US CPI up more than expected; Beige Book limp; US Social Security bribe; China CPI modest; China exports strong; China new bank lending recovers; UST 10yr at 5.18%; gold lower and oil firmer; AU$1 = 69.6 USc

Here's our summary of key economic events overnight that affect Australia, with news of a developing spiral of higher energy costs and higher money costs. Wall Street is recoiling at the prospects. The NZD is collateral damage.

US mortgage applications fell again last week from the week before with both new lending and refinance activity retreating equally. That extends the declines to eight of the past nine weeks and it now at its lowest level since early 2025. The benchmark 30 year mortgage  interest rates is little-changed at 7.5% but still very high and now just off its late 2023 brief peak. Prior to that you have to go back 25 years to find a rate this high.

Also higher than expected was the September US CPI inflation rate. You may recall it came in at 3.4% in August, and analysts had expected it to come in at 3.6% as the fuel cost increases bit. But it actually came in at 3.7%, its highest since May's unusual +4.2% spike, and prior to that in early 2023 and off the pandemic splurge. Yes, it was largely driven by fuel costs, but electricity prices were up +4.4% and rents up +3.2%. Many other costs were flat or lower however. Bond yields rose on the news and a Fed rate hike on October 29 is more likely now.

The October Fed Beige Book was released today, describing an economy just chugging along. Since last month, two of the twelve Federal Reserve Districts reported moderate growth in economic activity. Three Districts reported modest growth, while four reported slight growth, and three reported no significant change. It is clear that any expansion they have is from the AI buildout, but elsewhere it is absent.

Some 76 million Americans receiving Social Security benefits will see their monthly ​payments rise +3.6% in 2027, accelerating from the prior ‌year's +2.8% increase for a second straight year. Announcing this just before the November elections will lock in an even worse fiscal result in the new year.

Across the Pacific, China also released September CPI data overnight and it was expected to rise to +1.0% there from +0.8% in August. But in fact it came in at +0.9%. Their fuel costs were up +14.9%, their food costs fell -0.9%. Within that, beef prices rose +7.5% and lamb prices +6.4%. Dairy products fell -1.5%.

Things were not so tame for Chinese producer prices where were up +5.0% in September from a year ago, +1.2% from August.

They also booked a very strong export performance for September, up +36.3% from a year ago, their best non-February month ever and generating a +US$133.5 bln monthly trade surplus, easily a new record high apart from January 2025 and that rush to avoid impending US tariffs. Cars and electronics are driving the boom. Exports to ASEAN nations have been strong. To the US, exports climbed +39.6%. Trump's containment adventure is a failure - Americans are just paying his tariffs while buying record volumes. Tariffs certainly are not hurting the Chinese, just as most analysts knew. Tariffs are a tax on yourself.

And for the first time in a while, China saw new bank lending rise more than expected, up just over +¥1 tln from August (+AU$215 bln). The rise was modest in their context, and less than in any September in the past ten years, but is was a recent improvement and that will encourage Beijing.

Singapore and Malaysia are suffering under a severe haze emergency from Indonesia's annual illegal burning operations. This year it is the worst on record. El Nino conditions aren't helping.

OPEC's monthly report released overnight reports very weak demand growth for oil, (+0.2% from a year ago) but they bravely see it recovering in 2027 to a +2.6% expansion. From this vantage point, that look 'hopeful'.

The UST 10yr yield rose +2 bps to 5.24% before falling sharply to 5.18% in a short term defensive reaction. The 30 year yield is at 5.52%, also down a net down -4 bps. The key 2-10 yield curve is now at +39 bps (-2 bps). Their 1-5 curve is now at +51 bps (-3 bps) and the 3 mth-10yr curve is at +123 bps (-3 bps). The China 10 year bond rate is down -1 bp at 1.65%. The Japanese 10 year bond yield is now at 3.01%, down -1 bp from yesterday. The Australian 10 year bond yield starts today at 5.35%, up +5 bps from yesterday. 

Wall Street is lower today with the S&P500 down a full -1.2% and the Nasdaq down -2.0% on rising worry about the earnings reports. Overnight, European markets all higher between Frankfurt's +0.2% and London's +0.7%. Yesterday, Tokyo ended little-changed. Hong Kong was down a minor -0.1% and Shanghai fell by -0.9%. Singapore ended down -0.1%. The ASX200 closed its Wednesday trade down -0.8%. 

The price of gold is at US$4080/oz and down -US$74 from yesterday. Silver is down a very sharp -US$3.50 at just under US$55.50/oz.

Oil prices have risen +US$1.50 from yesterday to just under US$96/bbl in the US, while the international Brent price is up +50 USc at US$106.50/bbl. Transiting ships in the Strait of Hormuz are under constant daily attack now but the pace of the attacks is slackening - only two in the past 24 hours. Hormuz transits have stayed very low today with just four ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and 6 entering for new loads but no tankers  (0 dark). The Red Sea activity is lower both ways at the Yemen chokepoint.

The Australian dollar is down -20 bps from yesterday, back to just on 69.6 USc. Against the Japanese yen we are down -20 bps at ¥110.4. Against the euro we are up +20 bps at just on 62.6 euro cents. 

The bitcoin price starts today at US$82,005 and down -1.7% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.5%.