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0:00Sackwarker, France's budget woes, send bell markets into a bit of a tizzy, widening the French German spread. Meanwhile, the US continues to be an economy that is growing more than most, but today's indicators show prices are still rising like the prices paid component of the manufacturing ISM, for example, shooting up in today's numbers and then mortgage rate during the biggest jump in years. But bonny is down today, but the US dollar is up. We'll try and figure out. The mixed messages this Friday with payrolls just around the corner in the United States as well. It's Friday is the 2nd of October, 2026. It's the morning call from NAB. Good morning. Well, shares are up this morning in the United States, 0.3% for the Nasdaq, 0.2% for the S&P. So chips are doing well. NVIDIA, for example, is up 1.5%. But Google is down 1.5%. And Apple is losing 1% as well. In Europe, the DAX is down 1%, 1.7% off the FTSE 100 as well. And quite a rise in the US dollar. It's up

1:000.7% today. The Aussie is down a third of 1% to 69.2 US cents. The Swiss franc is up half a percent. That is on top of that rising US dollar. And Bonneild is lower in the United States. So 10 year Treasury is down 5 basis points, down 8 basis points for German buttons, 3 for 10 year gilt yields in the UK. But up 6 basis points in France. And sizeable moves in oil as well. Up 4.4% for Brent, 2.7% for WTI Brent was back to below 100. Actually, kicking the session off at 96.5. But it is back over 102 now. So here's NABs Ken Compton. So we've got these big moves in yields and equities and the dollar. And US economy that's doing better than most is weathering the storm. We had the manufacturing ISM overnight, which was a little weak. So very mixed messages. I'm trying to figure out what exactly is going on this morning. Please explain. Yeah, and what do you feel? It's certainly one of those sessions where you've really got to pull open some of the intraday charts to even begin

2:01to try and make a bit of sense of what has happened. Haven't you? I mean, you sort of already mentioned there the divergent moves in Bonne yields across economies. And I mean, essentially, we've had the beginning of the session really was focused on that renewed run up in oil with Brent getting back above 102, ultimately, and still settling around that level. But then early in the European session as the French unveiled a new budget plan, everything sort of started to fall apart from there to some extent. And you had a big flight to quality move into treasuries there for a few hours, which then got on wound by the US started that you talked about. And then got on wound again after that as the flight to quality would return. So it's been it's been all over the shop. And I guess the interesting thing with that with the volatility that's come out of that French budget, I mean, you know, this is going to be an ongoing source of market turmoil over the next six or six or six or so months as they as they progress into water selection. I mean, ironically enough, it was a proposal to cut spending that caused the big widening

3:04in French, peeled spreads over Germany, sort of back towards, you know, sort of fresh, sort of fresh decade plus highs again. So I think the plan is to cut the deficit from 5.4% of GDP to five, but there was some immediate sort of criticism from the governments, sort of fiscal watchdog there. The growth assumptions are pretty optimistic, obviously, the political situation in terms of getting anything down fiscal inference is pretty hostile. So, you know, so immediately you start to sort of call into call into question the viability of the government, that sort of thing. So, yeah, that spread that we talked about there the 10 year yield differential out to 130, 140 basis points just a couple of weeks ago, that was only 100. So this is a this is sort of a pretty substantial substantial move. And then as we got to those levels, that sort of triggered everyone to, you know, maybe ironically enough, look at the US as the as the safe haven space to be. So you had a shift back into treasuries and all the other usual risk on stuff that we get including a rally in the Swiss unit, if you have a thing. Yeah, it's going to say because the Swiss

4:05bank's up quite a lot in the US style. So the dollars up, I guess, because it's, yeah, because it's a safe haven. So because the numbers, the manufacturing numbers, the ISM overnight, was a little week, wasn't it? Although, you know, good and bad news, the good news was new orders has gone from 53.75 to 55.3 and the employment to sub indices has gone up as well. But gosh, look at prices paid. It's gone from 71.1 to 77.9, which was way more than expected. So over a weight about inflation, that is a worrying indicator. Yeah, I mean, slightly, slightly down on the overall headline activity number, but you obviously that the other thing we did get just before the ISM manufacturing was the final reads on US PMIs with obviously the big overshoot in the flash PMI last week, being one of the factors behind the bonds sell off that we saw in just, in only that sort of revised down from a, you're from a red hot 57 down to just 56. So a number that's arguably a touch more comparable to the, what we got out of the ISM manufacturing,

5:07but sort of unequivocally strong numbers there and that fall in Treasury yields that I talked about that was coming out of the reaction of French, British getting said why that almost entirely reversed on the back of this data release. So we had Treasury yields push out back again to this sort of 534 level, which is the multi-decade hyzer we've been talking about repeatedly. But from there, I mean, you can also line that up against us around the same time, a little bit early, we'd gotten some of a few more of the job partials here to pay rolls to night. Initial claims, 197, okay. That's the lowest since July, a touch, a touchable consensus, not usually, but a challenge at job cuts, which is another one of these series we get in the week ahead of payrolls. And that was the lowest September job cuts since 2022. Obviously job cuts and layoffs are pretty seasonal numbers. So 43k there is down about 20% on a year ago. So a fairly strong leading again to payrolls tonight. Yeah. And so hence, a bit of optimism that things

6:15might sort themselves out. I guess Philip Jefferson, the Chair of the Vice Chair of the Fed, saying pretty much what John Williams said earlier in the week that, you know, well, maybe we can wait. Yeah. He is a voter, so that does that a bit of a bit of wait to his comments as well. And he said that any further move in the cash rate should be set by the data. The outlook and the balance of risk, I think one quote from him was that the mate had more time, as you said. So once again, the hammering, the point of inflation has been too high for too long, the risks are all tilted upward. So, yeah, and arguably, you know, a labor market that's seeing low layoffs and and low jobless claims and potentially an unemployment rate that's still going to be sitting at 4.1 tonight. We might not be too worried about inflation in the US at the moment, but the labor market there is not looking here excessively loose and so it's still going to sort of put it all out into the mix. But also the mortgage rates you just put into that mix as well because now

7:17they're being they're accelerating rapidly. In fact, the biggest jump since October 2022, they're now up to 7.28% because of course they take a mate for 30 years. So that must have an impact on housing you would have thought ultimately. So we've got that to watch. Meanwhile, Iran's foreign minister has said that they are in talks and they would be willing to restore nuclear inspectors to their bomb facilities in exchange for some sanctions relief according to the Wall Street Journal who says it's according to people familiar with the matter. So that's a bit like the nuclear accord that Donald Trump got rid of at the end of his first term. What's all this new again? It seems maybe so. I mean, a few different stories coming out of that region of an article. Probably the major one is that the US is going to add a third carrier group into the mix. I mean, there's been a lot of stories this week about how the volumes of oil getting out of the Middle East, whether it be via the straight, via the Ovalen pipeline through Iran and Saudi and those other things. The volumes of crude getting out are actually very substantial now. So, but obviously the

8:21perv a US military presence in the region is one reason why that's happening. So adding a third carrier group is potentially going to reinforce that. But then Trump has reportedly also told I had to the expects to, you know, expect to use that to assume bombing by the end of November. So, you know, go figure. And I guess that's why that's sort of been attributed to one of the reasons why oil is back above, back above 100. Yeah, the nuclear inspectors story obviously plays a bit the other way. I would see that with all prices staying up obviously, the threat of bombing probably, you know, probably won the market debate on that point. More broadly, Trump is still denying the sanctions relief. And obviously the talks in New York last week went nowhere. So there's dope real sort of meaningful change. Well, I guess there's no end game, is there? So, I mean, if it was sort of like, well, let's go back to where we were with weapons inspectors coming along and inspecting facilities. Maybe that's, I mean, maybe that's progress. I don't know. So,

9:23hands blicks bringing back. That could be, although he's, I mean, you told me that you'd looked up to see if you were still alive. So he is. So he could still do the gig, but he's 98. So we don't, we'd actually all the nuclear facilities have to have a disabled access probably as part of the deal, wouldn't they? That would, that might be the outcome. Look, anyway, let's move on. Japan, the Tankan survey very quickly. So big business doing quite well. Six straight quarters of rising sentiment, basically, it's now at the highest it's been in eight years. And it seems to be part of the argument is these big businesses couldn't use for them that they can pass on the rising cost to consumers. Not so good for inflation, of course. And we get the CPI number for Japan today. Yeah, the Tankan took a bit of blame yesterday, along side the BOJ minutes for causing a bit of a slump in the yen with, I think, I think that story of both Ray and I agreed that story seemed to be significantly overplayed. You could probably point to US Treasury yields rising at the time as being a bit more of a clearer driver of, of year and weakness, but yeah, the Tankan

10:27itself, I mean, did get some headlines of being a touch soft and unexpected, but I think probably the biggest story there still is, you know, the, the, the, the continued sort of growth in the number even if it was one point less than expected. The CPI today, 1.8% year on year for the X-Fish Food and Energy measure for the, for the Tokyo number. So, yeah, it's again, we're still sort of seeing numbers sort of sitting around, probably around the levels the Borge wants to see. And I guess, I sort of looping back again, a little bit sorry, but to those BOJ minutes that, that I mentioned, I guess the, the Davish element there was seen as probably, probably should have been unsurprising. I would argue that the two government appointed, the two new government appointees to the Borge Board wanted to sit back and wait and see what the effective cumulative heist delivered so far was, whereas the broader, the broader B.A.J. Board was, was more concerned about avoiding inflation overshed in the target. So, that sort of tension that was clearly discernible from the outcome of

11:29the meeting anyway was, was, was reinforced by the minutes. So, um, I think on, on the back of that, we have seen the pricing for a Borge follow up hike in, in October, did ever weigh, you know, a tiny bit, but still we're talking about, go six points to four points or something like that. So, yeah, the market is still expecting the Borge to move again by, by year end, but obviously, you know, the, that decision, um, that, that's, that's the prime meeting. They're the uncertainty, it's been, the uncertainty is from that is, it's still there, and that was back to by the minutes. So, the B.A. They did their financial stability review, they published the results of that, yes, today, and uh, that conclusion was, yes, we, we still have stability, basically, as the summer. Yeah, and I think it's probably the, the key thing to think about when, when interpreting the stability review, it's not necessarily meant to be an assessment of, you know, where the economy is at, in fact, it's definitely not expected to be an assessment of, of where the economy is at, and how things are going. It's more, what are the emerging risks to the stability of the financial system. So, um, the, the RBI seems very comfortable there that, um, that their policy actions so far,

12:31and anything they envisage being able to get into the future and not going to sort of undermine the stability of the, of the financial system, you know, households look, you know, okay, your house prices are falling, but, um, sort of mortgage serviceability is not falling away too much, negative equity is still less than 1% of borrowers, and indeed they estimate that if we've got a further 20% fall in house prices from here, you'd probably still only have 5% of mortgage is a negative equity, but, um, and keep in mind, their negative equity is not in itself a problem at the aggregate system level. It's, as long as things are still serviceable and, um, and those things are still okay. I think some of the, some of the RBI's assessment of the business sector were interesting though. Um, they did say that, you know, their data is a bit lagged, but, um, at the end of 2025, the proportion of businesses that were profitable was actually high than just prior to the pandemic. So that was, um, that was sort of a bit interesting, but, um, the spots where they see, do you see weakness? They're probably the ones, you know, unsurprisingly, our transport hospitality and construction, which are obviously, um, all pressured by, uh, by import costs.

13:35Politically, very bad for government though, isn't a negative equity where you've got a proportion of the population paying for something they haven't got basically. Uh, we also had, uh, the job vacancies yesterday, first trade, they were down, and the trade balance as well, a little lower than expected, because imports have been a bit choppy. Yeah, vacancies down, 0.9% over the quarter. So, uh, big drop in, or reasonable drop in, in privacy to job vacancies, you know, the public sector rebound of about over about eight percent, um, wasn't enough to, uh, to offset that, that leaves you with the vacancy rate, the lower since the pandemic, you know, the RBI said that li, uh, um, you know, labor market indicators are a broadly stable, you know, this data doesn't really do much to, uh, you know, to dissuade enough in that view. Um, trade balance, yeah, last year we were talking about the volatility and in non-monetary gold that was, uh, that was shifting that around about billions, uh, each month, um, this year, we're talking about, um, data center equipment. So that was the, there was a big, um, there's sort of a bit of a lumpy move in, in that sector. So, um, you're 22% up in capital goods on the month. Um, interestingly though, the other lumpy thing we've seen this year has been

14:38electric vehicle imports. Those were down, so, um, so the big rush for those, maybe into, uh, you know, in, in July that, that, that, that's interesting though, um, yeah, fuel import, um, down sharply. So I don't know, this is necessarily indicates a problem, it probably just sort of indicates that, um, we've been pretty successful in filling up all the available storage that we have around the place more so than anything else, but, um, but that's interesting in the, in the light of the current, uh, current crisis. Yeah, I thought, okay, uh, electric car sales were skyrocketing, but uh, this month, the month numbers on there, I guess. So, yeah, it's a month and on St. Sh. There I think. So, uh, today, obviously non-farm payrolls, finally, in the United States, and it's important always is, but I'm sort of sent in given that, you know, we're looking at inflation, is the, the, the wage estate is going to be a really important part of this, isn't it? It is getting to be, um, more notable, and I guess, you know, it's not getting too much attention to this point, just to be fair. It hasn't been, uh, hasn't been a huge problem, yeah. So we do get, um, you know, average air will earnings, they're expected to be unchanged, 0.3% month on month or, or about 3% year on year. So that, um, that, that is going to be an area,

15:43it's going to get increasing attention, particularly as we do sit there and look at a job market with, uh, with, with low layoffs. Um, I think the consensus numbers, not for hiring, are still sitting around, I could stand to 80 now. So I think it started the week at a, at 100, we've sort of ebbed away on the expectations, but unemployment rate still picked the stand chain. So that's going to be the, the key release for the night. Um, yeah, I guess we'll, we'll see where we go from there, see whether the market expectations of, um, sort of another sort of three or so red hot rate hikes from the Fed over the year are sustained or not. No, it's been a confusing session, is that I have to say I'm still a little bit confused by it all, but maybe a little come out and in the wash today and it'll all become clearer in the meantime. Good start, we'll catch you next time, Ken. Cheers. Thanks for. And the future of AI, is it going to revolutionize humanity, or is it going to end it? Uh, that is the spectrum, isn't it? And, uh, where I'm in that spectrum, we're going to end up. Well, Damien Webb from brighter super has just spent some time in Silicon Valley meeting some of the key figures there. He gives us his view on the risk factor. Is he cautious or optimistic? Well, have a listen to the weekend edition this afternoon to find out.

16:48Join me for that. I'm Phil Dobby from there. Have a great long weekend. If you're listening to us in New South Wales, we'll see you soon.