US inflation expectations stable. US forced to subsidise farmers. Japan GDP shrinks. China exports zoom, surplus tops U$1 tln. German industrial production rises

Here's our summary of key economic events overnight that affect Australia, with news long term bond yields are on the move higher again with the UST 10yr at a 4 month high, but the Japanese yen is now at a 27 year high. The Australian equivalent is at a 2 year high and threatening a 14 year benchmark.

In the US, the top-line survey of inflation expectations seems stable at a highish 3.2% for the year ahead, 3.0% for 5 years ahead. But within that are some signals that have garnered attention. Expectations for food rose to 5.9%, petrol climbed to 4.1%, medical care surged to 10.1% (the highest since January 2014), college education increased to 8.4%, and rent jumped to 8.3%. The main reason the overall lid remained is that house price expectations fell. The survey indicated that consumers expect a worsening financial situation.

The failure of the Trump Administration to get a deal out of China for agricultural exports is seeing them scrambling to support their farmers with direct subsidies.

There was another US Treasury auction today, the ever-popular 3 year Note. But offer volumes fell more than -7% for this event. It delivered a median yield of 3.57%, little-changed from the 3.54% at the prior equivalent event a month ago.

In Japan, a powerful earthquake with a preliminary magnitude of 7.5 struck northeastern Japan late Monday night, with a tsunami warning for coastal areas of Hokkaido issued.

Japan’s GDP contracted -0.6% in Q3 2025 from Q2, a larger fall than the flash estimate of a -0.4% decline and market forecasts for a -0.5% drop. The latest figure followed a downwardly revised -0.5% growth in Q2 and marked the first quarterly contraction since Q1 2024, with business spending slipping for the first time in three quarters.

In China, they released November trade data overnight and their exports rose by +5.9% from a year ago to an eleven-month high, much better than the expected +3.8% rise and recovering from the -1.1% fall in October. There was a notable surge in exports to non-US markets. A lower than expected rise in imports delivered at trade balance exceeding +US$110 for the month and extending their rise that started with the Trump challenge in late 2024. Separation from the US has delivered a rising export dividend for China. For the eleven months of 2025 so far, the Chinese trade surplus has now exceeded US$1 tln.

Over all of 2025 to the US, their exports fell -18% and their imports fell -13%. To Australia, China's exports are up +8% while imports are down -8%. 

As good as these export numbers are for China, they are also going into debt at an equally impressive rate. China’s central government will likely issue more than CNY12 tln (US$1.7 tln) of new debt in 2026, with a fiscal deficit ratio of at least 4%. There is alarm in some quarters as the expansionist policies get the official tick.

In Europe, German industrial production rose +1.8% in October from September, sharply outperforming market expectations for a -0.4% decline. It was the strongest monthly gain since March. Year on year it is up +0.8%. The Germans measure this metric in real, inflation-adjusted terms.

The UST 10yr yield is now at 4.17%, up +3 bps from this time yesterday. The key 2-10 yield curve is still at +58 bps. Their 1-5 curve is now positive by +15 bps and the 3 mth-10yr curve is positive by +45 bps. The China 10 year bond rate is unchanged at 1.86%. The Japanese 10 year bond yield is up another +3 bps to 1.98%. The Australian 10 year bond yield starts today at 4.73%, up +4 bps. 

Wall Street has started its week with the S&P500 down -0.4% in Monday trade. Overnight, European markets were little-changed between London's -0.2% dip and Frankfurt's +0.1% rise. Yesterday, Tokyo ended its Monday trade up +0.2%. Hong Kong was down a sharpish -1.2% however, while Shanghai ended up +0.5%. Singapore fell -0.5%. The ASX200 ended its Monday with a very minor -0.1% dip.

The price of gold will start today at US$4191/oz, and down -US$6 from yesterday.

American oil prices are down -US$1 at just over US$59/bbl, while the international Brent price is just under US$63/bbl.

The Australian dollar is marginally softer from yesterday, now at just under 66.3 USc, down -10 bps. Against the Japanese yen though we are up +20 bps at just on ¥103.2. Against the euro we are unchanged at 57 euro cents.

The bitcoin price starts today at US$89,846 and up +0.4% from this time yesterday. Volatility over the past 24 hours has been modest, at just over +/- 1.6%.