Morning Wrap (21.10.2026)

RBA Deputy Governor Andrew Hauser said the inflation outlook is worse than previously forecast, with underlying inflation likely to come in higher than expected. Capacity constraints also appear to be exerting stronger pressure than anticipated, keeping the possibility of a fifth rate hike in November on the table. Goldman Sachs has revised its forecast and now expects a 25 bp rate hike to 4.85% on November 3.

Hauser placed particular emphasis on Q3 trimmed mean inflation, which he believes could exceed the RBA's forecasts. The September CPI data, scheduled for release on October 28, will therefore be a crucial reading ahead of the November policy decision.

BOJ Deputy Governor Himino warned that delaying policy adjustments for too long could allow inflation risks to materialize. Underlying inflation is already close to the 2% target, while financial conditions remain accommodative. Markets assign a low probability to an October rate hike but are pricing in around a 75% chance of another increase in December.

Finance Minister Katayama said Japan is approaching a sustainable inflation cycle driven by wage growth rather than solely by higher import costs.

Japanese exports rose 16.7% YoY in September, marking the 13th consecutive month of growth. Semiconductor- and AI-related demand remains the main driver, while exports to the U.S. increased by 22.9%. The trade deficit narrowed, although part of the improvement reflected delayed oil imports and could reverse in October.

U.S. pending home sales fell 7.3% in September, compared with expectations for a 0.5% decline, pushing the index to a record low. Housing starts also disappointed, although building permits came in above expectations. Elevated borrowing costs are clearly weighing on one of the economy's most interest-rate-sensitive sectors.

The Dow Jones gained around 1% by the end of the U.S. session, while the Russell 2000 rose nearly 1.8%. The Nasdaq remained close to flat. Declining long-term bond yields supported smaller companies. The rotation suggests that investors remain willing to take on risk but are becoming increasingly selective within the equity market.

Citadel founder Ken Griffin said AI is "almost certainly" in a bubble, while acknowledging that the technology is transformative.

According to reports, Nvidia is considering investing hundreds of millions of dollars in Australian AI cloud provider Firmus after the company abandoned its planned IPO.

SpaceX reported quarterly revenue of approximately $14.6 billion, with its AI segment accounting for more than half of the total. Elon Musk said AI computing capacity remains extremely constrained and suggested that even older Nvidia chips are being rented out at exceptionally high prices.