The Overnight Report: US CPI Report Awaits

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US markets rallied with higher oil prices driving energy stocks up. 

After a flat trading day yesterday, ASX200 futures suggest a slightly positive start on Friday.

Good Morning,

The ASX200 finished flat on Thursday with Energy rallying 3.2% as oil prices rose on Russian oil sanctions, with tech and banking stocks weaker.

What happened overnight, NAB Markets Today Research extract

A jump in oil prices is the main story overnight and which has been the main influence on what are otherwise moribund FX and rates markets heading into next week’s jam-packed central bank and geopolitical events, headlined by the Fed and APEC summit in South Korea.

This after the US yesterday announced new sanctions on Rosneft and Lukoil. US CPI is the main economic event heading into the weekend, but which is not expected to derail the Fed from a -25bps rate cut next week.

Oil prices are currently up over 5% in the past 24 hours, extending moves that began earlier in the week when reports circulated of a planned step up in US sanctions on Russia. During our day yesterday, the US announced sanctions on both Rosneft and Lukoil, demanding an immediate ceasefire from Moscow in the war against Ukraine. 

The sanctions are, reports indicate, likely to reduce the flow of Russian crude to Indian oil refiners to near zero.

Seeing is believing here, and while the news has seen Brent crude rise from US$63 to US$66 a barrel (and from US$61 at the start of the week) the reality is likely to be that Russian oil will before too long continue to be exported in similar quantities as now, via ever circuitous routes and elaborate disguises.

The price of Russian oil exports may suffer, but with an estimated break-even production price of US$15 a barrel, this isn’t going to be a supply inhabitant. For the time being though, the actions are likely to reinforce a US$60 floor price under Brent crude according to analyst commentary we’ve read overnight.

The impact of the oil price jump has been felt in US Treasury market where 10-year break-evens have risen from about 2.27% on Tuesday to 2.29% on Wednesday and 2.31% on Thursday, in turn responsible for most of the retracement in 10-yr nominal yields from 3.95% back to 4.0%.

Elsewhere in bond land, 2-year Treasuries yields are up 4bps to 3.48%, after a day which saw most European 2-year benchmark yields up 1-2bps and 10s 2-3bps in the Eurozone (but less than 1bps for gilts).

G10 data wise, we had Canadian August Retail Sales and US September Existing Home Sales. Existing home sales rose by 1.5% slightly to 4.06 million, in line with expectations, hinting at a modest tick back higher in response to lower mortgage rates, the key driver of US housing demand.

Sales are though still running more than -20% below their average on 6-7 year leading up to the pandemic.

Canada’s August headline sales volumes rose 1.0%m/m as expected but was 0.7% for the ex-auto measure against a consensus for a 1.3% rise. Moreover, the September flash estimate for nominal headline sales was down 0.7%m/m. the data didn’t move the dial on pricing for the Bank of Canada next week, still assigned an 80% probability for a -25bps cut.

In China, the 15th 5-year (2026-2030) policy Plenum concluded yesterday. The key passage from the post-meeting communique reads “The country should achieve greater self-reliance and strength in science and technology and steer the development of new quality productive forces. It should build a robust domestic market and work faster to foster a new pattern of development”.

So, more emphasis on both domestic supply and demand capabilities. On the latter, amid ongoing housing market deflation and the related destruction of household wealth, the key challenge is how to encourage residents to save less and consume more, a challenge which can realistically only be met by greatly improving social and health care safety nets.

Nothing new here.

In commodity markets outside oil, where Brent and WTI crudes are coming into the NY close showing daily gains of 5.6% and 5.4% respectively, gold has showed some signs of stabilising after this week’s -9% fall, currently up US$28 to US$4,125.

Base metals are also higher with copper recovering from its sharp mid-week drop to be up 2%, as is aluminium. Iron ore is up a lesser 0.5%.

Numbers due tomorrow! Do they matter? Steve Sosnick, Interactive Brokers

Although the government shutdown continues with no obvious end in sight, putting a halt to the usual pattern of economic data, the Bureau of Labor Statistics (BLS) will be releasing September CPI data tomorrow morning. 

Although the figures were originally scheduled to be released nine days prior, the delay has not diminished stock and bond traders’ anticipation for these data points.

The BLS website features a terse explanation for the special circumstances:

BLS will publish the September 2025 Consumer Price Index (CPI) on Friday, October 24, 2025, at 8:30 A.M. Eastern Time. No other releases will be rescheduled or produced until the resumption of regular government services.

This release allows the Social Security Administration to meet statutory deadlines necessary to ensure the accurate and timely payment of benefits.

The broader explanation is that the Social Security Administration must publish its annual cost-of-living adjustments by November 1st.  The failure to update those numbers would be greeted negatively by the millions of Americans who rely on Social Security. 

Interestingly, the market and the retirees are on opposite sides of the fence on this topic.  Investors want low inflation, but retirees want as big a number as possible.  It’s their way of getting a raise, and everyone wants a bigger raise whenever possible.

Consensus estimates are for the headline CPI to rise by 0.4% on a month-over-month basis, which would be the same as the August rise.  The monthly Core reading is expected to rise by a shade less, at 0.3%, also matching last month’s figure. 

This would imply year-over-year gains of 3.1% for both readings, meaning that the Core reading would be unchanged, and the headline would rise from last month’s 2.9%.  That last feature would be relatively welcome news for retirees. 

On IBKR ForecastTrader, the current consensus applies an 81% probability of annual Core CPI not exceeding 3.1%, which implies that traders on that platform are a bit more sanguine than the median economist’s estimate.

Some of you might be doing some quick and obvious arithmetic and thinking, “hey, isn’t 3.1% above the Fed’s 2% inflation target?”  Indeed, of course it is.  This is something we’ve noted before, particularly after August’s Core CPI rose by 0.346%. 

That just missed being reported as rounded to a 0.4% gain rather than an as-expected 0.3% rise.  Stocks rallied on the in-line report, and we described it as a rally based upon a whisker. 

One thing to keep in mind, though, is that the FOMC is not predisposed to surprise markets unless they feel that one is required. 

Markets are pricing in a near-certain -25 basis point cut at next week’s (October 29th) meeting and considering that the various Fed talking heads had ample opportunities to dissuade traders from that notion in recent days, but have chosen not to, one can reasonably assume that a cut is coming regardless of tomorrow’s inflation report. 

The question is whether tomorrow’s numbers bolster the case for another cut in December or beyond.  

In the meantime, I know what many retirees will be hoping for.

Corporate news in Australia

-Woodside Energy ((WDS)) has sold stakes in its US LNG project to Williams for US$250m.

-Regis Healthcare ((REG)) has acquired two Victorian aged care homes for -$45m.

-Allianz leads the $100m-plus bid for nib Holdings’ ((NHF)) travel insurance division.

-Premier Foods is considering KKR’s Arnott’s meals unit for Australian expansion.

-The sale of Lendlease Group’s ((LLC)) stake in Keyton has stalled.

On the calendar today:

-AU Oct PMI

-AU RBA Gov Bullock Speech

-JP Sept CPI

-US Oct U. Michigan Sent

-US Sept Building permits (suspended)

-US Sept CPI

-US Sept New home sales (suspended)

-XX Global Sept PMIs

-AMOTIV LIMITED ((AOV)) AGM

-DUSK GROUP LIMITED ((DSK)) AGM

-EVT LIMITED ((EVT)) AGM

-KINATICO LIMITED ((KYP)) AGM

-LUMOS DIAGNOSTICS HOLDINGS LIMITED ((LDX)) AGM

-MACMAHON HOLDINGS LIMITED ((MAH)) AGM

-NEWMONT CORPORATION REGISTERED ((NEM)) 3Q25 Earnings

-PILBARA MINERALS LIMITED ((PLS)) Sept Quarterly

-SPHERIA EMERGING COS. LIMITED ((SEC)) ex-div 3.80c (100%)

-SHINE JUSTICE LIMITED ((SHJ)) AGM

-SUPPLY NETWORK LIMITED ((SNL)) AGM

-SUNSTONE METALS LIMITED ((STM)) AGM

-TOURISM HOLDINGS LIMITED ((THL)) AGM

-WATERCO LIMITED ((WAT)) AGM

-WHITEHAVEN COAL LIMITED ((WHC)) Sept Quarterly

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

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