Global government bond yields fall and flatten; US PPI jumps more than expected as tariff missteps bite; China to cull excess airlines; Aussie jobs shrink; UST 10yr at 5.08%; gold firms slightly and oil rises; AU$1 = 69.1 USc

Here's our summary of key economic events overnight that affect Australia, with news long bond yields are falling fast today on worries about long-term growth prospects, while short term yields are holding with a much smaller pullback, kept up on expectations the Fed will hike in its battle against inflation. A bull flattening is underway. a signal that will worry bond traders even as they see the face value of their bonds rise.

Investors would rather hold US Treasuries than be exposed to AI debt in what they see as an AI debt reckoning coming soon.

US initial new jobless claims were little-changed last week, at +190,600, an increase from the prior week but all explained by seasonal factors. There are now 1.47 mln people on these benefits, down -11% from the prior year at this time as sharp qualification restrictions push people off this support.

But US inflation in their factories is leaping. Producer price inflation ran at a high +5.6% in August and was expected to ease to +5.3% in September. But in fact it came in at +6.3% in September in something of a shock. Everyone noticed, and expectations for a firm Fed response on October 29 have risen. Not doing so would be a signal that they aren't serious about tackling inflation.

And that inflationary urge helps explain why US retail sales rose +6.3% in September from a year ago - most of the increase is goods inflation. And that is bolstered by the tariff taxes they are now paying at the border. This seems slam-dunk evidence Americans are paying Trumps tariffs, not the world's exporters. The correlation between retail sales, tariffs and inflation is just too obvious.

And tariffs insulate American factories from facing global competition, giving them a false sense of prosperity - and enabling them to raise prices. The latest Philly Fed factory survey remained quite positive despite an easing in October. A key feature is the sharp rises in prices received, built on the excuse of rising prices paid. Meanwhile the New York Empire State factory survey also sees activity increasing protected by very elevated cost and price pressures due to the insulation from global pressures. The logical result will be uncompetitive industries in export markets. But that has yet to dawn on their policy-makers.

US crude oil stocks fell again last week and by more than expected, down -1% in a week. However, their very low Strategic Petroleum Reserves were unchanged having fallen -31% from a year ago and at just 283 mln barrels it is down to just 17 weeks of use at the current rate.

Indian exports in September maintained the level they have been at since April, but that does mean ther are up +22% from year-ago levels. Unfortunately for them, their imports rose much faster that in August, although these are only up +9% from year-ago levels. Together, they reported a larger trade deficit.

In China, not only do they have serious over-capacity in their manufacturing sector, they also have it in their domestic aviation market. Now their government is moving to cull competitors so that those that remain can be viable and stop posting large losses.

Singapore's haze is turning dangerously unhealthy. There are a lot of angry people at Indonesia in Singapore and Malaysia at present.

EU industrial production fell in August from a year ago and by more than expected. But it is still in the higher range  from two years ago.

There was a very big surprise in the Australian labour markets data released yesterday for September. You will recall they added +29,300 jobs in August and were expected to add another +20,000 in September. In fact, jobs contracted there by -39,300. It was distorted by the even sharper fall in part-time jobs, down -73,700 and saved somewhat by a +34,400 gain in full-time jobs. The number of unemployed people only rose marginally and their jobless rates was unchanged at 4.7% although that remains at a five year high. As unexpected as this labour market data was, analysts still expect the RBA to hike again on November 3 because inflation is the larger worry.

Global container freight rates rose again last week to be +166% higher than year-ago levels, driven by demand from China to the US and to some extent to the EU and the end of year holiday trade builds. But bulk freight rates tumbled -11% over the past week, to now be just +33% higher than year-ago levels

The UST 10yr yield fell sharply again, down -10 bps to 5.08% in an extended defensive reaction. The 30 year yield is at 5.42%, down a net -10 bps. The key 2-10 yield curve is now at +34 bps (-5 bps). Their 1-5 curve is now at +44 bps (-7 bps) and the 3 mth-10yr curve is at +107 bps (-16 bps), all in a bear flattening. The China 10 year bond rate is unchanged at 1.65%. The Japanese 10 year bond yield is now at 2.92%, down -9 bps from yesterday. The Australian 10 year bond yield starts today at 5.22%, down -13 bps from yesterday. 

Wall Street is up +0.4% today on the S&P500 but the Nasdaq is unchanged. Overnight, European markets were all higher between Frankfurt's +0.3% and London's +1.1%. Yesterday, Tokyo ended down a sharp -4.9%. Hong Kong was down -1.0% and Shanghai fell by -1.6%. Singapore ended down -0.4%. The ASX200 closed its Thursday trade down a minor -0.1%. 

The price of gold is at US$4147/oz and up +US$67 from yesterday. Silver is up +US$1.50 at just under US$57/oz.

Oil prices have risen another +US$2 from yesterday to just under US$98/bbl in the US, while the international Brent price is down  -50 USc at US$106/bbl.  A big release of strategic reserves is about to happen, but this isn't trimming prices. Transiting ships in the Strait of Hormuz are still exposed to daily attacks but the pace of the attacks seems to be 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, 2 tankers escorted (2 dark with transponders off) and only 2 entering for new loads but no tankers  (0 dark). The Red Sea activity is again lower both ways at the Yemen chokepoint.

The Australian dollar is down -50 bps from yesterday, now at 69.1 USc. Against the Japanese yen we are down -120 bps at ¥109.2. Against the euro we are down -100 bps at just over 61.6 euro cents. 

The bitcoin price starts today at US$81,997and essentially unchanged from yesterday at this time. Volatility over the past 24 hours has been modest at just under +/-1.7%.