A big week ahead of central bank decisions; inflation elevated, while PMIs positive; Canada retail positive; EU inflation expectations hold; war drums beat louder; UST 10yr at 4.99%; gold holds low and oil holds high; AU$1 = 70.4 USc

Here's our summary of key economic events over the weekend that affect Australia, with news oil prices are almost at their record high as the US and Israel prepare of a major escalation against Iran when the US mid-term and Israeli voting is done.

But this week will be focused locally on key data released about inflation; September CPI is expected to rise to 4.2%, PPI to 4.5%.

In the US it will all be about the Federal Reserve's reaction to surging inflation on Thursday (AEST time) but no-change is expected, intimidated from a proper decision by partisan politics. The vote will be interesting however given the signals from some members worried that they are letting the inflation cat out of the bag.

The US Fed isn't the only major central bank deciding monetary policy updates. They will also come from Japan (no change expected), the ECB (no change as well) and the Bank of Canada (+25 bps).

Wall Street will be focused on earnings results from Big Tech.

China's political elite are meeting this week but we will still get updates on industrial profits, along with early PMI survey results. Data from India, South Korea and Taiwan will be covered by us too.

Over the weekend we got Japanese inflation which was unchanged in September from August, to be 2.1% higher than year ago levels. That is up from 1.9% in August but lower than the expected 2.3% rate. This will bolster the expectation that the Bank of Japan will make no change to its 1.25% level at its review next week (October 30).

According to the S&P Global PMI for Japan, October delivered a solid expansion even if it was marginally less than in September. Order backlogs rose but the pace of new orders incoming slowed. Employment growth was minimal. Japanese businesses are still optimistic about the year ahead.

Taiwan's industrial production rose strongly again in September and although it didn't rise as fast as in the prior three months, it was still up +20% from year-ago levels.

In India, their 'flash' October PMIs show business activity rose markedly in October and inflationary pressures softened further. Their post-pandemic economic expansion shows no signs of slowing.

In the US, the University of Michigan’s consumer sentiment index was revised up for its full October result, but it remains at its lowest level in five months (when it hit its record low). The cost of living continues to dominate consumer views of their economy, with sentiment now -10% below its year-ago level and -15% below February, just before the war on Iran. Year-ahead inflation expectations edged up to 4.7% from 4.6% in September, while long-run inflation expectations also increased, rising to 3.5% from 3.4%.

But the major data out over the weekend relates to PMIs. The US factory PMI stayed very positive at near a five year high, as factories bask in tariff protection which allows them to raise prices to recover fast-rising cost increases. Input costs are rising but this survey featured how fast companies were raising selling prices. Inflation expectations are rising and the flow-through of these sorts of increases will worry the US Fed if it is serious about inflation control. Price rises in their services sector seemed even less restrained.

And we haven't updated this recently, but the surge in measles cases in the US due to waning vaccination rates seems to be gathering pace.

In Canada, and although slightly dated, they reported good growth in their retail sector in August, up +1.2% in volume terms. This data shows expanded activity even excluding cars and fuel. And their data for September shows the expansion continued in 'real' terms.

In the EU October PMIs remained positive and expanding in October even if slightly less than in September. Germany posted an improving factory PMI, and better than the EU average.

Meanwhile the ECB consumer inflation expectations survey for September only shows a modest rise, from 3.0% to 3.1% for the year ahead, even though the same survey records that consumers felt it was running at 3.6% in the month. But this survey doesn't cover the period of the US war on Iran.

Here in Australia the S&P Global factory PMI stayed in a minor contraction, and their services PMI fell from a September expansion to an October contraction. Both the rates of input cost and output price inflation rose in October amid a broad-based intensification of price pressures.

The UST 10yr yield is unchanged from Saturday at 4.99% but down a sharp -12 bps for the week in a major defensive move. The 30 year yield is at 5.32%, up +1 bp from Saturday but also down -12 bps for the week. The key 2-10 yield curve is now at +31 bps (+2 bps). Their 1-5 curve is now at +40 bps (unchanged) and the 3 mth-10yr curve is at +99 bps (+1 bp). The China 10 year bond rate is down -1 bp at under 1.62%, down -2 bps for the week. The Japanese 10 year bond yield is holding at 2.80%, down -14 bps for the week. The Australian 10 year bond yield starts today at 5.18%, down -3 bps overnight, but up +2 bps for the week.

The price of gold is down a minor -US$4 at US$3994/oz, down -US$163 for the week. Silver is just under US$54/oz, little-changed from Saturday, down -US$3/oz for the week.

Oil prices have risen +50 USc from Saturday to just over US$103.50/bbl in the US, while the international Brent price is little-changed at US$116.50/bbl which is now higher than its early May peak and closer to its June 2022 US$119/bbl high point. A week ago these prices were US$101.50 and US$110/bbl respectively. Hormuz transits have stayed at a trickle today with just six ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and 7 entering for new loads, no tankers (1 dark). The Red Sea activity features a fall in outbound traffic at the Yemen chokepoint. There were no reported attack on shipping, but there have been significant fighting in the region.

The Australian dollar is up +10 bps from Saturday at just on 70.4 USc. Against the Aussie we are also up +10 bps at ¥110.4. Against the euro we are still at 62.9 euro cents. 

The bitcoin price starts today at US$81,510 and up +0.5% from Saturday at this time, up +0.3% for the week. Volatility over the past 24 hours has been low at +/-0.6%.