Morning Wrap: ASX 200 to bounce, S&P 500 little changed, Trump calls off Iran strike

In a nutshell:

• US benchmarks finished mixed: S&P 500 flat (-0.07%), Nasdaq -0.51% on a memory chip and semi-led tech pullback, Dow +0.32% as defensives outperformed

• Bonds yields in focus, with the US 10-year yield briefly pushing above 4.60% to a one-year high and Morgan Stanley's Mike Wilson warning the AI-led rally is at risk from the global bond rout

• Trump called off a planned US strike on Iran scheduled for Tuesday after appeals from the Saudi, Qatari and UAE leaders, citing "serious negotiations" toward a no-nuclear-weapons deal

Let's dive in.

• Major US benchmarks finished mixed but off session lows

• S&P 500 flat and Nasdaq lower on tech weakness, Dow and Equal-weight S&P 500 (+0.62%) buoyed by defensive and energy outperformance

• US 10-year yield briefly crossed 4.6% as accelerating war-driven inflation pushed traders to price out 2026 rate cuts and lean toward a hike

• Morgan Stanley's Wilson warned the AI-led equity rally is at risk of "the first meaningful correction" since markets bottomed in late March if the global bond selloff and long-end yields keep climbing (BBG)

• Memory chip names led a tech selloff after Seagate's CEO told a JPMorgan conference that new fabs would "take too long," sending Seagate down ~7% and Micron down ~6% on supply concerns (CNBC)

• Goldman Sachs says central banks will increase gold purchases, aiding bullion price recovery by year-end (BBG)

• NextEra Energy agreed to buy Dominion Energy in an all-stock deal valued at ~$67bn, creating the world's largest regulated electric utility as power demand from AI data centres surges (RT)

• Seagate slumped ~7% and dragged Micron down ~6% after CEO comments at a JPMorgan conference that new memory chip factories would "take too long" to come online to meet AI demand (CNBC)

• Bernstein said TSMC trades at a ~20% discount to the SOX semiconductor index and called it the "most trustworthy compounder in AI space" as hyperscaler capex builds (CNBC)

• Ford launched a new subsidiary, Ford Energy, pivoting toward battery-storage capacity for AI data centres using technology licensed from China's CATL (TS)

• Trump said he called off a US military strike on Iran after Qatar's Emir, Saudi Crown Prince Saud and UAE's Zayed Al Nahyan asked him to "hold off" amid "serious negotiations" toward a deal that would include "No nuclear weapons for Iran" (BBG)

• Iran's Supreme National Security Council announced creation of a new "Persian Gulf Strait Authority" to formalise Tehran's control over the Strait of Hormuz, even as Pakistan-brokered talks continue (NW)

• 23 tankers near Iran's oil-export hub Kharg, marking the largest cluster since the US naval blockade started (BBG)

• US issues new waiver allowing sale of Russian crude and petroleum (BBG)

• White House said China agreed to purchase at least $17bn of US agricultural products in 2026 and an initial 200 Boeing jets following last week's Trump-Xi summit, plus formation of a new US-China Board of Trade and Board of Investment (CNBC)

• Traders fully priced out Fed rate cuts in 2026 and lifted bets on a rate hike before year-end after last week's hot CPI and PPI prints, CME FedWatch showed a 25% chance of a hike by December, up from 21.5% a day earlier (CNBC) 

• China April retail sales rose just 0.2% year-on-year, sharply missing expectations of a 2% rise and slowing from 1.7% in March, the weakest since 2022 as the Iran war hit consumer demand (CNBC)

• China April industrial output climbed 4.1% year-on-year, well below expectations for a 5.9% rise and urban fixed-asset investment contracted 1.6% in the first four months vs. forecasts of 1.6% growth (CNBC)

• IEA warned global oil inventories are declining rapidly, with Q2 2026 stockdraws now seen averaging 8.5 million barrels per day (EIA)

• Critical Metals executes binding scheme to acquire all shares and options of European Lithium (EUR)

• MinRes restarts operations at Bald Hill lithium mine, project was placed into C&M in Nov-24, decision underpinned by significant recovery in lithium prices, restart costs estimated at $20m with first shipment expected in 1Q27 (MIN)

• Motorcycle COO Michael Poynton purchases ~850,000 shares, beneficially owns 2.6m shares after the transaction (MTO)

• Rio Tinto launches Pilbara power asset selldown, KKR among suitors preparing for first round of offers (AFR)

• Tabcorp's 40-year Victoria licence extension under auditor investigation as the contract is ~4x longer than typical contracts, with no public tender (AFR)

• Brambles: A wave of earnings downgrades is sweeping through the mid-to-large cap space, proving that even the market's most defensive names aren’t safe. Brambles (-20.2%) took a massive hit on Monday after downgrading its FY26 revenue growth guidance to 2-3% (down from 3-4%) and underlying profit growth expectations to 3-5% (down from 8-11%). Management pinned the blame on US repair capacity constraints, weighing on their ability to service higher-than-expected demand. Though this points to an operational bottleneck rather than a fundamental deterioration in market conditions. UBS upgraded the stock this morning, citing the selloff as overdone and that earnings risk is now largely priced in, even as they trimmed their price target and forecasts. Still, the initial market reaction was nothing short of capitulation. The stock gapped 11.9% at the open, and finished the session down 20.2%.

• Energy: The market has refused to acknowledge the inflationary and rising yield backdrop until last Friday, and in parallel, we're starting to see some love for energy stocks. The S&P 500 Energy index is at a six-week high and within ~3% of its 27-Mar high, Santos is having a crack at the $8 level (its failed to break through for the last ~4 years) and Woodside is trying to move out a downtrend.

• Tech: iShares Expanded Tech-Software ETF up 1.1% overnight to the highest since 29-Jan, NYSE-listed Cloud Computing and Fintech ETFs also higher, pointing to some positive flows for local names.

• Alkane Resources initiated Buy with $2.30 target (UBS)

• Brambles upgraded to Buy from Neutral; but target cut to $23.80 from $25.40 (UBS)

• Brambles downgraded to Hold from Accumulate; target cut to $18.70 from $25.50 (Morgans)

• Ora Banda Mining upgraded to Buy from Neutral; target up to $1.60 from $1.40 (UBS)

• Woolworths upgraded to Overweight from Neutral; target up to $37 from $35 (JPMorgan)

Stocks trading ex-dividend: 

• Tue 19 May: GQG Partners (GQG) – $0.034

• Wed 20 May: Gullewa (GUL) – $0.07

• Thu 21 May: Orica (ORI) – $0.285

• Fri 22 May: None

Other ASX corporate actions today:       

• Dividends paid: None

• IPOs: None

• Earnings: OFX Group (OFX), TechnologyOne (TNE)

• AGMs: Electro Optic Systems (EOS)

Economic calendar (AEST):

• 9:50 am: Japan GDP Growth

• 10:30 am: Australia Consumer Confidence

• 11:30 am: RBA Meeting Minutes

• 4:00 pm: UK Unemployment

• 10:30 pm: Canada Inflation