Hormuz situation worse; eyes on how key central banks stand up to inflation's rise; Canada and India report CPI; China reveals low bank loan growth again; UST 10yr at 4.96%; gold dips, oil rises; AU$1 = 71.4 USc

Here's our summary of key economic events overnight that affect Australia, with news the Gulf Cooperation Council meetings with Iran have been 'postponed'. So no progress there.

That means we need to prepare for more pain at the pump, and aggressive competition for global fuel supplies.

In the US a full +25 bps is now priced in for Thursday's US Fed review which would take their policy rate to 4.0%. In Japan, a full +25 bps is also priced in, taking theirs to 1.25%. If one or both don't deliver these rises where will be strong financial market reactions. And the inflation-fighting cred of both central banks will be in tatters. With no monetary policy resistance to inflation, things would get very messy and rather quickly.

And while we are reviewing these chances, we should note that markets are pricing a 75% chance of an RBA rate rise on September 29, and a 70% chance of an ECB rise on October 29. 

Meanwhile, Canada's August CPI inflation rate came in at 3.0%, the expected level and unchanged from July. Markets are currently pricing in a 75% chance of a +25 bps hike at the Bank of Canada's October 28 review.

India's CPI inflation rate was reported overnight too, coming in at 4.8% for August and as expected, but notably higher than the 4.4% July rate. Food inflation, which makes up a dominant part of this measure, came in at almost 6%. Their 5.25% policy rate is next reviewed on October 7.

China reported its August new yuan loans data overnight and it was weak again, extending the unnerving trend that started with the unexpected April fall, which was followed up with an even larger July fall. This August data was expected to be a very modest +¥400 bln expansion, but it only came in with a +¥60 bln rise. For an economy as large as China's this is very low. For example, August 2025 recorded a +¥590 bln rise and that was considered low. In August 2024 it was +¥900 bln.

The UST 10yr yield is now just on 4.96%, down -2 bps from yesterday but essentially holding its new highs. It did top 5% at one point however over the past 24 hours. The 30 year yield is at 5.33%, also down -2 bps. The key 2-10 yield curve is now at +34 bps (up +1 bp). Their 1-5 curve is now at +43 bps (-2 bps) and the 3 mth-10yr curve is at +110 bps (-2 bps). The China 10 year bond rate is unchanged at 1.69%. The Japanese 10 year bond yield is now at 3.00%, up +1 bp. The Australian 10 year bond yield starts today at 5.34%, down -2 bps from yesterday.

Wall Street has started its week weaker than expected, down -0.3% in Monday trade on the S&P500, also down -0.3% on the Nasdaq. Overnight, European markets were mixed between Lindon's +0.4% rise and Paris's -0.8% retreat. Yesterday Tokyo ended down -0.8%. Hong Kong was up +0.5% but Shanghai dipped -0.1%. Singapore was up +0.4%. The ASX ended its Monday trade up +0.1%. 

The price of gold is now at US$4310/oz, and down -US$40 from yesterday at this time. Silver is at just under US$63.50/oz and down -US$1.

Oil prices have risen +US$1.50 to US$101.50/bbl in the US, while the international Brent price is up the same to just on US$106/bbl. Hormuz transits are still very low today with just seven ships exiting over the past 24 hours, one tankers escorted (0 dark with transponders off) and ten entering for new loads (0 dark). The Red Sea activity is back to about 20 each way at the Yemen chokepoint.

The Australian dollar is down -30 bps from yesterday, now at 71.4 USc. Against the Japanese yen we are up +20 bps at ¥110.3. Against the euro we are unchanged at just on 61.8 euro cents.

The bitcoin price starts today at US$78,886 and up +1.9% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.6%.