The Overnight Report: Chips Drag Down Tech

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

Chip stocks pulled down the Nasdaq, while the Dow Jones fell slightly due to a sell off in Caterpillar.

As noted by Barron's, the S&P 500 is now cheaper than it was at the start of 2026, despite a 9.6% rally over the first half, due to stronger earnings growth.

The Australian market started FY27 on a negative footing, with ASX200 futures pointing to a weak start for Thursday, following two consecutive down days.

Good Morning,

The Australian market started FY27 on the backfoot with the ASX200 declining by -56 points ot -0.6% to 8,723.

The final session of FY26 had also been a down day.

Consumer Staples fell -2.1% and Healthcare outperformed.

Today’s Big Picture, J.L.Bernstein

Warsh Keeps His Cards Close

The new Fed chair made his first public appearance since his debut meeting and wouldn’t say whether a rate hike is coming this month.

He called the late July meeting a “good family fight” and said the inflation outlook has improved, but also that “prices are too high”.

Traders put the odds of a July hike around one in three.

Tomorrow’s jobs report just became the biggest data point of the month.

Chips Cool Off While the Dow Hits a Record

Semiconductors sold off hard as investors booked profits on the best trade of the first half.

Micron and Sandisk led the way down after both more than tripled last quarter, so some giveback was overdue.

The money didn’t leave the market, it rotated into banks and blue chips, which is why the Dow set a record on a day the Nasdaq fell.

That’s a healthy market, not a scared one.

Meta Wants to Be a Cloud Company

Meta plans to sell its excess AI computing power to outside customers, per Bloomberg.

The stock had its best day since January while CoreWeave fell hard, since Meta would be competing with it directly.

Turning your biggest cost into a revenue line is the dream every hyperscaler chases.

Meta just said it out loud.

Chris Weston Pepperstone extract

After rounding out a true blockbuster quarter for the NAS100, the index got off to a fairly shaky start to Q3 and the month of July, with the cash index down -1.5%, while the S&P500 cash index outperformed, closing down -0.2%.

There were several factors weighing on the broader US technology sector. On one hand, we saw investors de-grossing extreme long equity positions, with Micron falling -10.6%.

Despite the outsized daily percentage change, trading volume was relatively light at 50.3 million shares, -12% below the 30-day average.

The real liquidation was more evident in the DRAM Memory ETF, which fell -11% on volume of 70.8 million shares, some 48% above its 30-day average.

The Semiconductor ETF (SMH) also experienced above-average selling pressure as the session progressed.

At the same time, we saw short covering emerge and money rotate back into some of the more unloved areas of the market, particularly software.

The IGV ETF gained 3% on volume 35% above its 30-day average. Whether that rotation proves sustainable remains to be seen, but strong gains in Microsoft, Apple and Amazon helped support the broader index.

The other major theme still being debated across the semiconductor industry is Meta’s move to compete more aggressively in the cloud market and its intention to sell AI compute.

This development caught many investors by surprise, particularly given Meta had only recently signalled partnerships with various third-party compute providers. The announcement prompted investors to question whether the move reflects growing confidence in future AI demand, which would be the bullish interpretation.

However, Meta’s transition from simply consuming compute to becoming a provider, effectively competing as a true hyperscaler business, saw CoreWeave fall -14% on very heavy volume, while Nebius declined -17%, with trading volume running 74% above its 30-day average.

These factors pulled the NAS100 back towards the 30,000 level. While overall futures volumes remained lighter than recent sessions, there is a growing sense that further de-grossing and position squaring could continue to weigh on the index.

As we move into the US earnings season, traders may choose to reduce risk before tactically re-engaging on the long side.

For now, however, the flows favour communication services, with Meta the standout performer on the day, while financials also traded well, with the XLF ETF breaking above the top of its recent consolidation range, as momentum-focused traders look for long entries.

From a macro perspective, all eyes were on Fed Chair Kevin Warsh’s speech at Sintra. Once again, market players appeared to be initially caught off guard, interpreting his comments as less hawkish on inflation than anticipated.

The initial reaction saw US two-year Treasury yields fall from 4.19% to 4.13%, a 6bp decline that weighed on the US dollar, pushed gold up to US$4,115 and supported Bitcoin.

It did not take long, however, for markets to reverse that initial dovish interpretation. Two-year Treasury yields rebounded to close at 4.17%, effectively unchanged on the session.

US interest rate markets pared back some of the implied probability of further rate hikes, although much of the near-term direction will now depend on today’s US non-farm payrolls report.

Ahead of Warsh’s panel discussion, markets were implying a 36% probability of a July Fed rate hike. That has now eased back to 28%, leaving just over a one-in-four chance of a policy change.

We also saw around 6bp of implied Fed tightening priced out of the December FOMC meeting.

Despite the repricing in Fed expectations, the US dollar held up relatively well. The subsequent rebound in both nominal and real Treasury yields has continued to support the greenback.

As US Treasury yields recovered, gold reversed sharply lower, falling back towards $4,030. Gold remains heavily influenced by interest rates and, to a lesser extent, the US dollar.

Until Treasury yields begin a sustained decline, gold bulls are likely to struggle to generate a meaningful upside breakout.

As always, setting the risk playbook for the possible cross-asset reaction to US non-farm payrolls comes with many challenges. One could argue that the unemployment rate will matter more than the headline payrolls number.

The consensus among economists expects the unemployment rate to remain unchanged at 4.3%, so a rise to 4.4%, and especially to 4.5%, would push Treasury yields lower, weaken the US dollar, prompt a reassessment of positioning, and see further rate hike expectations priced out of the OIS curve.

Consensus expects payroll growth of around 115,000, with economists’ estimates ranging from 25,000 to 200,000. A jobs print below 80,000, combined with a higher unemployment rate, would see Treasury bulls step in and US dollar sellers emerge, at least in the short term.

Conversely, an unemployment rate of 4.3% or lower, payroll growth above 150,000, and positive revisions to previous payrolls would likely see US dollar bulls regain full control of the tape.

Under that scenario, the implied probability of a July rate hike could move back towards 35% to 40%, a scenario that would take gold through US$4,000.

For equity traders, there is probably no single rigid playbook to work from. Ideally, equity players want a Goldilocks outcome: respectable job creation, a stable unemployment rate, and a report that does not materially disrupt Treasury markets or compel the Fed to take a more urgent stance on policy.

Anything that avoids a marked increase in the implied probability of near-term rate hikes is likely to be welcomed by equity bulls.

While the effects on broader markets have been contained, the technical breakdown in the crude market is attracting significant attention.

After spending two sessions trading within Friday’s high-low range, Brent futures broke below the range lows with little resistance.

Brent futures have now made a fresh lower low, with sellers clearly taking control, and attention now turns to whether prices can break below the psychologically important US$70 a barrel level.

The market is increasingly signalling that supply is no longer viewed as a major concern and that a normalisation of shipping through the Strait of Hormuz remains the base-case expectation.

The move in crude has not had a meaningful impact on broader markets so far, with positioning, Meta and Kevin Warsh dominating market narratives.

However, if oil continues to trend lower, traders will increasingly focus on what that means for inflation expectations and, ultimately, the path of monetary policy.

How Bitcoin’s Strong Start to Q2 Went Wrong — And What Lies Ahead in Q3, Tony Sycamore, IG extract

Bitcoin wrapped up a tough Q2 with a decline of -14.20%, broadly in line with gold down -14.15%, and silver, down -24.21% as the debasement trade came under pressure. 

The second quarter of 2026 began with Bitcoin trading around the US$68,000 level before a strong risk-on rally pushed it more than 20% higher to a peak of US$82,833 in early May.

That move ran in tandem with a similar around a 20% gain in the Nasdaq100. However, the two risk assets soon decoupled with the Nasdaq continued its climb driven by renewed AI fever, while Bitcoin turned lower.

 The initial selling pressure in Bitcoin came from profit-taking ahead of a significant band of technical resistance, including the 200-day moving average near US$83,250 and trend-channel resistance around US$83,000 (projected from the February low near US$60,000).

We highlighted the importance of this zone in our early May note here:

“Bitcoin’s overnight gains have pushed it squarely into a significant resistance zone between US$81,000 and US$83,500” and that “a failure to clear the US$81,000–US$83,500 resistance zone in the coming sessions could lead to another round of profit taking and a retest of the lower boundary of trend channel support near US$69,000.”

 While the technical barriers slowed the advance, the real damage came in mid-May after the release of warmer-than-expected US CPI and PPI prints for April.

The warmer inflation data reinforced fears that surging oil prices were feeding into broader price pressures and the final catalyst for the US rates market to flip from pricing in Fed rate cuts to pricing in Fed rate hikes.

 That shift triggered fresh liquidations across the debasement trades — gold, silver, and Bitcoin included. Bitcoin was pushed down to a low of US$59,100 in early June, exacerbated by leveraged selling and notably by chunky outflows from major instructional players including BlackRock.

 While Bitcoin attempted a recovery from the US$59,100 low, the FOMC meeting in mid-June under new Fed Chair Kevin Warsh proved more hawkish than expected, sending the debasement trades — Bitcoin, gold and silver — lower once again.

The knock-on effect has seen Bitcoin start Q3 on the back foot, hitting a fresh 21-month low today as it dipped below US$58,000 to around US$57,735.

 In the short term, whether Bitcoin finds its footing or takes another leg lower will depend heavily on tomorrow night’s US Non-Farm Payrolls report. A solid print showing continued labour market resilience would likely reinforce expectations of a Fed rate hike before year-end, adding further pressure on the debasement trades.

 Conversely, a softer-than-expected Non-Farm Payrolls print could ease rate hike fears, support risk assets, and give Bitcoin some much-needed breathing room as we head into the new quarter.

In the medium term, the biggest question is whether the run of data in the coming months proves strong enough to force the Fed’s hawkish bias into action — especially knowing that single rate hike cycles are extremely rare.

Bitcoin Technicals

Bitcoin finished last week below the 200-week moving average at US$62,444 for the first time since October 2023.

This increases the chances that we are set to see a deeper pullback into the US$50,000–US$52,000 support area, which acted as strong demand during the pullback in mid-2024.

The first indication that downside risks have abated would be a move above the mid-June US$67,253 high, followed by a sustained move above the 200-day moving average currently at US$75,203.

Trump’s US$1billion crypto filing shows finance, wealth creation has already changed, Nigel Green, deVere Group extract

President Donald Trump’s latest annual financial disclosure has highlighted just how deeply digital assets have become embedded in the global financial system, with more than US$1bn in crypto-related income reportedly generated from ventures that now rival the earnings of much of his long-established real estate empire.

The filing also reinforces the growing role cryptocurrency is playing among political leaders, institutions and sovereign investors, although it also underlines the need for investors to distinguish between established digital assets such as Bitcoin and highly speculative political or meme tokens.

Bitcoin has evolved into a globally recognised institutional asset class, supported by regulated investment products, institutional custody, corporate treasury adoption and growing sovereign acceptance. Political and meme tokens, by contrast, remain highly speculative instruments whose values can rise and collapse at extraordinary speed.

The significance of Trump’s disclosure lies less in the wealth generated through digital asset ventures than in the fact crypto businesses have grown large enough and influential enough to rival traditional industries that have dominated wealth creation for generations.

Only a few years ago, major political figures and financial institutions routinely dismissed cryptocurrency. Today, digital assets are helping generate billions of dollars in reported wealth for the President of the United States, illustrating how profoundly the financial landscape has shifted.

Institutional adoption has accelerated at a pace rarely seen in modern financial history.

Some of the world’s largest asset managers now oversee tens of billions of dollars in Bitcoin investment products. Major financial institutions have built digital asset businesses, while pension funds, family offices and insurance companies have all allocated capital to the sector. Publicly listed companies have also increasingly adopted Bitcoin treasury strategies.

Political and sovereign participation is becoming equally significant.

Alongside President Trump’s crypto business interests, Vice President JD Vance has disclosed personal Bitcoin holdings. National governments and sovereign wealth funds have also begun adopting Bitcoin strategies, while policymakers and regulators worldwide continue developing digital asset frameworks.

Some of the world’s largest sovereign wealth funds and state-backed investment institutions have established exposure to the digital asset ecosystem, both directly and indirectly, reflecting growing acceptance among the largest pools of global capital.

The trend mirrors a broader shift among prominent investors and financial leaders, many of whom were once sceptical of Bitcoin but have since embraced its role as a legitimate asset class.

For investors, the investment risk may increasingly be having no exposure to digital assets at all while a new financial architecture continues to develop.

As with previous technological transformations, early adopters may benefit significantly, while those who dismiss the shift risk spending years trying to catch up.

That does not suggest investors should rush blindly into cryptocurrency markets. Rather, it highlights the importance of education, recognising that visibility is not value and branding is not investment merit.

Developing a considered investment strategy with professional advice remains essential as institutions, governments and some of the world’s largest pools of capital continue increasing their involvement in digital assets

Corporate news in Australia:

• Alcoa ((AAI)) will acquire South32’s ((S32)) aluminium assets in a deal worth up to US$5.6bn 
• Centuria Capital ((CNI)) acquired a 50% stake in Sydney CBD office assets from Brookfield and launched a $268m capital raising
• The ACCC opposed Coles Group’s ((COL)) proposed acquisition of a Kalgoorlie supermarket and liquor site on competition grounds
• Ampol ((ALD)) completed its $1.16bn acquisition of EG Australia to expand its retail network
• Coles Group ((COL)) is undertaking due diligence and negotiating with TPG Capital over a potential acquisition of Greencross Pet Wellness Company
• Westgold Resources ((WGX)) completed the $54.4m sale of the Peak Hill Gold Project to Great Boulder Resources
• Perpetual ((PPT)) rejected EQT-controlled Windflower’s $2.5bn takeover proposal, arguing it undervalued the company
• Pacific Equity Partners is selling Cranky Health back to its founders after an auction process
• Magellan Financial Group ((MFG)) completed its merger with Barrenjoey, adopted the Barrenjoey name and announced the combined group’s leadership team
• Intelligent Monitoring Group ((IMB)) agreed to acquire ADT’s UK security business for about $350m
• Winning Group appointed advisers for a planned $1bn IPO
• EchoIQ ((EIQ)) raised $110m through an institutional placement to fund expansion of its AI cardiac diagnostics business

On the calendar today:

-NZ May Bldg permits

-AU May Trade Bal

-EZ May Unemployment

-US June Nonfarm Payrolls

-US June Unemployment

-US May Durable goods orders

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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