The Overnight Report: Chips Boost Aftermarket

Array
(
    [0] => Array
        (
            [0] => ((THL))
            [1] => ((A2M))
            [2] => ((ASM))
            [3] => ((AUG))
            [4] => ((HUM))
            [5] => ((CCP))
            [6] => ((KMD))
            [7] => ((NIC))
            [8] => ((CBL))
            [9] => ((RCE))
        )

    [1] => Array
        (
            [0] => THL
            [1] => A2M
            [2] => ASM
            [3] => AUG
            [4] => HUM
            [5] => CCP
            [6] => KMD
            [7] => NIC
            [8] => CBL
            [9] => RCE
        )

)

This story features TOURISM HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: THL

Traders sold chip stocks, sending the Nasdaq lower overnight.

However, Micron, after the close, has seemingly come to the rescue, with the after-hours market cheering its result.

The stock is trading up more than 12%, boosting other memory stocks after-hours.

The Australian market took the May CPI print in its stride and rose yesterday.

Ahead of May labour force data, SPI futures are pointing to a positive start.

Good Morning,

The ASX200 rose 21 points, or 0.2%, to 8,808 on Wednesday. Technology gained 5.2%, Energy fell -1.1%, and miners lagged.

After a mixed May CPI print yesterday, CBA estimates Australian employment rebounded by 30,000 (consensus: 32,500) in May, following a decline of 19,000 in April.

Monthly changes in employment are very volatile. May employment data are due at 11.30am (AEST).

Today’s Big Picture, J.L.Bernstein

Oil Is Back To Prewar Prices

Brent fell below US$75, WTI under US$70. First time since the Iran war kicked off.

Tankers are moving through the Strait of Hormuz again after last week’s US-Iran deal, and even with traffic still light, oil flowing means cooler inflation later this year.

The market’s betting the peace holds. So far that bet is paying off.

AI Nerves Return Before Micron

Tech took it on the chin again as investors got jumpy about high valuations and the giant bills piling up for the AI buildout.

The Mag Seven plus Broadcom and Oracle have lost about -US$2.7 trillion this month. 

Gold Slips Under US$4,000 As The Dollar Climbs

Gold dropped below US$4,000 for the first time in seven months, and Bitcoin fell under US$60,000.

The same thing is driving both, a strong dollar and a Fed in no rush to cut.

New Chair Kevin Warsh has stayed hawkish, so traders are now betting on a possible hike later this year.

These assets aren’t broken. The dollar is just running the show right now.

ANZ Bank, Australian Morning Focus extract

The S&P500 was down -0.1%, the EuroStoxx50 closed down -0.25% and the FTSE100 rose 0.3%. 

The yield on the US 10-yr Treasury note fell -10bp to 4.40%. 

Oil prices were lower with WTI down -4.6% to US$69.9/bbl. Gold fell -2.9% to US$3,997.3/oz. 

US May new home sales fell -7.3% m/m to 580k (seasonally adj) rate, below consensus expectations and continuing the downward trend over recent months.

Higher mortgage rates, slower population growth and low consumer confidence are weighing on US residential construction. 

In Germany, the May IFO business climate index rose 0.6pts to 85.6 and the current situation index rose 0.9pts to 87.0.

Oil prices have fallen sharply in June and are nearly back to levels that prevailed before the start of the Middle East conflict.

The focus now is on whether higher oil prices from March-May will or will not drive a broader rise in inflation and unanchoring of inflation expectations.

Market-based inflation expectations argue the latter is unlikely to happen. 

The 5y5y inflation swap rate is trading around 2.34%, down from 2.48% in mid-May. The 10-yr breakeven has fallen more sharply over the same time horizon. 

These falls started prior to last week’s FOMC meeting. May PCE data will be published later tonight (10:30pm AEST). 

The headline deflator is forecast to have risen 0.4% m/m and core is forecast to rise 0.3% m/m. 

Given the sharp fall in oil prices this month versus May, the impact value of the headline data has lost some of its punch.

More focus will be on the core data and how inflation is performing outside of energy-sensitive sectors and imputed costs, like portfolio fees.

The market-based PCE deflator excluding food and energy has eased gradually in the first four months of this year, suggesting no pass-through so far. 

It will also be important to watch durable goods prices, which rose 0.6% m/m in April. Tariffs have contributed to higher durable goods prices this year.

For the Fed, the question is whether tariff effects will start to unwind soon or whether there is a more persistent rise in goods inflation.

Data over the June-August period will be informative in answering that and other questions on inflation.

Concerns over tighter monetary policy weighed on sentiment. Precious and industrial metals suffered large falls.

Energy was lower on easing supply shortages.

Gold Dips Below US$4,000: Long-Term Drivers Still Intact, Paul Williams, Solomon Global

Gold’s move below US$4,000/oz is significant psychologically, but corrections are often a feature of long-term bull markets.

A year ago, gold was trading at around US$3,347/oz, meaning that, even at this level, gold is up almost 20% over the past 12 months (it has seen 11.4% average annual growth over the last 25 years).

The drivers that have supported gold in recent years, such as central bank buying, geopolitical uncertainty and elevated sovereign debt levels, have not disappeared overnight.

Short-term price moves are often driven by factors such as profit-taking, shifts in interest rate expectations, and currency strength, rather than by a fundamental change in gold’s long-term investment case.

During the 1970s, gold fell by around -45% between its mid-decade highs and 1976 lows before surging to record levels in 1980 (it started the decade at US$35 and hit US$850 in January of 1980). 

During the 2008 financial crisis, it declined by roughly -30% before recovering strongly and reaching record highs in 2011.

These episodes demonstrate that sharp corrections have often been part of the journey for long-term gold investors, and the question they need to ask is whether the fundamental reasons for owning gold have materially changed.

In my view, they have not. 

US Market Desk, Franklin Templeton extract, Chris Galipeau

We are constructive on US equities and have established a new target range of 7,400-7,800 for the S&P500 Index, driven by 15-plus% year-on-year (y/y) earnings-per-share (EPS) growth.

First-quarter (Q1) earnings exceeded consensus expectations, which has served to drive the S&P500’s 2026 earnings estimate to US$341 today, up from US$310 at the start of the year. 

Would you believe the tape is cheaper today than it was on January 1, despite being up 8% year-to-date (YTD)? 

It is.

Coming into the year, the tape was 22.5x 2026 estimates. Today, the tape trades at 21.7x earnings. When it comes to equities, keep in mind that the single most important variable is forward earnings growth/corporate profitability.

According to my analysis, the only thing that puts earnings under severe pressure is a recession. Markets might challenge a new Fed chair in the near term, but a lot would have to go wrong to cause earnings degradation.  

We reiterate our “broadening” call on equities and emphasize our bullish call on US small- and mid-cap stocks; we also continue to favor emerging market (EM) equities and Japan. 

Additionally, the risk/reward profile in the Magnificent 7 names is more appealing today versus the start of the year. Earnings estimates have steadily ticked up all year, and history shows in the long run, earnings drive stock prices—not geopolitics.

Dispersion continues within the S&P500 Index. There are 209 stocks in the index that are outperforming the S&P500 index YTD.

Also, 293 stocks are underperforming the index YTD. Looking closer, 194 names are up more than 10% and 128 names are down more than -10%.

Dispersion is also true at the sector level. Energy, information technology, industrials, materials and real estate are all ahead of the S&P500 YTD.  Consumer staples, utilities, communication services, financials, consumer discretionary and health care are lagging YTD.

That’s five of 11 sectors outperforming YTD.

We have dispersion at the index level in the United States as well. The Russell2000 Index, the Russell2000 Value Index, and the Russell2000 Growth Index have been leading YTD performance in the United States. 

The Russell1000 Growth Index is the laggard at up 3.06%. The S&P500 Equal Weight Index leads the (cap-weight) S&P500 by 65 bps YTD.

In other words, small caps have been leading large caps, value over growth, and the average stock over the index as a whole.

Bottom line: We reiterate it makes sense to have a diversified equity playbook that includes large-, mid-, and small-cap exposure in the United States, with a balance of growth and value.

The same can be said for ex-US equity exposure—including EM and developed international markets.

Our takeaway is to reduce concentration and spread one’s bets. Consider using any further consolidation to an advantage.

Corporate news in Australia:

• Tourism Holdings ((THL)) has received a takeover proposal from a strategic buyer, adding a new bidder at NZ$3.30 per share
• a2 Milk ((A2M)) will return NZ$300m to shareholders via a fully franked special dividend to be paid on July 24 after achieving Chinese regulatory approval for Pokeno facility
• Energy Fuels’ proposed takeover of Australian Strategic Materials ((ASM)) has been delayed again following Energy Fuels’ US$1.9bn acquisition of German rare earth magnet maker Vacuumschmelze 
• Gold Fields, via subsidiary G Ex Australia Pty Ltd, has acquired a 5.33% strategic stake in Augustus Minerals ((AUG)) for $550,000, providing support for the junior explorer’s development plans
• Humm Group ((HUM)) is considering a break-up of the business and a potential sale of its commercial division after Credit Corp’s  ((CCP)) takeover proposal collapsed
• EV charging operator Evie Networks has restarted its sale process, appointing corporate advisory firm Tallarook to assess strategic options
• Private equity firm Next Capital is exploring a sale of its stake in supply chain consultancy TMX Transform
• SK Hynix is preparing a record US$29.4bn Nasdaq listing to fund expansion of its AI chip operations
• KMD Brands ((KMD)) plans a 1-for-25 share consolidation 
• Nickel Industries ((NIC)) will invest -$244m in an Indonesian nickel project supplying the EV battery market.
• Control Bionics ((CBL)) has launched a $10m capital raising to support growth and scale operations 
• Recce Pharmaceuticals ((RCE)) has launched a $10m capital raising to fund clinical trials and support a recently signed licensing agreement
• Online retailer New Aim has postponed its planned $500m ASX IPO and withdrawn from the 2026 listing pipeline
• Gina Rinehart has invested $50m in Lumitron Technologies to help commercialise the company’s high-resolution X-ray imaging technology

On the calendar today:

-AU May H/H spending

-AU May jobs data

-US 1Q GDP

-US May PCE

-US May Personal spending

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.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms