United States
Investors are bracing for the fallout from the US military strikes on Iranian nuclear enrichment facilities over the weekend. The Iranian government has threatened retaliation, warning of “everlasting consequences.” In contrast, the US President described the strikes as a “spectacular military success” and issued a warning that the US had additional targets in Iran if a peace agreement could not be reached.
On Friday US equity markets traded choppily as investors weighed dovish signals from the Federal Reserve against rising geopolitical tensions. Markets opened higher after Federal Reserve Governor Christopher Waller indicated that interest rate cuts could begin as early as the July meeting, offering a more accommodative view than Chair Powell’s earlier comments, which had suggested there was no urgency to ease policy. However, this initial optimism was tempered by the mounting risks of wider conflict in the Middle East.
By the close, the S&P 500 had slipped 13 points, or 0.22 percent, to finish at 5,967.84. The Nasdaq Composite declined 0.51 percent, while the Dow Jones Industrial Average edged up 35 points, or 0.08 percent, to close at 42,206. Sector performance was mixed, with six sectors finishing lower, led by communication services, and five sectors posting gains, with energy outperforming. Trading volumes were elevated due to the expiration of options contracts.
Energy stocks extended their recent rally amid the heightened tensions. Chevron rose 0.92 percent and ExxonMobil gained 1.33 percent, with both stocks now up more than nine percent over the past two weeks as oil prices rebounded from recent lows.
Semiconductor stocks weakened following a Wall Street Journal report that the US government may revoke waivers allowing certain American chipmakers to continue selling technology to China. Nvidia fell 1.12 percent to US$143.85, while the VanEck Semiconductor ETF declined 0.88 percent.
Apple shares advanced 2.25 percent after reports emerged that the company had considered acquiring Perplexity AI to enhance its artificial intelligence capabilities. The move is seen as an effort to catch up in the fast-moving AI space. In contrast, Alphabet shares fell 3.59 percent after the European Court of Justice recommended dismissing the company’s appeal against a €4.75 billion fine for antitrust violations.
In fixed income markets, bond yields fell as Waller’s comments prompted traders to increase their bets on a July rate cut. The yield on the 10-year US Treasury declined by two basis points to 4.37 percent, while the two-year yield fell three basis points to 3.91 percent.
Looking ahead, investors will be closely watching several major events this week, including the release of the Federal Reserve’s preferred inflation gauge—the Core PCE—on Friday, as well as Fed Chair Jerome Powell’s testimony before Congress. However, geopolitical developments in the Middle East are expected to dominate sentiment, with markets particularly sensitive to any escalation that could impact oil prices, inflation expectations, or global supply chains.
Europe
European shares ended the week mixed, with the Euro Stoxx 600 edging up by 0.13% to close at 536.53, while the FTSE 100 slipped 0.20% to finish at 8,774.65. The FTSE 100 posted its first weekly decline in six weeks. Sector performance on the Euro Stoxx 600 was broadly positive, with eight sectors advancing—led by financials—while three sectors declined, with energy the worst performer.
Market sentiment was subdued due to ongoing concerns about the Middle East. Comments from US President Donald Trump, indicating he would decide within two weeks on any potential strikes against Iran, eased immediate fears of escalation. This led to a pullback in oil prices, which weighed on the energy sector, down 0.76% on the day. After strong gains earlier in the week, some profit-taking was also evident.
Travel stocks benefited from the easing geopolitical tension and received an additional boost from broker upgrades. In the financial sector, insurance stocks led the gains, with both Allianz and AXA rising more than 2%. The biggest decliner of the session was UK homebuilder Berkeley Group, which dropped 8.19% following disappointing earnings and senior management changes.
Despite geopolitical headwinds, analysts remain optimistic about European equities over the next six months. Citigroup raised its year-end targets on Friday, joining other investment banks in citing the positive effects of lower interest rates and increased government spending. Supporting this view, the European Union announced plans to raise annual spending by the European Investment Bank to EUrR100 billion and to triple funding for the EU’s defence and energy infrastructure sectors. These measures come ahead of this week’s NATO summit, which could introduce further market volatility.
European bond markets were steady on Friday, with the German 10-year Bund yield holding at 3.24%. The euro is trading at 1.1475 against the USD falling after the US attacks on Iran.
Australia
The Australian equity market edged lower on Friday, with the ASX 200 declining by 18 points (-0.21%) to close at 8,505.5. Early session weakness was later offset by modest gains in the afternoon. It was a subdued day across sectors, with six finishing lower and five advancing. No sector moved more than 0.90%.
Consumer Staples led the declines as major supermarkets fell—Coles dropped 2.23%, while Woolworths slipped 1.03% to $31.81. In contrast, Treasury Wine Estates rose 0.86% ahead of its investor update on Tuesday, where the CEO is expected to address the recent profit guidance downgrade issued in early June.
The Financials sector was broadly weaker. Commonwealth Bank (CBA) dipped 32 cents to $182.53, paring gains from its record highs earlier in the week. ANZ was the worst performer in the sector, falling 2.54% to $28.39. It declined 4.18% over the week amid leadership changes announced by the bank’s new CEO.
Energy stocks finished the week flat after a strong rally. Woodside gained 0.86% to $25.85. Meanwhile, uranium stocks saw some profit-taking following strong gains earlier in the week on expectations of rising demand. Boss Energy fell 4.74%, pressured further by a broker downgrade, while Paladin slipped 1.34%.
All eyes this week will be on Wednesday’s release of May’s monthly CPI data. Economists anticipate a decline to 2.3%, which would support expectations for potential rate cuts by the RBA. On Friday, bond yields moved lower, with the 10-year yield falling 7 basis points to 4.18%.
In after-hours trade, the ASX 200 extended its losses, falling a further 20 points (-0.24%) in line with declines on Wall Street. The Australian dollar starts the week lower at 0.6433.
Commodities
Oil prices declined on Friday after US President Donald Trump stated that any potential US military response to Iran would be decided within the next two weeks. His comments provided some reassurance to nervous markets. Brent Crude dropped 2.33% to US$77.01 per barrel, while West Texas Intermediate fell 2.58% to US$73.84. Although the risk premium tied to potential supply disruptions has slightly eased, it remains factored into current pricing. Analysts expect oil prices to spike today as the market awaits damage assessments from the recent bombing of an Iranian nuclear site and any potential retaliation from Iran.
In other supply-related news, the European Union chose to maintain its price cap on Russian oil at US$45 per barrel, opting not to reduce it. Meanwhile, hedging activity among US oil producers surged last week, as companies moved to lock in recent high prices.
Gold was little changed, slipping 0.07% to US$3,368, with traders holding back as they await clearer geopolitical or economic developments. Silver also declined, falling 1.02% to US$36.01.
Bitcoin traded lower, down 4.5% from Thursday’s close to US$99,557. Losses accelerated on Sunday following the US attack on Iran, with traders anticipating a risk-off session today. In related news, over the weekend Texas became the third US state to pass legislation establishing a strategic Bitcoin reserve.
Copper prices rose by US$18, closing at US$9,634 per tonne on the London Metal Exchange. A supply shortage in UK warehouses has contributed to a widening spread between US-landed and UK copper prices, as demand increasingly shifts copper stock toward the US because of expected tariffs.
Economic Calendar
AU:
- S&P Global Purchasing Managers Indexes (Jun) – 9.00am
EU:
- HCOB Purchasing managers Indexes (Jun) – 6:00pm
US:
- S&P Global Purchasing Managers Indexes (Jun) – 11.45pm
- Existing Home sales (May) – 12:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
