GLOBAL MACRO: Supply Side Pressures Neutral, Commodity Prices Mixed
Global indictors have been mixed suggesting that we could see inflation rates remain fairly steady. Some commodity prices were higher in August, such as food, while others were lower, like oil. In September so far metals are higher while oil prices and container rates continue to trend lower.
- There had been concerns that increased US protectionism could adversely impact supply chains. The NY Fed global supply chain pressure index shifted slightly positive in May but returned to -0.1 in August but overall it has remained very close to neutral through 2025 implying few pressures.
Global inflation vs supply chain pressures
- Shipping rates are likely either to be disinflationary or neutral. The FBX container shipping rate fell 16.8% m/m in August to be down 61% y/y with the China to North America’s east coast route down 29.7% m/m & 66.9% y/y. The bulk goods Baltic Freight index rose for the third straight month in August and is slightly higher this month.
- Brent crude fell for the second straight month in August and has started September lower. It is now down around 10% YTD. With the market widely expected to be in surplus, oil is unlikely to add to inflation pressures.
- FAO food prices have only fallen in two of the last 8 months. Annual inflation has stabilised but is yet to moderate. Processed rice prices rose almost 2% in August but were down over 40% y/y and have started September lower.
- LME metal prices were slightly weaker in August but still up 5.9% y/y and September so far are looking higher with all metals up except lead. Iron ore was higher last month and could post a third straight monthly increase this month. Wool is also up and has been trending higher since last October.
Global inflation vs food & oil prices
Source: MNI - Market News/LSEG
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
