Investors are eagerly awaiting the minutes from the US Federal Reserve’s latest meeting on Wednesday (Thursday AEST) for insights into monetary policy under new chairman Kevin Warsh. Warsh’s prior hawkish comments drove gold and copper prices lower, rallying the US dollar on tighter policy signals. Higher rates typically raise borrowing costs for manufacturers, impacting metals demand, while a stronger US dollar makes commodities more expensive for international buyers. Recent softer job numbers and falling energy prices pared back rate hike bets. However, Warsh’s lack of forward guidance makes these minutes crucial. Stephen Innes of SPI Asset Management noted, “Each data point has become less of a signpost and more of a weathervane.”
Acute volatility in the artificial intelligence (AI) trade also commands attention, as investors assess the sustainability of significant sector spending. Facebook owner Meta’s shares jumped nearly 10 per cent last week after revealing plans to sell AI computing power, a move triggering a sell-off in “neocloud businesses” like CoreWeave and Nebius, which dropped about 15 per cent. Semiconductor stocks then tumbled as investors rotated towards defensive consumer staples. Dominic Mlcek, Infinity Asset Management portfolio manager, said, “Attention will remain firmly on the AI trade. We saw some early signs of rotation out of crowded winners, so we’ll wait and see if this continues.” Minotaur Capital’s Thomas Rice flagged preliminary quarterly results from memory chipmakers Samsung and Taiwan Semiconductor Manufacturing Company, due this week, as vital for gauging second-quarter AI demand.
Domestically, S&P/ASX 200 futures indicate a 0.2 per cent fall at Monday’s open, after Australian shares surged 1.4 per cent last Friday to carve out a nearly 1 per cent weekly gain. This was partly on scaled-back US rate hike bets following softer American jobs data. Local attention focuses on a speech by Reserve Bank of Australia chief economist Sarah Hunter on Wednesday for insights into Australia’s interest rate outlook; the RBA held its cash rate at 4.35 per cent last month. Commonwealth Bank economist Harry Ottley expects the speech to clarify the RBA’s view on the fading energy shock’s impact. Elsewhere, the Reserve Bank of New Zealand will announce its interest rate decision on Wednesday, with forecasts split, and China’s June inflation figures are also due on Thursday.
