The dominant macro shock overnight was the intersection of a hotter-than-expected US CPI print — headline inflation rising to 4.2% in May, a three-year high — and an acute escalation in US-Iran military hostilities after Iran downed an American Apache helicopter patrolling the Strait of Hormuz. These twin catalysts drove a sharp risk-off rotation: the Nasdaq fell 1.98%, the Dow shed over 900 points, and the VIX surged 11.83% to 22.22, while Brent crude jumped 4.03% to $95.14/bbl and gold fell 4.63% as the stronger dollar following the CPI print crushed precious metals. The Fed is now fully priced for a 25bp hike in December, with the May CPI result arriving just days before the 16–17 June FOMC meeting, leaving rate-sensitive assets under considerable pressure. The ECB's Day 2 policy meeting in Frankfurt today — where a 25bp hike is broadly expected — adds a second major central bank flashpoint to an already fraught session.
For Asia-Pacific markets opening Thursday, the risk-off tone from Wall Street is the primary headwind, though the picture is regionally nuanced. The Nikkei's strong 2.17% advance and the KOSPI's remarkable 8.18% surge suggest Japan and South Korea found idiosyncratic tailwinds — likely yen dynamics and domestic flows respectively — while China's SSE gained 1.28% on contained CPI data that gives Beijing room for further fiscal stimulus. The AUD fell 0.40% to $0.6995 as the commodity complex broadly weakened — aluminium crashed 10.60%, copper fell 1.99%, and gold dropped sharply — creating a difficult open for ASX materials names, though energy producers will find support in surging oil prices. The ASX 200 faces a conflicted open: energy tailwinds versus broad materials weakness, US futures pointing modestly lower, and domestic investors awaiting Westpac Consumer Confidence and NAB Business Confidence data released early this morning.