Japan and China to take a break; Xi to visit Trump; China FDI still weak; Japan hikes & moves to protect the yen; US factories slow down; RBA signals more rate hikes; UST 10yr at 5.00%; gold holds, oil holds; AU$1 = 71.3 USc

Here's our summary of key economic events over the weekend that affect Australia, with news global financial markets are little-changed at near historic highs even though economic data releases seem to be still giving weaker signals.

This week will be dominated locally by the August jobs data release which is expected to show +20,000 jobs growth.

Elsewhere, China is heading into its Mid-Autumn Festival which starts on Friday and runs through to Sunday.

In Japan it will be Silver Week with markets closed there today through Wednesday.

China made no changes to their Loan Prime Rates over the weekend. Ahead this week there will be many such decisions in Switzerland (no change at 0%), Sweden (no change at 1.75%), Norway (no change at 4.25%), Mexico (no change at 6.5%), and Indonesia (no change at 5.75%).

And there will be a major diplomatic set piece this week with Chinese President Xi visiting the US on Friday and Saturday (AEST). Don't expect much other than photo opportunities, although with Trump there is always the capacity for something to go badly wrong during or after the meeting. In May, China agreed to buy 200 Boeing jets during Trump’s visit to Beijing but no actual deal has been done so far, so anything announced at these summits doesn't mean anything will actually happen.

In the US they will release durable goods order data and most observers think they will fall in August from July.

From everywhere will be getting PMI updates. And from Taiwan we will get its export order data.

All this, plus whatever happens in the Middle East wars.

Over the weekend we learned that China posted another weak foreign direct investment result for August, down -5.3% on a year-to-date basis. But the incremental flows were tiny in August. up just +US$7 bln from July and virtually unchanged from year ago levels. From two years ago there is a large drop. For all the official propaganda about how well the Chinese economy is doing, it isn't enticing investment in. A key reason these flows are so low is that sovereign wealth funds are now on the sidelines.

Japan's CPI inflation rate held at +1.9% in August as it was in July, and their core inflation rate eased to 1.7%. Both results were at the bottom end of expectations, and should have taken pressure off the Bank of Japan who were meeting as this data was released. But they have other issues weighing on them including defending the yen, and facing bullying pressure from the Trump Administration. All the same, inflation this low when the global price pressure is high is an achievement, even if Japan is only one many Asian economies that are managing to replicate that result.

As universally anticipated and earlier implied, the Bank of Japan delivered its +25 bps rate hike on Friday, taking its policy rate to 1.25% which is a 31 year high. They said they will "continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions."

Meanwhile, the Bank of Japan made a 'rate check' in currency markets on Friday ahead of their holiday, after the yen fell on the rate hike, and that has strengthened sentiment for the yen, also likely underpinned by geopolitical considerations.

Across the Pacific, US industrial production stalled in August from July, a disappointing result because it rose in July and was expected to rise again in August. It is now +1.4% higher than a year ago, not exactly an indicator of a booming economy although that is up from +1.1% in July. Almost all of this is due to data center buildout ("business equipment" was up +7.1%). In fact, production of consumer goods is now falling at a -1.1% annual rate.

Also disappointing was the US Conference Board leading indicator which edged lower in August when a small rise was anticipated and after a bigger rise was booked in July.

In Europe, the August ECB inflation expectations survey shows them at 3.0% (median) and 5.0% (average). These levels are little-changed from the June and July survey results.

Germany reported their August producer price levels overnight and that came in at +4.6%, higher than July's +3.0% and higher than the expected +4.1% rise. Of course, driving this were energy costs which were up +8.3% from a year ago, up +3.2% from July.

Here in Australia, after testimony to a parliamentary committee on Friday in which Governor Bullock made a hawkish briefing on inflation risks, economists have suddenly realised that a rate hike is the most likely outcome at the nest monetary policy review there on September 29. That will take their cash rate target up to 4.60%. And it may go higher if inflation isn't restrained at that level.

The RBA isn't angling to save the local housing market. It may well become collateral damage in the fight against rising inflation.

The UST 10yr yield is now just under 5.00%, down -1 bp from Saturday up a net +2 bps for the week. The 30 year yield is at 5.33%, unchanged but down -2 bps for the week. The key 2-10 yield curve is now at +25 bps (down -1 bp). Their 1-5 curve is now at +43 bps (-1 bp) and the 3 mth-10yr curve is at +110 bps (also down -1 bp). The China 10 year bond rate is up an unexpected +4 bps at 1.72%. The Japanese 10 year bond yield is now at 2.98%, unchanged from Saturday to be down -1 bp for the week. The Australian 10 year bond yield starts today at 5.27%, down -2 bps from Saturday but down -12 bps for the week.

The price of gold is at US$4383/oz, and just +US$2 from Saturday, down -US$33 from a week ago. Silver is at just over US$66/oz and down -50 USc but up +US$2 from a week ago

Oil prices have held at just under US$100/bbl in the US, while the international Brent price is up +50 USc at US$104/bbl. A week ago these prices were US$100.50/bbl and US$104.50/bbl respectively, so little-changed. Hormuz transits are choked right off today with just three ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and three entering for new loads (0 dark). The Red Sea activity is now only about 15 each way at the Yemen chokepoint in a sudden shift.

The Australian  dollar is unchanged from Saturday, still at 71.3 USc. Against the Japanese yen we are up +20 bps at ¥111.8. Against the euro we are still at just on 62 euro cents. 

The bitcoin price starts today at US$81,118 and little-changed from Saturday. Volatility over the past 24 hours has been low at just over +/-0.8%.