US data turns dark on inflation & deficits, Fed speakers jumpy; China's bank lending contracts; Microsoft issues ease; UST 10yr at 5.15%; gold holds and oil firms but supply recovering faster than demand; AU$1 = 67.8 USc

Here's our summary of key economic events overnight that affect Australia, with news we have been presented with two stark examples of what will happen if we don't manage our monetary and fiscal affairs properly.

American producer prices rose +6.5% in the year to October, about the pace expected and similar to the high +6.3% increase in September. Sanitising it to a 'core' rate still recorded a +4.9% rise and indicating that it has pressure on their inflation rate. It doesn't help that this is their fastest rate of increase, pandemic excepted, since 2011 when the modern data series began.

There were more Fed speakers out overnight warning that there is a need to raise US interest rates to combat persistent inflation. That includes from the boss of the San Francisco Fed, regulator Michelle Bowman, and the boss of the Boston Fed.

Making matters worse, the disastrous management of the US federal budget just gets worse, and worse than analysts had expected. Their budget deficit widened to -US$404 bln in October from -US$284 bln a year earlier, missing forecasts of a -US$298 bln gap. That makes the deficit over the past year -US$2.1 tln and easily a record. Interest on their growing debt pile exceeded US$100 bln in the month. Most other costs rose, but tax receipts fell, especially from companies and the wealthy. Neither Trump nor Bessent are competent to be running this. It's a hot mess that is unlikely to end well and the day of reckoning is coming faster than they realise.

In China, new yuan loans fell in October, dropping -¥100 bln from September, a very rare event and only the second time it has happened since this data has been tracked. It is their first ever October contraction. The average expansion over the prior five years was +¥670 bln. It is confirmation of very weak domestic demand. Their tech industry raises its funds in either the bond market or by private placement. So without loan demand, banks are not incentivised to offer savers good rates. This will make many people grumpy and push them into risky options with high liquidity risk. Beijing will be nervous about what this says about their economy.

It is not without irony that Xi and Trump will meet this coming week in China to 'solve' some big public policy issues. The current management of their respective domestic economies doesn't show they have the skill.

The global outage of Microsoft Outlook and Teams is easing today after nearly 24 hours of chaos that crippled online communications, including in financial markets.

The UST 10yr yield is up +4 bps from yesterday, now at 5.15% and up +30 bps from this time last week. The 30 year yield is at 5.47%, up +3 bps or +23 bps for the week. The key 2-10 yield curve is now at +29 bps (up +4 bps). Their 1-5 curve is at +35 bps (+3 bps) and the 3 mth-10yr curve is at +112 bps (down -3 bps). The China 10 year bond rate is down -33 bps at just on 1.59%, up +2 bps for the week. The Japanese 10 year bond yield is up +3 bps from yesterday at 2.88%, up +21 bps for the week. The Australian 10 year bond yield starts today at 5.14%, up +7 bps from yesterday, up +14 bps for the week. 

Wall Street is ending its week lower with the S&P500 down -0.5% today but for a weekly net gain of +1.5%. and the Nasdaq is down -1.0% today to limit its weekly gain to +0.7%. Overnight, European markets were mixed, between London's +0.4% rise and Frankfurt's -0.1% dip. Yesterday Tokyo rose +0.5% for a strong +5.5% weekly rise. Hong Kong fell -1.5% on Friday to end its week down -4.0%. Shanghai was down -0.6% for a weekly fall of -0.7%. Singapore fell a full -1.0% in Friday trade. The ASX200 ended down -0.7% to close its week up a net +0.7%.

The Fear & Greed index is now in the 'fear' zone from the 'extreme fear' zone a week ago.

The price of gold is little-changed, up +US$6 at just on US$3882/oz but down -US$277 for the week or a -6.7% retreat. Silver is now just on US$49/oz and down -US$1 from yesterday, down -5.8% for the week.

Oil prices have risen +US$1 today, to just on US$88.50/bbl in the US, while the international Brent price is up +US$1.50 at just on US$95.50/bbl. A week ago these prices were US$90/bbl and US$97.50/bbl respectively, so a net minor -2% dip. Hormuz transits have stayed very low today with just four ships exiting over the past 24 hours, three tankers escorted (4 dark with transponders off) and six entering for new loads, two tankers (4 dark). The Red Sea activity is back to about 20 crossings each way at the Yemen chokepoint.

The world oil market will return to a surplus in the fourth quarter of this ‌year, the IEA said overnight, as Middle East exports recover faster than global oil demand despite the continued attacks on shipping.

The Australian dollar has dropped overnight, down another -30 bps to be just under 67.8 USc. Against the Japanese yen however we are down -30 bps too at ¥108.4. Against the euro we are down -10 bps at just on 81.5 euro cents. 

The bitcoin price starts today at US$68,981 and down -3.9% from this time yesterday. That puts it -8.8% lower than a week ago. Volatility over the past 24 hours has again been moderate at +/-2.8%.