The Axis attack on 1 July 1942 at El Alamein

The Axis attack did occur on 1 July 1942, although the Axis forces were very tired. The German Africa Corps had been held up due to a variety of reasons. The ground was very difficult, causing "heavy going" as they said. There was also a dust storm causing problems. On top of all that, the British were able to launch a substantial air attack on the attacking forces. The Africa Corps had not expected to find any units at Deir el Shein. Deir el Shein turned out to have the 18th Indian Brigade and nine Matilda tanks. A fierce, eight-hour battle was fought against the Indians, who were unsupported, as was the typical British situation. The Germans were able to "overrun" the brigade, which was "virtually destroyed". The battle had slowed down the German advance and they were reduced from 55 tanks down to 37 tanks still runners.
During the afternoon on 1 July, the South African Division artillery fired on the 90th Light Division. The initial German response was to "dig in". By 3:30pm, the Germans were losing their nerve and "many men fled". The 90th Light Division diary had an entry saying that they had stopped what could have turned into a rout. The artillery fire had brought the division's advance to a stop. By early on 2 July, Rommel called off the southern move by the Africa Corps and ordered them to the north to support the 90th Light Division attack on the El Alamein Box.
General Auchinleck took the 18th Indian Brigade loss in stride. He had already decided to narrow the front to a size more easily defended. He thought that they should pull out of Naqb Abu Dweis and Bab el Qattara. During the night of 1 July to 2 July, General Auchinleck ordered the 1st Armoured Division and the New Zealand Division to be ready for a counter-attack from the south.
In the north, the 90th Light Division made a half-hearted attack on the South African troops. The morale of the 90th Light Division was so bad that they never seriously attacked. The Italians of X Corps had also been ordered to attack, further north, but they were  also ineffective and probably dispirited. By the middle of 2 July, General Auchinleck had decided to hit the enemy "flank and rear" with XIII Corps. That caused a tank battle between the 1st Armoured Division and the Africa Corps. The battle lasted until night and was "inconclusive". The Italian armor was in the south but air attack kept them from making any moves. This is based on the account in Vol.III of the Australian Official History.