Good morning. Technology results from Elon Musk's two companies and Meta lifted US equity futures overnight. SpaceX's September-quarter profit came in at more than twice what analysts had forecast, and Musk confirmed that SpaceX and Tesla are exploring a merger. After the close, Meta's revenue and Tesla's revenue both came in above consensus. The gains came with higher borrowing costs: the US 10-year Treasury yield rose 3 basis points to 5.15 per cent. Brent is trading at US$109.92 this morning, up 0.9 per cent from this time yesterday, with Westpac warning that a prolonged Iran conflict could push it considerably higher.
UK inflation rose faster than economists expected, led by motor fuel, and French government borrowing costs passed 5 per cent for the first time since 2002, yet European equities still finished higher. In Asia, TSMC halted steel-structure construction at every one of its Taiwan sites after an accident killed four workers at Kaohsiung, one of its hubs for the 2-nanometre chips used in AI data centres.
Closer to home, RBA Deputy Governor Andrew Hauser's warning that the inflation outlook is materially worse than the bank forecast in August lifted the market's estimate of a rate rise on 3 November to better than even. Domain's figures showed house prices falling in every capital in the September quarter, the steepest quarterly fall on record, so the RBA is considering a further rise while housing is already falling. On the ASX, NextDC lost more than 40 per cent of its value after a stalled Melbourne grid connection forced a guidance cut of more than a third, and CSL named GSK's Deborah Waterhouse as its next chief executive.
S&P 500 futures are trading at 7,801 this morning, up 0.6 per cent, with Nasdaq 100 futures up 1.0 per cent at 30,010 and Dow futures up 0.6 per cent at 53,066; these levels include after-hours trading on the Meta and Tesla results. In the regular session, the Nasdaq led after results from SpaceX and Super Micro Computer revived demand for AI-linked shares. Bitcoin rose 2.4 per cent to US$84,513, moving with technology stocks.
The STOXX 600 rose 0.9 per cent to 644 and the FTSE 100 rose 0.2 per cent to 10,752, with both indices advancing despite higher French government bond yields. The euro was unchanged at US$1.1233.
At yesterday's Asian close, the Nikkei 225 rose 0.9 per cent to 64,621, but it is still down 4.6 per cent over five sessions. In the same prior session, the Hang Seng fell 0.9 per cent to 23,652 and the Shanghai Composite fell 0.6 per cent to 3,713. Both are down about 9.6 per cent over six months. The yen is unchanged at 158.19 to the US dollar.
The ASX 200 finished yesterday's session up 0.2 per cent at 8,831. It traded lower for most of the day after the RBA's inflation warning, then rallied in the late session. The 10-year government bond yield was unchanged at about 5.3 per cent. The Australian dollar is at US70.31 cents this morning, up 0.4 per cent and 1.6 per cent higher over five sessions.
Core inflation rose to 2.8 per cent, against 2.7 per cent expected and 2.6 per cent in August, and prices rose 0.4 per cent over the month, against 0.3 per cent expected. Bank of England Governor Andrew Bailey has said rates need to rise but has not said when. FX Street said sterling is supported by stronger UK data and by rising expectations of a 25 basis point rise in November.
The rise came as the French government deployed troops to Paris ahead of fresh mass protests, after last weekend's riots, the AFR reported.
Westpac's Sian Fenner said Gulf crude exports have recovered to 70 to 90 per cent of pre-conflict levels, but they now move through ship-to-ship transfers and escorted convoys that take five to 10 days. Chartering a tanker from the Gulf to China costs 15 times what it did a year ago. The IMF has modelled that oil at US$130 through the March quarter would take half a percentage point off global growth next year and add 1.1 percentage points to inflation.
Futures price a rise as far more likely by December than at next week's meeting.
Reuters reported the same day that global diesel prices would stay high despite President Trump's deal with Russia, and CNBC reported that Ukrainian drone strikes have cut Russian diesel exports. Russia is the world's second-largest diesel supplier. Higher fuel prices are part of the energy-driven inflation behind higher bond yields.
A 25 basis point rise is fully priced by March, and markets have begun to price a small chance of a sixth increase next year, which would take the cash rate above 5 per cent for the first time since 2008. Goldman Sachs now forecasts a rise in November. Hauser cited the Middle East conflict and the boom in data-centre construction. Bloomberg data reported by the ABC put the November probability at 51 per cent.
Every capital last fell in the same quarter 15 years ago. Unit prices fell 3.5 per cent, and the combined-capitals median house price is $1,226,566. No consensus is published for this series. Cotality's Gerard Burg said the fall was driven by weaker demand after rate rises. On 16 October, AMP economist My Bui forecast a 10 to 15 per cent peak-to-trough fall by mid-2027, against 5.2 per cent so far.
Real federal spending rose 4.3 per cent in 2025-26, more than double the 1.8 per cent forecast in the 2024-25 budget. Deloitte Access Economics' Stephen Smith said fiscal policy is adding to demand while the economy runs above capacity. That bears on how much of the inflation-fighting falls to the RBA, ahead of December's mid-year budget update.
Kearns said job advertisements, the vacancy rate and business hiring intentions do not point to a rapid deterioration. Challenger's labour-tightness index, which combines them, has barely risen this year, against sharp increases during the 2023 and 2024 rate cycles.
Bui expected inflation pressures to ease over the coming months, after the trimmed mean slowed to 0.2 per cent in August from an outlier 0.5 per cent in July. She also noted that employment rose 1.2 per cent over the year against 1.7 per cent population growth, and put fair value for the Australian dollar at about US72 cents.
Diluted earnings were US$3.83 a share after a US$9.9 billion charge for its August settlement with 52 state attorneys general, or US$7.40 excluding the charge. The company narrowed its 2026 capex guidance to US$135 billion to US$145 billion, from US$130 billion to US$145 billion, so the lowest end of its planned AI infrastructure spending is now higher. The result landed after the close, and the shares first trade on it in tonight's regular session.
SpaceX's AI revenue rose more than ninefold on a year earlier to US$7.6 billion. Its shares rose 11 per cent on Wednesday and Tesla's rose more than 3 per cent. Musk put the combined group at about US$3.5 trillion and said the committees have not yet agreed terms. A deal would need approval from 50 per cent of all Tesla shareholders, not just a majority of those voting. SpaceX is not eligible for the S&P 500 until June 2027. Phoenix Growth Fund's Jack Hu estimated a merger could bring about US$50 billion of index-fund buying, rising to US$170 billion once SpaceX's escrow arrangements roll off.
Deliveries of 486,532 vehicles beat the roughly 461,100 analysts expected but were about 2 per cent lower than a year earlier. Spending on AI and robotaxis weighed on profit. Tesla has stopped Model S and Model X production at Fremont to install its first large-scale Optimus robot line. The shares rose more than 3 per cent in Wednesday's regular session, before the result was released.
The penalty puts a figure on the legal exposure facing the large US platforms, and is separate from the US$9.9 billion settlement charge in Meta's quarterly result. New Mexico Attorney General Raúl Torrez said the state would continue to pursue technology companies.
Kaohsiung is one of TSMC's leading-edge hubs for 2-nanometre production, the process used for high-performance data-centre chips. The company is expanding capacity there to meet AI demand. It has not said when work will restart.
IFM is an Australian infrastructure manager and reportedly beat bids from KKR, Apollo and Gautam Adani. Completion depends on regulatory and national-security approvals and is expected in H1 2027. The deal shows Australian capital still competing for large core infrastructure assets offshore.
The appointment ends a six-month global search. Interim chief executive Gordon Naylor stays until February and then returns to the board. Waterhouse will receive a base salary of £1.5 million, a short-term incentive of 120 per cent of salary at target, a long-term incentive of 250 per cent at target and a £7.71 million award to replace forfeited GSK shares. She will keep her base in the UK and is barred from involvement in the Seqirus vaccines business until 31 March 2027.
The money will build a new manufacturing facility at the Henderson defence precinct near Fremantle. The shares were 1.9 per cent higher at $4.26 in late trading on Wednesday.
“We can't allow expectations to shift away from target.”
“That is exactly why we have acted to curb growth in the NDIS and aged care, and why we will continue to identify responsible savings and reprioritisations at every budget update.”
“Our investments are paying off, the core business is strong, and we're seeing velocity across the board.”
“We all love AI, but at some point it may not work.”
“One of the largest, if not the single largest state verdict against a company in American history.”
“The foundations are strong. My job is to continue the momentum and evolve the path into reliable growth for patients and shareholders.”
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Sources: Yahoo Finance, FRED, RBA, company filings.