Financial markets sceptical of US jobs report; US budget deficit to get much worse; China faces return of deflation; Australia gets borrowing surge; UST 10yr at 4.17%; gold up, oil up; AU$1 = 71.3 USc

Here's our summary of key economic events overnight that affect Australia with news of what seems to be an outlier jobs report that has financial markets sceptical.

US non-farm payrolls were claimed to have risen +130,000 in January in delayed data released today, far above the downwardly revised +48,000 level for December and more than double analysts' collective estimates. All the gains seem to be in their healthcare sector. If it stands, it undermines the case for Fed rate cuts.

Market reactions have not been supportive, with bond yields rising, rate curves fattening, the equity markets falling, and the USD falling.

The detail of this jobs report remains 'interesting' all the same. Raw (not seasonally adjusted) data shows payrolls actually fell -2.65 mln in January from December, down -2.85 mln from November. And nested within this data are revisions for calendar 2025 now showing employment growth for 2025 revised down to +181,000 from +584,000 previously reported, implying average monthly job gains of just +15,000.

These revisions bring the official data back looking like the private ADP data - except for the January headline result. Markets expect this to be revised sharply down in coming months.

US mortgage applications fell again last week, the third consecutive dip, although not as sharp as the prior two.

There was another US Treasury bond auction overnight, this one for their ten year Note. It was well supported. The median yield came in at 4.11%, down from the 4.13% at the prior equivalent event a month ago.

Meanwhile, the US budget deficit keeps getting worse. It will grow in fiscal 2026 to -US$1.85 tln, the Congressional Budget Office said overnight. Current policy settings are worsening the country's fiscal picture amid low economic growth, particularly the enormous tax-cuts for the rich. They say the "One Big Beautiful Bill" tax cuts will add $4.7 tln to US deficits.

Across the Pacific, there is still no inflation in China, and it has turned toward deflation faster than expected. Their annual inflation rate eased to +0.2% in January from an already very low 0.8% in the previous month. This is its lowest level since October and below market estimates of 0.4%. Food prices fell for the first time in three months (-0.7% vs 1.1% in December) while non-food inflation slowed sharply too (0.4% vs 0.8%). Meanwhile, Chinese producer price deflation eased to -1.4%.

China also released January car sales data, coming in at 2.35 mln for the month. However, that was -3.3% lower than for January 2025 and -3.8% lower than the same month in 2024. Notably soft were NEV sales in January. Perhaps we are seeing signs of maturing (or exhaustion?) in this very dynamic market. It's is hugely important to China's industrial base, selling more than 34 mln units in 2025.

Here in Australia, the number of new owner-occupier new home loan commitments rose +7.5% in the December 2025 quarter compared with a year ago. On a value basis, that rose +18.9%. For housing investor loans for the same periods, the number of new loans rose +24%, and their value rose +32%.

The UST 10yr yield is now just under 4.17%, and up +2 bps from yesterday. The key 2-10 yield curve is flatter at +65 bps (+5 bps). Their 1-5 curve is also flatter at just under +27 bps (+3 bps) and the 3 mth-10yr curve is also flatter at +45 bps (down -3 bps). The China 10 year bond rate is down -1 bp at just under 1.80%. The Japanese 10 year bond yield is unchanged at 2.24%. The Australian 10 year bond yield starts today at 4.78%, down -1 bp.

Wall Street has started its Wednesday with the S&P500 up +0.1%. Overnight, European markets were mixed between London's +1.1% rise and Frankfurt's -0.4%. Yesterday Tokyo didn't trade Wednesday for Foundation Day. Hong Kong was up +0.3%. Shanghai ended it up only +0.1%. Singapore also closed up +0.4%. The ASX200 ended its Wednesday up +1.7% with CBA's gains in the top 5.

The price of gold will start today up +US$58 from yesterday at US$5075/oz. Silver is up +US$3.50 at US$84/oz and extending its new volatility.

American oil prices are up +US$1 at just on US$65/bbl, while the international Brent price is now just under US$70/bbl.

The Australian dollar is up +50 bps against the USD from yesterday, now just under 71.3 USc. Against the Japanese yen we are unchanged at ¥109.1. But against the euro we are up +50 bps at 60 euro cents.

The bitcoin price starts today at US$65,965 and down -5.1% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.