Morning Wrap: ASX 200 to fall, Dow notches all-time highs, Brent tumbles below US$80

In a nutshell:

• Dow notched a record close while the Nasdaq fell and the S&P 500 slipped, as investors rotated out of chipmakers into cyclicals

• Brent crude down 4.7%, broke below US$80 for the first time since March as the US-Iran deal points to a Strait of Hormuz reopening, prompting Goldman, Morgan Stanley and Citi to slash forecasts

• SpaceX higher (+4.8%) but faded from session highs of +17.2%, briefly overtook Microsoft on a ~US$2.9tn cap, and unveiled a US$60bn all-stock deal to buy Cursor-maker Anysphere

Let's dive in.

• Major US benchmarks finished mixed, with the Dow climbing to a record close but the S&P 500, Nasdaq and Russell 2000 all lower after a three-straight days of gains

• Investors rotated out of chipmakers and into cyclicals such as Goldman Sachs, Caterpillar and American Express as falling oil prices buoyed the value sector

• Breadth was still a little soft, with the Equal-weight S&P 500 (-0.33%) lower after three-straight gains, two of which were fresh all-time highs

• No major catalyst behind the pullback, likely profit-taking motive, rotation also evidenced by narrow breadth and strength across Financials, select-Industrials and Utilities

• Geopolitical tail risks ease off but equities still face hawkish Fed, Washington interventions in AI, massive stock supply (BBG)

• US companies seek over $40bn debt in credit markets amid optimism after US-Iran tentative Strait of Hormuz deal (BBG)

• Fed kicked off Kevin Warsh's first FOMC meeting, with markets positioned for a hold and watching Wednesday's dot plot and debut press conference (CBS) 

• FMS Sentiment down 0.6 pts to 6.0, cash up 0.2pp to 4.1%, Bull & Bear Indicator rising to 8.9 from 7.8, now in sell-signal territory

• Equity allocations down 12pp to net 38% overweight, US equity overweight down 3pts to net 17%, tech allocation down 7pts to net 26%

• Global growth optimism improved to net -1% from net -14%, profit expectations at three-month high, net 34% expect higher short-term rates (highest since Sep-22)

• AI bubble fears jumped to 28% from 5% in April, closing in on second wave of inflation (34%) as biggest tail risk

• Long semiconductors the most crowded trade at 80%, the highest reading in FMS history

• Survey closed 11 June, ahead of last Friday's escalation in Iran conflict odds

• Iran's foreign minister says a new round of negotiations will begin Friday in Switzerland, with 60 days to resolve issues including uranium enrichment as the US keeps its regional military presence (BBG)

• Shipping operators cautioned it could be weeks before tankers return to the Strait of Hormuz (BBG)

• Qatar plans rapid LNG production ramp-up after Strait of Hormuz reopens, restoring exports quickly (BBG)

• Average US petrol price drops below US$4 after Iran deal but analysts warn surge risk remains (FT)

• Wall Street banks cut near-term oil-price forecasts amid optimism over Strait of Hormuz reopening (BBG)

  • Goldman Sachs cut its Q4 Brent forecast to US$80 from US$90 and its 2027 average to US$75, expecting Hormuz tanker traffic to fully recover by end-July 

  • Morgan Stanley sees 50% of regional production back by September and 80% by December, trimming its Q4 Brent call to US$80

• SpaceX confirmed a US$60bn all-stock deal to acquire Anysphere, maker of AI coding tool Cursor, expected to close in Q3 2026 pending regulatory approval (YF)

• Short seller Jim Chanos likened the IPO boom to the "Enron era", warning SpaceX trades near 110 times revenue and that buying above 100x rarely pays off (ST)

• Robinhood announced it would cut roughly 10% of staff or 290 jobs, in an organisational "flattening", even as June trading volumes hit records (BBG)

• Fed began Kevin Warsh's first FOMC meeting, with the funds rate seen held at 3.50-3.75% and economists expecting a shift from an easing bias to neutral 

• Economists anticipate Fed will need to hike interest rates by end-2026 to counter inflation despite US-Iran deal (FT)

• BOJ raises rates by 25 bps as expected, flags end to JGB taper from Apr-2027 (BBG)

• RBA leaves interest rates unchanged amid signs of slowing economy, warns inflation still too high (BBG)

• China retail sales fell 0.6% year-on-year in May, the first annual decline since December 2022, reversing April's 0.2% rise and missing forecasts of flat (RT)

• China industrial output rose 4.5% year-on-year in May, accelerating from 4.1% in April and beating a 4.3% Reuters poll estimate (BS)

• China new home price declines quicken, contraction in property investment deepens, property stocks slump (BBG)

• ARN Media expected to settle lawsuit with Kyle Sandilands for $12m (AFR)

• Fletcher Building guides FY26 EBIT of NZ$375-380m vs. $346m ests (~9% beat at the midpoint), Construction division divestment has significantly reduced debt, rising fuel costs and broader inflation leading to delays, and in some instances, cancellations of new projects (FBU)

• Flight Centre guides FY26 underlying profit before tax of $275-295m vs. prior $310-345m, launches $200m on-market buyback, flags Q4 disruption weighing on leisure earnings and touring business (FLT)

• Sims guides FY26 EBIT of $420-435m vs. prior guidance of $350-400m, 13.9% upgrade at the midpoint, cites continued strength across non-ferrous metals, as well as improved trading conditions for ferrous (SGM)

• Qube holders approve scheme of arrangement to be acquired by Rubik Australia, deal remains subject to various conditions including ACCC and FIRB approvals (QUB)

• Not a whole lot: A fairly defensive overnight session, though fairly similar to our Tuesday session. Not much overnight volatility for commodities (ex-Energy). Brent tumbled 5.6% overnight and down a further 1.1% early this morning to US$75.78, though S&P 500 Energy sector closed just 0.25% lower.

• Flight Centre, Sims: Two polarising updates, with FLT downgrading FY26 UPBT by 12.9% at the midpoint, a fairly chunky downgrade. Stock is down 21% YTD but up 22% in the past month. SGM upgraded EBIT by 13.9%, also fairly material. A very strong trending stock, up 63% YTD, with most of its gains achieved in the past month.

• Karoon Energy: Shares tumbled 11.5% on Tuesday after cutting CY26 total production guidance by 11% to 72.82MMboe from prior 8.1-9.2MMboe. A very ugly downgrade that's seen Macquarie move to Underperform and slash its target price this morning.

• Karoon Energy downgraded to Underperform from Neutral; target cut to $1.50 from $2.0 (Macquarie)

• Telstra initiated Neutral with $5.50 target (Citi)

Stocks trading ex-dividend: 

• Wed 17 Jun: Select Harvests (SHV) – $0.035, WAM Active (WAA) – $0.01, WAM Income Maximiser (WMX) – $0.006

• Thu 18 Jun: AFT Pharmaceuticals (AFP) – $0.016

• Fri 19 Jun: None
  

Other ASX corporate actions today:       

• Dividends paid: Amcor (AMC)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 4:00 pm: UK Inflation

• 10:30 pm: US Retail Sales

• 4:00 am: Fed Interest Rate Decision (Ests: Hold at 3.75%)