The Overnight Report: Three More Days

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This story features CORPORATE TRAVEL MANAGEMENT LIMITED, and other companies.
For more info SHARE ANALYSIS: CTD

The S&P500 finished flat, with the Nasdaq down on ongoing selling in the Mag 7 heavyweights.

Apple shares fell the most in over a year as Micron rallied on its huge earnings beat.

The ASX200 weakened on Thursday, but SPI futures are pointing to a positive start (again!), with three trading days left in the fiscal year.

Good Morning,

The ASX200 retreated on Thursday by -60 points, or -0.7%, to 8,749. Miners and Energy fell, Healthcare rose 2.6%.

With three trading days left until the end of the month, quarter and fiscal year, volatility, rotation, repositioning, window dressing and every other trading feature may well dominate moves in share prices.

Local jobs data and household spending were the major macro news events, see details below.

A heads up: Monday marks the ex-distribution/dividend date for a suite of REITs.

For more details, check out the FNArena calendar:

https://fnarena.com/index.php/financial-news/calendar/

Today’s Big Picture, J.L.Bernstein

The Memory Squeeze Hits Your Wallet

Micron’s revenue quadrupled to US$41.46 billion.

It locked in 16 long-term supply deals and said the memory shortage runs past 2027, so this isn’t a one-quarter pop.

Scarce memory is great for the chipmakers and brutal for everyone who buys from them.

Apple and Microsoft both raised hardware prices today to cover it, which is how a chip shortage quietly becomes your inflation.

The Fed Is Talking Hikes Now

The Fed’s favorite inflation gauge hit its highest level since late 2023, right in line with expectations, so the market shrugged.

But here’s the shift that matters. Oil and the AI buildout are both pushing prices up, and new chair Kevin Warsh cares about that more than slow growth.

Traders now put better than even odds on a rate hike in September.

The cut story we opened the year with is done, and that’s a big reason money is leaving pricey tech right now.

Wendy’s Is the New Meme Stock

Reddit traders piled into Wendy’s and squeezed the shorts, who had bet against nearly a third of the stock.

It ran hard, then gave most of it back by the close. Feels like 2021.

Wendy’s itself doesn’t matter much here.

The signal does: risk appetite is creeping back into corners of the market, and I’m watching whether it spreads to other beaten-down names tomorrow.

ANZ Bank, Australian Morning Focus extract

The S&P500 was flat overnight and the EuroStoxx50 ended its session up 0.9% while the FTSE 100 gained 0.7%.

The yield on the US 10y note fell around -2bp to 4.39%.

WTI lifted 3.7% to US$71.9/bbl. Gold was stronger at US$4026.5/oz.

The headline May PCE deflator rose 0.4% m/m, up 4.1% y/y. The core measure, excluding food and energy, rose 0.3% m/m, up 3.4% y/y.

US GDP: Q1 GDP data was revised up to 2.1% saar from 1.6%. Within the data, personal consumption expenditure growth, 70% of GDP, was revised down to 0.5% from 1.4% and contributed 0.37% to GDP.

Real private investment grew 7.9% saar, contributing 1.35% to GDP. Investment is heavily concentrated in AI.

Key themes and views on US inflation:

Both the PCE deflator and the core inflation measure are too high relative to target and underpins our expectation the Fed will hold rates steady into mid-2027 to exert downward pressure on inflation.

The breakdown of the data, however, was more encouraging.

NAB Market’s Today extract, Australia Macro

Yesterday’s local labour market data came in largely as expected, unemployment falling back to 4.4% in May from 4.5%, driven by a rise in employment of 40k (NAB up 35k, consensus up 32.5k).

Through the volatility, the data suggest there has been some gradual softening in the labour market over recent months.

The trend unemployment rate just tripped the rounding barrier, to move up to 4.4% from 4.3%, and trend employment growth remained relatively flat at 20k, a level marginally below what is required to keep the unemployment rate stable.

The RBA’s May SoMP forecast the unemployment rate would average 4.2% in Q2 and 4.3% in Q4. Even after today’s data, unemployment is tracking above that forecast, which supports the view the RBA will not be pushed by the data to tighten further.

Alongside the labour force survey, job vacancies fell -2.1% over the three months to May. Vacancies have trended broadly sideways over the past year, and the ratio of unemployed people to vacancies continues to trend modestly higher.

Like most labour demand indicators, there has not been a sharp easing following the beginning of the conflict in the Middle East. In some contrast, the NAB Quarterly Business Survey for June, also released yesterday, saw a notable softening in the share of firms that reported labour as a constraint on output.

Also published Thursday, Household Spending rose by 1.3% in May (NAB 0.8% and consensus 0.5%). The rebound partly reflects a reversal of April’s transport weakness, as travel related refunds normalised.

However, spending was still solid excluding air transport, and broad based, with discretionary spending particularly resilient (non-discretionary suppressed by lower fuel prices).

Underlying momentum is holding up, and spending has not softened materially.

Micron Profits, Apple Prices: AI boom fuelling new inflation threat, George Prior, deVere Group

Micron’s blockbuster earnings and Apple’s decision to raise prices because of soaring memory costs point to a powerful new force shaping the US economy, the AI boom is beginning to generate fresh inflationary pressures.

Micron’s stronger than expected quarterly results sent semiconductor stocks sharply higher, helping lift the S&P500, Nasdaq and Dow, while the Federal Reserve’s preferred inflation gauge accelerated to 4.1% in May, its highest annual reading in three years.

Apple’s decision to increase prices on selected Mac and iPad models after AI driven demand pushed memory costs sharply higher has added another dimension to the inflation debate.

AI is no longer only creating wealth, it is beginning to create inflation.

Micron tells us where the profits are. Apple tells us where the inflation is.

The race to build AI infrastructure has become so intense that demand for advanced memory is outstripping supply.

Pricing power is strengthening across the semiconductor industry, and those costs are beginning to flow through to consumers. Apple’s decision to raise prices is an early warning that inflation is finding a new route into the economy.

For years the assumption has been that AI would lower inflation by making businesses more productive. Long term, that is still expected to happen.

But first the opposite effect is likely.

Companies are investing hundreds of billions of dollars in AI infrastructure. Data centres are competing with laptops, tablets and smartphones for the same advanced components. Supply tightens, prices rise and consumers eventually pay more.

Inflation does not always begin with oil or wages. Sometimes it starts with success.

Today’s inflation report and today’s earnings report are two sides of the same coin. Both indicate the US economy remains exceptionally strong.

Consumer spending is holding up. The labour market remains resilient. AI investment continues to accelerate, and corporate America is delivering exceptional profits.

Those are not conditions that normally justify lower interest rates.

Earlier this year investors expected several Federal Reserve rate cuts. That confidence has faded quickly. The bigger question today is no longer how soon rates come down. It is how long they stay restrictive if inflation refuses to retreat.

Markets may be celebrating today’s earnings, but policymakers will be studying today’s inflation data just as closely.

Micron deserves every headline it receives today. But one company’s outstanding earnings do not tell the whole story.

An economy producing inflation above 4%, record AI investment, resilient consumer demand and companies passing higher costs on to customers raises an obvious question.

Is the economy becoming too hot?

The Fed’s job is to keep inflation under control, not to support stock market rallies.

If demand continues to exceed supply across critical industries while inflation remains elevated, there will be little pressure on policymakers to loosen monetary policy.

Markets are celebrating Micron. The Fed will be paying much closer attention to Apple.

One reflects extraordinary corporate success. The other shows inflation is finding another way into the economy.

Investors who understand both will be far better positioned for what comes next.

Is the Dollar Debasement Trade Kaput, Ed Yardeni & Elias Griepentrog

The “Dollar Debasement Trade” was a big theme in global financial markets last year.

The thesis was that President Donald Trump’s aggressive tariff hikes would revive inflation in the US and undermine foreigners’ confidence in the US’s reliability, especially among America’s allies.

In addition, the president’s attacks on Fed Chair Jerome Powell threatened the Fed’s independence and heightened concerns that a compliant Fed would keep rates artificially low to finance widening federal budget deficits.

In this scenario, foreign investors would respond by selling the US dollar and US securities in favor of foreign currencies and securities, gold, Bitcoin, commodities, and other non-US assets.

The result would be a bad combination of rising US Treasury bond yields, falling US equity prices, and a weaker dollar. Following Trump’s Liberation Day tariffs on April 2, 2025, and his attacks on the Fed, that scenario briefly materialized, with the dollar falling, equities declining, and yields rising.

We were rightly skeptical about this so-called “Sell America Trade.”

As tariff concerns eased and recession fears abated, the debasement narrative lost momentum.

Its credibility might have ended last Wednesday, when Fed Chair Kevin Warsh made price stability his top priority at his first FOMC monetary policy meeting. Traders rapidly priced in two rate hikes by early 2027, bolstering the dollar.

Consider the following developments suggesting that the debasement trade is kaput.

(1) Currencies. The dollar index (DXY) found support at the lower end of its rising channel since last year. It has strengthened since last week’s FOMC meeting. DXY is a fixed weighted basket of the US dollar against six major foreign currencies, with the euro and yen having the largest weights at 57.6% and 13.6%, respectively.

The euro has been weak in recent days, even though the ECB raised its official rate by 25bps on June 11. The recent decline in energy costs should benefit Europe more than the US, yet the euro has still fallen since last week.

The BOJ also raised its official rate by 25bps on June 16, yet the yen has dropped back to levels not seen since December 1986.

(2) Gold & Bitcoin. The Fed’s new tightening bias and the recently rising dollar have weighed heavily on the gold price. After a record breaking run to a new high of US$5,589 per ounce on January 28, the price of gold began to fall when the latest Middle East war began at the end of February.

Some central banks reportedly were forced to sell their gold reserves to defend their weakening currencies. The subsequent hawkish Fed recalibration under Warsh increased the cost of holding gold. We think it has found support at US$4,000. If that doesn’t hold, the next level of support is around US$3,500.

We are reducing our year end forecast from US$5,500 to US$5,000.

After peaking above US$120,000 on a series of crypto friendly catalysts late last year, Bitcoin has been cut in half to US$60,990. It certainly doesn’t pose a serious threat to the US dollar.

(3) Commodities. Brent crude plunged following the reopening of the Strait of Hormuz, which returned supply to the market and unwound much of the geopolitical risk premium. Previously, we observed a bear market in oil from mid-2022 until the war began at the end of February 2026. We attributed it to weakening demand out of China. In the past, DXY and Brent crude oil prices tended to be inversely correlated.

The FIBER Industrial Materials Spot Price Index seems to be peaking. In the past, the DXY has also been inversely correlated with commodity prices.

Meanwhile, copper’s strength since last year is best explained by demand for AI infrastructure and is not indicative of a Sell America Trade.

(4) Stocks. The downtrends in the Stay Home versus Go Global ratios since early last year appear to confirm the Sell America story. We think it has more to do with global portfolio rebalancing, as the US now accounts for over 60% of the All Country World MSCI’s market capitalization.

(5) Bonds. The US 10 year Treasury bond yield has remained range bound, contrary to the bearish implications of the Sell America narrative.

Warsh’s commitment to price stability, combined with the plunge in oil prices, is restoring confidence that inflation will moderate in the coming months, as shown by a decline in breakeven inflation rates.

(6) Capital flows. The Dollar Debasement Trade predicted that foreigners would be selling US securities. The US Treasury International Capital (TIC) data show the opposite. Private net capital inflows into the US remained robust at US$1.3 trillion on a 12 month basis through April. Official accounts showed net capital inflows at only US$88.0 billion over the same period. They certainly haven’t been net sellers.

Corporate news in Australia:

• Roc Partners-backed Precision Poultry has acquired $140m of poultry assets, expanding its position in Australia’s poultry sector
• Ready To Drink has emerged as a bidder for PEP-owned Cranky Health, as Pacific Equity Partners progresses the sale process
• Corporate Travel Management ((CTD)) has delayed its ASX relisting after further accounting issues and impairments pushed back the completion of its financial reporting
• Echo IQ ((EIQ)) shares rallied after Pro Medicus ((PME)) secured a $20m AI healthcare investment
• Family-controlled FDC Construction has launched a $970m IPO, making it the largest ASX listing of 2026 to date
• Pengana has launched a new ASX-listed fund focused on investing in private AI companies
• Sunstone Metals ((SHN)) is raising $10m through a four-bank broker syndicate to fund gold and copper exploration
• Fresh-produce business Comfresh is considering an ASX listing after abandoning a trade sale process

On the calendar today:

-CH 1Q BoP

-US May Trade Bal

-US May trade bal

-US Uni of Mich sentiment

-CENTURIA CAPITAL GROUP ((CNI)) ex-div 5.21c (9%)

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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