Persian Gulf standoff turns childish; US petrol stocks drop; eyes on Tesla results; EU consumer sentiment dives; BHP back selling to China but in yuan; UST 10yr at 4.31%; gold and oil prices rise; AU$1 = 70.6 USc

Here's our summary of key economic events overnight that affect Australia with news Iran has attacked three ships in Strait of Hormuz and detaining two others so far after Trump indefinitely extended is ceasefire. It is a standoff over Tehran’s closing of the strait and Washington’s blockade that raises doubts about whether talks would actually resume.

The Pakistani mediators are not happy about the disheveled US approach to it all.

In the US, mortgage applications rose last week as mortgage rates dipped slightly. But that was enough to trigger a good rise in both the new purchase activity, and the refinance activity. Modest to be sure, but positive all the same.

American petrol inventories dropped by -4.6 mln barrels last week (even as US crude oil stocks rose unexpectedly), and this followed a -6.3 mln barrels fall the previous week. This was the tenth consecutive weekly fall and way more than the expected -1.5 mln barrels retreat. US petrol prices eased marginally from a week ago - they have stopped rising on a daily basis - but they are still up +35% from the start of the Trump Gulf War. That rise is now embedding.

Today's US Treasury 20yr bond auction brought regular modest demand, if softish, but the median yield rose to 4.84% from 4.77% at the prior equivalent event a month ago. There were similar 20 year German bund auctions overnight too, and yields on them rose similarly although they run about -150 bps lower.

It is interesting to get the Tesla Q1-2026 financial update. Their recent production has far outstripped sales, and much lower cost Chinese alternatives are causing them real headaches. Their battery business is also under extreme pressure. But they beat analyst profit expectations and their stock rose.

In another odd corporate transaction, it seems the Trump Administration is quite comfortable using taxpayer money 'rescuing' (nationalising) failing airlines, and maybe other struggling businesses. (Apparently the government knows best and can do a better job running these businesses than the private sector. The 'deep state' at work.)

The April EU consumer sentiment survey revealed a sharp fall, suddenly back to levels they were at early 2023. It is a crash reminiscent of the initial pandemic reaction, one that took years to recover from.

Here in Australia, iron ore major BHP has responded to Chinese state pressure, agreeing to denominate its contracts in Chinese yuan rather than the USD, probably a significant break that will speed the internationalisation of the Chinese currency. It was the 'price' of a month's long standoff.

Sulphur and urea have eased marginally over the past week from record highs, but to be fair the fall-backs are not especially meaningful.

The UST 10yr yield is now just on 4.31%, up +2 bps from this time yesterday. The key 2-10 yield curve is now at +50 bps (-1 bp). Their 1-5 curve is at +23 bps (unchanged) and the 3 mth-10yr curve is at +65 bps (unchanged). The China 10 year bond rate is now at 1.73%, down -2 bps. The Japanese 10 year bond yield is up +1 bp at 2.40%. The Australian 10 year bond yield starts today at 4.96%, also up +1 bp from yesterday.

Wall Street has opened its Wednesday trade with the S&P500 up +1.1% in a relief rally. Overnight, European markets were softer, down between Paris's -1.0% and London's -0.2%. But yesterday Tokyo closed up +0.4%, although Hong Kong fell -1.2% Shanghai rose +0.5%. Singapore ended -0.2% softer. The ASX200 closed down -1.2%.

The price of gold will start today up +US$21 at US$4736/oz. Silver is up US$1.50 at US$8/oz.

American oil prices are up +US$3 at just over US$92.50/bbl, while the international Brent price is up +US$3.50, and now at US$101.50/bbl.

The Australian dollar is unchanged from yesterday at this time at 70.6 USc. Against the Japanese yen we are up +20 bps at ¥114.2. Against the euro we are up +10 bps at just on 61.1 euro cents.

The bitcoin price starts today at US$79,034 and up +4.3% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.1%.