United States
Wall Street’s momentum stalled overnight as a sell-off in major tech names dragged the broader market lower, halting a three-day advance that had pushed the S&P 500 within reach of record highs. The index fell 0.3%, while the Nasdaq declined 0.5% and the Dow ended flat. Apple slipped 2%, and Tesla was little changed after Tuesday’s strong rally. Oracle rose sharply in late trade after reporting stronger-than-expected revenue.
Earlier in the session, stocks gained ground following softer-than-expected US core inflation figures for May, which fuelled bets the Federal Reserve may cut rates as early as September. The report showed companies have so far refrained from passing on higher import costs to consumers. The prospect of easing policy pushed bond yields lower, with the two-year Treasury yield falling below 4% and the US dollar touching its lowest level since 2023.
President Donald Trump added to the day’s developments, announcing a trade framework with China that includes rare earth and magnet supplies from Beijing and relaxed visa access for Chinese students. The US and China have reached a preliminary trade agreement following high-stakes talks in London, with President Donald Trump announcing a framework that includes upfront rare earth and magnet supplies from Beijing and the easing of US restrictions on Chinese student visas. While Trump declared the deal “done” pending final sign-off with President Xi Jinping, key details remain vague, and doubts linger over the actual impact on tariff levels, which are still higher than pre-Trump administration rates. Market reaction was mixed, reflecting scepticism about whether this pact marks genuine progress or merely delays deeper structural tensions between the two economic superpowers. President Trump claimed the US will receive a total effective tariff rate of 55% while China will maintain an effective rate of 10%, although these figures are yet to be backed up officially.
The latest Consumer Price Index (CPI) data revealed softer-than-expected core inflation in May, rising just 0.1% on the month versus expectations of 0.3%. On an annual basis, core CPI — which excludes food and energy — rose 2.8%, slightly below forecast. This marked the fourth consecutive month that core inflation came in under expectations, adding weight to the view that businesses are delaying passing on higher tariff-related costs to consumers. Services inflation, excluding energy, rose just 0.2%, while prices for goods excluding food and energy were unchanged. Further insight into price pressures will come tonight in the form of producer prices for the month of May, expected to show a 0.2% increase in headline prices and 0.3% in core prices.
Treasury yields retreated across the curve, driven by growing conviction that the Federal Reserve will cut rates. Market pricing now reflects a 75% probability of a September move and two cuts by year-end. Despite cooling inflation, the Fed is expected to remain on hold at next week’s meeting. Economists warn that underlying pressures — especially from tariffs — may still drive prices higher in coming months as firms run down inventories and grapple with policy uncertainty.
Europe
European equities declined on Wednesday as optimism from the US inflation report faded amid lingering concerns over the Trump administration’s trade stance. The Stoxx Europe 600 dipped 0.3%, led by a sharp sell-off in retail stocks after Zara-owner Inditex missed sales expectations, falling 4.4%.
Although the latest US CPI print bolstered hopes for Fed rate cuts, economists remained cautious. “Today’s data are unlikely to alter the Fed’s wait-and-see stance,” said Berenberg’s Atakan Bakiskan, who warned that tariffs could still drive a resurgence in inflation.
Utilities and media stocks offered modest support to the broader index, while financials were broadly weaker. Market sentiment remains tethered to the progress of US–EU trade talks, which are now expected to stretch beyond Trump’s July 9 deadline. Despite an uptick in the pace of negotiations, the lack of clarity is weighing on risk appetite.
Bond yields across the region slipped, with German bunds and UK gilts both gaining amid safe-haven demand and rate cut speculation.
Australia
The ASX 200 climbed to a new closing high of 8592.1 on Wednesday, adding 4.9 points (+0.1%) after touching an intraday peak of 8639.1. Seven of eleven sectors advanced, with gains led by energy, mining and real estate stocks. However, traders noted that momentum may be starting to stall at these elevated levels.
Hugh Dive of Atlas Funds Management said renewed offshore interest in domestic names like Commonwealth Bank helped drive gains, but cautioned that stretched valuations may limit further upside without an earnings catalyst.
The local rally tracked early strength on Wall Street and optimism around a new US–China trade framework. But with little fresh data domestically, gains moderated through the session ahead of US producer price and jobless claims data due tonight.
Woodside Energy jumped 1.9% to $23.50 and BHP gained 1.5% as iron ore edged higher. Commonwealth Bank slipped 0.3% to $181.40 after hitting a record high earlier in the day. Buy-now-pay-later provider Zip rose 15.5% after lifting earnings guidance, while Johns Lyng Group soared 17.7% on takeover speculation.
Fletcher Building rallied 10% on takeover interest in parts of its operations, while Monash IVF rebounded 11% after Tuesday’s steep sell-off linked to an embryo mix-up.
ASX futures are pointing 20 points higher, suggesting a positive open. Investors will be watching a speech from the RBA’s David Jacobs in Tokyo later today for any clues on domestic rate expectations.
Commodities
Commodity prices surged overnight amid rising geopolitical tensions and optimism over a potential US–China trade truce. Brent crude jumped 4.6% to US$69.91 a barrel, while WTI rose 4.9% to US$68.15 as Middle East tensions escalated and the US hinted at a possible evacuation of its embassy in Iraq.
Gold rallied 0.9% to US$3352.67 an ounce, supported by risk aversion and falling US yields. Iron ore rose 0.8% to US$95.15 per tonne, while copper was steady around US$9,756. Silver also edged higher in line with broader precious metals strength.
In currencies, the Australian dollar slipped 0.3% to US65.02¢, tracking a modest pullback in risk sentiment. Bitcoin declined 0.8% to US$108,994 in quiet trade.
Bond markets rallied, with the US 10-year yield falling to 4.42% and Australia’s 10-year yield at 4.28%.
Economic Calendar
AU:
- Consumer Inflation Expectations (June) 11:00
US:
- Producer Prices (May) 22:30
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
