The Overnight Report: That’s A Wrap

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

The S&P500 and Nasdaq ended up 9.5% and 13%, respectively, over the 1H2026.

The Dow Jones recorded its best first half since 2020.

The ASX200 fell on the last day of trade in FY26 with futures pointing to a cautiously positive to start FY27.

Hopefully a better year is in store for the little Aussie battler.

Good Morning,

The ASX200 slipped on the last day of trading for FY26, down -45 points or -0.5% to 8,779. Property and Miners led the falls. Financials outperformed.

The ASX200 lifted 2.8% in FY26 (5.9% including dividends), led by Materials up 48.3%, Energy up 9.84% and Consumer Staples up 9.74%.

The worst performing sectors were Healthcare, down -37.47%, Information Technology, down -38.06% and Telecommunication Services, down -12.36%.

Aristocrat Leisure ((ALL)) is organising a briefing with analysts today.

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

Today’s Big Picture, J.L.Bernstein

Chips Carried The Quarter, Megacaps Got Left Behind 

Semiconductors are closing their best quarter on record while the big AI spenders fell out of favor.

Microsoft is staring at its worst month since the dot-com bust, and Meta ends the quarter underwater.

The Russell2000 just booked its best first half since 1991, so the rally is real and it’s broadening.

Investors want the companies selling the shovels, not the ones writing the biggest checks.

The Job Market Is Losing A Little Steam

Job openings beat forecasts in May, so the headline looked fine.

Underneath, hiring stayed slow and the share of people saying jobs are hard to find hit its highest since early 2021.

Consumer confidence came in lighter than hoped, with job worries creeping in.

Nothing alarming yet, but it’s worth half an eye into Thursday’s payrolls.

Oil Cooled Off Hard 

Crude is closing its worst quarter since early 2020.

Flows through the Strait of Hormuz are back to normal, and the war premium has drained out of the price.

The market went from bracing for a supply shock to worrying about a glut in a matter of weeks.

For anyone filling a tank this summer, that’s a rare bit of good news.

NAB Markets Today extract

Markets ended the quarter on a positive note. The S&P500 rose 0.8% to cap its best quarter since 2020.

In US data, Conference Board consumer confidence did rise in June, but only slightly and from a downwardly revised May. Labour market details softened.

The share saying jobs are hard to get rose to a five-year high, pushing the jobs plentiful less jobs-hard-to-get differential to its lowest since early 2021. JOLTS data showed job openings were little changed in May, slightly above consensus expectations and a stable quits rate at 1.9%.

Cleveland’s Hammack, a voter this year, said she sees no tension between employment and inflation mandates, that she is not seeing a lot of policy restraint in the economy, and that inflation is more broad-based.

On the July meeting, “I want to wait and see how all of that data comes in before I make a decision … I’m not going to prejudge anything.” The Fed doesn’t have much room to absorb more good news as we look to payrolls on Thursday.

Markets price 8bp for July and 22bp by September.

Country level inflation data leave the risk skewed a little lower to the eurozone wide number today, where consensus looks for 3.0% yoy. Spain CPI was higher than expected, French CPI was lower than expected, and German and Italian reads were marginally lower than expected.

Most of that is volatility in energy prices, but French and Italian numbers also showed some better news on services prices. There was no shortage of ECB speakers alongside Sintra.

The general sentiment seems to be encouraged but cautious on recent oil price moves, still wary of pipeline inflation pressures, comfortable the June hike was appropriate and not willing to be drawn on pre-commitment to a follow up.

Markets price 16bp for the September meeting.

Equity markets were higher globally, ending the quarter on a positive note. The S&P500 is up 0.8% to end the quarter up almost 15% from near war-driven lows at the end of March, its best quarter in 6 years.

The Nasdaq was 1.5% higher and 21% higher over the quarter. For all of the talk of ‘chipwreck’ on some large down days, the Philadelphia Semiconductor Index rose almost 4% Tuesday to be 88% higher over the quarter.

Meanwhile, the Magnificent 7 gained ‘just’ 11% over the quarter.

In FX, the USD was little changed in the DXY. The dollar was flat against the euro, stronger against the yen and weaker against the AUD and NZD, consistent with the broader risk backdrop across markets.

USDJPY rose 0.4% to above 162.5, a fresh 40 year high and leaving markets on watch for stronger verbal warnings or outright intervention from Japanese authorities.

Japanese finance minister Katayama said yesterday “the bottom line is that we stand ready to take appropriate action whenever necessary” but characterised her communication as stable and only used the phrase ‘bold action’ when prompted by a reporter.

The government spent a record YEN12 trillion intervening to support the currency in April and May. Data released yesterday revealed the government didn’t intervene over the past month despite some large intraday moves during the period. 

In rates markets, yields were higher. US 10yr yields are 8bp higher, with the selloff accelerating in the US afternoon with 4bp added to yields in the past couple of hours. 2yr yields were also higher, although 2s10s steeped around 2bp. 10yr gilt yields rose 4bp, but German 10yr bund yields, in contrast were little changed at 2.86%.

In commodities, oil was little changed by the standards of recent volatility. Brent was -0.3% lower at US$72.92, while WTI slid -0.9%. Brent prices are just 0.6% above their 27 February level, although Dec 2026 contracts remain 8.7% higher than pre conflict at US$73.22.

Additional volume from the Middle East has been entering a market where the offsets of inventory drawdown, higher US exports and lower Chinese imports are still in place.

Morgan Stanley analysts said flows through Hormuz only need to recover to about 65% of the pre-conflict level for a glut to form.

Weekly Macro Talking Points, Benoit Anne, MFS Investment Management

It is complicated.

Following the Fed and deciphering its policy signals has always been a critical part of a fixed income investor’s investment process. But here is the twist. That job has just been made harder by the new Fed Chair, Kevin Warsh, who seems to be keen on promoting less communication, no forward guidance, no elaboration on the new Fed reaction function, and a murky stance on the inflation target.

Listening to our fixed income investment team, we believe this can only mean one thing: higher rate volatility and a higher risk premium. Of course, it is still early days, but it does not seem that navigating the Fed is going to be straightforward in the period ahead.

In our view, this complicated policy backdrop may have broad implications: first, given the higher volatility regime, it reinforces the case for active management.

More importantly, it probably undermines the reliance on duration as a steady and predictable source of alpha. That, in turn, should benefit other alpha levers, including sector allocation and security selection.

Where are we in the US business cycle?

This does not look like a late-cycle economy. In fact, probably the opposite. Our multi-asset investment team has a probabilistic model that assigns a probability of 98% that the economy is in the expansion phase.

In other words, the cycle is still young.

The latest GDP update confirms this observation. In the first quarter, corporate profit growth was comfortably in double-digit territory. Meanwhile, profit margins rose by the biggest amount since mid-2022.

When the broad corporate sector is that healthy, with profits rising and margins expanding, it typically sends the signal that the business cycle is very healthy.

The Fed seems to agree. Both the Atlanta Fed and New York Fed GDP growth estimates, the so-called GDP nowcasts, currently stand above 2.5%, pointing to a robust growth outlook.

Unsurprisingly, private investment (excluding residential investment) has been a formidable engine of economic growth, with a real growth rate exceeding 10%.

Listening to our high-yield portfolio managers, the single most important risk they are always watching for is the risk of a recession. We believe we are far away from that.

So what does this mean? The macro backdrop remains supportive of growth assets, be it equities or credit.

The bond-equity correlation is not negative, at least not yet.

But it is getting close. By our own measure, using the two-year rolling correlation of monthly US Treasury and S&P500 returns, the correlation coefficient has fallen to just 0.15, its lowest level since early 2022, before the Fed’s aggressive hiking cycle.

This means fixed income is well on its way to providing better diversification benefits. This is important. When reflecting on the current merits of exposure to fixed income, the two major arguments are the attractiveness of total yields and fixed income’s stronger diversification benefits.

Signs of AI trade fatigue strengthen the case for diversification. Semiconductor stocks faced their worst week in months, with a gauge of chip shares down -5.3% on Friday alone, despite the sector still being on track for one of its strongest quarters on record.

The sell-off reflects a familiar mix: crowded positioning, concern that higher component costs could hit end-device demand, and reports that OpenAI may delay its IPO until 2027.

The moves were sharp. South Korea’s Kospi was halted twice last week, with Samsung and SK Hynix under heavy pressure, while Nvidia saw its worst weekly decline since April 2025.

Yet the fundamental backdrop has not broken. Micron delivered a strong quarter, guided well ahead of expectations and signalled that AI infrastructure demand remains robust. It also pointed to tight memory markets and strong customer demand, suggesting parts of the AI supply chain remain constrained.

The market is split on what comes next. Some see this as a necessary reset after extended positioning. Others argue it is too early to call the top of the AI cycle.

For investors, the key question is whether this is a healthy rotation within AI or the start of a broader de-rating.

The evidence still looks more consistent with rotation. But the caveat matters: the easy phase of buying the AI basket indiscriminately may be over. Areas with clearer demand visibility should be better placed.

More crowded parts of the market remain vulnerable to further volatility. The focus is shifting from simply owning AI to owning the right parts of AI.

More importantly, the recent volatility reinforces the case for diversifying away from information technology megacaps (contribution from Karis Burrell, Insights Analysis Senior Analyst).

Citadel’s Scott Rubner: 1H 2026 Market Structure & Flows, Stephen Innes, The Dark Side of the Boom extract

Markets entering the second half of 2026 bear little resemblance to the markets investors navigated for most of the past two decades.

The defining story of 2026 has not been a single macro event, it has been the structural transformation of equity markets.

Concentration, passive investing, retail participation, leverage, and volatility are no longer independent trends. Together, they increasingly determine how capital flows, prices are discovered, and risk is transferred.

These structural forces are no longer simply influencing markets, they are increasingly defining them.

The first half of 2026 reinforced one of the defining features of today’s market: historically high concentration and increasingly narrow leadership.

The ten largest companies now account for nearly 40% of the S&P 500, remaining near record concentration levels. Their combined index weight has increased by around 10% since June 2023 and around 13% since June 2020.

Corporate news in Australia:

• IGO Ltd ((IGO)) completes the acquisition of the remaining stake in the Copper Wolf copper project for $6.15m, taking full ownership of the asset
• Deep Yellow ((DYL)) acquires Energy Resources of Australia’s 50% interest in the Cooper Creek uranium joint venture for $648,000
• Avenir Collective acquires Australian skincare brand Wrinkles Schminkles in an eight-figure deal to expand its beauty portfolio
• Perennial seeks to extend the lock-up period for its $200m pre-IPO fund as it continues to develop the investment vehicle 
• Vocus commits $500m to build a new Sydney-Melbourne long-haul fibre network to support rising AI and data centre demand
• Navis Capital is assessing potential exit options for Caring Group ahead of a possible 2027 sale process

On the calendar today:

-AU May Bldg Approvals

-JP 2Q Tankan

-EZ June CPI

-US June ADP employment

-US June ISM mfg

-US May Construction Spending

-ARISTOCRAT LEISURE LIMITED ((ALL)) investor briefing

-GRAINCORP LIMITED ((GNC)) ex-div 14.00c (100%)

-NEXGEN ENERGY LIMITED ((NXG)) AGM

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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