James Brodie
Head of Learning & Development, Flux
US-Iran Strikes Continue Overnight, FOMC Minutes Lean Hawkish
Stocks rally on Trump deal comments, Fed stays hawkish, China CPI misses, AI cash flows weaken, and fund manager cash hits record lows.
Markets Overnight After another night of U.S. and Iranian bombing, equities rallied on comments from Trump, who claimed "Iran called a little while ago, they want to make a deal" (which Iran denied).
Trump continues to jawbone the market, but not before the 2-year yield hit cycle highs at 4.24%, with OIS pricing 36bp of hikes by year end.
China's June CPI missed at +1.0% YoY vs. 1.1% consensus, with consumer deflation keeping a lid on domestic demand.
A Bloomberg chart tracking combined free cash flow of the five hyperscalers (Amazon, Alphabet, Meta, Microsoft, Oracle) minus their two chip suppliers (Micron, Nvidia) has crashed to roughly negative $60 billion, its first-ever negative reading after staying positive for nearly two decades. This shows cash flowing from AI infrastructure builders to chipmakers. History suggests suppliers often capture the value while spenders struggle for returns; this doesn't prove AI will repeat that script, but it does show the market pricing in lofty returns for hyperscalers even as their own cash flows tell a different story. Separately, SOXX took in $5.4B yesterday, 4x the old daily flow record, almost certainly a model or large institutional trade.
Asia Wrap
The Kospi bounced off its final support level at 7,053. Japan was the clear regional winner, with the Nikkei up 1.55% to 67,859 as yen weakness boosted exporter earnings expectations.
FOMC Minutes
The Fed remains deeply split between hikes and cuts for the rest of the year (9 officials leaning toward at least one hike, 9 toward holding or cutting), though upside inflation risks from AI infrastructure demand, tariffs, and energy prices continue to dominate the discussion. Overall tone leans hawkish.
Fund Manager Cash Levels
Bank of America data shows fund managers now holding cash at just 10% of AUM, the lowest level in the survey's history, well below the long-run average of roughly 12% and even under prior lows seen in 2007 (11%) before the GFC. (BkofAmerica)
Written by
More News
Brent Eases as The US Agrees to Further Talks With Iran
Brent eases as US-Iran talks resume. Russia's fuel crunch deepens, while India expands SPR capacity with a new 13mb site.
Brent on its way to weekly gains on geopolitical risk
Oil prices are on-track for a weekly gain, with the M1 Brent futures contract beginning the week at $71.54/bbl.....
Brent Slides as Russia’s Saratov Refinery is Hits
Brent falls as Russia halts refinery runs and bans diesel exports. CFTC blocks 24/7 crude trading; Iraq backs OPEC membership.
Hungry for TACOs
US-Iran tensions escalate as strikes hit vessels and targets. Brent spikes $8 before easing as markets digest renewed volatility.
16 page report