MPC Markets Morning Call — 7 July 2026: Chips Bounce Back as AI Trade Gets a Second Wind
Wall Street started the first full week of July on the front foot, with chip stocks snapping a two-week losing streak and the Dow closing at a fresh record. Volume was light — about 28% below the 20-session average — as traders eased back in after the Independence Day break. The AI hardware trade drew buyers again after Broadcom locked in a chip-supply deal with Apple through 2031 and Nvidia pushed back on server-delay rumours. Oil slipped to pre-Iran war levels on an OPEC+ output increase and improving Hormuz shipping traffic. The yen drifted near 40-year lows as a former Japanese currency czar argued it should be closer to 130 per dollar, not 162. Fed chair Kevin Warsh testifies on Tuesday, and Wednesday’s Fed minutes will give the first proper look under the hood of the new-look central bank.
S&P 500 rose 0.7% to 7,537, Nasdaq climbed 1.3%, and the Dow added 0.3% to notch a record close — all on notably light post-holiday volume.
Chip stocks staged a comeback — the SOX index finished 2.2% higher, with AMD up 6.6%, Broadcom up 3.7%, and memory names rallying on bullish UBS and Citi notes.
Nvidia gained just 0.8%, lagging peers after a SemiAnalysis report claimed its NVL144 rack architecture would be delayed to 2028. Mizuho dismissed the concerns as “more noise.”
Oil settled near late-February lows after Saudi Arabia made its biggest price cut in 26 years, OPEC+ lifted output targets by 188,000 bpd, and Hormuz tanker traffic showed signs of recovery.
Former Japanese currency czar Tatsuo Yamasaki said the yen is undervalued by up to 20% and should be around 130 per dollar, flagging potential stealth intervention.
ASX 200 futures pointed to a flat open, with local focus on Lynas’s rare earth magnet JV, a2 Milk’s earnings guidance, South32’s Arizona mine approval, and Netwealth’s expanded Morgan Stanley mandate.
Equities — Chip Stocks Snap Two-Week Slide, Dow Hits Record
Monday was a dip-buyer’s session. The S&P 500 rose 0.7% to 7,537, the Nasdaq Composite jumped 1.1% to 26,121, and the Dow added 0.3% to close at a fresh all-time high of 53,056. Communication services and information technology led, while healthcare, consumer staples and utilities lagged. Decliners actually outnumbered advancers within the S&P 500 by a 1.3-to-one ratio, which tells you the gains were concentrated in the mega-cap names.
The real story was chips. The Philadelphia Semiconductor Index bounced 2.2% after shedding roughly 12% over the previous two weeks. AMD surged 6.6%, Broadcom added 3.7%, Qualcomm and TSMC both gained more than 4%. Memory stocks joined the party — Micron rose 2.2%, SanDisk gained 3.6%, Western Digital added 3.4% — after UBS lifted its DDR contract pricing forecast to +32% quarter-on-quarter for Q3, up from +17% previously. UBS sees the DRAM industry undersupplied until at least Q2 2028 and expects memory industry revenues to hit US$992 billion this year and US$1.76 trillion in 2027.
Nvidia was the notable underperformer, up just 0.8% versus a 3.2% surge in the SOX and 4%-plus moves from AMD and TSMC. Weekend reports from SemiAnalysis claimed Nvidia’s Kyber NVL144 rack architecture would be delayed to 2028 due to PCB manufacturing challenges, and that an alternative back-to-back rack design had been scrapped after pushback from hyperscale clients. The report triggered sharp selling among Asian tech suppliers overnight — Japan’s Ibiden dropped 10% — though Mizuho’s Jordan Klein dismissed the delay stories as “more noise” and pointed to strong Hon Hai earnings as evidence that Nvidia’s supply chain remains healthy.
Morgan Stanley said the recent chip weakness signals a broadening of AI-trade gains, with investors likely to rotate toward hyperscalers — the companies actually spending big on data centres. Alphabet, Amazon and Meta saw heavy selling in June while the SOX climbed 11%, but that dynamic has reversed over the past two weeks. The brokerage also flagged consumer discretionary, transports and biotech as potential rotation beneficiaries.
Dell popped more than 4% after Trump told Americans to “go out and buy a Dell computer” during a first-of-its-kind Oval Office bell-ringing ceremony for the launch of Trump Accounts — savings accounts seeded with US$1,000 for over 500,000 American children. Strategy (formerly MicroStrategy) closed flat after disclosing an US$8.32 billion loss on digital assets for the June quarter and selling US$216 million of Bitcoin to fund a financing overhaul.
Geopolitics — Iran Mourns, NATO Watches, China Fires a Missile
Three geopolitical threads dominated Monday, none of which moved markets dramatically but all of which sit in the background as potential catalysts.
In Iran, tens of millions flooded Tehran’s streets for the funeral of slain Supreme Leader Ayatollah Ali Khamenei, killed alongside family members in an airstrike. President Pezeshkian walked with mourners, but there have been no public sightings of Mojtaba Khamenei, the son who succeeded the former leader. The body will travel to other cities in Iran and Iraq for further ceremonies. The European Stability Mechanism warned that renewed Middle East conflict and a US asset selloff are the two biggest risks to the euro zone — and if they combine, the bloc could tip into recession with inflation pushing near 5%.
Despite a framework peace deal, the US and Iran continue to wrangle over management of the Strait of Hormuz. Tehran wants to retain some control; Washington has rejected that. Trump said oil is now “even lower, on a barrel basis, than it was before we started” and warned Iran must hold its concessions — adding “there’ll be no nuclear deal for Iran.”
China test-fired a missile from a nuclear-powered submarine into the Pacific, drawing sharp criticism from Japan, Australia, New Zealand and Taiwan. State media did not specify the type, but the Global Times suggested it was the JL-3 — China’s most advanced submarine-launched ballistic missile, capable of reaching the continental United States from Chinese coastal waters according to a Pentagon report.
The NATO summit looms this week with the Iran war front and centre. Meanwhile, UK Foreign Secretary Yvette Cooper is set to warn that AI poses the “greatest security challenge of the next decade,” drawing parallels with nuclear safety efforts after Hiroshima.
Energy, Commodities & FX — Oil at Pre-War Levels, Yen on Intervention Watch
Oil settled near late-February lows. Brent crude slipped 0.1% to US$72.03, WTI dipped 0.2% to around US$68. Three things weighed: Saudi Arabia’s biggest price cut to its flagship crude in at least 26 years, OPEC+’s agreement to lift production targets by 188,000 barrels per day from August, and improving traffic through the Strait of Hormuz. Kpler data showed 108 verified vessel crossings over the weekend, while Iran’s state media reported maritime trade with Qatar had resumed after a five-month suspension.
That said, uncertainties linger. Ships are still turning transponders off to avoid Iranian attention, and at least eight vessels U-turned over Friday and Saturday while trying to transit the Omani coast route. Western navies maintain the threat level is “substantial” with the centre of the strait mined.
US emergency crude stocks fell to their lowest since May 1983 after the Strategic Petroleum Reserve shed 6.2 million barrels in the week of 3 July. That’s part of a Trump administration agreement to release 172 million barrels over four months to keep a lid on prices.
Gold slipped 0.4% to US$4,162 an ounce, pulling back from a two-week high. The Bloomberg Dollar Spot Index was flat. Bitcoin rose 1.4% to US$63,571.
The yen kept drifting near its 40-year low of 162.84, trading around 162.03 on Monday. Former vice finance minister Tatsuo Yamasaki said the currency is undervalued by up to 20% and should be around 130 per dollar. He expects the Bank of Japan to keep hiking rates, sees US rate hike odds as uncertain, and suggested Japanese authorities are ready to act with “stealth intervention” — small-scale operations to keep speculators off balance.
“I wouldn’t be surprised if the yen were around 130 to the dollar. That’s honestly how it looks to me,” the former currency czar said. He warned short-yen speculators that they “risk being punished by an intervention” and said Washington is more on board with Japan’s intervention intentions than at any time he can recall.
Macro — Fed Under the Microscope, Services PMI Holds Steady
Treasury yields barely budged. The 10-year slipped two basis points to 4.47% after last week’s softer-than-expected jobs report dialled back rate-hike expectations. Fed funds futures now show roughly even odds of a hike by September, down from heavier bets heading into the July 4 weekend.
Monday’s data showed US services activity improved in June — S&P Global’s services PMI came in at 54.8, up from 53.8 in May, with the employment sub-index rising to 53.0 from a contractionary 49.3. The ISM services report told a similar story: the headline ticked up slightly and job creation rebounded. But inflation is far from beaten — ISM Services Prices paid rose to 64.2, the highest since the first quarter.
“Service-providing businesses account for most private employment. Recent months’ steadier PMI reports reinforce our confidence that the economy will continue to add jobs in the second half of the year.”
All eyes now turn to Fed chair Kevin Warsh, who testifies before the House Financial Services Committee on Tuesday. Wednesday brings the minutes from the Fed’s last meeting — the first under Warsh, who ditched forward guidance and told markets the central bank would focus purely on inflation. Those minutes will give the best read yet on how hawkish the new-look Fed actually leans.
“Recent macro data will make the Fed feel less worried about the job market, giving them more latitude to focus on inflation. And inflation was still a problem in June. However, the outlook for inflation looks better in the second half of 2026. Price shocks from the war and tariffs look set to fade. Housing costs are no longer exacerbating inflation like they did through 2025.”
ASX Outlook — Flat Open Expected, Corporate News Busy
ASX 200 futures pointed to a flat open, up just 3 points or 0.03% to 8,813, after reversing earlier modest losses. The local index is coming off a week where the tech-led bounce on Wall Street provided a modest tailwind, though the ASX didn’t see the same chip-driven volatility given its heavier weighting toward resources and financials.
Lynas Rare Earths will invest around A$50 million to support a rare earth permanent magnet factory in Malaysia under a long-term deal with South Korea’s JS Link. The Kuantan facility targets 3,000 tonnes per year of NdFeB sintered magnets for automotive, wind energy and defence applications, with Lynas exclusively supplying rare earth materials until January 2038.
a2 Milk tipped FY26 revenue of NZ$1.97 billion, up more than 12% year-on-year, with EBITDA margin at the upper end of its 14–14.5% guidance range. China-labelled infant formula sales fell about 14% after supply chain disruptions forced customers to competing brands, though the company says those issues are now substantially resolved.
South32’s Hermosa critical minerals project in Arizona is set to receive US Forest Service approval on Tuesday under fast-track permitting. The mine contains one of the world’s largest undeveloped zinc deposits plus manganese essential for large-capacity batteries. Full production is targeted for 2029.
Netwealth reported FY26 net inflows of A$15.4 billion and guided to FY27 net flows of A$18–20 billion, up 17–30% year-on-year. Separately, it won Morgan Stanley Wealth Management Australia as a platform client for ASX-listed equities — the first major win for its Netwealth Private offering and a gateway into an estimated A$600 billion private wealth and stockbroking market.
VanEck announced Australia’s first AI-powered ETF (ASX: GOAT), which begins trading on 20 July tracking the Akros Enhanced World ex Australia Index.
KMD Brands (Kathmandu) appointed former Metcash CEO Ian Morrice as an independent non-executive director, effective 20 August.
Key events for the session ahead and the rest of the week:
- Tuesday: Fed chair Kevin Warsh testifies before House Financial Services Committee; US trade balance (May); South32 Hermosa mine approval expected
- Wednesday: Fed minutes from June meeting released (first under Warsh); France trade balance (May); Germany, Finland, Norway, Denmark industrial output (May)
- Thursday: Netherlands, Estonia, Hungary, Czech Republic CPI (June); Delta Air Lines and PepsiCo earnings (prelude to Q2 reporting season)
- Watch: Middle East developments, Trump social media posts, potential yen intervention, Strait of Hormuz shipping flows
