US struggles to smooth over Trump mistakes; enormous China current account surplus; China now dominates aluminium markets; air cargo activity surges; UST 10yr at 4.35%; gold and oil rise; AU$1 = 68.6 USc

Here's our summary of key economic events overnight that affect Australia with news we are now in week five of a completely preventable global crisis.

But first we should note that we are now touching up against the end of the month, and end of the first quarter. This is when fund managers and other large investors lock in their results for upcoming reporting. So there is a lot of position squaring activity at present, and that tends to skew financial market activity.

But the fundamental drivers - economic activity, inflation, geopolitical events - are not stopping, so there is still substantial market reaction to those. That is driving serious risk aversion. And markets watch key policymakers too.

Fed boss Powell was out speaking today to an economics class at Harvard. In answer to questions, he said distress in the private credit market looks more like a correction and not like a broader systemic event to them. He also said their would regard the inflation threats from the war on Iran as transitory, but that their patience was limited - given the fact that US inflation has been above 2% for five years now.

The New York Fed boss Williams was also talking, and he seemed now more concerned with the jobs market, saying a rate cut is a real possibility if it weakens further.

Meanwhile, the Dallas Fed's factory survey was a touch weaker in March than February on slowing new order growth. But their company outlook index dropped into negative territory and their outlook uncertainty index leapt.

In China, they reported an enormous current account surplus of almost +US$¼ tln in Q4-2025, almost US$¾ tln for the year, one that is globally destabilising. Also we should note that countries that signed up to the Chinese Belt & Road system are finding that they are on the short end of that deal. The two items are likely related.

India's factory production was up +6.0% in February from a year ago, better than expected.

In Europe, their Eurozone Economic Sentiment Indicator dropped in March on rising inflation expectations tied to the Middle East conflict.

So it will be no surprise to learn that German inflation jumped in March, driven by fast-rising fuel costs to its highest in over two years (January 2024) at 2.7%.

We should note that the aluminium price is on a sharp move higher again, approaching its mid-March post-pandemic record high. With Middle-East production damaged or out of service because they can't ship, China's dominance of the aluminium market seems likely now.

And air cargo demand surged in February, not only in response to Chinese New Year demand, but businesses seemed to rush the sector to get goods shifted fearing the Middle East situation. Sharply rising fuel costs, fuel scarcity in parts of the world, and the severe disruption to key cargo hubs in the Gulf are major shifts. February air cargo activity was up +11% from a year earlier with the Asia/Pacific region up +13.6%. But how this played out in March, and will play out in subsequent month, are likely to be a highly volatile mix of 'urgency' restrained by sharply rising costs.

It is worth noting too that concerns are rising that the oil and supply-chain problems are almost certainly going to provoke a global food crisis at some stage. Not only due to sharply higher costs, but sharply lower production at the same time. But that is yet to hit us all.

The UST 10yr yield is now just on 4.35%, down -9 bps from yesterday. The key 2-10 yield curve is marginally flatter at +51 bps (-1 bp). Their 1-5 curve is much flatter at +25 bps (-5 bps) and the 3 mth-10yr curve is now very much flatter at +63 bps (-12 bps). The China 10 year bond rate is little-changed at 1.81%. The Japanese 10 year bond yield is down -2 bps at 2.36%. The Australian 10 year bond yield starts today at 5.02%, down -9 bps from yesterday.

Wall Street started its Monday with the S&P500 up +0.7% but has since weakened and ended in negative territory, down -0.4%. Trump's latest bluster isn't helping. Overnight European markets all rose between Paris's +0.9% and London's +1.6%. Yesterday Tokyo closed its Monday session down -2.8%. Hong Kong was down -0.8% but Shanghai was up +0.2%. Singapore was unchanged. The ASX200 ended its Monday session down -0.6%. 

The price of gold will start today up +US$54 from yesterday, now at US$4547/oz. Silver is up +US$1 to US$70.50/oz.

American oil prices are up another +US$3 at just over US$102.50/bbl, while the international Brent price is -50 USc lower at just on US$112/bbl. Ship transit traffic in the Strait of Hormuz seem to be slowly returning, but on Iran's terms.

The Australian dollar is unchanged against the USD from yesterday, now at 68.6 USc. Against the Japanese yen we are down -30 bps at ¥109.3. Against the euro we are up +20 bps at just on 59.8 euro cents. 

The bitcoin price starts today at US$67,359 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.5%.