The Overnight Report: Tech Out, Dow Outperforms

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

Ahead of the US Independence Day holiday, selling pressure in technology and memory stocks continued, dragging down Nasdaq and the S&P500.

The Dow Jones continued to outperform, reaching a fresh high post its fourth straight weekly gain.

On Thursday, the Australian market recovered from its intraday low to finish flat.

ASX200 futures are pointing to a positive start to the final trading session of the week.

Good Morning,

On Thursday, the ASX200 rose 1.6 points, closing largely flat on the day, having recovered from early losses, down -67 points at the day’s low.

The US markets are closed on Friday for Independence Day.

CBA Economics: Daily Update – Fed hike expectations trimmed on jobs report

Weaker than expected US labour market data caused a pull back in Fed rate hike expectations that pulled US treasury yields lower overnight and in turn provided support to global sharemarkets. The boost to US sharemarkets was offset by investors rotating away from technology stocks.

In Australia, the trade balance shifted to a deficit of $3.0bn in May from a surplus of $1.4bn in April, the largest deficit since late 2015.

The deterioration in the trade balance was driven by a decrease in exports, which fell by -$3.2bn driven by lower gold, and metal ores and minerals export values. Higher imports added to the deficit, increasing by $1.2bn on higher motor vehicle and civilian aircraft imports.

US sharemarkets finished the holiday-shortened week little changed, as early gains from a cooler-than expected jobs report were erased with technology stocks slipping for a second-straight day. The Dow Jones index finished up 1.1%, the S&P500 index was flat and the Nasdaq index lost -0.8%.

In US economic data, nonfarm payrolls increased by 57,000 jobs in June, well below the 113,000 estimate of economists. Expectations for a rate hike from the Fed decreased after the report. Curiously the unemployment rate unexpectedly fell from 4.3% in May to 4.2% because of a material 0.3%pt decrease in the participation rate.

European sharemarkets rose as gains across sectors countered a slide in AI-related stocks, while investors assessed the US jobs data. The continent-wide FTSEurofirst 300 index ended up 1.4% and UK FTSE100 gained 1.7%.

US government bond yields pulled back from earlier highs, after the weaker-than-expected report on the US labour market cooled expectations for a rate rise. The US 10-year Treasury yield edged up 1 point to 4.49% while the US 2-year Treasury yield slipped 3 points to 4.14%.

Currencies were higher against the US dollar after the US jobs report. The Euro advanced 0.5% to US$1.1433, the Japanese yen climbed 0.9% to JPY161.09 and the Aussie dollar rose 0.4% to US69.20 cents.

Global oil prices advanced after data showed oil flows through the Strait of Hormuz surged to 14m barrels on July 1. Brent crude futures settled 0.3% higher at US$71.80 a barrel.

Base metal prices were mixed. Copper futures dipped -0.1% while aluminium rebounded 0.9% after the US dollar slid from the softer than expected jobs report.

Gold futures gained after the weak US jobs report lowered expectations of US rate hikes this year. The futures settled up 1.1% at US$4,126 an ounce.

Iron ore futures were steady despite China moving to restrict deliveries of certain Fortescue products to some local steel mills, tightening supply in the world’s largest market for the steelmaking ingredient.

The futures were down -0.1% to US$98.25 a tonne.

Looking Ahead: US markets will be closed on Friday due to the Independence Day holiday.

Chris Weston Pepperstone extract

Rotation continues to be the defining feature across US and global equity markets. There has been persistent selling in semiconductors, memory and parts of the AI complex, not just in US equities, but increasingly across Asia. 

Korea has experienced substantial outflows, particularly in SK Hynix and its 2x leveraged ETF, with similar flows and effects in Samsung Electronics, and the broader KOSPI as well as US equities.

Despite that, 71% of S&P500 stocks closed higher overnight, with both cash equity and futures volumes a touch above the 30-day average, highlighting that many investors were rounding out exposures into the long weekend break.

This was not a full risk-aversion move. It was a repositioning, with investors rotating into lower-volatility, higher-quality companies offering stable cash flows and predictable earnings. Healthcare, consumer staples and utilities were the standout sectors.

The US payrolls report prompted traders to reassess sizeable long US dollar aggregate positions and short-duration positions, but the totality of the intraday price action in the Treasury and OIS markets ultimately suggests the report was a position adjustment rather than the game-changer some were hoping for.

There is no doubt the payrolls report was weaker than expected. The headline payrolls figure came in close to the low end of economists’ estimates, and the sizeable downward revisions to the previous two months once again highlight how difficult payrolls are to price with conviction when revisions continue to be so significant.

The unemployment rate initially looked encouraging, falling to 4.2%, but that improvement was largely driven by lower labour force participation, which hardly inspires confidence.

Current USD OIS pricing implies an 18% probability of a Fed rate hike at the 29 July FOMC meeting, down from 30% before the NFP report. Further out the OIS curve, 6bp of implied tightening has come out of December pricing following payrolls, but the market still prices 30bp of cumulative tightening by December.

The message in pricing is that while US payrolls were softer, rates traders continue to view this as a stable labour market rather than one deteriorating sufficiently to materially alter the Fed outlook.

Attention now shifts to the 14 July US core CPI report. Based on current inflation fixings, the market is leaning towards a relatively benign inflation outcome, which would strengthen the case for the Fed remaining on hold later this month.

The next payrolls report is not due until 7 August, shortly after the July FOMC meeting, so inflation now becomes the key data point.

Should core CPI come in softer than expected, it would increase confidence that the core PCE inflation measure (due on 30 July) will follow a similar path, and the remaining 18% probability of a July rate hike would likely disappear.

Gold bulls will be feeling more optimistic heading into Asia, particularly as traders watch whether Chinese buyers return through the Shanghai futures market.

However, the flow picture remains relatively subdued. We have not seen anything notable in volume or options activity in the GLD ETF to suggest institutional buyers are feeling truly confident about sustained upside, while futures volumes remain broadly in line with their 30-day averages.

The price action itself remains constructive, and that will concern gold shorts, with both spot gold and gold futures repeatedly holding above the US$4,000 level, with strong buying emerging below the big figure on several occasions. 

Gold has now pushed above its five-day high, with attention turning towards US$4,400, the level where the rally stalled on 17 June.

However, a sustained break above that level will likely require renewed US dollar weakness and a meaningful decline in two-year US real yields, which have climbed from around 50bp in April to 2.16%.

A move back below 2% would provide a far more supportive backdrop for gold.

The equity story continues to revolve around rotation out of technology and, more specifically, the memory segment.

Micron and SanDisk remained under considerable pressure overnight, with both names experiencing elevated trading volumes. Attention now turns to how Korean memory stocks perform today and whether ETF outflows continue to accelerate.

With US markets closed for the Independence Day holiday, activity is likely to quieten into the weekend.

The key questions remain whether there is further rotation out of technology as earnings season approaches, whether the payrolls report ultimately proves significant enough to alter interest rate expectations, and what happens if the US core CPI report on 14 July delivers a materially softer inflation outcome.

Those questions are likely to shape price action across equities, rates and currencies over the coming weeks.

The World Didn’t Break: 2026 Mid-Year Investment Outlook, Franklin Templeton

Resilience is the key theme for 2026. 

Markets and economies have held up well despite geopolitical shocks, policy uncertainty and rising inflation. Global growth remains close to trend, supported by consumer spending, business investment, productivity gains and strong corporate profits.

We expect investment opportunities to broaden across global equity markets, while corporate credit markets should remain stable. Strong earnings in the United States and emerging markets will support a wider set of opportunities across regions and sectors.

Tighter monetary policy should keep bond yields high and yield curves flat, creating opportunities to earn income. We favor US high-yield credit, select emerging market debt—especially in Latin America—and municipal bonds for US taxpayers.

Long-term themes remain compelling. Artificial intelligence (AI) is driving demand for energy, infrastructure and broader economic change; rising investment in defense, national security and energy infrastructure create long-term potential return opportunities.

Aging populations will require investment in labor-saving technologies, assisted living and health care innovation.

In private markets and alternatives, secondaries, private credit, real estate and infrastructure offer attractive opportunities.

Risk to the view. 

Geopolitical conflict, inflation and a stronger central bank response remain key risks for investors to watch in the second half of 2026.

Our original Global Investment Outlook: 2026 and Beyond was built around three cyclical themes—broadening, steepening, and weakening—and three longer-term forces shaping investor portfolios: intelligence, private markets and big government. 

Midway through 2026, we think that framework still provides a useful starting point, but the balance of risks has changed. 

Broadening remains firmly intact, supported by resilient economic growth, strong earnings and improving opportunities across regions and asset classes. 

But steepening of yield curves has given way to higher-for-longer yields, reflecting higher inflation and tighter monetary policies.

Higher yields, however, also offer improved income opportunities in shorter-duration holdings, including US high yield and select emerging markets. 

Meanwhile, the US dollar has firmed and is likely to remain rangebound rather than weak over the remainder of 2026.

Most importantly, the world did not break. Despite war, tariffs, inflation, tighter policy and geopolitical fragmentation, the global economy and financial markets have held together better than many expected.

This update therefore reframes the outlook around a single organizing idea: resilience—both the resilience already evident in economies and markets, and the resilience investors may need to build into portfolios for the remainder of the year.

Broadening reflected our conviction that investment opportunities across regions and asset classes would continue to expand in 2026. Despite the US-Iran war, soaring energy prices and other uncertainties, that call has turned out to be spot on. 

It remains our central view for the remainder of this year.

Steepening referred to yield curves, but inflation and tighter policy have instead flattened curves. War-related disruptions to Persian Gulf energy and petrochemical shipments have pushed inflation higher. 

As a result, markets have shifted from expecting central bank rate cuts to pricing in possible hikes, causing yield curves to bear flatten. Accordingly, we now favour short-duration yield, given attractive income opportunities on offer.

Weakening was about the US dollar. That view was not entirely wrong. The dollar has remained range-bound in the first half of 2026. And that outcome is notable. A major global energy shock should have supported the dollar by improving the US terms of trade.

Instead, the dollar has only firmed modestly. That tepid response suggests the era of broad dollar strength is likely over.

The rest of this outlook is organized around one central idea: resilience. The phrase “the world didn’t break” is not meant to suggest that risks have disappeared or that the outlook is free of strain. 

Rather, it captures the defining surprise of 2026 so far: economies, markets, companies and investors have absorbed a series of shocks without a sustained breakdown in growth, earnings, credit or global trade.

The first sections explain why the global economy and financial markets have held up better than many expected, despite 18 months of geopolitical turbulence, tariffs, war, elections and rising inflation.

They also show how resilience has been supported by solid economic growth and strong corporate profits growth across sectors and regions.

Corporate news in Australia:

• Kelsian Group ((KLS)) to acquire Belaire Ferries and secures seven-year Auckland ferry contract 
• Capricorn Metals ((CMM)) to sell Nevada gold project to Sentinel Metals for up to $26m
• Megaport ((MP1)) completes retail component of $827.3m entitlement offer, raising $309m
• Sharon AI seeks a larger ASX IPO despite weakness across AI-related stocks
• Tourism Holdings ((THL)) has granted due diligence to BGH Capital

On the calendar today:

-NZ June ANZ consume confidence

-US Public Holiday

-XX Global PMIs

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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