Wars & bubbles dominate markets; eyes on the Fed, BofJ and RBA; China bank lending restrained; US sentiment stays near record lows; Swiss say no to population cap; UST 10yr at 4.49%; gold and gold little-changed; AU$1 = 70.5 USc

Here's our summary of key economic events over the weekend that affect Australia, with news the imminent deal Trump talked up on Saturday seems to have faded, mainly because Israeli attacks on Beirut have undermined the situation. But if there was to be a deal, it is sure to dominate financial markets. In the meantime, war is the standard situation.

UPDATE: Iran and the US have agreed a deal to end the conflict and open the Strait of Hormuz, according to Pakistani negotiators.

These same markets are also contending the implications of the wildly successful SpaceX float. It was full of animal spirits, FOMO, and gambling fever, and more than a few observers are seeing this as evidence of a gigantic bubble. After all it values SpaceX at 100 times its current revenues, and the business operates at a loss. At a US$2 tln 'value', to be sustainable it would need to generate after-tax profits of at least 10% or US$200 bln per year. And that is about double what Aramco-plus-Google do now, #1 and #2 combined.

In the real world, Thursday will bring the next US Fed policy meeting result, the first chaired by Kevin Warsh, Trump's replacement of Jerome Powell. Powell will still have a vote however. Most observers see them holding their key rate at 3.75%. The Fed has an inflation target of 2% for the PCE measure of inflation which is currently running at 3.8% with the CPI running at 4.2%, a three year high, with both rising sharply last time they were released. There will need to be some policy gymnastics to ignore those signals, but they may hope the fuel component reverses soon to save them. That is probably why markets think there will be no change on Thursday.

The US Fed won't be the only central bank in action this week. We will get reviews from the Bank of Japan (+25 bps to 1.00% expected), Sweden's Riskbank, Norway's Norges Bank, the Swiss National Bank, the English central bank, even in Brazil.

More importantly for us is that we will get the RBA's latest update on Tuesday, where no change from the current 4.35% is expected.

In Japan, attention will focus on the Bank of Japan's policy meeting, where it is widely expected to raise the benchmark interest rate by 25 basis points to 1% amid persistent inflation and yen weakness. If delivered, it would mark the first rate increase since December last year and the highest policy rate since 1995. The country is also set to publish trade, inflation, and machinery orders data.

In India, producer inflation is projected to rise to 9.1% in May from 8.3% in April, driven by rising energy costs. Other major releases include trade, unemployment, and passenger vehicle sales figures.

In China, investors will monitor a series of key economic releases next week, including house prices, industrial production, retail sales, fixed asset investment, and their jobless data.

After April's surprise decline, China's May new yuan loans resumed their growth in data out over the weekend, up +5.5% from a year ago with a modest +¥520 bln rise, about what was expected (+¥550 bln). Still, at that level it is the weakest May increase in eighteen years, as the usual suspect - the property market - continues to drag on bank lending.

Across the Pacific, American consumers felt the cost of living pressure ease slightly in June as petrol prices came back off their recent war highs. The University of Michigan’s Consumer Sentiment Index rose in early June, up from May’s all-time low and a better than expected recovery. It was a modest recovery all the same with improvements seen across all age, education, and political groups. Lower-income consumers, for whom fuel represents a larger share of budgets, showed a particularly strong rebound even if it is still deeply negative and its second lowest of all time.

And in Europe, Switzerland had another set of national referendums. One proposal, to cap its population at 10 mln, has been voted down.

The UST 10yr yield is now just on 4.49%, up +1 bps from Saturday, down -5 bps for the week. The key 2-10 yield curve is now at +40 bps (unchanged). Their 1-5 curve is now at +35 bps (unchanged) and the 3 mth-10yr curve is at +82 bps (+1 bp). The China 10 year bond rate little-changed at 1.74%. The Japanese 10 year bond yield is up +2 bps at 2.64%. The Australian 10 year bond yield starts today at 4.82%, up +1 bp from Saturday, down -13 bps for the week. 

The price of gold has recovered a very minor +US$4 from Saturday to US$4222/oz but down -US$102 for the week. Silver is little-changed US$67.50/oz and the same as last week at this time.

Oil prices are up +50 USc from Saturday at just under US$85/bbl in the US, while the international Brent price is now just on US$87.50/bbl. A week ago these two prices were US$90.50 and US$93/bbl respectively. Hormuz transits have dried up again. And global oil reserves are draining into uncharted territory.

The Australian dollar is down -10 bps from this time Saturday at just on 70.5 USc, up +30 bps for the week. Against the Japanese yen we are unchanged at ¥112.9. Against the euro we are holding at just on 60.9 euro cents. 

The bitcoin price starts today at US$63,655 and down a minor -0.3% from this time Saturday. That is a +5.8% rise from this time last week. Volatility over the past 24 hours has been low at just over +/- 0.8%.