Trump's Gulf War goes bad again; Canadian data stable; China winning the oil-alternative race; ECB uncertain; BIS nervous about stablecoins; UST 10yr at 4.25%; gold eases but oil prices rise; AU$1 = 71.7 USc

Here's our summary of key economic events overnight that affect Australia with news Trump's Gulf War is back in escalation mode with the two belligerents' trading harsh rhetoric. Which of course means no oil is getting through. Kuwait has declared force majeure on its oil exports due to the US blockade.

Financial markets are reacting with caution, but it seems they remain ready to push up with yet another 'relief rally' if things calm down again.

Meanwhile. Canada's CPI inflation returned back to its 2.4% pa level where it has been for six of the past seven months and basically where it was in March 2025. But it is up from the unusual February 1.8% level, caused solely by the rise in energy prices.

And the Bank of Canada released two Q1-2026 expectation survey results. The business version reported improved sentiment, with fewer businesses saying they are being affected by trade tensions with the United States, and many expect sales growth to improve. The consumer one said they became less negative about their spending plans than in the previous quarter as downward pressure from trade tensions eased. All the same, it is still quite negative.

China has held its Loan Prime Rate (LPR) benchmarks at record lows for an 11th straight month in April 2026, matching market expectations. The one-year LPR, the benchmark for most corporate and household borrowing, was held at 3.0%, while the five-year LPR, a benchmark for mortgages, remained at 3.5%.

And China’s exports of electric vehicles, solar cells and lithium-ion batteries surged significantly in March, following a sudden spike in demand for green energy products. Their investment in 'green' non-oil alternatives is really paying off for them.

In Malaysia, their exports rose to a three-month high in March, but the rate of increase was lower at +8.3% from a year ago, compared to 10.7% in February.

In Germany, producer prices, which had been falling on a year-on-year basis since March 2025, were virtually unchanged in March (-0.2%), but they rose +2.5% from February as the oil price spike kicked in.

ECB boss Lagarde says they are uncertain how to react to the two threats of higher inflation from the oil shock, and lower growth prospects that result from that. She said the "double uncertainty about the duration of the shock and the breadth of pass-through argues for gathering more information before drawing firm conclusions for our monetary policy". But she also warned that if governments 'support' consumers with generous programs, their hand could be forced to weigh against the downstream consequences of embedded inflation. She used 2022 examples of how these problems are caused.

And the BIS is warning of the threats of stablecoins. "If widely adopted in their current form, stablecoins would pose policy challenges in areas ranging from credit provision to monetary policy, with risks to financial integrity and regulatory evasion looming large." They will be particularly threatening to the sovereignty of emerging markets, they say.

Here in Australia, Canberra launched some direct "interest free" loans for certain sectors in the economy to assist them with the very high cost of fuel, logistics, fertilisers and plastics.

And we should probably note that the zinc price has risen to its highest since 2022, and prior to the pandemic, its highest since 2018.

The UST 10yr yield is now just on 4.25%, up +1 bp from this time yesterday. The key 2-10 yield curve is now at +53 bps (-1 bp). Their 1-5 curve is at +21 bps (+1 bp) and the 3 mth-10yr curve is at +59 bps (+1 bp). The China 10 year bond rate is now at 1.76%, down -1 bp. The Japanese 10 year bond yield is down -3 bps at 2.39%. The Australian 10 year bond yield starts today at 4.93%, down -7 bps from yesterday. 

Wall Street has opened its week softer with the S&P500 down -0.2%. Overnight, European markets were even softer, down between London's -0.5% and Frankfurt's -1.2%. But yesterday Tokyo closed up +0.6%, Hong Kong was up +0.8% and Shanghai also rose +0.8%. Singapore ended +0.1% firmer, as did the ASX200.

The price of gold will start today down -US$22 at US$4807/oz. Silver is down -US$1 at US$80/oz.

American oil prices are up +US$5 at just over US$89, while the international Brent price is up +US$4.50, and now at US$95/bbl.

The IEA's latest monthly report details the quantum of the Trump Gulf War on the oil market. They say the global oil supply dropped by -10% in March to 97 million barrels per day amid attacks on energy infrastructure in the Middle East and the plunge in shipping traffic through the critical Strait of Hormuz. To mitigate the immediate impact of these supply disruptions, consumers and refiners have tapped oil inventories. However, where stocks cannot fully bridge the gap, demand has taken a hit. Most notably, Asian petrochemical producers have curtailed operating rates as feedstock supply has dried up. Households and businesses using liquefied petroleum gas have also been impacted, while flight cancellations across the Middle East and parts of Asia and Europe have led to a sharp drop in jet fuel consumption. As a result, the report forecasts that global oil demand will contract by -80,000 barrels per day this year. This contrasts with our earlier forecast, before the outbreak of hostilities, that global demand would grow by +850,000.

The Australian dollar is up +20 bps from yesterday at this time at 71.7 USc. Against the Japanese yen we are up +30 bps at ¥113.9. Against the euro we are up +10 bps at just on 60.9 euro cents. 

The bitcoin price starts today at US$75,925 and up 1.5% from this time yesterday.  Volatility over the past 24 hours has remained modest also at just on +/- 1.5%.