Morning Wrap: ASX 200 to rise, S&P 500 slips despite cool inflation data, Oil prices spike on Middle East tensions

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

In a nutshell:

• US stocks struggled for upside after Iran threatened to attack US bases if nuclear negotiations fail

• US inflation printed cooler-than-expected for a fourth straight month

• Oil prices spike 6% on Middle East tensions, Brent crude trading above US$70 for the first time since May

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gave up early gains, finished around lows (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks faded early gains, finished lower and around session lows

• Today’s key drivers – Renewed escalation in Middle East tensions with US preparing evaluations of select embassies amid threats from Iran over nuclear program talks, this offset optimism from positive US-China trade developments and a cooler-than-expected US inflation print

• Bond yields expected to decline further, though long end at risk over debt, rising term premium (RT)

• Oil surges ~5% on escalation in Middle East tensions, speculation about possible supply disruptions (BBG)

STOCKS

• Meta's Zuckerberg invests $14bn in Scale AI, hiring co-founder Alexandr Wang to lift AI efforts (CNBC)

• Starbucks CEO Niccol mulls selling a stake in China business to boost sales (FT)

• GM investing $4bn to increase US gasoline vehicle production, responding to tariffs and low EV demand (AX)

• Warner Bros faces challenges amid cable TV struggles, leading to staff frustration ahead of planned split (FT)

• Moody's downgrades Warner Bros debt to junk status amid cable TV struggles, complicating bondholder discussions over split plans (BBG)

• Zara owner Inditex, reported 6% revenue increase in five weeks to June 9, weaker than last year, warned FX volatility could shave 3% off sales this year (BBG)

• Nintendo Switch 2 sold 3.5m units in four days, well-above market expectations and beating the original Switch's 2.7m sales during its first month in 2017 (BBG)

CENTRAL BANKS

• Economists predict slower BOJ JGB purchase tapering next year (BBG)

• ECB's Kazaks says some fine-tuning rate cuts 'quite likely' (BBG)

TARIFFS & GEOPOLITICS

• US-China officials agree on framework to restore trade truce and lift China's rare earth export restrictions, still pending XI and Trump sign off (BBG)

• Trump says China would supply rare earths and magnets up front, while Chinese students will be able to attend US colleges and universities (RT)

• US and Mexico reportedly near deal that would exempt Mexican steel from 50% tariff, up to a certain limit (RT)

• EU sees US trade talks extending beyond Trump's 9-Jul timeline, despite recent progress (BBG)

• US Federal Appeals court ruling allows tariffs remain in effect (BBG)

• Elon Musk expresses regret for criticising Trump, while Trump shows no interest in mending their relationship (BBG)

• US ordered some staff to depart embassy in Baghdad due to heightened security risks in the region, Iran threatened to attack US bases in the Middle East if talks over its nuclear program fall through (BBG)

ECONOMY

• US May inflation prints 2.35% vs. 2.5% consensus, core inflation of 2.8% below 2.9% forecasts, suggesting companies are holding back on passing higher tariff costs to consumers (BBG) 

ASX TODAY

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• AGL Energy seeking to sell its 20% stake in Tilt Renewables (AFR)

• ARN Media Chairman Hamish McLennan purchases 96,000 shares, beneficially owns 169,000 shares after the transaction (A1N)

• Iperionx secures first US Army task order under SBIR Phase III contract valued at $1.3m, further task orders expected under $99m contract (IPX)

WHAT TO WATCH TODAY

• Volatile conditions: Futures are pointing higher but markets appear to be entering a period of higher volatility amid Middle East escalation, ongoing trade talks and high valuations. The ASX 200 closed 0.06% higher on Wednesday, down from session highs of 0.6%, signalling some potential fatigue.

• Energy: Oil prices surged 6% overnight, with Brent crude trading at the US$70 a barrel level for the first time since early April. The oil price rally did not draw a big reaction from energy stocks, with the S&P 500 Energy Sector up just 1.49%. Its also worth noting that most local energy stocks have experienced a V-shape move from 7-Apr lows (e.g. WDS up ~25%).

• Uranium, gold, platinum: Expect a strong session for uranium names after the Global X Uranium ETF rallied 5.3% overnight to close at a decade high. Gold miners bounced after yesterday's pullback and platinum prices surged another 4.3% overnight (up almost 30% since mid-May).

BROKER MOVES

• Woodside downgraded to Neutral from Overweight; target cut to $23.90 from $26.80 (JPM)

Stocks trading ex-dividend: 

• Thu 12 Jun: Champion Iron (CIA) – $0.112, Dominion Income Trust 1 (DN1) – $0.617, Transmetro Corporation (TCO) – $0.05

• Fri 13 Jun: Dyno Nobel (DNL) – $0.024, Plato Income Maximiser (PL8) – $0.006

Other ASX corporate actions today: 

• Dividends paid: Dalrymple Bay (DBI), Far (FAR), Hancock & Gore (HNG), ResMed (RMD)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 4:00 pm: UK GDP (Apr)

• 10:30 pm: US PPI (May)