US inflation expectations ease but SMEs turn glum; Japan improves; China excavator sales roar but car sales reverse; Iran tolling Hormuz transits; UST 10yr at 4.55%; gold and oil little-changed; AU$1 = 70.5 USc

Here's our summary of key economic events overnight that affect Australia, with news that yesterday's renewed hostilities between Israel and Iran seem to have been paused. And financial markets are reacting as though this is something permanent, a deluded reading of even recent history. It is more an excuse to bet on higher equity prices again.

Away from these irrational markets and after hitting a two and a half year high in April at 3.5%, American inflation expectations for one year ahead slipped back to 3.2% in May, according to the latest national New York Fed survey update. Given that April's actual inflation was recorded at 3.8%, this represents a sanguine view of what lies ahead.

More broadly, the same survey shows that households expect their financial situation to deteriorate.

It is not only households. In a focus on the SME sector, another national review found them deeply pessimistic about 2026 prospects.

Across the Pacific in Japan, some top-line data out yesterday for the March quarter points to improving metrics. GDP came in with a +1.8% growth rate and better than expected (+1.3%). And bank lending data shot up in May, up +5.7% and easily exceeding the expansion of +5.4% in April from a year ago.

In China, construction machinery sales were strong in May with excavator sales up +36% from year-ago levels as infrastructure projects gain momentum.

Things are not so bright for car sales in China. Sales ‌dropped -22% from a year earlier to 1.53 million vehicles in May, the eighth consecutive monthly fall. Even EV sales fell (-5%).

In Germany, they posted some negative factory order data for April. They were down -3.8% on an inflation adjusted basis from the previous month, but that came after a +4.5% rise on the same basis for March. From a year ago, also in real terms, German factory orders were up +1.6% in April. And factory sales didn't decline in April either.

In the Persian Gulf, to cross the Strait of Hormuz, the transit trickle is still low but not zero. Only ten ships crossed in the past 24 hours. It has now been 100 days since the crisis began and it seems Iran is successfully tolling the Strait, according to maritime sources.

The UST 10yr yield is now just on 4.55%, up just +1 bp for the day. The key 2-10 yield curve is now at +39 bps (-2 bps). Their 1-5 curve is now at +46 bps (+3 bps) and the 3 mth-10yr curve is at +88 bps (+2 bps). The China 10 year bond rate has settle back -3 bps to just under 1.73%. The Japanese 10 year bond yield is up +5 bps at 2.72%. The Australian 10 year bond yield starts today at 4.96%, up +5 bps from yesterday.

Wall Street has started its week slightly firmer with the S&P500 up +0.4%. The Nasdaq is up +0.9%. Overnight, European markets were mixed between London's no-change and Frankfurt's -0.6% fall. Yesterday, Tokyo closed down a sharp -3.8%. Hong Kong was down -1.2% and Shanghai was down -1.7%. Singapore also fell -1.7%. The ASX was closed for the public holiday of course.

The price of gold will start today up +US$5 from yesterday at US$4333/oz. Silver is up +US$1 at just under US$68.50/oz.

Oil prices are up +50 USc from yesterday at just on US$91/bbl in the US, while the international Brent price is now just on US$94/bbl and up +US$1. Hormuz transits are still very low despite the pricing optimism.

The Australian dollar is up +10 bps from this time yesterday at just over 70.5 USc. Against the Japanese yen we are unchanged at ¥112.9. Against the euro we are also unchanged at just on 61.1 euro cents.

The bitcoin price starts today at just on US$63,416 and up +1.9% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.5%.