Stagflation fears loom large; dairy price rise; US sentiment drops; China focuses on next 5-year plan; EU inflation up; Australia current account deficit widens; UST 10yr at 4.06%; gold drops while oil jumps; AU$1 = 70.1 USc

Here's our summary of key economic events overnight that affect Australia with news inflation spike fear is gripping financial markets today as equities fall, bond yields rise, some key commodities like the oil price is spiking, and there is a sharp move toward perceptions of financial 'safety' which is hurting commodity-based currencies like the AUD.

The fear is based on seeing central banks hiking policy rates to weight against a looming inflation spike, just when economic activity is likely to weaken sharply on the consequences of Trump's wars. The fear is stagflation on steroids.

It is affecting investors from New York to Shanghai. And now Trump is blaming friends (Spain, the UK) for not being supportive enough and threatening new trade restrictions.

But it isn't universal - yet anyway.

First up in the US overnight, the February US Logistics Manager survey showed pressure on their system with rising inventories and strained capacity.

Meanwhile the RealClearMarkets/TIPP Economic Optimism Index retreated in March from February, and delivering a decline when an rise was expected. This is largely because personal investor sentiment fell sharply as confidence in US government economic policies slipped away.

In the Middle East, only one tanker, a Singaporean one, has managed to traverse the Straits of Hormuz in the past day. It's essentially closed still. Insurers have cancelled policies. Now the US says it is considering providing that, at taxpayer expense. The costs of war are broad.

The scheduled meeting between Chinese President Xi and US President Trump is still on for the end of March. Given the unhinged policy-making by the US, it is a lottery on how this will play out. Trump will undoubtedly look for short-term, face-savings wins. Xi will be playing a much longer game.

Meanwhile, China is putting the finishing touches to its latest five-year plan. We are approaching the rubber-stamp set piece.

In Europe, the Euro area inflation rate rose to 1.9% in February, up from 1.7% in January. Although minor it was an unexpected rise. And that pushed core inflation up to 2.4% in February. Given the global rise in uncertainty, and the US/Israel/Iran crisis pushing up their energy costs very sharply in the past few days, these inflation levels are unlikely to stay this low in March, giving the ECB a new headache.

Here in Australia, total residential building consents fell at a -7.2% rate in January, following a -30.7% drop in December. Year on year it is down -15.7%, the largest fall since late 2023. This may have ended the rising trend of approvals that started in July 2024. But there were 9,900 detached houses approved for construction nationally, a 41 month high. The big shortfall is in intensive housing.

Australia’s current account balance fell by -AU$2.8 bln in December 2025 to a deficit of -AU$21.1 bln. This is its second consecutive fall, driven by a net primary income deficit widening. This will take -0.1 percentage points from the December 2025 GDP result which will be released tomorrow.

In public comments yesterday, the RBA governor acknowledged the sudden increase in uncertainty in the global economy, on top of already high uncertainty from Trump's abandonment of an international rules-based order. She said "a supply shock could, for example, add to inflation pressures. And the potential implications for inflation expectations are something we are very alert to. But at the same time, a prolonged impact on energy markets could have adverse effects on global economic activity and result in downward pressure on inflation. It is not obvious how this might play out." Westpac says Brent crude at US$100 is entirely possible in the coming few weeks.

The UST 10yr yield is now just on 4.06%, unchanged from yesterday, although it did get up to 4.11% in between. The key 2-10 yield curve is soft at +55 bps (-2 bps). Their 1-5 curve is still just on +8 bps (unchanged) and the 3 mth-10yr curve is now at just on +36 bps (also unchanged). The China 10 year bond rate is down -4 bps at just on 1.79%. The Japanese 10 year bond yield is up +7 bps at 2.13%. The Australian 10 year bond yield starts today at 4.83%, up a SHARP +18 bps from yesterday.

Wall Street has opened Tuesday trade with the S&P500 down -1.2%. Overnight European markets were down between London's -2.7% and Frankfurt's -3.6%. Yesterday Tokyo ended its Tuesday session down -3.1%. Hong Kong was down -1.1% and Shanghai was down -1.4%. Singapore was an outlier, rising +0.5%. The ASX200 ended its Tuesday session down -1.3%. 

The price of gold will start today down -US$179 from yesterday at US$5117/oz. Silver is down another -US$4 at US$83/oz today.

American oil prices are up +US$5.50 at just under US$76/bbl, while the international Brent price is up the same to be now just over US$82.50/bbl. These at +7.5% rises. A collapse in Iranian oil production could have quite deep impacts.

The Australian dollar is down -90 bps against the USD from yesterday, now just on 70.1 USc. Against the Japanese yen we are down -120 bps at ¥110.7. Against the euro we are down -20 bps at 60.5 euro cents. 

The bitcoin price starts today at US$67,575 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.