The Monday Report – 20 July 2026

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This story features SOUTH32 LIMITED, and other companies.
For more info SHARE ANALYSIS: S32
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets fell on Friday, with ongoing selling in technology stocks.

The Australian market weakened on Friday to finish the week flat.

On Monday morning, SPI futures are pointing to a positive start, but ongoing US-Iran strikes and concerns over an escalation of the war may temper enthusiasm at the start of the week.

Good Morning,

The ASX200 fell -44 points of -0.5% on Friday, dragged down by Materials, off -2.9%.

The pace of quarterly reports picks up this week, staring with South32 ((S32)) and Yancoal  Australia ((YAL)).

For more details, see the FNArena calendar, https://fnarena.com/index.php/financial-news/calendar/

Tony Sycamore, IG extract

The ASX200 finished last week flat, closing just 9 points (-0.11%) lower at 8796 — right near the 8800 level where it has now closed for the previous five weeks.

The index’s recent stability partly reflects its relatively low exposure to the IT sector compared with regional peers that have been rerated sharply lower on a combination of leveraged selling, regulation changes and valuation concerns.

At a sector level, IT (-3.49%), Materials (-2.81%), Consumer Staples (-1.53%), and Health Care (-0.29%) were the weakest performers last week. In contrast, Consumer Discretionary (+2.62%), Telcos (+2.62%), Energy (+2.17%), and Utilities (+1.44%) outperformed the broader market.

This week the key local data point will be Thursday’s June Labour Force update. Last month, the May report showed employment rising by 40,300, comfortably above the roughly 30,000 consensus forecast (following a sharp revised fall of -40,700 jobs in April).

The unemployment rate eased to 4.4% from 4.5%, while the participation rate edged higher to 66.7%.

Consensus expects a more modest employment increase of around 19,000 for June, with the unemployment rate likely to hold around 4.4%. 

A softer-than-expected print, particularly a rise in the jobless rate toward 4.6% would add weight to the view that the RBA has tightened enough. Conversely, another strong result would keep lingering tightening risk alive, especially with the central bank still alert to wage and inflation pressures.

The Australian interest rate market starts the week pricing in around 5 basis points of tightening for the RBA’s August meeting, with a cumulative 18 basis points of hikes priced for the remainder of 2026.

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

Apple Takes The Top Spot By Doing Less AI

Apple passed Nvidia as the world’s most valuable company, up double digits over the past month while Nvidia bleeds.

Investors spent two years calling Apple the AI laggard. Today that low exposure is exactly why money is hiding in it.

Chips Are One Close Away From An Official Bear Market

Global chip stocks have erased about -US$3.3 trillion in value since June 22. 

JPMorgan’s cross-asset desk calls it profit taking in a crowded trade.

For perspective, Goldman notes the S&P has nearly doubled since the end of 2022, putting this bull market among the strongest since 1928, and pullbacks inside runs like that are normal.

The Fed Hawks Are Getting Louder

Cleveland Fed President Beth Hammack said businesses are now telling her the Fed needs to act on inflation, a first in her tenure.

Dallas’s Lorie Logan called for modestly higher rates a day earlier.

Import prices just posted their biggest annual gain in almost three years, and the only reason consumers feel better is cheap gas.

Gas is already climbing again.

ANZ Bank, Australian Morning Focus, extract

Tech stocks once again drove equity markets lower. 

Bond yields declined, despite higher oil prices amid intensifying hostilities in the Middle East. 

The S&P500 closed down -1.0%, the Dow down -0.8% and the Nasdaq down a sharper -1.4%.

In Europe, the EuroStoxx was down -0.8%, while the FTSE100 rose 0.3%. 

The yield on the US 10y Treasury note rose 1.0bp to 4.55%. 

In commodities, the active WTI future rose 4.3% to US$82.5/bbl. 

Gold rose 0.8% to US$4,017.4/oz. 

University of Michigan (US) consumer sentiment rose 4.9pts to 54.4 in July, the highest level since February, reflecting lower gasoline prices. 

Relative to history, however, sentiment remains very weak. Short-run inflation expectations fell, with the one-year ahead measure down -0.4ppt to 4.2%, while the five-to-ten-year ahead measure was stable at 3.3%. 

We expect the ECB will keep policy settings unchanged at its July meeting next week. Having hiked 25bp in June, we do not believe policymakers will feel any urgency to adjust policy settings further.

Whilst energy prices have risen in recent weeks following the resumption of hostilities in the Middle East, energy prices remain below the mild scenario that the ECB presented at its June meeting. 

Nonetheless, renewed upside inflation risks are likely to strengthen the ECB’s case to tighten policy further in time and we continue to expect another 25bp hike in September.

While we don’t think additional tightening is warranted by inflation dynamics, which show no evidence of pass-through of the energy price shock to broader inflation, nor by a very weak growth backdrop, the June meeting minutes revealed growing concerns about inflation persistence amongst policymakers. 

Our analysis suggests otherwise.

In any case, we don’t expect explicit forward guidance from the ECB at next week’s meeting, where we are likely to continue to see a data dependent, meeting-by-meeting approach.

But given the ECB’s current inflation assessment, which we do not believe has been supported by recent data developments, we can’t see a catalyst for the ECB to change its inflation assessment any time soon, absent a marked improvement in underlying inflation over the next few months. 

In our view, responding to near-term inflation developments amid a negative supply shock, and an already-fragile growth outlook, carries the risk of undermining the achievement of the 2% inflation target in the medium term.

Economic pressures from rising inflation and rates will persist, Moody’s Ratings, extract

While energy prices have eased since the start of the US-Iran conflict, ongoing volatility and earlier price shocks will have a lagged impact on Australia’s (Aaa stable) economic growth. 

The primary credit risk is a deepening of existing pressures, including elevated inflation and interest rates, compounded by housing market weakness.

The full effects of recent energy market disruption are still passing through the economy, and the cost base across refined fuels, agricultural and construction supply chains is likely to remain elevated over the next 12 months. 

Australia remains exposed to global energy supply chain disruptions because of its reliance on imported refined fuels, which are key inputs across the economy.

Economic growth will be constrained by inflationary headwinds but remains resilient. We have lowered our GDP growth forecasts but expect it to remain robust compared to other G-20 advanced economies. 

Despite a reliance on imported refined fuels, Australia is a net energy exporter and will benefit from higher liquefied natural gas (LNG) and coal prices, supporting fiscal strength.

Still, higher energy prices and fertiliser costs have exacerbated inflationary pressures that predated the conflict. Temporary cost-of-living measures offer limited relief and declining household purchasing power will weigh on Australian issuers’ credit quality. 

Fiscal pressures will intensify for Australia’s regional and local governments. Elevated inflation and higher interest rates are intensifying state governments’ high debt burdens. Increased construction costs will likely drive further expenditure pressure.

Although strong institutional frameworks, stable Commonwealth transfers and strong market access provide buffers, a prolonged disruption would further erode resilience. Resource-oriented states stand to benefit from potential revenue upside.

Energy market disruption supports energy exporters but weighs on fuel-intensive sectors. Increasing Asian demand for secure Australian energy supply boosts LNG and coal exports.

By contrast, the resources and transportation sectors are particularly exposed to higher input costs because of their heavy use of diesel. Execution risks on large-scale construction have risen as elevated building materials costs stretch budgets and erode margins.

Infrastructure is better positioned because of demand inelasticity and CPI-linked pricing, while digital infrastructure investment will continue unabated.

Bank asset quality will weaken amid softer economic conditions, but losses contained. Rising rates and weaker economic conditions will likely constrain debt affordability, increasing nonperforming loans, particularly for home loans which make up the largest part of bank portfolios.

Still, strong provisioning across the major banks will keep credit losses low. While higher rates will support net interest margins, competition, compounded by reduced investor loan demand following reduced tax concessions, will limit gains. Banks’ direct exposure to sectors affected by the conflict is low.

Downgrading Emerging Markets To Market Weight, Ed Yardeni & Toby Hearst, Yardenu Quicktakes, extract

We are downgrading emerging markets to market weight, not because the Go Global thesis is broken but because four separate short-term headwinds are converging at once:

(1) The price of oil is back above US$80 a barrel as the IRGC keeps the Strait of Hormuz contested.

(2) The FOMC is hawkish. With inflation still sticky and a solid labor market, financial markets are currently pricing in one rate hike before the end of this year.

(3) That’s boosting the dollar.

(4) AI fatigue is showing up in South Korea and Taiwan.

None of these reverse the multi-year case for international equities. Valuations abroad are cheaper than in the US, and the structural rotation away from decades of US stock market leadership is intact.

(1) Stay Home vs Go Global. The price ratios between these two long-run investment styles representing the US stock market (Stay Home) and the rest of the world’s stock markets (Go Global) remain below their early 2025 peaks in both dollar and local currency terms.

They are also still below their long-term uptrends from 2010 through early 2025, and on short-term downtrends since then.

Since early 2025, stock markets in the US and other developed economies have kept pace with each other. From 2010 through early 2025, the US market outperformed.

The ratios of the US versus emerging markets show the latter outperforming the former since early 2025 after underperforming since 2010. The downturn in the ratios since early 2025 was largely attributable to the AI-fueled booms in South Korea and Taiwan.

There has been quite a bit of rotation in leadership so far in July. The countries that led the broader 2026 rally, South Korea and Taiwan, are the worst performers this month to date, down -19.5% and -10.4% respectively.

China and Indonesia are at the top of the leaderboard this month, with gains of 8.0% and 9.8%, respectively. The US is in the middle of the pack.

(2) South Korea & Taiwan. South Korea’s KOSPI is concentrated in two companies: Samsung Electronics and SK Hynix. Leveraged ETFs tied to each stock launched only in May and attracted a flood of retail money, sending the KOSPI soaring.

When these stocks turned down, margin calls cascaded, forcing brokerages to liquidate roughly -WON426 billion in positions over the first 10 trading days of July alone.

The minimum margin deposit was tripled, and purchases per trade were capped. The Bank of Korea hiked to 2.75%, its first move since January 2023, targeting a won near 17-year lows and inflation above 3% y/y.

Taiwan has been a calmer version of the same AI trade. Its MSCI index is about 24% above its 200-day moving average, elevated but without the leveraged retail mania or the sharp reversal that hit South Korea.

The move remains orderly, a reminder that concentration risk and leverage, not AI exposure itself, drove South Korea’s whipsaw.

The South Korea and Taiwan ETFs are still up the most of any country ytd, at 67.2% and 53.2% in US dollar terms, respectively, significantly ahead of any other nation’s ETF.

Corporate news in Australia:

• Next Capital acquires Fujitsu Limited’s Australian data centre portfolio 
• Quadrant Private Equity enters exclusive talks to sell TSA Riley to Mace Group following a global sale process
• HiTech Group Australia Ltd ((HIT)) agrees to acquire Hudson Global Resources, the Australian business of Hudson Global Inc 
• Frontier Energy Ltd ((FHE)) secures $280m in project debt
• Morse Micro prepares an ASX IPO targeting a valuation above $600m
• Coles Group Ltd ((COL)) ends takeover talks with TPG Capital over a potential acquisition of Greencross
• SkyCity Entertainment Group Ltd ((SKC)) completes unconditional NZ$74.5m property sale with proceeds to repay debt
• Perpetual Ltd ((PPT)) rejects Windflower’s revised $2.55bn takeover offer backed by EQT

On the calendar today:

-NZ June Trade Bal

-JP Public Holiday

-AURELIA METALS LIMITED ((AMI)) Qtrly update

-SOUTH32 LIMITED ((S32)) Qtrly Update

-YANCOAL AUSTRALIA LIMITED ((YAL)) 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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