Here's our summary of key economic events overnight that affect New Zealand 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 will be interesting to watch the release of the Tesla financial update later this morning. 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.
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.
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 4.29%, little-changed 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. The NZ Government 10 year bond rate up +5 bps at 4.70%, a 'normal' level over the past three years.
Wall Street has opened its Wednesday trade with the S&P500 up +0.8% in a minor 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 NZX50 rose a very modest +0.1%, again.
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 Kiwi dollar is up +10 bps from yesterday at this time at 59.1 USc. Against the Aussie we are up also +10 bps at 82.5 AUc. Against the euro we are up +20 bps at just on 50.4 euro cents. That all means our TWI-5 starts today up +10 bps from yesterday at just on 62.5.
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%.
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24 Comments
Yeah seems not that open
Moodys downgrades NZ outlook
that was very predictable
In old, but still effective lingo - a Mexican standoff.
With all their assets I cannot see why the USN is not working to clear the other side of the strait of the threatened mines? Iran is currently forcing any ships who try to pass through the strait to sail close to the Iranian side, through their territorial waters. Researching why; apparently the IRGC has seeded the other side with mines. To win this stand off, the USN should be working to clear the mines, if they are there.
Mine clearing efforts started earlier this month, but the Pentagon warned it could take up to six months to clear. Besides, this isn't the Department of Clearing Mines.
This is the Department of War
Accurately, it would be the Department of Clearing Theirs
Would suggest a strike on a US Navy vessel, severe damage and casualties, will not be sellable to most American people . Guess the US is starting to realise off shore from Iran is a lot different to being off shore from Venezuela.
Not actually knowing anything about the logistics of mine clearing makes me eminently qualified to comment.
Id surmise that mine clearing requires slow and deliberate movement of the vessel making it a sitting duck for the Iranians, (with their non existent arsenal of course ,having been obliterated).
You hit the nail on the head
But don't mistake 90% of ballistic and cruise missiles capacity having been destroyed for anti ship missiles having been destroyed as well
Not to mention drones. They're flying lawn motors with bombs attached, have some 200km/h top speed or more, fly under the radar and have ranges that surpass 1,000km
Imagine trying to secure some 50 km West of Hokitika where you can be attacked by a drone launched from anywhere in the South Island
Oh, there are USVs as well (boat drones) that need to be taken care of
It takes one of the above to hit the target and the whole insurance industry loses its marbles
True, but the strait is 24 miles wide and the purportedly mined area is on the Oman side, forcing ships to sail close to Iran. Clear the mines, open shipping lanes on the western side of the strait and it becomes a lot harder for Iran to control the traffic.
There will need to be some form of protective cover, and drones could be used to clear mines too.
Murray, you said... "To win this stand off, the USN should be working to clear the mines, if they are there."
As Larry Johnston, ex CIA Intelligence, and US Lt Col Daniel Davis explain...
The Pentagon is Out of Military Moves in Iran... period.
Short of going nuclear, the US and Israel have lost this war.
https://www.youtube.com/watch?v=_9yuyaDBKHw
Agreed Colin. US has a new war aim that wasn’t an issue before launching Operation Epic Fury - getting the Strait of Hormuz opened.
It’s an unquestionable loss, however you want to spin it.
Now I fear Israel is going to continue to do everything they can to keep the Americans in this, providing they can handle the retaliation
they lost it long before they began dropping bombs Colin. Anyone with a working brain cell could have figured it was a losing proposition.
But the strait has been a problem area of vulnerability for a long time. Fixing that should be a priority for everyone. The IRGC has become a specialist in asymmetric warfare and that makes every ship transiting vulnerable to their mood swings. There needs to be a sloution or the other gulf states lose their income streams and become vulnerable to extremist manipulations.
You said, Murray... "But the strait has been a problem area of vulnerability for a long time."
Well, yes, but apart from when the West is causing wars in the region to facilitate them stealing and controlling its resources, there has not been a problem.
IMO, Iran has been remarkably restrained in their conduct when it comes to overseeing passage through this vital waterway situated right in the middle of their backyard.
This is particularly noteworthy in the context that much of the traffic rocking through the Strait, on a regular basis, were party to the illegal sanctions placed on Iran and that have cost them more than $1 trillion over their duration.
The "vulnerability" that you frame from a Western perspective wouldn't be an issue if we hadn't seen more than a century of foreign meddling. When another country attacks Iran, especially in an internationally recognised illegal war of aggression, then the rules change completely.
Trump has even threatened to eliminate their entire civilisation in a very thinly veiled nuclear strong-arm coercive warning.
Iran was attacked by the US in an undeclared illegal war of aggression - they have also been attacked by Israel in a coordinated fashion.
And so there is a coordinated conspiracy between two governments. The Israelis and the Americans conspired to wage an undeclared war of aggression against a UN member state - a sovereign state, the Islamic Republic of Iran.
Under international law, this has to be resolved, and so precedent says that there has to be some type of accord or treaty to end this war.
Until that happens, Iran is perfectly within its rights to exercise control over the situation within its territorial waters and over what it deems to be a direct threat to its national security.
Given that Trump has repeatedly threatened to wreck their economy, and even to genocide their entire civilisation, I can only admire their amazing patience.
Imagine the boot on the other foot, and Iran had murdered Trump along with half of his administration, whilst at the same time pretending to be negotiating a peace deal in good faith - and if it was now threatening to bomb the entire US back into the Stone Age?
I wonder what sort of restraint War$hington would have demonstrated under those circumstances... rhetorical question.
The US army is the best army in the world at fighting an opponent with similar equipment, but poorer
The one little detail they have to iron out is that they're not equipped to fight the war they're fighting: staving off thousands of cheap drones and missiles
It's exactly the conundrum of the Russians 4 years ago, brilliantly explained in the "All bling, no basics" Perun video https://www.youtube.com/watch?v=KJkmcNjh_bg
I've never understood why people buy 13.hkWh of battery storage from Telsa for $15K, ,when you can get the same capacity from any number of suppliers (e.g. DAH Solar via tradedepot) for less than 4K
Plebs like donating cash to Dr Evil I guess?
Why do people pay magnitudes more for a t shirt or handbag with a particular label upon it?
For a while it was the only option when bundled with solar panels from the more reputable suppliers/installers (like Harrisons).
Also, do the others have an inverter, a gateway and an app to control and report as part of the package? These things add to the attractiveness of the powerwall.
Global economy on life support as furniture sold off.
"Inventories in the US Strategic Petroleum Reserve (SPR) continue to draw down to alleviate the pressure on prices. For week ending April 17, 4.2 million barrels left the SPR, bringing the new total to 405 million barrels. This is 320.5 million barrels shy of maximum capacity."
https://oilprice.com/Latest-Energy-News/World-News/US-Crude-Oil-Oil-Pro…
Then there's always this to consider.
"A 2010 study concluded there was a significant mismatch in design and use of the storage caverns. Instead of the initial estimated five large drawdown cycles, a large number of small drawdowns occurred over the previous 20 years. From 1996 through 2014, there were 14 instances of oil removals less than 10 million barrels. These multiple drawdowns have caused cavern deformation, salt falls and other damage to the cavern integrity."
https://www.aapg.org/news-and-media/details/spheres-of-influence/articl…).
The anti-vaxxers currently running the CDC have blocked a report showing the COVID vaccine reduced emergency department visits and hospitalisations by roughly half:
https://www.reuters.com/business/healthcare-pharmaceuticals/us-cdc-will…
Another step on the path away from evidence-based medicine, and towards 'vibe' and influencer-based decision making that will lead to unnecessary deaths.
The new US Navy Secretary:
During a campaign debate, he criticized the military's diversity, equity and inclusion initiatives.
Speaking about Navy recruiting during the debate, Cao said: "What we need is alpha males and alpha females who are going to rip out their own guts, eat them and ask for seconds. Those are the young men and women that are going to win wars,"
Yes, eating your own guts is a great way to ward off drones and reopen the Strait of Hormuz. I've long known that eating the hair from a leprechauns legs can protect you from ballistic missiles too.
Inspired by the Judean People's Front crack suicide squad from the Life of Brian, perhaps?
It was the Judean People's Front
get it right
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