Devon Funds Morning Note - 15 July 2026

Thursday 16th July 2026

Hormuz whiplash

Global

Global markets were driven by two big themes overnight: Trump’s fast moving Hormuz toll saga and a surprisingly soft US CPI print that eased Fed hike fears while producing a mixed risk asset response.

After initially threatening a 20% “reimbursement fee” on ships using US protection through the Strait of Hormuz, Trump reversed course within 24 hours, saying “highly productive conversations with Middle East leadership” had convinced him to replace the toll with “massive” Gulf trade and investment deals into the US. The blockade narrative remains intact, a “FULL Blockade” on ships to and from Iranian ports or carrying Iranian cargo, but the pricing and enforcement details are highly uncertain, leaving shipowners and energy markets juggling headline risk rather than a clearly defined regime. Despite this confusion, crude prices jumped: WTI rose about 2.2% to around US$80/bbl and Brent June futures gained roughly 2.6% to about US$85.50/bbl, while Asia Pac refining margins climbed 11% to about US$38.20/bbl and Singapore jet fuel spiked 12.5% to roughly US$144/bbl, a sharp move that, if sustained, is clearly negative for airlines.

On the macro side, a major downside surprise in US June CPI took pressure off the Fed to raise rates and reinforced expectations that the FOMC can stay on hold for longer. Headline CPI fell 0.4% month on month (versus -0.1% expected and +0.5% prior) and slowed to 3.5% year on year (versus 3.8% consensus and 4.2% prior), while core CPI printed 0.0% month on month and 2.6% year on year, both below forecasts and prior readings. The softness was driven by weaker energy prices and the flattest core print since the pandemic, with broad based weakness in core services, especially shelter as rents and owners’ equivalent rent cooled, reigniting the “shelter disinflation” story after strong April and May data. Core goods showed modest deflation as tariff effects faded, and Barclays’ mapping of the report implies core PCE of about 0.21% month on month (3.4% year on year), roughly 8bp lower than previously estimated, suggesting inflation is moving more decisively toward the Fed’s comfort zone even if PCE does not fall quite as much as CPI.

Barclays now expects the Fed to leave rates unchanged for the remainder of the year, arguing that slower shelter inflation and core PCE hovering near a 0.2% monthly pace give the FOMC breathing room.

Equity markets responded positively, with gains skewed toward energy, metals and semiconductors rather than broad cyclicals. Lower CPI, a stabilising KOSPI (up 0.7% yesterday) and weakness in IBM helped drive chip strength, yet US cyclicals finished slightly lower and the equal weight S&P 500 actually slipped, underscoring that the rally was concentrated in mega caps and specific themes. Key sector and theme moves included: Energy index up 3.2%, US metals index up 3.4%, Philadelphia Semiconductor index up 2.5%, “Mag 7” up 1%, and US software up 1%, while US cyclicals were marginally negative at -0.1%. The US dollar held up better than many might have expected given the softer CPI, with DXY down only about 0.3%, which helped cap gold’s rise at around 1.3%.

Stock specific news was dominated by a dramatic sell off in IBM, which dropped about 23% after a profit warning and guidance that Q2 revenue would be roughly 4% below consensus as customers diverted spending toward servers and storage ahead of AI driven price increases. CEO Arvind Krishna noted that clients were prioritising chips and servers, leaving less budget for IBM’s mainframes and software, highlighting a broader shift in discretionary IT spending toward AI infrastructure at the expense of traditional software and hardware. That message resonated across the market: it was interpreted as positive for chipmakers, reflected in the semiconductor index’s 2.5% gain, but negative for software infrastructure providers that may face similar budget reallocation when they report. In contrast, the US banking sector posted a modest gain of about 0.4%, led by Goldman Sachs up roughly 9% on strong results, while most other major banks were flat to slightly down, reinforcing the theme of highly idiosyncratic earnings driven moves rather than a clean sector wide trend.

New Zealand

The latest NZX session was subdued, investors weighed a slightly improved domestic macro tone against still‑soft migration and steady, but contained, construction cost pressures.

On the upside, the biggest lifts came from names such as Skellerup (SKL), which gained about 5%, alongside strong moves in Vista Group (VGL), Gentrack (GTK) and Property for Industry (PFI), all rising between roughly 2% and 4% on the day. Chorus (CNU) recorded one of the largest falls, down around 3%, while Fisher & Paykel Healthcare (FPH), Oceania Healthcare (OCA) and Spark (SPK) each declined about 2%. Tourism Holdings (THL), Hallenstein Glassons (HLG), Fletcher Building (FBU) and Air New Zealand (AIR) were also among the top detractors, with drops of 4% to 6% weighing heavily on the index and underscoring how travel, retail and construction‑linked names remain sensitive to shifts in demand, cost and sentiment.

On the macro side, the NZIER’s Quarterly Survey of Business Opinion (QSBO) pointed to a clear, if modest, improvement in business sentiment: a net 12% of firms now expect economic conditions to improve in coming months, up from just 1% in the March quarter survey, suggesting the corporate mood is moving away from outright pessimism toward guarded optimism. At the same time, Stats NZ estimated that May saw a small net migration loss of 99 people, with a sizeable net loss of 3,738 New Zealand citizens, highlighting ongoing outward flows of locals even as overall movements are close to balance. Construction cost data were more reassuring: the Cordell Construction Cost Index showed residential construction costs rising 1.1% in the June quarter and 3.5% over the year, broadly in line with long‑run quarterly averages and still below the long‑run annual average of about 4%, indicating that cost pressures in the housing build sector are firm but no longer surging in the way seen earlier in the cycle.

Australia

The latest ASX session was fairly muted, with the S&P/ASX 200 little changed but tilted slightly to the downside. The benchmark is hovering around the high‑8,700s to low‑8,800s, down modestly over the past month but still a few percent higher than a year ago. Moves in heavyweight names across banking and mining helped anchor the index close to flat, while smaller and mid‑cap names saw a wider dispersion of returns.

Orora’s sharp share price fall since January is starting to draw opportunistic interest, with The Australian reporting that at least one private equity firm is weighing a buyout proposal for the now roughly A$1.7 billion packaging group after a 38% slide year to date. The stock has been under sustained pressure following earnings downgrades and concerns around its Saverglass acquisition, leaving investors nursing heavy losses and prompting calls from some shareholders for board‑level change, which in turn creates fertile ground for PE suitors who see value in a turnaround story.

In financials, bank‑backed mortgage broker Lendi is trimming headcount as it reshapes its workforce to better fit a tougher housing and lending backdrop, according to the AFR. The cuts form part of a broader restructure aimed at aligning costs and staffing with softer volumes and shifting customer behaviour, highlighting how tighter credit conditions and slower mortgage growth are pushing bank‑aligned distribution platforms to adjust business models rather than simply absorb weaker profitability.

On the calendar, Australia has no key data prints, however the corporate diary is busier, with quarterly updates due from AEL, Evolution Mining (EVN), Rio Tinto (RIO) and 29Metals (29M), all of which sit squarely in the resources complex and could reinforce or challenge the positive lead implied by the futures.

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