Morning Wrap: ASX 200 to fall, S&P 500 flat, Fed holds rates and forecasts two cuts by year-end

ASX 200 futures are down 20pts (-0.23%) as of 8:30 am AEST.

In a nutshell:

• Major US benchmarks finished mixed, with the S&P 500 flat but the Nasdaq higher on broad tech strength

• The Fed left interest rates unchanged, in-line with market expectations

• Fed's economic projections guided to two rate cuts by year-end, also downgraded 2025 GDP expectations and raised its inflation forecast

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower but off best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished mixed, off best levels

• Fed left rates unchanged at 4.25-4.50%, in-line with market expectations

• Median projections reiterated prior forecast of two 25 bp cuts by year-end, though projections for 2026-27 saw a slight hawkish shift

• Israel-Iran attacks enter sixth day, though without any major escalation, the world is largely awaiting Trump’s decision on US involvement

• US traders made record futures bet that the next Fed Chair will take a more dovish stance after Powell's term ends in May 2026 (BBG)

• US dollar has lots over 10% of its value against the Euro, Pound, Swiss franc, and is down against every major currency (BBG)

• Israel-Iran conflict fuels best month for energy stocks since 2022 (EN)

• Oil options are now more bullish than after Russia's invasion of Ukraine (BBG)

STOCKS

• US companies are cutting workforces by ~3.5%, with the view that having fewer employees leads to faster growth and efficiency (WSJ)

• Amazon plans to deliver 10,000 robotaxis per annum with new factory as it challenges Waymo (USN)

• Microsoft planning to cut thousands of jobs, notably in sales (BBG)

• Two nuclear companies backed by Bill Gates, Sam Altman have raised more than $1bn this week (FT)

• Starbucks CEO Niccol pledged healthier menu, to align Trump administration's health agenda (BBG)

• Kraft Heinz to remove all chemical dyes from products within two years, following advocacy for bans (NYT)

• Airbus lifts dividend payout target to 50%, reaffirms guidance amid strong demand (BBG)

CENTRAL BANKS

• Fed holds rates steady at 4.25-4.50%, in-line with market expectations (BBG)

• Fed Summary of Economic Projections was unchanged, signalling two rate cuts by year-end, lowered 2025 GDP forecast to 1.4% from 1.7% in March’s estimate, lifted inflation estimate to 3.0% from 2.7% (BBG)

• Sweden's central bank cuts rates by 25 bps to 2.0% amid slow recovery and global risks, signals cautious pause (BBG)

GEOPOLITICS

• Trump says Iran proposed White House meeting, but it's 'very late' for talks (AX)

• Trump holds national security team meeting, fuels speculation that the US may join Israel's attack on Iran (BBG)

• Iran preparing to retaliate if US joins strikes, including proxy attack on US forces in Middle East or Strait of Hormuz (NYT)

• US deploying more fighter jets to Middle East though officials stress their defensive nature (BBG)

• Trump and Netanyahu speak, Israeli defense establishments believe Trump likely to enter the war in the coming days (AX)

TARIFFS 

• No trade deal traction out of G7 despite looming 9-Jul reciprocal tariff deadline with Trump's focus on tariffs as a revenue source complicating prospects (WSJ)

• China's rare earth exports tumbled 61% in May to a five-year low (BBG)

• Japan PM Ishiba reiterates national interests, won't rush into trade deal (BBG)

• Japan urges China to speed up rare earths export licenses amid risk of disruption to consumer goods supply chains (KYD)

ECONOMY

• China's housing market continues to decline, with new home prices dropping 0.2% in May, raising concerns for policymakers (FT)

• UK inflation unchanged at 3.4% in May, above expectations of 3.3%, driven by rising food prices, which increased at the fastest pace since early 2024 (BBG)

ASX TODAY

Be sure to check out our Live Blog for the latest coverage and analysis for company announcements, market movements and economic updates.

• HomeCo Daily Needs REIT reports 30-Jun-25 portfolio revaluation gain of $142m, reaffirms FY25 guidance, including 8.5 cents per share dividend (HDN)

• KMD Brands' trading update flags deceleration in sales, down from +0.5% in 1H25 to -1.9% in 2H25 YTD (KMD)

WHAT TO WATCH TODAY

• A quiet one: A relatively quiet overnight session, with slightly hawkish Fed data and muted geopolitical/tariff developments. Our overnight ETF watchlist notes some small gains for Tech, Healthcare and Uranium, and weakness for Gold and Energy.

• Steady grind lower: The S&P/ASX 200 is set to slip for a third straight session. Though the market has only been edging lower these past few days, down only 0.7% since its record close on Wednesday 11 June. Nothing wrong with this sluggish weakness. Let's see where the dust settles.

BROKER MOVES

• Centuria Office REIT downgraded to Sell from Hold; target cut to $1.10 from $1.20 (BP)

• Platinum Asset Management upgraded to Hold from Sell but target cut to $0.49 from $0.52 (BP)

• Sonic Healthcare initiated Buy with $33.70 target (BP)

Stocks trading ex-dividend: 

• Thu 19 Jun: None

• Fri 20 Jun: None

Other ASX corporate actions today: 

• Dividends paid: None

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 11:30 am: Australia Unemployment Rate (May)

• 9:00 pm: Bank of England Interest Rate Decision (Ests: Hold at 4.25%)