competition and ferry upgrade uncertainty weighing on the process
• Vector abandons plans to sell its fibre business despite interest from an Australian infrastructure fund
• Multiple investors prepare bids for Plus ES as Ausgrid advances a $3bn divestment process
• Navis continues to explore a sale of Device Technologies as part of an extended exit process
• Bain Capital submits a non-binding takeover proposal for oOh!media ((OML))

On the calendar today:

-NZ 1Q Mfg Volume

-AU NAB Business Survey

-AU Westpac Consumer Confidence

-CH May Trade Bal

-US April Trade Bal

-US May existing homes sales

-US May NFIB

-INFRATIL LIMITED ((IFT)) ex-div 9.51c

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

The Australian share market over the past thirty days…

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