Fin-X Weekly Update 14th September 2026
Risk appetite faded as inflation concerns resurfaced and energy prices rose sharply amid escalating Middle East tensions and supply concerns.
Central banks adopted a more hawkish stance, with the ECB raising rates and markets pricing further increases ahead, including in Australia.
US inflation came in slightly firmer than expected, while Australian data remained mixed and consumer sentiment softened.
This week, attention turns to central bank meetings in the US, UK and Japan, alongside significant global activity data.
Activity data was generally positive last week, with the Chinese trade balance continuing its upward trend. Even so, risk appetite faded as investors began to price in higher inflation and a round of rate rises from the world's major central banks.
Inflation concerns were underscored by Chinese producer prices, which accelerated to +3.8% yoy. The pace of the increase implied that China may no longer be acting as a source of global disinflation.
Energy prices added to the unease. Brent crude rose by +8.6% to US$ 104.61 per barrel after China resumed oil imports, with supply concerns compounded by a further escalation in the Persian Gulf. US forces struck multiple Iranian tankers in response to attempted missile attacks on a US warship, part of a broader effort to force Tehran to capitulate. Supply fears intensified further as Saudi Arabia told OPEC that its oil output had slumped again last month to its lowest since 1990, while Iran-backed Yemeni Houthis were later blamed for a drone attack that forced an emergency shutdown of the East-West pipeline over the weekend.
In the United States, Treasury Secretary Scott Bessent sought to curb the rise in Treasury yields by announcing a further US$6 billion in Treasury buybacks. The relatively modest sum did little to move prices, and sentiment was not helped by President Trump announcing that US$5,000 cheques would be paid to every American should the Republicans win the upcoming midterm elections. Were the payments made, the bill would run into the trillions of dollars and stoke further inflation and deficit concerns. Investors gave the pledge little credence, however, noting that previous DOGE and tariff “dividends” had never materialised.
Central banks provided the week's dominant theme. The European Central Bank raised rates by +0.25% to 2.50% on Thursday, as widely expected, setting up a likely second increase at its next meeting in October.
Markets were also attaching a more than 80% probability to rate rises this week from both the Federal Reserve and the Bank of Japan, to a 3.75% - 4.00% range and to 1.25%, respectively, while the Bank of England was expected to hold at 3.75% until November.
Friday's August CPI report brought a slightly firmer than anticipated monthly core reading of +0.3%, although the annual figures for headline (+3.4%) and core (+2.4%) were in line with expectations. The underlying “supercore” services measure, which excludes housing, rose +0.1% to 3.0% yoy, and Thursday's PPI Final Demand jumped by more than anticipated to +5.4% yoy.
The narrow breadth of inflationary pressure in the CPI report might not fully satisfy the Jackson Hole criteria for a rate rise set out by Chairman Warsh. Yet his insistence on letting the market provide the signal, rather than guiding it toward a particular rate, places pressure on the FOMC to deliver an increase this week. Market pricing has adjusted to four rate rises in total by the end of 2027, up from just two at the end of August. Failing to lift the Fed Funds rate would severely dent the credibility of the new Chairman.
At home, with the Reserve Bank due to meet in a little over a week, two senior officials used public appearances to prepare Australians for higher rates. In a fireside chat at the AFR Property Summit, Assistant Governor (Economic) Sara Hunter said inflation was still too high and that the risks were skewed towards higher rates. Deputy Governor Andrew Hauser, interviewed by Sarah Ferguson on the ABC's 7.30, resisted calling a September hike “inevitable”, emphasising that the Board still faced a genuine debate amid mixed data.
Domestic data was mixed. Westpac's consumer confidence index fell -5.2% to 84.4 in September, underscoring persistent household pessimism despite a better-than-expected Q2 GDP outcome and some signs that Q3 growth was broadening. ANZ-Indeed job advertisements rose +2.5%, but NAB Business Confidence remained in negative territory at −8, and business conditions dipped below zero for the first time since 2020.
In the week's other big story, leading figures in artificial intelligence responded to safety concerns raised by former and current staff, saying that it was time to slow the development pace of their most advanced models. Anthropic's chief executive, Dario Amodei, said the company would implement new safety steps, including third-party evaluators, and called on the industry to support a broader downshift. Sam Altman told Fortune magazine that OpenAI's initial public offering would be delayed until 2027 as the company focused on safety concerns.
Besides this week's central bank meetings, China's monthly activity data are due tomorrow. Industrial production figures are also scheduled in Japan, the eurozone and the United States.
Source: Bloomberg, CGA, BLS, NAB, 13th September 2026
Source: Bloomberg, S&P Dow Jones, MSCI, FTSE Russell, 13th September 2026
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