The Overnight Report: June Employment Data

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This story features FORTESCUE LIMITED, and other companies.
For more info SHARE ANALYSIS: FMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets traded flat to lower, led by selling in technology stocks.

Following earnings released after the close, Alphabet, Tesla and IBM shares are trading lower in the aftermarket.

After a positive session on the Australian market yesterday, ASX200 futures are pointing to a firmer start ahead of the June employment data, due at 11:30am AEST.

Good Morning,

The Australian market rose on Wednesday boosted by Materials, up 2.3% and the Energy sector.

Healthcare was the greatest drag, down -1.9%.

The ASX200 rose 30 points or 0.3% to 8,823.

Looking ahead to today, more quarterly updates are on the calendar, including from Fortescue ((FMG)), Karoon Energy ((KAR)), Santos ((STO)) and Sandfire Resources ((SFR)), as well as Macquarie Group’s ((MQG)) AGM.

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

Australia Labour Force (June): Thursday, July 23 at 11.30 AM, Tony Sycamore, IG

Last month’s May employment report delivered a stronger-than-expected outcome, with the number of employed people rising by 40,300, comfortably above the 30,000-plus consensus forecast. (This followed a sharp revised fall of -40,700 jobs in April.)

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

Looking to today’s June update, consensus expects an increase of 15,000 jobs, with the unemployment rate expected to remain steady at 4.4% and the participation rate unchanged at 66.7%. 

A softer-than-expected result,  particularly a rise in the jobless rate toward 4.6% would suggest the RBA has tightened enough.

Conversely, a strong jobs report would add to tightening risks.

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

Oil Puts Rate Hikes Back On The Table

Brent crude settled at US$94.07 after the 11th straight day of U.S. strikes on Iran.

Traffic through the Strait of Hormuz is down to a trickle, with nine ship crossings yesterday.

Futures traders spent the week raising the odds that the Fed hikes at next Wednesday’s meeting.

Cheap energy was doing quiet work for inflation all year, and that help is on pause.

Super Micro Has The Orders And Now The Margins

Super Micro Computer $SMCI booked more than US$60 billion of new orders in its fiscal fourth quarter and guided gross margins to roughly double its earlier target.

Backlog ended the year at a record. Order books were never the question in AI hardware.

Whether anyone makes real money filling them was, and this is the first clean answer we’ve gotten.

Tesla Misses On Earnings, Beats On Revenue

Tesla $TSLA came up short on profit even though sales came in ahead.

One quarter was always going to matter less than the roadmap here: robotaxi timing, the Cybercab, Optimus, and where the US$25 billion capital plan actually goes.

Specific answers on the call move this stock more than the miss does.

ANZ Bank, Australian Morning Focus, extract

Equity markets traded defensively ahead of major tech earnings.

Bond yields rose, following oil higher on escalating tensions in the Middle East.

The S&P500 was down -0.1%. In Europe, the EuroStoxx rose 0.5%, while the FTSE100 rose 1.2%.

The yield on the US 10y Treasury note rose 3bp to 4.66%.

In commodities, the active WTI future rose 1.5% to US$86.5/bbl.

Gold was steady at US$4,131.1/oz.

UK: Headline CPI inflation eased -0.2ppt to 2.6% y/y in June, a touch below the consensus. Core inflation was unchanged at 2.6% y/y, while services inflation eased -0.1ppt to 3.7% y/y, both marginally above the consensus.

Headline inflation is set to re-accelerate in coming months, reflecting higher energy prices, but below trend growth and a weak labour market are likely to constrain pass-through into broader inflation.

The Bank of England is due to meet next week. No change in policy settings is expected. Recent data have not made a strong enough case for tightening, despite some hawkish views within the Monetary Policy Committee.

Japan: The JPY hit a near four-decade low yesterday morning, before recovering some ground on reports that the Bank of Japan’s policymakers are open to a faster pace of policy tightening than the generally held view that the BoJ will hike every six months.

The ongoing weakness in the JPY is contributing to upside inflation risks, but the BoJ has maintained a cautious path towards policy normalisation as it seeks to entrench demand-pull inflation amid a modest growth outlook that has proven resilient, though not without risks.

Policymakers are likely becoming more convinced of the sustainability of inflation, given recent wage developments.

Nominal labour cash earnings have continued to trend higher and have been above 3% y/y since February.

June’s CPI data to be released later this week are also expected to show core inflation remaining above the 2% target, after accounting for institutional factors (subsidies/tax cuts).

The BoJ is due to meet next on 31 July, with no change in policy settings expected. Following today’s reports on the BoJ’s thinking, market pricing for a 25bp hike by the BoJ by September increased from around 20% to around 30%

Oil’s up 4%. The number that matters is up 1,900%: Nigel Green, deVere Group

Forget the 4% oil price hike jump. Watch what it now costs to insure a tanker through Hormuz.

Brent crude climbed close to 4% to US$94.23 a barrel and West Texas Intermediate rose 3.8% to US$87.46, after US Central Command carried out its eleventh consecutive night of strikes against Iran.

Secretary of State Marco Rubio told the ASEAN Foreign Ministers’ meeting in the Philippines that Washington remains open to talks but accused Tehran of failing to honour an agreement over the Strait of Hormuz.

He warned that allowing Iran to control the waterway would set a dangerous precedent for the rest of the world.

A 4% move in the oil price is the number every headline will carry today, and it’s not the number that matters most.

The number that matters is what shipowners are now paying to insure a single tanker for the few hours it takes to cross Hormuz, because that price is set by people whose job is to be right about risk, not to trade a headline.

The scale of the shift already visible in the marine insurance market. War risk cover for a large crude carrier through Hormuz stood at around 0.25% of hull value before this conflict began.

According to the Lloyd’s Market Association, that premium has now settled at roughly 5% of hull value, the new market norm, a rise of close to 1,900%. For a US$100 million tanker, that is the difference between a premium of around US$250,000 and one running into several million dollars for a single transit.

Oil futures move on sentiment, headlines and speculation, and they can snap back the moment a ceasefire rumour appears. A war risk premium doesn’t work that way.

Underwriters are pricing an actual probability of an actual vessel being hit, insured by firms that lose real money if they get the number wrong. When that premium rises by close to 1,900%, it’s telling you the people closest to the physical risk think the danger is real and current, not priced in on hope.

The gap between the two markets, futures pricing headlines and underwriters pricing physical risk, is where the genuine signal sits for anyone trying to judge how serious this crisis is.

Eleven consecutive nights of strikes and a Secretary of State openly saying the two sides remain apart on Hormuz itself should worry markets more than a 4% move suggests.

Oil traders have been through enough Middle East flare-ups to hesitate before pricing in the worst case.

Marine underwriters don’t have that luxury. They’re quoting fresh premiums, vessel by vessel, voyage by voyage, and right now those premiums are climbing in a way that should concern anyone holding energy exposure far more than the daily Brent print does.

The risk to portfolios is being underestimated because the visible number, the oil price, is lagging well behind the insurance market.

Roughly a fifth of the world’s seaborne oil and gas passes through that strait.

A shipping disruption like this turns into a genuine supply problem fast, and a supply problem turns into an inflation problem almost overnight. Investors watching Brent alone will see that shift only after it’s already happened.

Gold should be rallying on a crisis like this, and instead it has fallen more than -20% since this conflict began in February, because a hawkish Fed defending against energy-driven inflation is a bigger headwind for gold than a Middle East war is a tailwind.

This crisis is being priced as real and ongoing by everyone whose job depends on getting that call right, and priced as background noise by everyone still watching the oil ticker and calling it a day.

Pick the wrong group to believe, and it won’t be the barrel price that catches you out.

Asia Pacific: What do China’s steel exports tell us about regional industrial cycles? Oxford Economics

• Steel is a foundational input across manufacturing, construction and infrastructure, and is increasingly central to Asia’s grid expansion, electrification and higher-value industrial supply chains.

• Asia’s steel imports from China materially overstate the strength of the region’s industrial cycle. A shift-share decomposition attributes most of the increase in Chinese shipments between 2022 and 2025 to gains in China’s market share rather than stronger recipient consumption. India is the exception, with the contribution from genuine investment demand much larger than elsewhere.

• South Korea illustrates why cheaper Chinese steel has delivered limited economy-wide benefits. While automakers and machinery producers benefit from lower input costs, these gains are partly offset by weaker pricing, lower utilisation and reduced investment incentives for domestic steelmakers, alongside greater competition in export markets.

• Vietnam’s direct Chinese steel import intensity appears close to peaking. Imports per unit of manufacturing value added fell by around -25% in 2025 as anti-dumping duties coincided with expanding domestic capacity. Future import growth is more likely to be concentrated in electrical-grade steels that local mills cannot yet produce at scale.

• India remains the region’s broadest and least China-dependent steel market. Demand is increasing across infrastructure, machinery, transport and electrical equipment, while ongoing capacity additions and moderate trade safeguards should allow a greater share of that demand to be supplied domestically.

• Chinese policymakers’ export licensing measures and higher trade barriers are likely to redirect surplus steel exports rather than eliminate them. The greatest pressure is expected on heavily discounted finished steel products, while exports may increasingly shift towards semi-finished and specialty grades, as well as markets with weaker trade protections.

Corporate news in Australia:

• WiseTech Global ((WTC)) will acquire artificial intelligence platform FRDM.ai for up to $10m
• Aware Real Estate has acquired a 50% stake in Sydney’s 100 Market Street office tower for $226m
• ·SkyCity Entertainment Group ((SKC)) has agreed to sell Auckland’s Grand Hotel to reduce debt and strengthen its balance sheet
• Forrestania Resources ((FRS)) is facing investor resistance over its proposed acquisition of Zenith Minerals ((ZNC))
• ·Helloworld Travel ((HLO)) revealed it rejected a takeover approach from Webjet Group ((WJL))
• Toyota has acquired the AB Equipment forklift business from Anchorage-backed ELF
• Merchant Investment Management is leading a $225m capital raising in Ironbark Asset Management
• Radiopharm Theranostics ((RAD)) has launched a $16m equity raising to fund drug manufacturing and clinical trials

On the calendar today:

-AU June Unemployment

-EZ ECB rate

-US July Kansa Fed Mfg

-FORTESCUE LIMITED ((FMG)) Qtrly update

-KAROON ENERGY LIMITED ((KAR)) Qtrly Update

-MACQUARIE GROUP LIMITED ((MQG)) AGM

-SANDFIRE RESOURCES LIMITED ((SFR)) Qtrly Update

-SANTOS LIMITED ((STO)) 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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