Eyes on Asian oil refinery outlooks; Trump backs down over Powell claims; US mood at record low; China FDI low; Russian oil becomes attractive; UST 10yr at 4.31%; gold eases but oil firms; NZ$1 = 58.8 USc; TWI-5 = 62.2

Here's our summary of key economic events over the weekend that affect New Zealand with news the Strait of Hormuz has now been shut for 58 days. That means the oil flow to Asian refineries is now critical, even after countries (like Japan, Kora, China) released strategic reserves. Refineries are going to start shutting down if flows from the North and South America, or Africa can't make up the difference - which is likely. The impact on prices will be severe. And of course it isn't only fuel that will be affected (supply and price), but other related products like fertiliser and plastics (essential for product protection). So watching the Urals oil price will now be of intense interest. Competition for supply will become equally intense in a Game of Thrones sort of way.

More immediately, this coming short week locally will be all about employment indicators (ahead of the following week's jobs data release) and building consents, and absorbing the big March data dump from the RBNZ.

In Australia, it will be all about their CPI on Wednesday with the headline annual rate expected to rise to 4.7% from 3.7% in March, followed by their PPI. And looking ahead to the following week's RBA review on May 5.

Internationally, the big set pieces from the Bank of Japan, the Bank of Canada, and the US Fed will dominate the week's global news, with the Fed's one likely Powell's final one before Warsh takes over. Unknown is whether Powell will remain on the committee. If he does, he will be a voting member. The ECB will also be meeting this week (and the English central bank).

In China, the key releases will be about their April PMI's both official and unofficial.

Overlaying all of this will be developments in Trump's Gulf War. But moves to end the conflict seem even more chaotic and incoherent. The Strait of Hormuz is still essentially shut. Only eighteen ships crossed in the past week, all with Iranian consent. And separately, Israel is ignoring the ceasefire agreement in Lebanon.

Meanwhile, the Trump Administration has dropped its criminal investigation into the Fed's Powell - which means the Kevin Warsh is likely to be the new Fed boss soon.

In the US, the University of Michigan’s Consumer Sentiment Index was revised up fractionally to 49.8 in April from an initial estimate. Despite the slight improvement, this remains the survey's lowest level ever for a survey that started in 1946. Which just emphasises the heavy toll the Iran conflict has taken on consumer confidence. It fell across all demographics, regardless of political affiliation, income, age, or education.

In that survey, expectations for business conditions deteriorated for both the short and long term, nearly matching levels seen a year ago when reciprocal tariffs were introduced. While the Iran ceasefire and a slight dip in petrol prices helped sentiment recover a fraction of its early-month losses, the conflict’s primary impact on consumers stems from the wide spreading price shocks. Inflation expectations surged, with year-ahead expectations jumping to 4.7% from 3.8%, the largest one-month increase since April 2025, while long-term expectations climbed to 3.5%, the highest since October 2025.

Meanwhile, US oil rigs in service fell yet again with local oil company bosses piling on the pressure to keep prices high in their domestic market. We make that the lowest level since May 2020, and prior to that, June 2016. American consumers are being taken for suckers.

Enthusiasm for coal is retreating. Not only are the major miners trying to offload their remaining mines, coal prices slipped below US$130 per ton, easing from the 17-month high of US$146.5 reached on March 20 to the lowest level in over seven weeks. China's globally significant transition to cheap solar and electric options will also undercut the oil price long term if and when the Persian Gulf situation opens back up. We are probably going through an icon transition thanks to Trump's folly. (Then again, this might be an interesting development which could give coal a new life without CO2 emissions.)

Canadian retail sales were up +3.8% in February from a year ago, and actually up on a volume (price-adjusted) basis as well. They rose again in March but that was likely only because of higher fuel costs.

Interestingly, even though they face the same pressures from importing fuel, Japan seems to have avoided an inflation spike in March. It came in there at 1.5%, little different to their February rate (1.3%) or the expected rate (1.5%). These are still at near 4 year lows.

China said its March net inflow of foreign direct investment was a modest +US13.0 bln increase from February, almost double to the even more modest flow in March 2025. For the year to date it is running at about the same levels although that is a very low standard, back to about GFC levels.

And China is subtly restricting outflows. China’s securities regulator has taken action against a domestic company for listing on a foreign exchange (the Nasdaq) without getting their approval, the first enforcement action of this kind.

The Russian central bank cut its policy rate by -50 bps overnight to 14.5%. This was the expected action.

The UST 10yr yield is now just on 4.31%, unchanged from this time Friday but up +6 bps for the week. The key 2-10 yield curve is unchanged at +53 bps. Their 1-5 curve is still at +25 bps and the 3 mth-10yr curve is at +65 bps (+1 bp). The China 10 year bond rate is now at 1.76%, up +1 bp. The Japanese 10 year bond yield is also up +1 bp at 2.44%. The Australian 10 year bond yield starts today at 4.98%, up +3 bps from Friday. The NZ Government 10 year bond rate is unchanged at 4.72%, up +1 bp for the week.

The price of gold will start today down -US$9 at US$4709/oz, but down -US$148/oz for the week. (If you buy gold, it might just be supporting a criminal supply chain.) Silver is down -US$1 at just on US$75.50/oz, down -US$6 for the week.

American oil prices are up +50 USc at just under US$94.50/bbl, while the international Brent price is als up +50 USc, and now at US$105.50/bbl. A week ago these prices were US$84.50/bbl and US$91/bbl respectively, so a big net rise. And we should note that the Russian benchmark (Urals) oil price has jumped to US$107.50/bbl

The Kiwi dollar is unchanged from Saturday at this time at 58.8 USc. That is a minor -10 bps off from this time last week. Against the Aussie we are unchanged as well at 82.2 AUc. Against the euro we are also unchanged at just on 50.2 euro cents. That all means our TWI-5 starts today at just on 62.2 which is no net change from this time last week.

The bitcoin price starts today at US$78,040 and up less than -1% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 0.8%.

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