Global markets were a smelted cocktail of conflict, copper, and central bank caution.
As tensions flare in the Gulf, President Trump’s call for “UNCONDITIONAL SURRENDER” sent investors to safe havens at a time when investors are selling US equities. In the US, the Fed remained on pause with rates while growth projections dimmed further. The country is also facing a copper conundrum amid a looming tariff standoff.
However, the weaker dollar is good for select markets and assets.
Warmongering
US President Trump met with his national security team to discuss the escalating Middle East conflict, fuelling speculation that the US may join Israel’s attack on Iran. Bloomberg reported that before gathering his advisers in the Situation Room, Trump posted a demand for Iran’s “UNCONDITIONAL SURRENDER” and warned of a possible strike against the country’s leader, Ayatollah Ali Khamenei. According to the New York Times, Iran is preparing missiles for possible retaliatory strikes on US bases. The risk of all-out war spells trouble for risk assets like stocks and investors flee for the safety of gold and the US dollar.
US rates on hold
The Fed cut its outlook for the US economy, projecting just 1.4% growth for the world’s largest economy for 2025, with unemployment rising from 4.2% to 4.5% and personal consumer inflation increasing from 2.1% in April to 3%. Reserve Chair Jerome Powell said the Fed expects that higher prices are coming due to tariffs, and policymakers are waiting to see how much of the cost will fall on consumers, which is why the committee chose to keep rates unchanged. US equities closed little changed on the news, with the S&P 500 (VOO-NASQ) ending below 6,000 after briefly crossing that mark. Bloomberg reported that the Fed’s latest economic projections show a growing divide on the committee, with some officials expecting no rate cuts in 2025, and investors seeing a high chance of a rate cut in September.
US stock sell-off
According to Goldman Sachs, stock selling is gathering momentum in the US. Mutual funds had $10 billion in outflows while hedge funds are buying equities at a slower pace. Trend-following funds are also more skewed to sell than buy moving forward.
These funds (known as commodity trading advisors) are set to offload over $17 billion, according to Bloomberg. Pension and target date funds are also expected to sell $89 billion of stocks in their month-end rebalancing, according to the head of Americas equity derivatives strategy at UBS Group.
Tariff clock ticking
Some of America’s closest partners now face a ticking clock before a July 9 deadline that the US has set to impose a global slate of higher tariffs.
While the G-7 summit was expected to yield some headway in breaking impasses that have emerged due to President Trump’s so-called “reciprocal” levies, he has doubled down on his support for the trade measures due to the revenue the duties are expected to bring in.
However, the US Supreme Court has been asked to consider striking down President Trump’s tariffs, which could have worldwide economic implications.
Copper conundrum
Freeport-McMoRan’s (FCX-NASQ) copper smelter in Arizona is one of the last remaining in the US, and it’s struggling to stay competitive due to high operating costs and cheap Chinese competition.
While the US has plenty of copper reserves – the latest data compiled by the US Geological Survey put reserves at around 47 million metric tons, which ranks the US seventh globally and ahead of China – the country lacks the smelting and refining infrastructure to process it domestically, making it dependent on foreign refining.
The industry has been shrinking for decades, with only two smelters remaining in the US, and the cost of building a new one is estimated by Bloomberg to be around $3 billion, making it a challenging business to revive.
However, the Resolution Copper project, a giant deposit in Arizona owned by Rio Tinto Group (RIOL-TRQX) and BHP Group (BHPL-TRQX) recently got the green light from the Supreme Court to proceed. It is expected to take 29 years to start production though.
No pharma voice
President Trump’s administration is discussing policies that would make it harder for pharma firms to advertise directly to patients. Pfizer (PFE-NASQ) and AbbVie (ABBV-NASQ) stock prices fell on the news.
Weaker dollar asset allocations
With sustained weakness in the US dollar and a bearish outlook, institutional investors like Investec remain overweight emerging market equities, with central and eastern Europe (CEE), Brazil, and South Africa among the key beneficiaries. SA miners and financial stocks, including banks, insurers and REITs, are among the biggest sector beneficiaries of a weaker US dollar.
SA banking risk
The South African Reserve Bank’s climate risk stress test found that major banks are reasonably well positioned to assess their vulnerability to climate risks, but some challenges remain around data gaps and modelling capabilities.
Sector focus: Platinum
The six-element (6E) platinum group metal (PGM) basket price has increased by 19% in rands year-to-date, headlined by platinum. The potential of increased platinum jewellery consumption has fanned the excitement, but a lasting upcycle will need solid automotive consumption from key markets like China and Europe as the sector accounts for 67% of demand. A limited supply of above-ground stocks will also support the platinum price.
Stock focus: Vukile
Vukile Property Fund (VKE-JSE) reported strong financial year-end results, with assets crossing the R50 billion mark, income from local properties rising 6.3% and rental renewal growth of +2.4%. The international Castellana portfolio delivered good income growth of 6.4%. The company also upped guidance for the 2026 financial year, which should underpin the relative performance of the stock against the rest of the sector.
