The Overnight Report: Struggling Momentum

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This story features TASMEA LIMITED, and other companies.
For more info SHARE ANALYSIS: TEA
The company is included in ALL-ORDS

US equites rallied first, then weakened, and finally recovered into the close.

The Dow Jones was the only index to finish positive as semis led the Nasdaq down again.

The ASX200 closed off its intralow yesterday led by the telco sector.

SPI futures are pointing to a positive start.

Good Morning,

The ASX200 slipped on Tuesday, down -21 points or -0.2% to 8,604 after recovering from its intraday low sell off.

Telcos led seven of eleven sectors higher, with materials weighing on the index. Gold miners and uranium stocks were the worst performers in the sector.

Hedge funds have doubled their short positions in Australia’s major banks to almost $11bn over the past six months.

Theirs is reportedly the largest short position since July 2010, when the corporate regulator began collecting data.

Today’s Big Picture, J.L.Bernstein

Tech rotation flipped the green open

Stocks opened higher and gave it all back as the chip rebound ran out of gas.

Money rotated out of semis and into value names like Home Depot and Smucker, and nine of eleven sectors still closed green.

Part of the selling is desks freeing up cash for SpaceX’s debut this week.

This looks like profit-taking after a huge run, not the start of something worse.

Iran flares again with a downed helicopter

Trump said Iran shot down a US Apache over the Strait of Hormuz and that the US must respond.

Both pilots got out safe.

Oil had been falling all day on ceasefire hopes and clawed back part of the drop on the news.

The Strait is still effectively shut, so oil stays the swing factor here.

Housing put up its best month in years

May existing home sales rose to a 4.17 million annual pace, beating expectations, with a record median price.

Buyers are pushing through high mortgage rates, and homebuilders led the day’s move into old-economy names.

Healthy housing is one more reason the Fed sees no rush to cut.

NAB Markets Today Extract

Brent crude futures briefly traded below US$90/bbl last night for the first time since mid-April.

Kuwait offered 4mbbls of oil to Asian refiners and the US Energy Secretary touted increased tanker movements through the Strait of Hormuz. Trade in oil at that level was fleeting, with reports soon emerging of the Iranians downing a US Apache helicopter. 

But the immediate spike to US$93/bbl was also short-lived, with markets finding greater assurance in the physical supply than fear from the social media barbs over the helicopter attack.

Brent is trading around US$91.70/bbl toward the close as Iranian state media promises a “decisive response” after President Trump said responding to the helicopter shootdown is a “necessity.” As we go to print, there are reports of projectiles and explosions in Iran.

Overnight data didn’t have much impact: NFIB small business optimism was softer than expected and hiring intentions fell to a six-year low. US existing home sales for May were a surprising bright spot, lifting 3.2% mom in May to a five-month high.

Meanwhile oil exports helped narrow the US trade deficit more than expected to US$55.9bn.

National Australia Bank announced yesterday that we no longer expect the RBA to hike by 25bp in August, and now see the cash rate peaking at the current rate of 4.35% for the cycle. 

The next move in the cash rate is likely to be down, but the timing is uncertain, although we have pencilled in Q2-2027 for the first cut and the policy rate to end next year 3.6%.

A key point in this new forecast is that we are minded to view the proposed changes to taxation arrangements for housing and other asset classes as an exogenous tightening of financial conditions.

Yesterday’s local data flow was not the causal factor in our forecast change but did support the decision. Whilst the NAB Business Survey showed a material rebound in business confidence by 10pts to negative -14, that’s still a historically low result.

Conditions remained steady at a below-average plus-3. Capacity utilisation is below 82% for the first time since early 2025 and the profitability sub-component is furthest below its long-run average, suggesting margin pressures persist.

Slightly earlier, the Westpac–Melbourne Institute Consumer Sentiment Index fell -2.9% in June, returning almost to the April lows. Notably, real estate is on the nose as the “wisest place to save” amidst the debate over tax changes announced in the Budget.

Also during the local session yesterday, China’s May trade surplus hit a record US$105bn –- driven by a 19.4% surge in exports (AI-hardware led) and 27.4% import growth, both decisively beating expectations.

Equities markets overnight generally saw losses tightly concentrated in energy and technology, especially semiconductors. The Nasdaq100 fell as much as -4% and the S&P500 as much as -2.3% in the mid-session trough, before recovering to close -1.0% and -0.25% respectively.

The Philadelphia Semiconductor Index fell -3.2% (albeit a day after surging 5.6%), aided in part by China’s announcement of a 2-trillion-yuan data centre plan with an 80%-homegrown technology target by 2028.

Continental Europe showed similar trends, although the FTSE100 was a notable underperformer, down -1.4%.

Bond yields fell as the oil price decline and tech-led risk-off tone outweighed the week’s growing inflation anxiety. The 10-year Treasury yield fell -4bp to 4.52% but the 3Y note auction cleared slightly back from mid, albeit with bid/cover and indirect bidding up a little from last month (10Y notes will be sold tonight). 

Gilts fell -4bp to 4.91% and Bunds 2bp to 3.04%, both supported by the oil decline dampening near-term inflation expectations.

In FX the DXY was a touch weaker, slipping back below 100.00. USD/JPY made a fresh post-intervention high of 160.45 before settling at 160.3, with the yen feeling the weight of reported short positioning even with the BoJ effectively fully priced to hike next week. 

AUDUSD fell -0.3% to 0.702, touching 8-week lows at 0.7005, as the market tempered rate hike expectations for the RBA a little.

Overnight (Wednesday EST) the marquee release is US May CPI. Core is forecast to slow slightly from 0.4% mom to 0.3% mom. That’s still 2.9% yoy. 

Higher gasoline prices will support again in May, but it also provides the cleanest read yet on whether the oil-driven spike is broadening beyond fuel into core goods and services.

We have lifted our near-term core forecasts on evident upstream price pressures and semiconductor cost spikes feeding consumer goods, though core should still moderate later this year as wage growth stays contained and assuming some reopening of the Strait of Hormuz.

SpaceX, OpenAI, Athropic’s IPOs are NOT the same AI trade, Nigel Green, deVere

Investors are treating the IPOs of OpenAI, Anthropic and SpaceX as part of the same AI boom. They shouldn’t.

It comes following a remarkable week on Wall Street that signals a new phase in the artificial intelligence race.

OpenAI, Anthropic and SpaceX are all seeking access to public capital markets as competition intensifies and the cost of building the future rises sharply.

It’s reported that OpenAI could seek a valuation of up to US$1 trillion, while Anthropic’s latest funding round valued it at US$965 billion, and SpaceX is targeting a record-breaking valuation of around US$1.75 trillion.

Too many investors are looking at OpenAI, Anthropic and SpaceX and seeing one trade. I believe that’s a mistake. These are three fundamentally different businesses with three very different paths to creating shareholder value.

OpenAI is the biggest name in AI. It introduced AI to hundreds of millions of people, and built one of the most recognised brands in tech. But being the most famous company and being the best investment are not necessarily the same thing.

The ChatGPT creator reported more than 900 million weekly active users earlier this year and around 50 million consumer subscribers.

Revenue has accelerated dramatically, yet the company has also indicated profitability is unlikely before the end of the decade as it continues investing heavily in infrastructure and model development.

OpenAI helped create a market where many users expect powerful AI tools to be free or close to free. It’s a remarkable achievement from a product perspective. It can be a much harder starting point from a monetisation perspective.

Public markets are going to ask tougher questions than private investors have asked. User growth and brand recognition is impressive. Neither automatically translates into margins that justify a valuation measured in hundreds of billions or even a trillion dollars.

By contrast, Anthropic may offer investors a different proposition. Anthropic has spent less time chasing public attention and more time building relationships with enterprises.

Business customers behave differently from consumers. They sign larger contracts, they’re often less price-sensitive and they tend to stay longer once systems become embedded in operations.

Anthropic’s latest funding round valued the company at US$965 billion, up sharply from earlier valuations, and it has become one of the leading providers of AI systems to large organisations. Enterprise adoption is where some of the most durable revenues in AI could emerge.

For those investors looking beyond headlines, that deserves attention.

SpaceX, meanwhile, occupies an entirely different category.

The Elon Musk-led company is aiming to raise approximately US$86 billion in what would be the largest IPO in history, with reported demand already exceeding supply by around two-to-one.

On conventional valuation metrics, plenty of investors will argue SpaceX looks expensive. The challenge with that argument is that markets have spent two decades underestimating Elon Musk.

SpaceX is not simply a launch company. It’s a satellite communications business, a space infrastructure business and, increasingly, part of the broader AI ecosystem.

Investors buying SpaceX are buying execution, ambition and optionality. They are buying into Musk’s vision that many previously dismissed and later regretted dismissing.

There’s an argument to be made they know there’s little chance it’s worth the valuation, but they have to buy Musk’s dream because you can’t really bet against him.

OpenAI is a bet on turning extraordinary consumer adoption into profits.

Anthropic is a bet on enterprise AI becoming embedded across business.

SpaceX is a bet on Elon Musk continuing to achieve what critics say cannot be done.

Corporate news in Australia:

• Barbeques Galore is closing -62 stores as recapitalisation deal falls over
• KMD Brands ((KMD)) is reportedly attracting private equity interest, with potential takeover approaches or brand-level asset sales under consideration
• SpaceX funding round heavily oversubscribed, with some institutional investors reportedly submitting orders exceeding US$10bn
• OpenAI has confidentially filed IPO paperwork, signalling a potential public listing amid a broader wave of AI-related IPO activity
• Alicanto Minerals ((AQI)) is seeking to raise $25m in equity following its acquisition of a Western Australian gold mine
• Monvia has launched an IPO expected to raise more than $100m for its insurance software platform business
• Blue Owl Capital is reportedly exploring a sale of Stack Infrastructure, its Asia-Pacific data centre business, in a deal that could value the asset at around US$30bn

On the calendar today:

-JP May PPI

-CH May PPI

-US May CPI

-GQG PARTNERS INC ((GQG )) May update

-TASMEA LIMITED ((TEA)) ex-div 10.00c (100%)

-TOWER LIMITED ((TWR)) ex-div 4.10c

-WESFARMERS LIMITED ((WES)) investor briefing

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

The Australian share market over the past thirty days…

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

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