The Overnight Report: Dow Hits Another Record

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

The three major US indices returned from their holiday weekend with renewed optimism.

The Dow Jones hit a second consecutive record close.

Memory stocks recovered from their recent sell off ahead of Samsung Electronics reporting earnings today.

The Australian market slipped yesterday on weakness in banks and miners.

ASX200 futures are pointing to a flat to slightly positive start.

Good Morning,

The ASX200 closed lower on Monday, down -13pts or 0.15% to 8,831.

Six of eleven sectors lifted but losses in banks and miners dragged the index lower.

Yesteryear’s laggards Healthcare and tech outperformed.

Today’s Big Picture, J.L. Bernstein extract

AI Trade Finds Its Footing

Foxconn’s weekend sales beat is the clearest signal yet that AI chip demand hasn’t cracked.

Samsung reports tomorrow (Tuesday AEST) and is expected to post a profit jump close to 18 times last year’s number.

A clean print there should put a lot of the recent chip stock jitters to bed.

Oil Keeps Sliding on a Supply Glut

OPEC-Plus raised output again and ship traffic through the Strait of Hormuz picked back up over the weekend.

Both are draining out the inflation premium that built into oil during the Iran standoff.

Cheaper oil gives the Fed more room, but a break in that ceasefire is still the one thing that could flip this fast.

Trump Turns a Photo Op Into a Stock Move

Trump told Americans to buy a Dell computer at this morning’s Trump Accounts event, and Dell moved on it.

AMD moved even more after Goldman raised its price target well above where the stock trades now.

Worth watching how much more of this we get as Trump Accounts stay in the news this week.

ANZ Bank Australian Market Focus, extract

US equity markets rose, led by technology stocks, while bond yields were little changed in a quiet start to the global trading week. 

The S&P500 was up 0.7%. In Europe, the Euro Stoxx50 fell -0.2% and the FTSE 100 was down -0.3%. 

The yield on the US 10y Treasury note was down -0.8bp at 4.47%.  

The US ISM services index eased -0.5pts to 54.0 in June, in line with consensus. Business activity declined by -2.3pts to 55.4 and new orders fell by -2.2pts to 55.1, though both continue to signal a solid demand backdrop. 

Prices paid dropped -3.6pts to 67.7, the lowest level since February. Employment rose by 3.3pts to 51.2, returning to expansionary territory.

Inventories fell sharply, down -11.3pts to 51.2, suggesting precautionary stock-building dynamics are unwinding, with respondent comments indicating that supply chains are stabilising. 

However, some commodities remain in short supply, particularly those linked to building data centres. 

The dataflow is light this week in the US and is unlikely to challenge views on the monetary policy outlook.

The minutes of the FOMC’s June meeting are set to be released on Wednesday and are likely to show growing support for rate hikes among members, as reflected in the June dot plot, in which six of the 18 FOMC members pencilled in at least one hike this year. 

That said, as Chair Warsh noted in Sintra last week, inflation risks have eased since the June meeting, and members’ views are likely to have evolved accordingly.

Market pricing of near-term rate hikes from the Fed has been pared back following last week’s softer-than-expected labour market report.

Nonetheless, the minutes will be closely watched as the first set under a Warsh’s leadership. Given Warsh’s preference to move away from forward guidance, the minutes may take on a somewhat different tone.

Crude oil prices switched between gains and losses as rising supply from the Persian Gulf offset ongoing tightness in product markets.

Saudi Arabia has made big reductions to its main crude oil for buyers in Asia, selling barrels at a discount to the regional benchmark Arab light crude for the first time since 2020. This highlights the increase competition in the region following the surge in oil leaving the Persian Gulf in recent weeks.

However, the market is still showing signs of tightness. Oil product markets remain significantly tighter than crude markets. Refining margins continue to strengthen, particularly in the US, as robust fuel demand collides with lean inventories and constrained product supply.

Gasoline inventories are still drawing down while distillate and jet fuel stocks have only recently stabilised, creating ongoing support for crack spreads despite crude prices retreating to preconflict levels.

And despite the recent surge in activity in the Strait of Hormuz, the recovery in oil flows is proving slower than expected. The initial rebound in tanker transits through the Strait of Hormuz has stalled, with vessel crossings remaining in single digits and no sustained recovery evident.

While the interim US-Iran agreement has reduced immediate geopolitical risks, shipping operators remain cautious, limiting the speed at which crude exports can return to normal levels.

Asian LNG prices inched lower on signs of rising supply. The 30-day moving average of shipments from Australia rose to 229kt on Sunday, the highest level since late March, according to ship tracking data. This may provide some relief for markets still reeling from disruptions to supplies from the Middle East.

Major Gulf producer Qatar has said its plans to ramp up LNG exports within weeks, but it has also recently extended force majeure on some shipments to Asia and Europe.

Gold prices inched lower as the market contemplates the outlook for interest rates. Swap traders are still pricing-in a 25% chance of the Fed hiking rates at its next meeting. However, this pricing has eased lower following data which showed a weaker-than-expected labour market.

A fall in demand for jewellery has also weighed on sentiment. The World Gold Council estimates that global jewellery demand fell -23% y/y in Q1 2026 as high prices weighed on sales. This was driven by falls in China (-32%) and India (-19%).

Iron ore futures edged higher as concerns over tightening supplies continued to hang over the market. China’s state-backed iron ore trader, China Mineral Resources Group, is said to have expanded its curbs on Australian iron ore.

The group has asked several domestic steel mills not to buy any USD denominated cargoes of Fortescue’s super special fines product.

This helped offset the impacts of a seasonal slowdown in Chinese demand and small profit margins at Chinese mills, which have been squeeze by high coking coal prices.

Aluminium led the base metals sector higher, rising from a four-month low as some doubt over the resumption of exports from the Persian Gulf emerged.

Last week, Emirates Global Aluminium said it aims to speed up resumption of output at its Abu Dhabi facility that was damaged during the US-Iran conflict. It said it’s working to reach full production of hot metal at the smelter earlier than the one-year timeline it previously reported.

However, in the meantime the full reopening of the Strait of Hormuz remains elusive.

Daily transits have risen but remain significantly below the pre-conflict level.

Mega-rotation could be biggest since post-pandemic: Nigel Green, deVere CEO extract

The dominance of the US mega-cap technology stocks may be giving way to broader market leadership, with deVere Group chief executive Nigel Green arguing a “mega-rotation” out of Big Tech will become one of the defining investment themes for the remainder of 2026.

The view comes as investors increasingly rotate away from concentrated positions in the largest technology companies and towards sectors including financials, industrials, healthcare, energy, infrastructure and value stocks.

The shift follows softer-than-expected US labour market data and growing signs participation in the equity rally is broadening beyond the so-called Magnificent Seven.

Evidence of this rotation is emerging across US equity markets. The S&P 500 Equal Weight Index has recorded its strongest start to a year relative to the market-cap weighted benchmark since 1992, while equal-weight US equities have outperformed in recent months.

At the same time, the Dow Jones Industrial Average recently reached a record closing high above 52,900 as investors favoured more economically sensitive sectors while reducing exposure to parts of the technology and semiconductor complex.

Investors are entering one of the most significant reallocations of capital since the post-pandemic recovery. While concentration in a handful of mega-cap technology stocks generated exceptional returns over recent years, it also created elevated concentration risk within portfolios.

Investors are now recognising opportunities exist across a much broader range of sectors rather than remaining focused on the narrow group of companies that has dominated market performance.

The rotation gathered momentum after the latest US employment report showed the economy added just 57,000 jobs in June, around half market expectations, while payroll gains for previous months were revised lower.

The weaker labour market data prompted investors to further reduce expectations of additional Federal Reserve tightening, with markets increasingly anticipating policymakers will leave interest rates unchanged as employment growth moderates.

A more stable interest rate outlook has renewed investor interest in sectors that lagged during the artificial intelligence-driven rally and are expected to benefit from a less restrictive monetary environment.

The latest employment figures reinforce expectations that the next phase of the market cycle will differ materially from the previous one, characterised by stabilising interest rates, moderating rather than collapsing economic growth and significantly broader market leadership.

The Federal Reserve remains central to this outlook, with more stable interest rate expectations historically encouraging investors to diversify capital across a wider range of industries.

Despite the growing rotation, the long-term outlook for artificial intelligence remains positive. AI is expected to continue reshaping industries, business models and investment portfolios for many years.

However, investors are increasingly asking where the next wave of equity market returns will originate, with the answer extending well beyond the largest technology companies.

Wall Street strategists have increasingly characterised the current environment as a broad rotation trade, with capital flowing towards cyclical and value-oriented sectors following several years of technology dominance.

Recent weakness across momentum-driven semiconductor stocks has added support to expectations that broader market participation could become a defining feature of the second half of 2026.

Financials, industrials, healthcare, infrastructure, energy and selected consumer sectors are expected to experience renewed investor demand, supported by relatively attractive valuations, solid earnings potential and significant scope for additional capital inflows.

The breadth of investment opportunities available today is greater than at any point in recent years, while broader market leadership has historically supported stronger and more durable bull markets.

Investors who remain heavily anchored to the previous cycle’s winners risk missing the next phase of market leadership, with the current rotation underpinned by favourable economic, monetary policy and valuation dynamics that are expected to continue well into the remainder of 2026.

Corporate news in Australia:

• Genesis Minerals ((GMD)) has launched a $5.6bn takeover bid for Vault ((VAU)), eclipsing Regis Resources’ ((RRL)) existing proposal
• Sojitz has joined the growing list of bidders pursuing Programmed as Persol advances the sale process at a valuation of around $1bn
• Bennelong Funds Management has commenced a sale process as founder and owner Jeff Chapman prepares to exit the business
• Stakk has acquired US-based ParaScript for $90m to expand its fraud detection technology capabilities and strengthen its international footprint
• SCX.ai has launched a $40m initial public offering on the ASX as investor appetite for artificial intelligence listings continues to build

On the calendar today:

-JP May earnings

-US May Trade Bal

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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