Here's our summary of key economic events overnight that affect Australia with news commodity markets are signaling more intense stress with copper and sulfur jumping to new all-time highs and aluminium jumping to near its brief pandemic spike. Tightening supply from the Middle-East standoff is driving the cost of these fundamentals up.
Today, Trump is in Beijing where heavily choreographed set pieces are play out ahead of the formal discussions. Trump got welcomed by a non-Politburo member, the first time China has done that. So far he is being treated just like any other visiting head of state, rather than the special senior welcomes by his predecessors.
And China is organising one of its tankers to exit the Strait of Hormuz in defiance of the US blockade, right at the time these meetings take place.
US mortgage applications were little-changed last week, but with this week's push higher in benchmark interest rates, they are likely to fall when reported next week.
American producer prices were up +6.0% in April from a year ago, getting a +1.4% shove in April from March. Distorted input costs from Trumps Gulf War are embedding uncompetitive pricing in American-made goods. Only the pandemic surge has been greater (also on Trump's watch.) It isn't clear right now why American producer prices are rising faster than just about everywhere else, but history will eventually explain that.
US crude oil stocks took another outsized tumble last week according to official EIA monitoring. Petrol stocks there fell sharply too. (These sharp drops are confirmed by industry data too.) The industry is raking in record profits on these lower volumes. Why the US, a net petroleum producer, is feeling the brunt of these price hikes is a classic study in oligopoly power. (And see this investigation.)
Meanwhile, UST 30yr bond yields have risen above 5% on secondary markets. Apart from the pandemic spike, this is the first time they have done so since 2007, so a two decade high. The overnight US Treasury 30 year bond auction delivered a medium yield of 4.99% (top bid 5.05%), up from 4.82% at the prior equivalent event a month ago.
And we should note that Kevin Warsh is now the Fed Chairman. But ex-boss Powell is still there. Given the Trump-induced inflation surge, he is unlikely to be able to deliver on Trump's demand for lower US interest rates.
In Canada, their central bank says they see no evidence that AI is having a material impact on their jobs market - yet, anyway. For them, the benefits are outweighing the costs.
EU industrial production rose in March from February, but that wasn't enough to counter the outlier faster rise a year ago, so it ended down -1.0% year-on-year. An outsized fall in Germany twisted these results.
In its May monthly report, OPEC cut its forecast for global oil demand growth in 2026, joining other forecasters such as the IEA in cutting expectations due to the Iran war.
Here in Australia, the wealthy are reeling after their latest Budget signaled a levelling of the tax playing field and the wind-down of concessions for wealth. To be fair, these are to be unwound over many years, but the big end of town is furious they are losing their perks. Certainly, those dependent on the property market can see an end to the gravy train.
The UST 10yr yield is now just on 4.47%, unchanged from this time yesterday. The key 2-10 yield curve is now at +48 bps (+2 bps). Their 1-5 curve is now at +34 bps (+1 bp) and the 3 mth-10yr curve is at +82 bps (up +3 bps). The China 10 year bond rate is now at 1.74%, down -1 bps from yesterday. The Japanese 10 year bond yield is up +4 bps at 2.60% and a new 29 year high. The Australian 10 year bond yield starts today at 5.07%, dipping -1 bp from yesterday. The NZ Government 10 year bond rate is up +4 bps at 4.78%.
Wall Street lower today with the S&P500 up +0.8%. Overnight, European markets were all higher between Paris's +0.4% and Frankfurt's +0.8%. Tokyo ended its Wednesday session up +0.8%. Hong Kong was up +0.2% with Shanghai up +0.7%. Singapore was up +1.2%. But the ASX200 ended down -0.5%. And the NZX50 slipped a minor -0.1% in its Wednesday trade.
The price of gold will start today up +US$12 at US$4690/oz. Silver is up +US$3 at just over US$88/oz.
American oil prices are holding up at just over US$101.50/bbl, while the international Brent price is at just over US$106/bbl, which is down -US$1.50.
The Australian dollar is up +20 bps from yesterday at this time at 72.6 USc. Against the Japanese yen we are up +40 bps at ¥114.6. Against the euro we are up +30 bps at just on 62 euro cents.
The bitcoin price starts today at US$79,447 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.7%.
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