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Chapter 1: What is the main topic discussed in this episode?
A listener production.
More conflicting signals on the Iran war send both stocks and oil higher. Meanwhile, major AI news puts a rocket under tech shares and an activist investor takes a big stake in Northern Star Resources. Hello, good morning. I'm James Gruber. It's Tuesday, the 2nd of June, and this is the morning edition of the ComSec Market Update.
Chapter 2: What recent events have influenced stock and oil prices?
Well, there have been major developments with the Iran war and AI overnight, both of which influenced markets. On the war, earlier in the day, Iranian press reported that Tehran was halting indirect negotiations with the US and plans were being made for Iranian forces and their allies to completely block the Strait of Hormuz and take action elsewhere, including another key shipping route.
Then, Iran and the US traded military strikes. That sent markets sharply lower and oil soaring. However, late in the day, Donald Trump came out on social media to proclaim that negotiations with Iran were proceeding at a rapid rate. US share markets reversed course and headed higher after that.
They were helped by the other big news that Nvidia has developed a new chip that puts AI capabilities directly into personal computers. The chip is the result of a three-year partnership with Microsoft to reinvent the PC for the AI era, Nvidia CEO Jensen Huang said. On AI, Anthropic also came out and said that it had confidentially filed for an IPO.
All in all, it was an eventful day on overseas markets. Let's take a deeper look at what's happened with Aussie futures, commodities and currencies. The ASX is poised to open lower with index futures down 0.3%. Yesterday, the ASX 200 finished little changed with losses in banks wiping out gains in resources. Notably, BHP rose 0.3% to close at an all-time high.
Today, eyes will be on Northern Star Resources after activist investor Elliott Investment Management came out overnight to disclose a $1 billion stake in the company. Elliott is calling for the miner to appoint an external CEO and launch a strategic review, including a sale, following recent underperformance versus peers.
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Chapter 3: How has AI development affected tech shares?
On commodity markets, global oil prices soared after those tensions ramped up between the US and Iran. Brent Creed futures settled 4.2% higher at US$94.98 a barrel. Base metal prices were higher on Monday. Copper futures gained 2.6% after several brokers raised their copper price forecasts.
Meanwhile, aluminium futures advanced to four-year highs, up 1.6% after the US and Iran traded military strikes. Meantime, gold futures fell on Monday as escalating tensions in the Middle East heightened inflation concerns and reinforced expectations that central banks may keep monetary policy tighter for longer. The futures settled down almost 2% at US$4,506 an ounce.
Iron ore futures rebounded from recent weakness up 0.5%, though concerns remain about elevated Chinese inventories. Let's take a look at currencies. They were lower against the US dollar. The euro fell 0.2% to 1.1634 US dollars. The Japanese yen dipped 0.2% to 159.66 yen. And the Aussie dollar dropped 0.3% to 71.63 US cents.
Chapter 4: What impact did the Iran war have on market trends?
Let's head to Wall Street now. The Dow Jones Index finished up 0.1%, the S&P 500 was 0.3% higher, and the Nasdaq rose 0.4%. A closer look at the trading day there. US share markets began the new week and month with modest gains amid rapid developments in US-Iran peace negotiations and the unveiling of a new computer chip that promises to bring AI to personal computing. All
Of the 11 major sectors in the S&P 500, only technology and energy enjoyed gains, while utilities suffered the biggest percentage drop. Nvidia rose 6.3% after the company unveiled that new chip, while Microsoft shares added 2.3%. The reaction among semiconductor stocks were mixed. Qualcomm tumbled almost 9%, while Intel fell almost 5%.
Micron shares breached the $1,000 mark for the first time, rising 6.3%. The semiconductor index advanced 3.2%. Software stocks rebounded from the heavy selling earlier this year on AI disruption fears. ServiceNow and IBM rose more than 9% and 8% respectively. The software services index advanced 4.3%. U.S. government bond yields climbed after a report that Iran was halting talks with the U.S.
sent oil prices sharply higher. The U.S. 10-year Treasury yield added 1.4.46%, while the U.S. 2-year Treasury yield rose 2.24.04%. To the European markets, both the continent-wide FTSE Euro First 300 index and the UK FTSE 100 ended down 0.7%. Europe hit one-week lows as escalating tensions in the Middle East dampened hopes for a near-term resolution to the Iran war.
Britain's EasyJet jumped 10% after Castle Lake said it was considering a potential takeover bid, with a British budget airline calling the US investment firm's timing highly opportunistic given the impact of the Iran war. Software stocks advanced, extending a recovery as gains in US peers ease concerns over AI disruption fears.
SAP, Europe's largest software company by market value, rose more than 8%. Among other movers, Wise tanked 8% on news that the Brussels Public Prosecutor's Office is investigating the digital money transfer company for suspicious transactions worth half a billion euros. It's now time for the watch list. In Australia, building approvals for May are out today.
In the US, Jolt's job openings for April are released. There are also earnings reports from Palo Alto Networks, Dollar General and Alto Beauty. In Europe, inflation figures for May are out with 3.2% year-on-year tipped. Now it's time for our one more thing segment. There's a lot of talk about an AI bubble, though if you look purely at Nvidia's valuation, it doesn't seem so extreme.
Currently, it trades at a 12-month forward price-to-earnings ratio of 17 times. To put that into context, that's less than the P for the S&P 500, as well as our own ASX 200. It's even less than what many mature consumer-branded companies in the US like Costco and Walmart are trading on, with PE ratios of 45 times and 36 times respectively. And that's it for today.
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Chapter 5: What are the implications of Nvidia's new chip for personal computing?
The ComSec Media and Markets team is monitoring developments on today's local trading session, so check out our afternoon episode of the podcast for all the key updates. I'm James Gruber. Have a great day.
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