Morning Wrap: ASX 200 to fall, S&P 500 slumps as Middle East conflict intensifies, Oil prices spike

ASX 200 futures are down 17pts (-0.19%) as of 8:30 am AEST.

In a nutshell:

• Major US benchmarks struggled as Middle East tensions escalate

• Latest Bank of America fund manager survey highlights improving sentiment, lower cash levels and higher soft landing expectations

• Oil prices spiked 6% on renewed Middle East tensions, gold prices relatively flat

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower, closed near worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks broadly lower, finished near worst levels

• Middle East tensions back in the spotlight, with Trump saying he is not in the mood to negotiate and may take further action to end Iran’s uranium enrichment

• Oil prices spiked after a Monday’s pullback, with Brent crude up 6.3% to US$77 a barrel, closing near session highs

BOFA FMS SURVEY

• Latest Bank of America Global Fund Manager Survey highlighted sentiment rebounded back to pre-Liberation Day levels

• Cash levels down 0.5 percentage points to 4.2%, the largest two-month decline since December 2023

• Fund manager sentiment up 0.8 pp to 3.3, the largest year-to-date gain

• Soft landing seen as the most likely outcome for the global economy, back to the highest level since October 2024

• Trade war triggering global recession remains the biggest tail risk, but down to net 47% from 80% in April

• Long gold remains the most crowded trade

STOCKS

• Mitsubishi raising prices on new US vehicles by ~2.1% on average (RT)

• Apple supplier Jabil lifts annual guidance, says data center demand remains strong (RT)

• Amazon CEO Jassy says he expects AI to reduce its corporate workforce over the next few years (BBG)

• Amazon extending Prime Day to four days, anticipating significant spending and early holiday shopping (AX)

• Amazon continues to invest billions in cloud and AI services in Asia, targeting local language models (CNBC)

• OpenAI secures $200m contract with the US Defense Department to explore AI applications for administrative and security tasks (MS)

• Reddit launched AI advertising features to enhance brand engagement by analysing user conversations and trends (RT)

• KKR to acquire Australian energy provider Zenith Energy (BBG)

CENTRAL BANKS

• BOJ leaves interest rates unchanged, will slow pace of bond purchase from next year to ensure market stability (BBG)

• RBI Governor Malhotra says there's still space for further easing if inflation undershoots projections (BBG)

GEOPOLITICS

• Trump said US now has complete control of Iranian skies, called for Iran's "unconditional surrender" and knows where Iran's supreme leader is hiding, but not going to take him out for now (BBG)

• Trump meeting with national security team to make decisions on path forward, including potentially launching strike against Iran's nuclear facilities (AX)

• Trump warns people to evacuate Tehran, clarifies he seeks definitive end to Iran's nuclear ambitions, not a ceasefire (AX)

• US is blocking proposed G7 statement urging Israel and Iran to de-escalate, Trump wants to keep pressure on Iran to halt its nuclear weapon efforts (BBG)

• Israel says will continue military operations against Iran's missile and nuclear threats, regardless of US negotiations (BBG)

• No significant impact on vessels through Strait of Hormuz from Israel's strikes on Iran (FT)

TARIFFS 

• Trump says EU not offering US a fair trade deal yet (RT)

• Ishiba and Trump failed to reach trade agreement at G7 summit, active negotiations to continue at ministerial level (BBG)

• US pushing Vietnam to reduce use of Chinese technology in devices that are then exported to the US (RT)

• Trump and Starmer sign UK-US trade deal, slashing tariffs on cars and aerospace but steel unresolved (RT)

ECONOMY

• IEA forecasts global oil supply will exceed demand in 2025, with production rising significantly (FT)

• US retail sales fell 0.9% month-on-month vs. consensus for a 0.7% decline, largely weighed by fall in cars and building materials (BBG)

ASX TODAY

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• APA Group acquires ARC Pipeline from Senex for $110m, to be immediately cash accretive, with FY26 EBITDA contribution of $12m (APA)

• Boss Energy says Honeymoon uranium project met its FY25 production guidance, June quarter-to-date has produced 328,102lb of uranium (BOE)

• Cedar Woods acquires residential site in Victoria for $50m, to be developed into multi-stage apartment project, with sales to be launched in FY27 (CWP)

• Horizon Minerals provides gold mining and processing update, first free cash flow from Philips Find achieved, Boorara stockpiling 190,000 tones of high-grade ore (HRZ)

• Lynas confirms first production of Terbium Oxide at Malaysia operations (LYC)

• Pepper Money on the selling block, KKR seeking buyer but high target price a turn-off (The Aus)

WHAT TO WATCH TODAY

• Back to risk off: The past two sessions have indicated that the market is looking through the Middle East conflict, but renewed tensions is placing downward pressure on markets. Every S&P 500 sector expected for Energy finished lower, with Health Care, Discretionary and Materials leading to the downside.

• Silver, Energy: Silver prices spiked 2.2% to US$37/oz, the highest since September 2011. However, this drove minimal upside for the Global X Silver Miners ETF, which ticked 0.6% higher overnight. The Energy sector is back in the spotlight after Brent crude rallied 6.3% overnight to US$77 a barrel, closing just shy of recent intraday highs of US$78.4.

BROKER MOVES

• Cochlear upgraded to Buy from Neutral; target up to $325 from $285 (UBS)

• Neuren Pharmaceuticals initiated Outperform with $18.60 target (MQG)

• oOh!media upgraded to Buy from Neutral; target up to $2 from $1.65 (UBS)

Stocks trading ex-dividend: 

• Wed 18 Jun: Aft Pharmaceuticals (AFP) – $0.011

• 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):

• 9:50 am: Japan Balance of Trade (May)

• 4:00 pm: UK Inflation Rate (May)

• 10:30 pm: US Building Permits, Housing Starts (May)

• 4:00 pm: Fed Interest Rate Decision (Ests: Hold at  4.5%)