The Overnight Report: The Chips Are Down

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            [6] => ((NST))
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This story features NORTHERN STAR RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: NST
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets fell as chip and memory stocks led the Nasdaq lower.

Apple reached a new all-time high, while SpaceX fell below its IPO price.

After a flat trading session on Thursday, ASX200 futures are pointing to a slightly weaker start.

By Danielle Ecuyer

Good Morning,

The ASX200 closed flat on Thursday at 8,841.

Telcos gained 1.1% while Miners declined by -1.6%.

The local calendar suggests we should see gold miner Northern Star ((NST)) release its quarterly production numbers.

Those of Rio Tinto ((RIO)) on Wednesday were well-received, but those from BHP Group ((BHP)) yesterday not so.

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

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

Chips Failed The Good-News Test

Taiwan Semiconductor $TSM posted its fifth straight record quarter and the stock fell anyway.

The selling spread to memory, equipment, and the rest of the AI names.

Hedge funds are now sitting at their lowest AI exposure all year.

That reads as profit-taking after a huge run, not a demand problem, and that difference is everything if you’re deciding whether to buy the dip.

Housing Is Still Stuck

Pending home sales dropped in June and builder confidence fell to 34, a level where more builders see a bad market than a good one.

The average 30-year mortgage hit its highest in nearly a year.

Buyers needed lower rates or lower prices to step in.

They got neither.

Oil Looks Calm, Shipping Doesn’t

Brent sat near US$84 even with the Strait of Hormuz shut.

The new wrinkle: Iran reportedly told the Houthis to be ready to threaten the Red Sea if the US hits its power grid.

That would knock out a second shipping route with the first already down.

The price is quiet, the risk underneath it isn’t.

CBA Economics: AI stocks drag US shares lower as Iran conflict intensifies, extract

Weakness in technology stocks drove US sharemarkets lower overnight, as investors focussed on whether expected returns from AI justify massive investment and current valuations.

Intensifying conflict in the Middle East also weighed on risk appetite, with global oil prices remaining around their highest levels since Mid-June despite easing slightly.

In Australia, yesterday the CommBank Household Spending Insights series rose by 0.3%/mth in June after a 0.2% lift in May and 1.2% fall in April. Household spending has been choppy in recent months making it challenging to see a clear trend.

Overall, the data does show some weakness through June with End of Financial Year Sales less impactful than 2025. The softening we are seeing in the CommBank HSI is broadly in line with our expectation that household spending will slow over the remainder of this year.

US sharemarkets were lower on Thursday as weakness in chip stocks outweighed solid US economic data and what has so far been a strong earnings season. The Dow Jones index finished down -0.2%, the S&P 500 index fell -0.5% and the Nasdaq index lost -1.5%.

In US economic data, a spate of indicators released on Thursday showed the economy’s resilience. Retail sales increased 0.2% in June, its lowest gain in five months, but in line with expectations. Weekly jobless claims fell -8,000 to 208,000, the lowest in two months.

European sharemarkets posted slim gains for the third straight session on Thursday, as caution over the Middle East war kept markets in a tight range despite strong earnings. The continent-wide FTSEurofirst 300 index ended up 0.1% and UK FTSE100 rose 0.5%.

US government bond yields were modestly higher after data on consumer health and the labour market did little to modify investor expectations on the path of near-term interest rates from the Federal Reserve. The US 10-year Treasury yield advanced 1 point to 4.56% while the US 2-year Treasury yield gained 2 points to 4.16%.

Currencies were lower against the US dollar. The Euro dipped -0.2% to US$1.1439, the Japanese yen dropped -0.1% to JPY162.40 and the Aussie dollar slipped -0.2% to US69.94 cents.

Global oil prices fell but remained near the highest since mid-June as the Iran war escalated, with Tehran asking Yemen’s Houthi movement to be prepared to close the Red Sea oil export route. Brent crude futures settled -0.8% lower at US$84.23 a barrel.

Base metal prices were mixed on Thursday. Copper futures were flat while aluminium futures climbed 0.9% on continued supply concerns.

Gold futures declined as escalating Middle East tensions reinforced US rate-hike bets. The futures settled -1.5% lower at US$3,992 an ounce.

Iron ore futures were little changed as traders weighed ample supply against Port Hedland strike risk. The futures settled down -0.1% to US$98.81 a tonne.

Looking Ahead: In the US, there are housing starts and industrial production. In Europe, the consumer price index for June is out.

Too Much Complacency, Ed Yardeni & Elias Griepentrog, Yardeni Quicktakes

Our Roaring 2020s thesis holds that the demand side of real GDP remains supported by resilient consumer spending and robust business investment.

On the supply side, tech-led productivity is boosting real GDP, while keeping a lid on inflation. Now that the economy has proven its mettle over the first seven years of the decade, it should continue to do so over the remaining three years of the Roaring 2020s.

While our Roaring 2020s thesis has been a contrarian view for much of this decade, it is increasingly accepted.

We are in good company. Both US Treasury Secretary Scott Bessent and Fed Chair Kevin Warsh are vocal proponents of the productivity-led economy story. Investors have been increasingly betting on it, as evidenced by record-high stock prices and stable bond yields.

We are comfortable with the financial markets embracing the Roaring 2020s narrative. However, as optimism becomes consensus, rising complacency can leave markets vulnerable if overlooked risks become more visible.

One example of such complacency may be in the crude oil market. Despite renewed attacks on shipping by Iran and the resumption of the shooting war between the US and Iran, the price of a barrel of Brent crude remains relatively subdued at around US$85 currently.

Alternative routes for exporting oil that avoid the Strait of Hormuz have helped keep prices relatively contained. So has weak Chinese demand. However, the oil market may be underestimating the risk of a prolonged war, especially if it continues into the winter months with depleted oil inventories.

This week’s batch of cooler-than-expected PPI and CPI inflation numbers for June certainly calmed concerns on that front. As a result, the likelihood of an imminent Fed rate hike has become less likely, with the federal funds rate futures market now moving toward one rather than two such moves over the next 12 months.

The recent increase in the 10-year US Treasury yield was attributable to the 10-year TIPS yield, signaling better productivity-led growth. The spread between the two narrowed, suggesting a moderation in inflation expectations.

Signs of complacency are not limited to financial markets. Sentiment indicators tell a similar story, with Polymarket.com showing only a 10% probability of a US recession this year.

Our favorite Bull/Bear Ratio rose to 3.12 last week, well above its historical average, suggesting that investor optimism has become increasingly widespread and may be approaching excessively bullish territory in the near term.

Furthermore, June’s BofA Global Fund Manager Survey shows investors increasingly anticipate a Roaring 2020s outcome, with an AI-driven productivity growth boom and no Fed tightening.

A record percentage of respondents expect a “no landing” global economy, and their cash levels are extremely low. All that triggered BofA’s contrarian sell signal.

The buying of US equities by foreign investors tended to be a contrarian indicator in the past. They loaded up on US stocks near the tail end of the previous three bull markets.

Be warned: Over the past 12 months, they purchased a record-busting US$903.8 billion.

US dollar concentration emerges as hidden risk in portfolios, Stephen Dover, Frankin Templeton Institute. 

The Franklin Templeton Institute cautions that institutional portfolios carry far greater US dollar concentration than headline asset allocation figures suggest.

This is a risk that is largely unintended and increasingly consequential as global monetary and fiscal policy paths diverge.

The Institute’s analysis of a 2025 Preqin survey of 1,633 institutional investors, including public pensions, endowments foundations and insurers, the average institutional portfolio carries approximately 80% exposure to the US dollar once currency exposure across all asset classes is aggregated. US equities alone made up 85% of the equity allocation in the sample.

When US equities dominate allocations and consistently outperform, dollar exposure grows mechanically through appreciation, creating a feedback loop that intensifies currency concentration without deliberate decision. 

This matters because currency exposure has become increasingly correlated with equity and credit risk rather than providing diversification. During market stress, dollar strength often coincides with risk asset selloffs, meaning hedged international portfolios simultaneously face equity drawdowns and adverse currency moves.  

The net international investment position (NIIP), which reflects the cumulative amount of investment by foreigners on a net basis relative to GDP, sits at roughly 90% of GDP. With this percentage having doubled over the past decade, Franklin Templeton’s researchers indicate the scale of foreign capital dependence leaves the dollar vulnerable. 

If for any reasons inflows slow, the dollar would depreciate. In this regard, a factor to watch is any pivot in financial asset flows away from the United States, which could arise from concerns about US politics, geopolitics or slowing US growth. Similarly, efforts by investors to diversify holdings away from the United States would undermine the value of the dollar. 

Home bias has increased reliance on US assets to alarming levels. For example, in 2010, emerging markets comprised 13.9% of the MSCI AC World Index with average investor allocations at 13.4%. Today, EM’s index share is 11.0%, but average allocations have collapsed to just 5.2%.

Separately, central banks globally are moving out of sync. Prior to the US-Iran War, the Federal Reserve was biased to cut rates, the European Central Bank had paused its easing cycle, the Bank of Japan had already cautiously begun to hike rates, and various emerging central banks were prepared to cut rates amid falling inflation.

Those divergences in policies had contributed to a weakening of the US dollar since early 2025, which in turn boosted investor interest in non-US markets, including in emerging markets.

With the outbreak of the war and the impairment of shipping via the Strait of Hormuz, policy perceptions have again shifted. The Fed and emerging central banks are now (mostly) on hold, the ECB and the BoJ are inclined to tighten their monetary policies.

Unsurprisingly, volatility, correlation and returns have shifted markedly. But the underlying point remains: Divergence in the conduct of monetary policy creates opportunity for tactical re-allocation.

Corporate news in Australia:

• Future Fund-backed consortium leads the race to acquire Ausgrid’s smart metering business in a deal valued at around $3bn
• Liberty Bell Bay will shut after its proposed acquisition collapsed, leaving the Tasmanian manganese smelter’s future uncertain
• Acorn Capital has exited Dredge Robotics, selling its stake to Perth-based family office Verona Capital
• Coles Group ((COL)) is challenging the ACCC’s decision to block its proposed acquisition of a supermarket development site in Kalgoorlie
• Sports Entertainment Group ((SEG)) is exploring a potential acquisition of ARN Media ((A1N)) as radio sector consolidation gathers pace

On the calendar today:

-EZ June CPI

-US Jul U of Mich Sentiment

-US June Building Permits

-US June Housing Starts

-NORTHERN STAR RESOURCES LIMITED ((NST)) Qtrly Update

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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