Stop the Boats

0:00The US blockade of Iran is in place, and after an initial negative reaction mark, it seemed to be quite positive about it, perhaps because they think it's going to bring things to a head. Or maybe it's because who knows what to think. It's Tuesday, it's the 14th of April, 2026. It's the morning call from NAB. Good morning. Well, oil prices are higher today, up 2% for WTI, 4.1% for Brent, but both still be low 100, although Brent wasn't far from 104 earlier in this session, so it's come back down. The US dollar is down a little on the DXY, but the Aussie dollar is up 0.4%, to almost 71 US cents now, shares are basically higher in the United States, below in Europe, with the S&P up half a percent, the Nasdaq climbing 0.7%, but a 0.4% drop in the Eurostocks 50. And bond yields, well, basically low in the United States, but higher in Europe. So 10 year treasuries down two basis points, German 10 year bonds up four basis points, the same in France and much of the rest of Europe, actually.

1:01So here's NAB's re-actual. I mean, that's been quite a climb back in equities in the United States after a bad start to the session, because we had the initial reaction to the President's plan to block the state of Hormuz, which is happening now, it seems, and shares are climbing, as that's a good thing. He seems that way, yeah, good morning Phil, but I'm still trying to get to the bottom of quite the turnaround, and I guess the obvious sort of news story, if there is one that's driven this, is President Trump claiming that the right people from Iran basically have reached out on the telephone effectively, and are keen to resume peace negotiations. Now, we do take those things, those sort of claims with a pinch of salt as we've learned to, and I've not heard anything formally from Iranian officials to corroborate that, but it does seem that markets are willing to take, whether you call it the Panglossian view, that the blockade aimed, obviously, at restricting the flow of any Iranian ships

2:08coming out of Iranian ports, and obviously a lot of that oil in particular is destined for China, so perhaps the view is that this will put China in the mix in terms of putting pressure on Iran, basically, to come back to the table and try and strike a deal, because obviously they're one of the countries that will suffer most economically, either from higher prices, or simply the lack of Iranian crude, for which they've been the main buyer, so who knows, but certainly the markets are speaking, and as you say, quite a dramatic turn around in stocks, look at the Aussie dollar, which I think quite rightly was kind of the whipping boy, as we used to calling it, first thing, a Monday morning in response to the lack of any success in peace negotiations, and then the blockade announcement has touched 71 cents in the last half an hour, so it's continuing to yo-yo with risk sentiment and volatility in the oil price, where that's sort of near 10% jump that we saw at the open yesterday,

3:11it's pretty much been halved in the last couple of hours. Well, I guess what has been removed is the doubt as to whether it's going to work or not, because initially, I mean, it started at midnight our time, and the Wall Street General is saying 15 warships are in place, and there's no activity in or out of any Iranian ports, so yes, maybe this blockade's going to work, maybe that's in the market is saying, Well, that is the view at least anyway, so if the U.S. or Gulf Slates are unable to move any of oil designated for for Asia, most of the world out, then well, let's stop around doing that, and maybe that does, maybe that does bring the style mate, even though in the short term, of course, the lack of any oil transiting the straits or any other goods, fertilizers, helium, etc., is only going to add to concerns about supply shortfalls and keep up with pressure on prices, so certainly this can't be sustained for more than a couple of weeks, and then we're certainly going to be in that situation where there is going to be no availability

4:16of a Middle East product, just at a time when probably the last ships that did exit before the war have pretty much reached their destination and unloaded their cargo. Well, this slight fall we're seeing in spot pricing today, I mean, that's not happening for six months and one year out, they're less convinced, so anyway, well, we'll see what happens. Meanwhile, the Bank of Japan Governor O'Rader talk down the prospect of a rate hike at the next meeting. Yes, he certainly did, and it certainly, a message hasn't been lost on the market, it was actually his deputy governor. He may know who gave the speech because Governor UADO, as well as the great and good of the central banking and finance officials' world, heading to Washington for the spring IMF meetings, but he said that looking ahead developments in the Middle East remain uncertain, and we will closely monitor them and their potential impact on economic activity, prices and financial conditions. So following those remarks, we've seen market pricing for a quarter point cut at the April 30th meeting down to about 35% from 55%

5:20last Friday. So in currency markets, generally speaking, currencies have been firmer against the US dollar, but the yen is the exception there and it has weakened slightly. So we're very much of the view that if the BOJ decides to stand pat at the end of April, then the risks are that the dollar yen exchange rate is going to punch up through 160, and then we'll see whether or not the Moff is willing to order in the BOJ to intervene to try and keep it there, but certainly in the absence of a rate hike that has to be the way that the yen is headed. So I thought, let's have a look and see what European defence stocks are doing after the winner of the Hungarian election was announced as Peter Magyar, who got two-thirds majority. So the end of the Victor Orban era after 16 years, which is fantastic news for Europe. You would have thought, fantastic news for Ukraine. I thought maybe that will release more defence spending in Europe. It'll be good for defence stocks, but actually they are down, and I think they're down because just the sentiment,

6:22the fact that there's been a 32-hour truce over the Orthodox Easter, which seems to be holding. So perhaps there's sort of sentiment on the upside of at least the situation not escalating there. But anyway, that was an interesting result in the election, wasn't it? So I mean, it is generally good news for Europe, that's for sure. Oh, no, absolutely, yes. And if the effect of the hungry has been the single biggest thorn in the side of great EU cohesion, particularly with respect to the EU's attitude towards Russia and Ukraine. So I think that's a removal of an obstacle, and it improves the chances of the EU being able to agree, increased aid for Ukraine. So that is certainly a positive, hungry, attacking much closer to the EU and how low of other issues, although when it comes to the big sort of structural reforms that are still absolutely necessary for an improvement in the productivity and growth prospects, I'm not sure that makes that much

7:24difference, but positive. And it also brings some prospect of the Hungarian foreign effectively making overtures to join the euro, which has obviously been very much on the back seat during the what 16 years of the urban era. So definitely a positive development, but I guess in a probably in terms of, if you should say, the reactions and defence stocks are a little bit of by the rumour sell the fact, given the polls were very much indicating a close to a landslide victory for Mankja, which is now eventuated. But on another day, I think it probably would have had a much more positive impact on European markets and on the euro, but obviously everything continuing to be drowned out by developments in the war. Yeah, New Zealand PMI yesterday felt a 46th of services PMI. This is a third month of contraction. This is for March, so all the sub indices will be low 50, but you know, impacted again by them at least, obviously. Yeah, no, certainly. So what was the fall to, to 46, are well into contraction

8:27retiretory there. And hopefully, and again, look through the by the market with the, I think, the inflation re-impact of sharply higher all prices still very much dominating the price action. One other data point to note, by the way, is that China's credit numbers for March were released after our markets closed yesterday, and they do show a slowdown in both the growth of new one loans. That's loans made by the banks and broader measures of aggregate financing. I think that latter measure is down from 8.1 to 7.9 on some Bloomberg calculations I'm looking at, and one loan growth down below 6% now, 6.1 to 5.8. So that obviously comes just ahead of Thursdays, Q1 GDP numbers, and the various March activity readings. So not particularly good at home, and as far as chances of upside surprises there. Yeah, trade data as well today, ahead of. So the other data overnight US existing home sales fell 3.6% in March that they're

9:28expected to fall, but not that much. But the focus today obviously very much at home, apart from obviously what happens in the Middle East, but the now business surveys out this morning along with the Westpac consumer confidence index as well. And the RBAs, Andrew Hauser having a fireside chat today, he's in New York, but it's going to be this morning, our time very soon in fact. So it's going to be interesting to see which way he is leaning right now. Is he going to be more patient or is he still going to be a bit hawkish? No, I think it's very interesting. So say 8.15 local types, speaking to the money market years event in New York, which is always a pretty big event usually attended by, particularly by economists and market strategists. So I imagine it could be very thought provoking. So let's see, obviously the deputy governor has got form for putting the market on the scent of rate changes. So remember heading into the heading into the March meeting. So let's see what he has to say. That's interesting. And I think interest in both the Nav Business Survey, we haven't had a survey out to really cover the

10:31impact of the war. So that's going to be of interest. And as for consumer confidence, we did already have a March reading from the Westpac series. So this is for April. And if you recall, the way they broke the numbers down was to say the survey responses that came very late in the piece. So picked up the impact of the war were dramatically weaker than the responses from those who completed the survey early and really before the outset of hostilities. So something of a fall there, but the risk is that that will pick up a greater deterioration in sentiment. So a lot, I think, to digest this morning locally. And then I guess PPI is going to be the main data interest overnight from the US, obviously, which will help economists condition their forecasts for the March PCED flaters that we'll get later in the month. Yeah, after that headline, CPI, last week, 3.3% year and year. So is it going to show strengthening inflation? Is it going to get even higher? Well, that's obviously the risk, isn't it? In the near term. So yes, we've had a

11:34couple of what point fours on the month on PCE. So I'm having some early, early estimates now, but I'd be surprised if they're calling for any significant retracement from the underlying run rate for PCED flater of 3% or higher. And to Bailey from the Bank of England, also talking in New York overnight tonight, actually a fireside chat at Columbia University entitled rethinking central bank independence in an era of financial instability. That's the early hours of the morning here. But he's also a chair of the Financial Stability Board and he's just written to the G20 central bank governors warning of heightened risk for sovereign bond markets, for asset valuations and for private credit emerging in part from the conflict in the Middle East, but also on top of existing vulnerabilities like stretched asset valuations that they're worried about and levels of non bank lending. In his words, thereby amplifying the threat to financial stability and the provision of critical financial services. Wow. There you go. So he's going to be

12:39doing his job, but yes, but no, obviously that to the issues of private credit have certainly sort of been somewhat amplified haven't they in recent weeks. So, you know, and we know that central banks have been in a really sort of wanting banks to stress test their exposures there. So that sends very much in that vein, but I think from a market point of view, obviously the interest is in any steer going into the next beer we meeting, but expectations for a rate hike as soon as this month have certainly been paired. I think we're down to something like 20% having been much more fully priced in, but we do still have something close to 50 basis points of tightening priced in between now and the end of the year. So whether he wants to or to push back against that pricing or not will certainly be a point of interest. Well, we'll see what the blockade brings, day one, and whether it was a smart move or not. Maybe it was, and maybe it'll all be over soon. That would be nice, wouldn't it? But we'll watch with interest. Good to talk. Catch you soon, Ray. Thanks for all. And that is the morning call for this Tuesday morning, the 14th of April, 2026. I'm Phil Dobby from that. I'll see you again tomorrow morning.