US inflation rises on Trump's adventure consequences; global wheat & corn output to fall; Japan spending retreats; Australia gets ambitious budget; UST 10yr at 4.47%; gold soft but oil up again; AU$1 = 72.2 USc

Here's our summary of key economic events overnight that affect Australia with news oil prices are still rising as the two sides dig in in the Persian Gulf with no obvious off-ramp for this toxic situation.

And hot on the heels of what is being seen as this humiliation of the US in the Middle East, Trump is heading to Beijing where the Chinese are waiting to attempt to get the US separated from Taiwan. Their chances seem better because China seems much less reliant on the inward-looking US.

But first in the US, their April CPI inflation rose slightly more than expected, coming in 3.8% higher than year-ago levels and a three year high. Trump's war pushed fuel costs up (+17.9%). But it is pushing non-fuel costs up too with core inflation its highest in 7 months. Electricity prices are up +6.1%. (Remember, this data is from the Trump-friendly 'new management', so we should remain sceptical.)

The weekly ADP Pulse monitoring reports that the private sector added +33,000 jobs in the last week of April, keeping up the pace it has reported for the prior five weeks.

And new monitoring shows it is not a good time to be young in the US.

The NFIB Small Business Optimism Index was little-changed in April and near its 11-month low of 95.8. Analysts had expected a small improvement, but it was not to be with survey respondents concerned about rising inflation, and affordability stress on their customers.

Overall US household debt was basically steady in Q1-2026 according to the latest update.

But their Federal Government debt is increasing in cost and at a faster face. The overnight auction for their ten-year bonds came in at 4.41% median yield, up from 4.23% at the prior equivalent event a month ago.

The May USDA WASDE report exposes the risks to American agriculture from creeping changes to their climate. They now concede that the US wheat crop will be sharply lower this coming season. Reductions from the EU, Argentina, and Australia are being forecast too. Corn production is likely to be lower too, although that is off this year's record harvests.

All this pressure probably means there will be no US Fed rate cuts for the foreseeable future. If there are any movements, rises are the more likely.

Across the Pacific, Japanese household spending turned worryingly lower in March as inflation started to bite and their households turned risk-averse. They are saving more. Household spending there fell -2.9% in March, much more than the -1.8% drop in February and below the expected -1.3% retreat. This is the fourth straight decrease and the largest.

India's CPI inflation rate inched up to 3.5% in April from March's 3.4%, not the big rise (to 3.8%) that was anticipated by market watchers.

In Germany, their ZEW Indicator of Economic Sentiment was expected to get more negative in May that in April, but in fact it got less negative, which was a market surprise. Economic expectations are brightening, they say.

Here in Australia, the government released a fairly ambitious Budget overnight, doing more needed reform than anticipated. But it is still a budget in deficit, even if less so. With some unusual bravery, they are tackling stubborn policy areas and will no doubt have to use some political capital to do so. Redistribution pain will bring howls from the usual suspects at the top end of the wealth spectrum. They have been aided by stronger than expected starting point from tax flows from commodities and corporate good health. Here is one less-partisan analysis.

But accelerating cost pressures are squeezing margins and demand is cooling, with the latest NAB Monthly Business Survey signaling a tougher operating environment for Australian businesses. This April survey shows purchase cost growth lifted sharply to +4.5% in April, outpacing product price growth at +1.8%. Business conditions fell while confidence marginally but it is still deeply negative (in fact, its worst since the pandemic). Those surveyed reported that forward orders fell further in April to be down sharply since February and giving up all the gradual gains achieved over the past year. Only mining orders rose and to be fair these were outsized gains in that sector. (Later today, we expect to get the Westpac consumer sentiment survey results.)

The UST 10yr yield is now just on 4.47%, up another +6 bps from this time yesterday. The key 2-10 yield curve is now at +46 bps (-1 bp). Their 1-5 curve is now at +33 bps (+3 bps) and the 3 mth-10yr curve is at +79 bps (up +4 bps). The China 10 year bond rate is now at 1.75%, down -1 bps from yesterday. The Japanese 10 year bond yield is up +5 bps at 2.56% and a new 29 year high. The Australian 10 year bond yield starts today at 5.08%, up +6 bps from yesterday. 

Wall Street lower today with the S&P500 down -0.2%. Overnight, European markets were mixed between London's no-changed and Frankfurt's -1.6% drop. Tokyo ended its Tuesday session up +0.5%. Hong Kong was down -0.2% with Shanghai down the same. Singapore was up +0.1%. The ASX200 ended down -0.4%.

The price of gold will start today down -US$44 at US$4678/oz. Silver is down -50 USc at just under US$85/oz.

American oil prices are up another +US$3 at just over US$101.50/bbl, while the international Brent price is at just over US$107.50/bbl, also up +US$3.

The Australian dollar is down -10 bps from yesterday at this time at 72.2 USc. Against the Japanese yen we are unchanged at ¥113.9. Against the euro we are up +10 bps at just under 61.6 euro cents.

The bitcoin price starts today at US$80,465 and down -1.9% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.5%.