Equities — Best Quarter in Six Years, Chips Steal the Show
The S&P 500 rose 0.8% to 7,496.51, the Nasdaq Composite added 1.5% to 26,213.72, and the Dow ticked up 0.3% to a fresh record of 52,317.81. For the quarter, the numbers were staggering: 14.8% on the S&P, 21.4% on the Nasdaq, 12.9% on the Dow. The Dow’s first-half gain of 8.9% was its best since 2021. More than $8 trillion was added to the S&P 500’s market value in three months flat.
Semiconductors were the story. The SOX index surged 87.8% for Q2 — its best quarter ever recorded. Intel and Marvell trebled, Micron quadrupled, and SanDisk climbed more than 700%. On Tuesday alone, SanDisk, AMD, Marvell and Intel rose between 6% and 10.9%. The catalyst late in the session was a reported $1.3 trillion investment pledge from Samsung and SK Hynix to build a new chip-making hub in southwestern South Korea, sending equipment stocks KLA (+9.3%), Applied Materials (+6.0%), Lam Research (+5.9%) and ASML (+5.3%) to or near 52-week highs.
But the rally had an asterisk. The Magnificent Seven as a group are down 4% for the year, with Microsoft off 24% and Meta down nearly 15%. Apollo’s chief economist Torsten Slok noted there are still “no signs of profit margins rising outside the tech sector” and warned the AI ROI runway in capital-intensive, regulated sectors “could delay structural productivity gains well beyond what the market currently projects.” Jeff Buchbinder at LPL Financial called conditions “consistent with a mature bull market that may be due for a pause” but stopped short of calling a top.
Geopolitics — Iran Talks Resume in Doha, But Hormuz Remains the Flashpoint
The four-month U.S.–Israeli assault on Iran defined the first half. Oil shot to $120 a barrel in March, global equities lost $9 trillion, and rate-cut hopes evaporated. A framework memorandum of understanding signed on June 17 eased some pressure, but the core dispute — control of the Strait of Hormuz, through which a fifth of the world’s oil transits — is unresolved. Weekend tit-for-tat strikes over the waterway showed just how fragile the ceasefire really is.
Trump’s envoys Jared Kushner and Steve Witkoff arrived in Doha on Tuesday. Pakistan confirmed technical discussions between the U.S. and Iran are set to resume, though no high-level meeting is scheduled. Qatar’s Foreign Ministry said regional security matters are on the table and could be elevated to senior level. The White House has suggested the strait is open; Tehran has demanded it retain control.
Separately, Trump is expected to announce on Wednesday that the U.S. will not extend the USMCA trade pact, starting a decade-long countdown to wind down the 32-year-old North American free trade zone. The move kicks off a six-year review session under the sunset clause Trump negotiated in his first term. And in a pair of landmark rulings, the Supreme Court upheld birthright citizenship and struck down curbs on coordinated campaign spending.
The Bank for International Settlements warned that disappointing AI returns could trigger major disruption in global markets. Every one of the Magnificent Seven has underperformed the MSCI World index this year, even as chip stocks have doubled. Equity Bank’s Charlie Robertson worries a “blizzard of coming IPOs could mark peak AI before the end of the year.”
Stephanie Roth at Wolfe Research flagged that surging memory chip costs are flowing into consumer prices. “AI was supposed to make everything cheaper. Instead, one of the first places it’s showing up is in higher prices,” she wrote, estimating higher memory prices have already added roughly 30 basis points to core PCE inflation, with more upside likely. Apple’s recent price increases brought the issue into the spotlight.
Energy, Commodities & FX — Oil’s Steepest Quarterly Loss Since 2020, Gold’s Worst Since 2013
Oil posted its steepest quarterly decline since 2020 as prices retreated from the war-driven $120 spike to pre-conflict levels. The Doha talks are the key variable. Capital.com’s Daniela Hathorn noted that “investors continue to price in a relatively orderly reopening of the Strait of Hormuz and a gradual normalisation of global oil flows,” though weekend skirmishes show how quickly that assumption can break.
Gold took an absolute hammering. The August futures contract traded at $4,031.70, down roughly 24% from the late-January all-time high near $5,589/oz. It’s on track for the worst month since October 2008 and the biggest quarterly drop since 2013. The put/call skew turned positive for the first time since 2016 — traders are now paying more for downside protection than upside. But Goldman’s Samantha Dart held her year-end $4,900/oz target, calling central bank diversification away from the dollar the “structural anchor.” An OMFIF survey of 90 central banks found for the first time that more plan to cut dollar allocations than increase them over the next decade.
The U.S. dollar index edged up to 101.20, on track for its fourth straight positive quarter. The Japanese yen slid to a 40-year low at 162.60 against the dollar despite Tokyo spending a record ¥11.73 trillion ($72.25 billion) trying to prop it up. State Street’s Michael Metcalfe warned the yen’s fate is now a key global risk point, flagging the danger that higher Japanese rates could drive money back into Japan and trigger selloffs elsewhere. Consumer confidence edged up to 91.2 in June on falling petrol prices, though it missed the consensus estimate of 94.4.
Rates & the Fed — Hawkish Warsh Takes the Stage at Sintra
The labour market is running hotter than expected. Tuesday’s JOLTS report showed job openings at 7.594 million in May, the highest since May 2024, beating the 7.296 million consensus. Navy Federal’s Heather Long called it “encouraging news” but noted the hiring picture is a “winners and losers story” — some industries improving while tech and finance remain bleak. The quits rate held at 1.9%.
All eyes turn to Sintra on Wednesday. New Fed Chair Kevin Warsh makes his debut at the ECB forum alongside Bank of England Governor Bailey and Bank of Canada Governor Macklem. Cleveland Fed President Beth Hammack told CNBC on the sidelines that she could advocate for higher rates if inflation doesn’t ease. The June dot plot showed at least half of FOMC policymakers anticipating rate hikes this year. ADP payrolls land Wednesday, nonfarm payrolls Thursday — a hot print would cement dollar strength and push rate-hike pricing higher.
José Torres, senior economist at Interactive Brokers, said the JOLTS surprise “bolsters optimism that the cycle remains on solid footing” but warned it “warrants a Federal Reserve that should increasingly focus on the inflation side of its mandate.” Employment statistics have “surprised to the upside in recent months, effectively countering the headwinds of elevated borrowing costs, AI-driven layoffs and restrictive immigration policies.”
The BlackRock Investment Institute moved emerging market equities to neutral from overweight, citing a “more attractive risk-reward profile” in local currency EM debt. It upgraded euro zone government bonds to overweight, arguing “markets are pricing restrictive policy rates of about 3% for several years. We think that’s overdone.”
ASX Outlook & Day Ahead — FY27 Kicks Off With a Flat Open
Australian shares start the new fiscal year with a quiet open. SPI futures are up 8 points, or 0.1%, to 8,784. Wall Street’s 15% quarterly surge provides a positive backdrop, though the ASX will be digesting a busy domestic news day. South32 agreed to sell its aluminium business to Alcoa for up to $8.1 billion as new CEO Matt Daley pivots the company toward copper and base metals. The deal includes $3.1 billion in cash, $1 billion in Alcoa shares, and up to $750 million in future commodity-linked payments. South32 also gave final investment approval for the Sierra Gorda copper expansion in Chile.
Ampol completed its $1.12 billion acquisition of EG Australia, adding roughly 480 fuel and convenience sites. Woodside took over as operator of the Gippsland Basin fields from ExxonMobil, bringing about 1,200 Esso workers across. CEO Liz Westcott flagged ambitions to develop more gas in the Gippsland Basin but said investment would hinge on Labor’s proposed domestic gas reservation system. The ACCC blocked Coles’ proposed Kalgoorlie supermarket acquisition, and IperionX landed a $9.54 million Pentagon contract for ballistic-grade titanium production.
The ASX opens its first session of FY27 with SPI futures pointing to a flat start at 8,784. The Australian dollar remains under pressure against the greenback. Domestically, investors will parse the South32/Alcoa transaction and its implications for the local materials sector.
- ASX Open (10:00 AEST) — SPI futures +8 points to 8,784; South32’s aluminium sale and Ampol’s EG Australia completion headline the corporate calendar.
- Fed Chair Warsh at ECB Forum, Sintra — His first major policy speech since June; markets will parse every word for rate-hike signals.
- U.S. ISM Manufacturing PMI (June) — Key read on whether the factory sector is expanding or contracting as rate-hike bets build.
- U.S. ADP National Employment Report (June) — Private payrolls data ahead of Thursday’s nonfarm payrolls; consensus at 118,000.
- U.S. Challenger Layoffs (June) — Watch for any uptick in AI-driven job cuts after Wolfe Research flagged tech sector weakness.
- U.S.–Iran Technical Talks, Doha — Kushner and Witkoff in Qatar; any breakthrough on Hormuz could move oil sharply lower.
