The Overnight Report: Semis & SpaceX Decline

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This story features A2 MILK COMPANY LIMITED, and other companies.
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The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Nasdaq led the overnight declines as semiconductor stocks fell following Samsung Electronics' results, weighing on the sector.

SpaceX shares declined after joining the Nasdaq100 index, while the Dow Jones relatively outperformed.

The Australian market was dragged lower by miners yesterday, with ASX200 futures pointing to yet another softer start on Wednesday.

Good Morning,

The Australian market fell for a second consecutive day on Tuesday.

The ASX200 lost -27 points, or -0.3%, to 8,804.

Miners led the declines, retreating by -2.6%, while Technology outperformed, rising 2%, boosted by a rally in WiseTech Global shares as Richard White stepped down as chair.

SpaceX joined the Nasdaq100, but its rockets failed to ignite.

The stock fell -6.83% to US$149.47, leaving it trading below its first-day opening price of US$150.00.

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

Iran Attacks Ships, US Pulls The Oil License

Iran hit three vessels near the Strait of Hormuz in the past day, including a Qatari LNG tanker.

The US Treasury responded by revoking the license that let Iran sell oil legally.

Brent pushed above US$76 and the naval coalition raised the strait’s threat level to severe.

The June interim deal is hanging by a thread.

The Memory Trade Is Now A Bear Market

Micron, Samsung, SK Hynix and the Roundhill Memory ETF are all well off their recent highs.

Semiconductors have lost roughly -US$1.5 trillion in market value since June 25, with Micron alone shedding nearly -US$350 billion.

The damage spread past memory today to equipment makers like Applied Materials and Intel.

Financials And Healthcare Hit Records

Bank, insurance, and large-cap healthcare ETFs all touched all-time highs this morning.

Wells Fargo’s Mike Mayo called this one of the best banking environments he’s seen in three decades, citing record capital markets activity and loan growth.

One caution: the financials chart is overbought on momentum measures.

Rallies this fast usually need a breather.

ANZ Bank Australian Market Focus, extract

Equity markets declined as continued volatility in technology stocks dragged indices lower.

Bond yields rose, following oil prices higher after several ships were attacked in the Strait of Hormuz and the US revoked its waiver on the sale of Iranian oil.

The S&P500 fell -0.4%. The EuroStoxx50 declined -1.2%, while the FTSE100 rose 0.1%.

US Treasury yields rose, with the 10-year Treasury yield up 5.4 basis points to 4.55%.

In commodities, the active WTI futures contract rose 4% to US$72/bbl, while gold fell -0.4% to US$4,106.60/oz.

Three ships were attacked overnight in the Strait of Hormuz, according to Bloomberg: a Qatari gas tanker, a Saudi oil tanker and a third unspecified vessel.

This is the largest number of attacks in a single day since the US-Iran Memorandum of Understanding was agreed. The US Treasury Department has also revoked the waiver that had authorised the sale of Iranian oil.

The New York Federal Reserve’s median one-year-ahead inflation expectations rose 0.21 percentage points to 3.67% in June, the highest level since September 2023, despite lower petrol prices during the month.

The three-year-ahead measure also rose 0.21 percentage points to 3.34%. The five-year-ahead measure was little changed at 3.02%.

The combined goods and services trade deficit widened by US$23bn to US$77.6bn in May.

Goods exports fell -US$11.3bn, while goods imports rose US$12.3bn during the month. Weakness in exports was concentrated in non-monetary gold and other precious metals.

While capital goods imports linked to the AI investment boom remained a significant contributor, strength in imports broadened in May. Consumer goods imports rose US$3.5bn, industrial supplies and materials increased US$3.1bn, largely due to higher crude oil imports, while motor vehicle imports rose US$2.2bn.

The recent strength in imports, which have increased sharply over the first five months of the year, is likely a reflection of the normalisation of orders following last year’s pre-tariff front-loading. There may also be a renewed element of this, with current tariffs implemented under Section 122 of the Trade Act due to expire on July 24.

Trump Administration officials have indicated these measures will be replaced, returning to the previous tariff regime.

Stepping back from the recent volatility, the strength of the AI investment boom is clearly evident in the trade data. As of May, the trade deficit in computers, peripherals and semiconductors stood at US$44.1bn, accounting for around 57% of the overall trade deficit, and continues to grow.

Following the trade data, the Atlanta Federal Reserve’s GDPNow tracker for the second quarter was revised to an annualised 1.4% quarter-on-quarter, with net exports subtracting -1.3 percentage points from growth.

From the US Market Desk, Chris Galipeau, Franklin Templeton extract

We are constructive on US equities and have established a target range of 7,400-7,800 for the S&P500 Index, driven by more than 15% year-over-year, earnings per share (EPS) growth.

First-quarter earnings exceeded consensus expectations, which have served to drive the S&P500’s 2026 earnings estimate to US$341 today, up from US$310 at the start of the year. Earnings season begins in about two weeks, and this will be the next major catalyst for the market. 

We reiterate our “broadening” call on equities and emphasise our bullish view on US small- and mid-cap stocks. We also continue to favour emerging market equities and Japanese equities.

Earnings estimates have steadily ticked up all year and, I’ll repeat, earnings drive stock prices in the long run—not geopolitics.

I’d argue we are seeing some signs of excess in the market that I want to flag. For example, Citadel is reporting a retail “frenzy” for exposure to the semiconductor sector, as reported by Bloomberg.

In June, retail investors traded roughly US$1.9bn of semiconductor options premium per day. That is six times the historical average, with 75% of the options traded being call options.

Trading US$1.9bn in option premium is a measure of option cost and also represents the potential maximum loss on those contracts. That sixfold increase over the historical average is astounding, and the heavy tilt towards call options represents speculation.

Additionally, Citadel reported leveraged exchange-traded fund (ETF) assets reached a record US$218bn. Since the end of March alone, assets have increased by roughly US$82bn (60%), led by technology (136%) and semiconductor (US$175bn) exposures.

One out of every three listed options traded in the United States now expires on the same day.

The Wall Street Journal reported the combination of increased retail use of margin and the rush into leveraged ETFs has fuelled speculative positioning. US margin debt rose 54% to a record US$1.4trn in May from a year earlier, according to FINRA.

Dispersion continues within the indices. In the S&P500 Index, 231 stocks are outperforming the index year to date (YTD), while 191 stocks are down for the year.

In my view, this sets up an ideal environment for stock selection and, for some investors, tax-loss harvesting at the same time.

If you look at the S&PSmallCap600 Index, you see the same dispersion pattern. In this index, 248 stocks are outperforming the index YTD, but 180 are down for the year.

As of this writing, the Equal WeightS&P500 Index, representing the “average stock”, is at a new all-time high. The S&PMidCap400 Index is at a new all-time high. The Russell2000 Index is at a new all-time high. The Russell1000 Value Index is also at a new all-time high.

Bringing up the rear so far this year is the vaunted Magnificent Seven basket, which is down -1.74% YTD as of this writing. The basket may very well still end up in positive territory in 2026 if it can sustain a rally, though it is about -10% behind the S&P500 Index YTD.

This significant underperformance by the Magnificent Seven has probably gone too far, in my estimation. Collectively, these stocks are now as oversold as they have been in five years, based on technical indicators.

The relative strength index for the basket is 28.7. As such, these stocks are technically oversold and may be worth a look.

Fundamentally, the Magnificent Seven basket is trading at 22 times 2027 EPS estimates. EPS growth is expected to be 20% Y/Y in 2027 versus 2026. The price/earnings-to-growth (PEG) ratio is about one. In my view, it looks like a good time to buy.

Bottom line: We think it is prudent to have a diversified equity playbook that includes large-, mid- and small-cap exposure in the United States, with a balance of growth and value.

Large-cap growth is on sale. The same can be said for ex-US equity exposure, with emerging markets and Japanese equities looking attractive.

Our takeaway is to reduce concentration and spread one’s bets. Consider using any further consolidation to your advantage.

Will the US dollar bounce be sustained? MFS Investment Management, Benoit Anne extract

First, the important disclaimer: predicting currency markets in the near term is an art form that entails an elevated degree of uncertainty and risk, given the diversity and complexity of market drivers.

Having said that, we are in the camp that believes the risks to the US dollar (USD) are now skewed to the downside, following the major USD bounce we have observed since mid-May.

From a macro policy standpoint, the Federal Reserve may not be as hawkish as previously perceived. Any repricing of Federal Reserve tightening expectations to the downside will likely undermine the USD, especially when other central banks are proceeding with actual policy tightening.

From a global macro perspective, investor risk appetite has recovered, which is typically supportive of higher-beta currencies.

Finally, the technical backdrop has shifted. CFTC net long US dollar positions reached US$34.3bn in the week through June 23, 2026, representing the most dollar-bullish speculative positioning since January 2025.

This could well mean the USD is now overbought.

Overall, a potential weakening of the dollar in the period ahead supports the case for global diversification and exposure to non-US assets, including non-US equities, global credit and emerging market fixed income.

AI capex: Look beyond the obvious winners

The equity story is broadening beyond the obvious AI winners.

Semiconductors, compute and data centre infrastructure led the first phase, alongside power, cooling and grid upgrades. The more interesting question is what comes next if AI becomes a sustained corporate investment cycle rather than a narrow data centre trade.

That shift could reshape earnings leadership in less obvious ways.

Higher compute intensity may support demand for advanced manufacturing equipment, automation, precision components, logistics, security, data management and deployment services.

Recent data point to a broadening trend, with core capital goods orders strengthening and gains spreading into machinery, primary metals and fabricated metals—categories more closely tied to manufacturing investment, reshoring and the physical build-out of capacity.

The key point is that AI may be the catalyst, but the investment opportunity is becoming broader.

As capital spending spreads into manufacturing, automation, infrastructure and capacity, the differentiator will be not just who spends, but who allocates capital and executes that spending well.

For some companies, broader capital expenditure could lift productivity, improve service levels and create operating leverage. For others, it may raise capital intensity, increase depreciation or expose business models that cannot earn an adequate return on new investment.

The key question is not, “Do we own AI?” but rather, “How does this capital expenditure cycle evolve, and are investors exposed to durable beneficiaries or crowded trades?”

AI may remain the headline, but the investment opportunity is to distinguish between companies that can convert this broader capital expenditure cycle into higher productivity, stronger cash flow and durable returns, and those whose margins, earnings and cash flows may erode as the cycle matures and slows.

(Contribution from Ross Cartwright, Lead Strategist, Strategy and Insights Group.)

Corporate news in Australia:

• Mineral Resources’ ((MIN)) $10m airline acquisition raises fresh governance and transparency questions
• Court approves the Macquarie-led ((MQG)) $11.7bn takeover of Qube Holdings ((QUB)), clearing a key hurdle for the transaction
• Verso Capital Partners completes its first acquisition with the purchase of Grange Banks
• CK Infrastructure launches a $2bn-$3bn sale process for EDL Energy
• Sumitomo Mitsui Trust Bank will acquire a 15% stake in Morrison, with JPMorgan and Goldman Sachs advising
• JBS is reportedly pursuing a $2.5bn acquisition of Baiada Poultry despite denials the business is for sale
• Lynas Rare Earths ((LYC)) will invest $50m in JS Link to support development of a Malaysian magnet manufacturing facility
• Cobre ((CBE)) is seeking to raise $100m in equity to lift its stake in the Sierra Atacama copper project to 75%
• Parratech is seeking a private capital partner to help fund its US expansion amid strong data centre demand

On the calendar today:

-NZ RBNZ rate decision

-JP May BoP, Trade Bal

-US June FOMC mins

-A2 MILK COMPANY LIMITED ((A2M)) ex-div 28.76c (100%)

-A2 MILK COMPANY LIMITED ((A2M)) ex-div 5.08c (100%)

-COGSTATE LIMITED ((CGS)) Qtrly update

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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