Despite good industrial production data globally, markets retreat on US equivocation for a peace deal; eyes on the RBA; city ranking updates; UST 10yr at 5.24%; gold drops and oil firms; AU$1 = 70.2 USc

Here's our summary of key economic events overnight that affect Australia, with news the rejection of the Iranian peace proposal by the US has meant diplomatic efforts to resolve the issue have lost momentum and financial markets have downgraded prospects across the board, even though the release of some recent data has generally been positive.

First, the very positive August Dallas Fed factory survey has been repeated in September even if not quite at the same level. The last time they had two successive positive reports at this level was in March 2022, and prior to the pandemic recovery, in 2018. If there is a downside in this report it is that cost pressures are rising fast and faster than prices are rising.

Fed Governor Lisa Cook said overnight that future productivity gains from AI may not be enough to offset near-term price pressures, warning this trend could drive up US inflation.

Meanwhile the US and China are working on a US$30 bln tariff reduction framework, have agreed to establish an AI dialogue, and agreed to increase flights between the two countries. But all this just seem window-dressing talk at this stage. No actual deals have been agreed. Remember the Beijing meetings in May where large airplane and ag products were announced, neither of which resulted in contracts or trade.

China's industrial profits were up +4.2% in August to just over ¥690 bln from the same month in 2025. For the eight months of 2026 they are up +15.7% so this latest period is recording a notable slowing in their growth. But it is still growth. Most observers had expected the growth rate to pick up to +18% so there is a disappointment in this data, and reflected in today's Shanghai equity markets.

Singapore's industrial production rose a sharp +15.4% in August from a year ago and driven by a +28% surge in electronics products.

India’s industrial production rose +8.0% in August from a year earlier, up from an upwardly revised +7.4% in July and well above market expectations.

Later today we will be watching the RBA's monetary policy review which is widely expected to deliver a +25 bps hike to 4.6%. Financial markets have priced that change in at a 76% chance. Note, that isn't 100%. But of course most interest will be in how these policymakers see the track from here. Some observers think it will hit 5.35% before the middle of next year before the RBA is done hiking.

Before then we should note the release of the 2026 Global Cities Index from Oxford Economics. They say the top city is New York, followed by London, Paris and then Seattle ahead of San Francisco. Sydney came in at #13 (a fall from 7th), Melbourne at #16 (a fall from 6th) and Brisbane at #36 (a fall from 23rd). The index claims to assess the strengths, weaknesses and future potential of the world’s 1,000 largest cities.

The UST 10yr yield is now just on 5.24%, up +7 bps from yesterday and a new high since June 2007. The 30 year yield is at 5.55%, up +5 bps and its highest since January 2001. The key 2-10 yield curve is now at +33 bps (up +3 bps). Their 1-5 curve is now at +52 bps (-1 bp) and the 3 mth-10yr curve is at +130 bps (up +10 bps). The China 10 year bond rate is little-changed at 1.68%. The Japanese 10 year bond yield is now at 3.11%, up +4 bps from yesterday and a new generational 30 year high. The Australian 10 year bond yield starts today at 5.44%, up +7 bps from yesterday and a 16 year high.

Wall Street has started its week on the back foot, down -0.8% in its Monday trade. The Nasdaq is down -0.9%. European markets ended their Monday trade just marginally softer. Tokyo ended yesterday down -0.7%. Hong Kong was up +0.5% but Shanghai fell -1.7%. Singapore ended up +0.3%. The ASX200 ended up +0.2%. 

The price of gold is at US$4137/oz and down -US$148 from yesterday. Silver is at just over US$61.50/oz and down -US$3.

Oil prices have risen +50 USc from yesterday to just over US$93/bbl in the US, while the international Brent price is just under US$106/bbl and up +US$1.50. Hormuz transits are rising today with 15 ships exiting over the past 24 hours, 5 of which one are tankers escorted (9 dark with transponders off) and nine entering for new loads (5 dark). The Red Sea activity is holding low at about 20 vessels in both directions at the Yemen chokepoint.

The Australian dollar is down -10 bps from yesterday, now at 70.2 USc. Against the Japanese yen we are unchanged at ¥110.5. Against the euro we are also unchanged at just on 60.7 euro cents.

The bitcoin price starts today at US$83,618 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.3%.