ASX Shares Tumble as ASIC Launches Probe into Systemic Failures

Economic

Summary:

Australia’s ASX Ltd saw its stock slide over 4% on Monday following a formal investigation by the Australian Securities and Investments Commission (ASIC)...

Market Reaction Reflects Eroding Confidence in ASX

Shares of the Australian Securities Exchange (ASX) dropped sharply by 4.4% to A$69.58 in early Monday trading, marking their steepest daily decline since March and hitting the lowest level since late April. The sell-off follows ASIC’s announcement of a formal inquiry into ASX’s governance and risk management structures, after what the regulator termed “repeated and serious failures.”

The immediate market response reflects growing investor concern that ongoing operational lapses could further damage ASX's standing as a provider of secure, reliable market infrastructure in Australia’s financial system. If current losses hold, this marks a significant loss of market capitalization and a reputational blow for one of the country’s key financial institutions.

ASIC Targets Governance and Infrastructure Weaknesses

ASIC Chair Joe Longo stated that the investigation will zero in on ASX's “governance, capability, and risk management frameworks,” with an independent expert panel appointed to lead the review. The panel is expected to offer both a diagnosis of systemic weaknesses and recommendations for restoring trust. ASIC also made clear that both it and the Reserve Bank of Australia have lingering doubts about ASX’s ability to ensure operational robustness in its market infrastructure.

The outcome of the inquiry, including any enforcement actions or structural reforms, will be made public, heightening the potential regulatory consequences.

CHESS Project Collapse Casts Long Shadow

Central to the controversy is the prolonged and ultimately abandoned attempt to replace ASX’s CHESS clearing and settlement system with blockchain-based technology. First announced in 2016, the CHESS replacement was touted as a world-first modernization initiative but became a cautionary tale of technological overreach. In November 2022, ASX scrapped the overhaul, citing the project’s complexity and scalability limitations.

In the wake of that failure, ASIC sued ASX in 2024 for making allegedly misleading statements about the viability and progress of the CHESS upgrade. That legal battle, combined with December’s platform breakdown, has continued to erode market confidence.

ASX Acknowledges Failures, Promises Reform

In response to the ASIC inquiry, ASX Chairman David Clarke admitted that trust had been “damaged” and emphasized the company’s efforts toward a broader transformation strategy. However, his statement implicitly recognized that past reforms had not gone far enough to restore operational credibility.

ASX now faces mounting pressure to demonstrate meaningful internal reform and to comply fully with the inquiry process. The regulator’s tone suggests that failure to cooperate—or further disruptions—could result in stronger regulatory sanctions or structural interventions.

The ASIC inquiry represents a critical inflection point for Australia’s financial infrastructure. While ASX remains central to the country’s capital markets, its operational fragility and lack of technological execution have now triggered a public crisis of confidence. The months ahead will test not only the exchange’s resilience but also the broader regulatory system’s ability to enforce accountability in a high-stakes, systemic institution. Investors, regulators, and market participants alike will be watching closely for signs of meaningful reform—or further dysfunction.

Source: Reuters

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Economic

Forex

Safe-Haven Demand Boosts Dollar Amid Middle East Escalation

The dollar gained modestly against major currencies on Monday, supported by investor flight to safety as the Israel–Iran conflict showed no signs of easing. Market participants are increasingly concerned that Tehran may retaliate by targeting the Strait of Hormuz—a critical passageway through which over 20% of global oil shipments flow—raising fears of widespread economic fallout from potential energy supply disruptions.

The US dollar rose 0.14% to 144.3 yen and saw similar gains against the euro, which fell to $1.1534. The greenback held steady at 0.81 against the Swiss franc, while the US Dollar Index (DXY) hovered at 98.25. In contrast, risk-sensitive currencies such as the Australian and New Zealand dollars recorded marginal gains, reflecting fragile optimism.

Fed’s Policy Hold and Soft Economic Backdrop in Focus

While geopolitical risk lifted the dollar in the short term, analysts remain cautious about the sustainability of its strength. Win Thin, global head of markets strategy at Brown Brothers Harriman, noted that “if the Fed delivers a dovish hold as we expect, the dollar is likely to resume weakening due to the worsening fundamental backdrop in the U.S.”

The Federal Reserve is expected to keep interest rates unchanged during Wednesday’s meeting, but investors will closely scrutinize the Fed’s updated economic forecasts. A shift toward lower growth projections and persistent inflation pressures could result in a more neutral or dovish tone.

Chris Weston, head of research at Pepperstone, anticipates that Fed commentary will reflect signs of economic softening. “The shift towards lower growth is very much upon us,” he said, suggesting a careful policy stance from the Fed in light of rising geopolitical tensions and slowing domestic momentum.

Global Central Banks Line Up for Policy Decisions

A packed calendar of central bank meetings across multiple advanced economies is set to shape investor sentiment this week. The Bank of Japan concludes its two-day meeting on Tuesday, with no rate change expected. However, discussions around reducing government bond purchases could emerge as part of a broader push for greater domestic ownership.

Meanwhile, central banks in the UK, Sweden, and Norway are also scheduled to announce their decisions, with policymakers balancing inflation control against economic fragility.

Trade Uncertainty and Tariff Pressures Linger

Despite its modest rise, the dollar has lost more than 9% year-to-date, as investor concerns linger over the Trump administration’s aggressive trade strategy. Key trade deal deadlines loom within the next three weeks, and unresolved negotiations with the EU and Japan are keeping markets on edge.

Talks between Iran and the US regarding Tehran's nuclear program were also postponed following Israel’s surprise airstrike, further clouding the geopolitical and trade outlook.

Commodities and Treasuries Reflect Risk-Averse Positioning

Gold continued to draw safe-haven inflows, rising 0.22% to $3,435.5 per ounce—just below its record high set in April. US Treasuries saw mixed moves, with longer-term yields retreating slightly after a spike on Friday. Investors are evaluating how sustained geopolitical instability could stoke inflation or prompt defensive positioning in fixed income markets.

Markets are entering a high-stakes week dominated by geopolitical turbulence and central bank signaling. While the dollar may continue to benefit from safe-haven flows in the near term, its trajectory will ultimately hinge on the Fed’s tone, global economic resilience, and the course of Middle East tensions. Investors should brace for volatility as competing risks shape market sentiment.

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Middle East Situation

Market Sentiment Rises Amid Tension, With Energy and Safe Havens in Focus

Asian equities rebounded modestly at the start of the week, with investors looking past the weekend’s escalation in the Israel-Iran conflict to focus instead on regional data and domestic policy expectations. Japan’s Nikkei 225 gained 1% and China’s Hang Seng China Enterprises Index recovered from early losses, buoyed by better-than-expected Chinese retail figures.

The limited escalation in airstrikes brought some relief to traders, though caution remains high. Brent crude spiked as much as 5.5% in early trading before retracing, reflecting market anxiety about possible oil supply disruptions and inflationary risks, especially as central banks prepare for upcoming rate decisions. West Texas Intermediate crude was up 1.2% at $73.88 per barrel.

Supportive Data from China and Defense Momentum in Japan

Retail sales in China rose 6.4% year-over-year in May, surpassing estimates of 4.9%. Although broader data releases from China painted a mixed picture, the retail boost provided a lift to Chinese equities and regional risk sentiment.

Meanwhile, Japanese stocks were supported by a weaker yen—down 0.2% against the dollar at 144.34—and a surge in defense-related equities. Reports that Japan and the EU plan to deepen defense cooperation spurred gains in this sector.

Investor Strategy Shifts to Hedging as Central Bank Meetings Loom

US equity futures also rose slightly, with the S&P 500 up 0.2%, signaling cautious optimism ahead of a week packed with central bank announcements. The Federal Reserve and Bank of Japan are both set to deliver their latest policy outlooks, with markets watching for signals on inflation, growth, and future rate paths.

The 10-year US Treasury yield climbed two basis points to 4.42%, while Australia's 10-year yield rose sharply by seven basis points—its strongest move since May 19.

As volatility persists, investors are increasingly hedging their portfolios. Equity strategist Wolf von Rotberg from Bank J. Safra Sarasin recommended adding exposure to gold and energy stocks as buffers against geopolitical shocks and oil supply chain risks. Spot gold advanced 0.3%, reaching a new all-time high, underlining its status as a preferred safe-haven asset.

Currency and Crypto Movements Reflect Risk Rebalancing

In currency markets, the Bloomberg Dollar Spot Index strengthened 0.1%, while the euro and British pound each fell 0.1% to $1.1535 and $1.3552 respectively. The offshore yuan remained stable at 7.1857 per dollar.

Cryptocurrencies also reversed recent declines, with Bitcoin climbing 1.1% to $105,899.28 and Ether rising 2.9% to $2,576.68, snapping multi-day losing streaks.

Markets appear cautiously resilient, but the underlying tone is one of alertness. The rebound in stocks and crypto, along with safe-haven bids in gold and oil, reflects a wait-and-see attitude as geopolitical risks collide with monetary policy crosswinds. Central bank decisions this week, coupled with any potential escalation in the Middle East, could sharply tilt sentiment in either direction.

Source: Bloomberg

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Inflation Nears Target After Three Years Above 2%

European Central Bank (ECB) President Christine Lagarde stated in an interview with China's Xinhua News Agency, published on June 14, that the ECB is now close to achieving its long-term inflation target of 2%. She emphasized that financial stability remains a critical precondition for price stability and expressed confidence in the effectiveness of the bank’s current monetary stance.

The ECB recently revised its inflation forecasts downward, projecting consumer price growth to fall to 2.0% in 2025 and further to 1.6% in 2026 across the eurozone’s 20 member states. These figures reflect continued disinflation following years of high inflation pressures triggered by supply chain disruptions, energy crises, and geopolitical shocks.

Digital Euro Project Progresses

Lagarde also noted that the ECB’s digital euro initiative has reached a stage where it could be implemented if lawmakers give the green light. This signals a readiness to modernize the monetary system, aligning with global trends toward central bank digital currencies (CBDCs).

Risks and Policy Outlook

Despite the optimistic tone, ECB Governing Council member and Croatian central bank head Boris Vujcic cautioned that unexpected changes in economic growth and inflation, along with unpredictable EU–US trade negotiations, could influence future policy directions.

On June 5, the ECB cut interest rates for the eighth time in 12 months but hinted at a potential pause in July 2025, signaling a shift toward policy stabilization as inflation approaches target levels. This move marks a transition phase from aggressive tightening to a more data-dependent strategy, underlining the ECB’s cautious optimism in navigating a complex economic environment.

Source: Reuters

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[Quick Facts]

1. Trump: Iran and Israel should reach agreement to 'Make the Middle East Great Again'.

2. Iranian President: "More decisive and severe response" if Israel continues hostilities.

3. Iranian FM: Tehran seeks no escalation unless forced.

4. BOJ reportedly to discuss halving bond purchase reduction scale next week.

5. Netanyahu-led 7-Member core group planned Iran attack.

6. U.S. consumer confidence rises in June for first time since December.

[News Details]

Trump: Iran and Israel should reach agreement to 'Make the Middle East Great Again'

Trump stated that Iran and Israel should and will reach a deal, just like he facilitated between India and Pakistan. "Likewise, we will have PEACE, soon, between Israel and Iran! Many calls and meetings now taking place. I do a lot, and never get credit for anything, but that’s OK, the PEOPLE understand. MAKE THE MIDDLE EAST GREAT AGAIN!"

Iranian President: "More decisive and severe response" if Israel continues hostilities

According to CCTV News, Iranian President Ebrahim Raisi declared at a cabinet meeting on June 15th that Iran would deliver a "more decisive and severe response" should Israel persist in hostile actions. Raisi emphasized firm opposition to Israeli aggression, noting recent events prove Israel " does not abide by any humanitarian, legal, or international rules." He further criticized U.S. and Western support for Israeli attacks, stating that just as Iran's armed forces have responded appropriately and forcefully thus far, continued hostilities would trigger an escalated reaction.

Iranian FM: Tehran seeks no escalation unless forced

Foreign Minister Araghchi stated Iran aims to avoid expanding conflict with Israel to neighboring nations unless compelled by circumstances. He condemned Israel's attack on Iran and Qatar's shared South Pars gas field as "flagrant aggression and an extremely perilous act," adding, "Dragging the conflict into the Persian Gulf region is a major strategic mistake, likely deliberate and intended to extend the war beyond Iranian territory." Per Reuters, the FM accused Israel of attempting to sabotage ongoing Iran-U.S. nuclear talks, which he said could have paved the way for an agreement. Araghchi also linked the military strikes to stalled nuclear negotiations, saying Iran had been prepared to continue talks with the United States before Friday's Israeli attack disrupted diplomatic efforts. He said: "From our perspective, (Israel's) aggression against the Islamic Republic of Iran could not have occurred without the agreement and support of the United States." Araghchi also stated that if America wishes to demonstrate goodwill, it must condemn Israel's assault on Iranian nuclear facilities.

BOJ reportedly to discuss halving bond purchase reduction scale next week

According to a Saturday report by Nikkei, the BOJ is considering halving the scale of its quarterly reduction in treasury bond purchases to 200 billion yen starting in April 2026 (currently about 400 billion yen per quarter). The proposal will be discussed at the BOJ's monetary policy meeting next Monday and Tuesday and is expected to garner support from a majority of policy committee members.

Netanyahu-led 7-Member core group planned Iran attack

The Jerusalem Post, citing anonymous sources, reported that a seven-member Israeli National Security Cabinet forum frequently convened over the past year to plan the military strike against Iran launched last Friday. The members are Prime Minister Benjamin Netanyahu, Defense Minister Israel Katz, Strategic Affairs Minister Ron Dermer, Foreign Minister Gideon Sa'ar, Finance Minister Bezalel Smotrich, National Security Minister Itamar Ben-Gvir, and Shas chairman MK Arye Deri. Sources stated that only these seven members knew of the military operation in advance, prior to Thursday night's full cabinet meeting. The group is reportedly known as the " small ministers' forum" and operated similarly to the war cabinet of the beginning of the war, the source said. Netanyahu reportedly ordered the attack as early as November last year, initially scheduled for late April, but it was delayed for "a number of reasons."

U.S. consumer confidence rises in June for first time since December

The latest survey released Friday by the University of Michigan showed its Consumer Sentiment Index surged 16% this month to a preliminary reading of 60.5. This marks its first increase since last December, rebounding from near-record lows seen in spring when heightened U.S. tariffs under the Trump administration fueled deep pessimism among consumers and businesses.

Survey director Joanne Hsu stated in a release: "Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed However, consumers still perceive wide-ranging downside risks to the economy."

[Today's Focus]

UTC+8 15:00 ECB's Nagel (Governing Council) speaks

UTC+8 18:30 ECB's Cipollone (Executive Board) speaks

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Nathaniel Wright

Stock markets in Asia moved higher at the start of trading on Monday, pulling back some of their losses from the end of last week. Oil prices surged as a conflict between Israel and Iran continued to escalate.

The Nikkei 225 index was up around 0.8% at the open, while US equity futures reversed earlier losses to edge higher. A broad gauge of Asian stocks was up around 0.2%.

Stocks had tumbled on Friday as investors reacted to reports that Israel had launched airstrikes against Iran, and the conflict between the two escalated over the weekend with a series of attacks from both sides.

A Bloomberg gauge of the dollar was slightly up in early trading Monday, while safe haven currency the Japanese yen lost ground. Brent crude rose as much as 5.5% in early trading.

Still, there is plenty of uncertainty for markets at the moment. Israel launched an attack on the giant South Pars gas field in the Persian Gulf, forcing the shut down of a production platform, after air strikes on Iran’s nuclear sites and military leadership last week.

“Markets should be prepared for a prolonged period of uncertainty,” said Wolf von Rotberg, an equity strategist at Bank J. Safra Sarasin. “Hedging against potential oil supply-chain disruptions via exposure to the energy market and adding to gold, which may see an acceleration of its structural uptrend, are the best ways to protect a portfolio against a further escalation in the Middle East.”

A major concern for investors is that the conflict leads to a prolonged disruption to the supply of oil. That could weigh on the global economy and potentially fuel a round of inflation just as many central banks pivot towards easing. The Federal Reserve and the Bank of Japan are among a raft of central banks set to announce interest rate decisions this week.

Pause Not Panic

In the region, most Middle East stock indexes dropped on Sunday. Egypt’s main gauge was the worst performer, seeing the biggest losses in more than a year on concern that a halt in Israeli gas production will cause fuel shortages. In Saudi Arabia, the Tadawul gauge’s declines were limited by Aramco, which gained on higher oil prices. Israel’s benchmark ended higher as military supplier Elbit Systems Ltd. rallied.

Source: Yahoo Finance

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Laura Fletcher

Open hostilities between Israel and Iran entered a fourth day on Monday with no sign of easing, stoking fears of a wider war in the oil-rich region.

Iran fired several waves of drones and missiles over the last 24 hours, while Israel hit the Islamic Republic’s capital, Tehran, killing another key military official.

Since Friday, 224 people have been killed in Iran, according to the government, which said most of the casualties were civilians. Iranian attacks left 14 people dead and around 400 injured, Israel’s emergency services said.

Tensions between the two countries erupted into direct conflict on Friday, when Israel launched surprise attacks on Iranian military and nuclear sites. Since then, its air campaign has underscored Israeli air superiority and exposed the constraints facing Tehran’s ability to respond effectively.

For Iran, the showdown poses a strategic dilemma. It can’t risk appearing weak, yet its retaliatory options are shrinking — and proxy forces it supports across the region have been largely deterred by Israeli action.

After having urged Iran to reach a nuclear deal on the onset of the Israeli attacks, US President Donald Trump on Sunday said Iran and Israel “should make a deal, and will make a deal.”

“We will have PEACE, soon, between Israel and Iran!” he said on Truth Social. “Many calls and meetings now taking place.”

He also said, in later comments to reporters, that “but sometimes they have to fight it out.”

There was little else suggesting an imminent breakthrough.

“We are in an existential campaign,” Israeli Prime Minister Benjamin Netanyahu said as he visited the site of a missile strike on the coastal city of Bat Yam on Sunday. “Iran will pay a very heavy price for deliberately murdering our citizens, women and children.” His defense minister said the “regime in Tehran” was now a target.

Israeli military said it hit military sites in various parts of Iran and killed the intelligence chief and other key officials of the Islamic Revolutionary Guard Corps.

The tit-for-tat weighed on financial markets, with equities in Saudi Arabia, Egypt and Qatar dropping on Sunday. The Egyptian pound weakened about 1.8% to beyond 50 per dollar in local trades. Israeli stocks rose, led by defense company Elbit Systems Ltd.

Investor caution elsewhere was also on display as trading resumed Monday in Asia, though the magnitude of the moves outside of energy remained relatively contained.

Oil futures traded around 2% higher, compounding steep gains from Friday. The dollar strengthened against all Group of 10 countries in a sign of defensive positioning. US equity index futures, meanwhile, were fractionally lower after declines of more than 1% for the S&P 500 and Nasdaq 100 on Friday.

Iran reported an explosion at one of its natural gas plants linked to the giant South Pars field on Saturday. While the country exports little gas and Israel appears not to have targeted its oil fields or crude-shipment facilities, the move risks pushing up global energy prices — which soared on Friday — even more.

The United Nations’ nuclear watchdog the International Atomic Energy Agency said multiple strikes on Iran’s uranium-conversion facility at Isfahan, south of Tehran, resulted in serious damage.

Iran’s deputy foreign minister, Kazem Gharibabadi, told state television that “we will no longer cooperate with the agency as we did before.”

According to Iran’s Fars news service, a key parliamentary committee said Tehran should no longer adhere to the nuclear Non-Proliferation Treaty, the bedrock arms-control agreement that compels signatories to accept inspections.

For now, it’s unclear if the government will take such steps.

Arch-enemies Israel and Iran have long fought a shadow war. The Jewish state’s been accused of cyber attacks and assassinating Iranian scientists, while Tehran’s funded anti-Israel militias in the Middle East.

Those tensions soared after Hamas, a Palestinian group backed by Iran, attacked Israel on Oct. 7, 2023. That led to Israel and Iran firing missiles and drones on each other twice last year.

Still, this is their most serious conflict yet. Since the fighting began, struck Iran’s nuclear and military sites using jets and drones, and killed several top commanders and atomic scientists.

Israel said it was aiming to end Iran’s ability to build a nuclear bomb, which it sees as an existential threat. Tehran maintains its atomic program has purely civilian purposes.

The attacks on Iran’s defenses seem to have given Israel air superiority over the Islamic Republic, including its capital.

The Israeli military on Sunday urged Iranians to “immediately evacuate” areas near weapons-production facilities and “not return until further notice.”

Netanyahu said his military would “strike at every site and every target of the Ayatollah regime,” while Iran’s Supreme Leader Ayatollah Ali Khamenei has said Israel will “pay a very heavy price.”

The conflict sent shockwaves through global markets last week, with investors buying haven assets such as gold.

Iran canceled its next round of nuclear talks with the US scheduled for Oman on Sunday. The same day, Trump reiterated that the US wasn’t involved in Israel’s attacks and said he could still get a nuclear deal with Iran.

He’s set to meet other leaders of the Group of Seven major economies in Canada and the conflict will be at the forefront of their talks. Israel is calling on Washington and European nations to help it attack Iran, arguing that is what’s needed to stop Tehran developing a nuclear weapon.

While the US has helped defend Israel by intercepting missiles and drones, Trump has not yet indicated if the US will join in the strikes on Iran.

For all that Israel’s already damaged Iranian atomic sites and says it will continue to strike them, many Western analysts say it needs US help to destroy some key facilities located deep underground.

Middle Eastern leaders and Russian President Vladimir Putin are voicing increasing concern that the conflict could spiral out of control. They have urged both sides to calm the situation quickly.

Germany’s Foreign Minister Johann Wadephul, speaking to local broadcaster ARD, urged regional states to talk with Iran, while Berlin continues engaging with Israel.

Germany, France and the UK are, he said from Qatar, ready to negotiate with Iran over its nuclear program.

It’s unclear if Tehran is entertaining last-resort options such as attacking tankers in the Strait of Hormuz, through which Middle Eastern states ship about a fifth of the world’s oil.

That type of action may draw the US, the world’s most powerful military, into the conflict, something Tehran has probably calculated it can’t afford, according to Bloomberg Economics analysts. That’s partly because the Iranian economy is already weak, with inflation at almost 40%, and public frustration with the government is high.