NAB Morning Call: Recent Episodes
Phil Dobbie
Start your day with the NAB Morning Call for the latest overnight key economic and market information straight from our team of expert market economists and strategists. This includes perspective on overnight news and market price action and the forces shaping movements in Australian and global markets in the days ahead.
Friday 21st June 2024
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Markets reacted rather swiftly to the news that President Macron had called a snap election for France, just after his own party had been heavily beaten in the European elections by Marine Le Pen’s Front National.
This week Phil talks to Anne Bucher, from Bruegel, an independent European economic think tank. Anne is a former Director-General in the European Commission until October 2020 – in fa
ct, she joined the commission in 1983 working across a wide variety of policy areas over may years. She has an innate knowledge of European politics.
So, how does she see the French situation play out? Can we expect the more extreme elements of the Front National agenda to be watered down? Has the UK’s Liz Truss moment served as a warning bell for any party promoting higher debt?
Whilst we can expect some compromise, Anne says the big casualty will be progress. As the EU fights battles with the right it’ll struggle to develop a cohesive plan for growth and climate change.
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Friday 21st June 2024
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Europe is in the midst of the group rounds of the Euros, but when it comes to central bank cuts Switzerland is already the champion, with Britain the favourite to cut next. JBWere’s Sally Auld talks through yesterday’s decisions by the Bank of England, the Swiss National Bank and the Norge’s Bank. In the US markets seemed unfazed by Neel Kashkari’s claims that hitting the Fed’s inflation target might take a year or two. Perhaps his views were surpassed by more soft data overnight, including another rise in jobless claims. New Zealand’s GDP was a little higher than expected, but it won’t last, says Sally. And tonight the PMI data-dump for Germany, France, the Euro area, the UK and the US.
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Thursday 20th June 2024
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The UK, which has seen inflation rise to one of the highest levels, is also one of the first to get it down to target, with the headline rate down at 2% yesterday. Even so, the Bank of England won’t cut rates when they meet today, although perhaps three members of the panel might call for it. Het markets are now fully pricing the first cut at the back end of the year. NAB is expecting August. NAB’s Gavin Friend explains why the variety of opinions and expectations. He also talks about the EU’s plans to implement penalties for the large number of member states who are holding too much debt. Meanwhile, the Norges Bank and Swiss National bank meet today. He Swiss re expected to cut rates and win a football match.
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Wednesday 19th June 2024
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The most valuable company in the world is not Apple or Microsoft. It's NVIDIA. Can anyone stop them? Meanwhile, the RBA kept rates on hold but in a way that was more hawkish that expected. NAB’s Rodrigo Catril says the committee even discussed the potential for rate hikes. NAB still expects a cut in November, nonetheless. In the US retail sales were weaker whilst government spending rose. Could all this extra government spending delay the fall in US inflation? Today UK CPI numbers are released and the US takes the day off, keeping NVIDIA on top for another 24 hours.
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Tuesday 18th June 2024
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French politics still has a long way to run, but markets have calmed down a bit on the hope that a LePen government might not be so radical. NAB’s Taylor Nugent says ECB chief economist calmed markets by suggesting there was nothing disorderly in bond markets that would see the need for the central bank to intervene. It’s going to be an uneventful RBA meeting today, with rates on hold and no new forecasts to map out the path of cuts for this year and next. All in all, a fairly quiet session. Except US equities, of course, that broke records, again.
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Monday 17th June 2024
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Last week was dominated by two big stories. First ,the dichotomy between US inflation data and the downgrade of rate cuts predicted by the Fed. Secondly, the snap French election , which could turn about to be very bad news for President Macron. NAB’s Ray Attrill talks through the market reaction to both by the end of the week, along with a sprinkling of data from Friday, the BoJ meeting and loan data from China. This week we hear rate decisions for the RBA, the BoE, the Swiss National Bank and the Norge’s Bank. Ray explains which one might cut.
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Friday 14th June 2024
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There’s been growing interest in private credit markets lately. So, what exactly is it? Phil talks to Gillian Gordon, Head of Alternative Investments and Responsible Investing at JB Were, who says it’s basically non-bank lending. So why would businesses choose to borrow directly from investors rather than issuing bonds, and what’s in it for the lender? Take twenty minutes to get across the ins and outs of private credit, and why there’s been so much interest in it lately.
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Friday 14th June 2024
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You might have expected that bond yields would start creeping back up again after the Fed’s hawkish ‘one dot plot’ meeting yesterday. Instead yields fell, as the latest producer prices echoed the softness in the CPI read before the Fed. JBWere’s Sally Auld says it feels like price pressures, after a hot start to the year, are starting to cool a bit. So, does that mean the Fed’s predictions of just one rate cut this year are already out of date, just one day later? There’s also a discussion about share, currency and bond movements in Europe, the take-outs from yesterday’s Australian labour market data and what to expect from the Bank of Japan today.
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Thursday 13th June 2024
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It's been a fascinating session overnight. Early Wednesday US markets responded positively to weaker CPI numbers. Bond yields fell sharply, alongside a dip in the US dollar and more enthusiasm for equities. There must have been an expectation that the numbers would be reflected in a more dovish approach by the Fed, but the dot plot from FOMC members told a very different story, with the median expectation for just one cut this year. NAB’s Gavin Friend talks through the response, highlighted that the plot is a set of opinions, not a forecast and its he hard numbers that count. The next of those will be US producer prices out today, which fed into the PCE, the Fed’s preferred inflation measure. So, markets haven’t fully pulled back to their pre-CPI positions, but can we expect that if the producer prices aren’t as encouraging?
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Wednesday 12th June 2024
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A mixed set of numbers overnight. The UK’s employment numbers showed wage pressures remain, whilst the NAB business survey also demonstrated inflation stickiness. NAB’s Ray Attrill says wages are a lagging indicator, and you can’t jump to conclusions that any of these numbers will change the central banks’ current trajectory. The path of cuts expected by the Fed becomes clearer with the release of their dot plot tomorrow morning. Meanwhile, bond yields fell overnight, helped by a positive auction result, and shares have been helped by Apple announcing the new AI iPhone. Economies and households might be struggling but we’ll always get excited by a new gadget.
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Tuesday 11th June 2024
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Non-farm payrolls came in a lot higher than expected in the US on Friday. Not only were there more people in jobs, but wages are also rising faster than expected. Phil asks NAB’s Taylor Nugent how uncomfortable this will be for the Fed and what it’s done to market expectations There will be a lot of focus on the FOMC meeting this week, with the dot plot telling us when the Fed thinks we’ll see rate cuts. Whilst the ECB has been working hard to reel back expectations for rate cuts in Europe, President Macron has thrown the cat amongst the pigeons by calling a snap election in France, in response to a lurch right in the weekend European Parliamentary elections. It’s not going to be a dull week.
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Friday 7th June 2024
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On 18th June Daniel Mookhey, the NSW Treasurer, presents his second budget to the state parliament. This week he talks to Phil about the challenges he faces, starting with house prices. They continue to rise, despite repeated efforts by governments over the years to bring them under control. How much of it is down to supply and what can the government do to increase it?
Infrastructure building is part of the solution, says Mookhey. But that costs money and, if the NSW government increases spending couldn’t it add to the inflation problem? Is that something he worries about?
In this half hour discussion Phil talks to the Treasurer about how he balances government spending against the drive to build the foundations for future growth, whilst facing the challenges of a less egalitarian society and a hefty state debt.
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Friday 7th June 2024
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The ECB cut interest rates as expected, but there’s no clear indication of when the next cut will come. NAB’s Gavin Friend says staff forecasts have pushed inflation higher. Hence, a hawkish cut. So much so, you wonder whether they would have carried through if it hadn’t been so clearly signalled beforehand. Now the focus is on the US labour market and what it means for the Fed. The ADP jobs number came in soft earlier in the week and the jobless claims number rose last night, with a softer read is expected tonight. Just as important ifs the question of wages. Q1 labour costs were downgraded yesterday, so will the fall carry through to the May number tonight?
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Thursday 6th June 2024
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US equities hit new highs today and bond yields continued to fall. The Bank of Canada cut rates overnight with indications there will be more to follow. They pipped the ECB to the post, with their cut expected later today. Equities and bonds have been buoyed by positive sentiment, helped by a surprisingly strong ISM Services number for the US, after a weaker ADP jobs report – combined they add to the case for cuts from the Fed. NABs Ken Crompton joins Phil today to talk through all this central bank action, as well as digging into yesterday’s Australian GDP data.
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Wednesday 5th June 2024
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Bond markets continue their rally, with yields down again this morning. NAB’s Rodrigo Catril says it’s in part down to the JOLTS data in the US overnight, which showed job openings slowing. That’s pushed forward expectations for Fed rate cuts slightly. He also points to the election result in India, which saw the PM lose his majority, which could impact future growth and, therefore, energy demand. We’ve seen commodity prices coming down again, hitting the Aussie dollar. Today we get Australia’s GDP for Q1. What should we expect? And could the bank of Canada be the first G7 central bank to cut rates in this cycle? We’ll find out later.
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Tuesday 4th June 2024
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Longer end yields pushed higher overnight. NAB’s Skye Masters says it was in part down to softer manufacturing data from the US, although there’s a chance markets have overreacted to what was a pretty mixed picture. For example, whilst the Manufacturing ISM fell, the Manufacturing PMI, for the same month, released at the same time, rose. Markets are hoping, though, that softer data on the back of falling inflation means more cuts can be squeezed in by the Fed at the back end of the year. There’s also discussion on the Australian minimum wage decision, why oil has fallen so sharply overnight and the importance of US job openings data tonight.
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Monday 3rd June 2024
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Europe’s core inflation number rose slightly on Friday. That won’t change the ECB’s bolted-on decision to cut rates this week, but the likelihood of more than one other cut this year is diminishing. NAB’s Tapas Strickland says Friday’s Core PCE Deflator number in the US was lower than last time, but if it had been 0.002% higher it would be the same as last time. Not enough to change expectations from the Fed, with speakers now in the blackout period ahead of the June 14 meeting. Today |Australia’s wage award decision will be watched, and GBP for Q1 is out this week too.
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Friday 31st May 2024
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Assuming he stays out of prison, Donald Trump has an even chance of winning the next Presidency. What does that mean for the Fed? Trump has often argued for the need to keep interest rates low, so he’s probably not too happy with the higher for longer strategy being used to fight inflation right now. We also know he wants to challenge the independence of the central bank. But how would that work exactly?
On this Weekend Edition Mary Rosenbaum, Managing Director of the Observatory Group, an analyst firm in Washington specialising in geopolitics and macroeconomics, gives her take on what President Trump 2.0 could do to achieve his low-interest aims. Will he try and replace people in the Fed, or change the Federal Reserve Act so the government has more control over how the Fed operates, with Treasury members on the board perhaps. Or will Trump resort to bullying the Fed to see things his way?
Mary talks through the various scenarios and what the implications could be on bonds, interest rates and the dollar. Some useful insights that’s worth half an hour of your weekend.
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Friday 31st May 2024
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Inflation is taking a long time to come down, everywhere it seems. Europe reports its CPI today, but the numbers from Germany and Spain have already shown it’s taking longer than expected. NAB’s Gavin Friend talks about expectations around the Fed’s preferred inflation measure, the Core PCE Deflator, out later today. With Fed speakers doing their best to pus expectations further back a high number here could be the ammunition needed for those expected no cuts this year, and maybe a rise. That’s an argument made by Bill Dudley on Bloomberg today. Yet there are many signs of a weakening global economy, the US included, which will give hope to those expecting cuts sooner rather than much later.
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Thursday 30th May 2024
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Australia’s monthly CPI reads are always to be treated cautiously. Nonetheless, the surprise rise in inflation did create a response on Asian markets, pushing Aussie yields higher. JBWere’s Sally Auld talks about how weaker bond demand in US 7-year note auction added to the bond sell-off. Australia wasn’t the only inflation surprise. German CPI also rose. The ECB is wedded to a cut next week, but will they deliver the 60bp priced in for this year? In New Zealand the question for today is can the government meet all their budgetary promises without adding to the inflation worries.
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Tuesday 28th May 2024
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There were two bond auctions in the US overnight – for 2 year and 5 year treasuries. Both saw weaker demand than expected. Phil asks NAB’s Ken Crompton if investors are weary of the size of bond supply this year. Meanwhile US consumer confidence rose more than expected. Yesterday we saw weaker retail numbers than expected, but part of that can be explained away by the timing of Easter. Today there's the CPI number for Australia, although it’s not expected to influence the RBA’s sense of timing.
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Tuesday 28th May 2024
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It’s been a quiet 24 hours with the UK and US on holiday, with the bond and equity markets closed in each place. But Europe was open for business, although the German IFO numbers offered little to get excited about – staying in the same place as last month. One ECB speaker said after the June rate cut, the central bank will retain ‘maximum optionality’ – central bank speak for we’re not sure what happens next. NAB’s Rodrigo Catril guides us through the data, and the commentary from the ECB and the BoJ. Australia’s retail sales numbers are out this morning, along with producer prices for Japan, and the Conference Board’s Consumer Confidence report out tonight in the US.
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Monday 27th May 2024
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Friday was a quiet end to the week, but the NSDAQ still managed to touch a new high. Bond markets closed early in the US, though, in readiness for a long weekend, that will see a slow start to this week. NAB’s Taylor Nugent says trade was light so we can’t draw any definitive conclusions about too much. Even Nobel economist Paul Krugman is unsure where things are heading. He said he could argue either way as to whether or not interest rates will remain higher for longer, and whether R* rate should return to 2019 benchmark levels, or has it moved higher. Does anyone know? After a quiet start, this week picks up with the US PCE deflator on Friday, and Australian retail sales and CPI prints before that.
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Friday 18th May 2024
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NVIDIA is now the third biggest listing in the US, with a market cap of 2.3 trillion dollars. Their earning results this week were an upside surprise for revenue, margins and forward guidance. So how far has the US tech growth story got to go? Phil talks to NABTrade’s Gemma Dale about the rise and rise of tech. Is it pulling investment away form Australian domestic stocks? They cite some interesting research from NAB that demonstrates how super funds have been selling US shares because the growth has been too strong and they need to rebalance their portfolios. Retail investors, of course, aren’t limited in the same way, so should they hold on for the ride? And what part does Australia play in the tech and environment megatrends? Can we expect some high growth companies as well?
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Friday 24th May 2024
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Stronger than expected PMIs in the US – for manufacturing and services – have pushed bond yields higher. Equities, which started the session strong on the back of the NVIDIA earnings, have also fallen sharply today as pricing for rate cuts by the Fed gets pushed back further. NAB’s Taylor Nugent says the data for the US does need to continue to soften for the Fed to deliver on cuts, and these numbers went against that trend. In Europe the latest ECB wages data also challenged expectations for moves beyond the already signalled June cut.
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Thursday 23rd May 2024
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The UK Prime Minister stood out I the pouring rain to announce a July 4 election for the UK, months ahead of expectations. Perhaps he doesn’t think the economy will improve so he might as well go sooner. It comes on the same day as the latest UK CPI numbers, which didn’t fall as far as expected. Phil asks NAB’s Gavin Friend whether this could all push rate cuts out further. There’s a worry in some quarters that the Fed could be in the same boat, with FOMC minutes just out. In NZ Adrian Orr said the RBNZ even considered a rate hike for yesterday’s meeting. Meanwhile, NVIDIA’s latest earnings showed
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Wednesday 22nd May 2024
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Equities were quite contained a day out from the NVIDIA earnings, although the S&P did hit another all time high. Copper prices continue to rise from its new high on Monday. Phil asks Ray what’s driving this – real factors or a speculative bubble? European wages data came in high, so much so that you’d be wondering why the ECB is so committed to a June rate cut. Canada saw inflation growth slow, and with the RBNZ tonight Phil asks Ray for his take on the order of bank cuts.
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Tuesday 21st May 2024
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There’s an absence of solid data. Maybe that’s why equity markets have reverted to AI-hype, ahead of NVIDIA earnings later in the week. There’s also been significant gains in the price of silver, gold and copper. Phil talks to NAB’s Rodrigo Catril about why precious metals are doing so well. None of this distracts from the commentary from central banks, with more from the UK and US tonight, as well as the minutes of the last RBA meeting locally. And the first fo the week’s significant CPI prints – first off, Canada.
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Friday 17th May 2024
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It’s a quiet start today after a week that finished slowly. Skye Masters discusses how bond yields have been slowly rising, unwinding the moves after the surprise CPI growth earlier in the month. Central banks still seem to be doing their best to warn markets not to expect rate cuts too soon. Isabel Schnabel from the ECB did just that on Friday, warning that, although a June cut was appropriate, a ‘cautious approach is needed beyond that’. If Friday was quiet, expect more of the same today, although data picks up later in the week, including CPI for UK, Canada and Japan, and the latest RBNZ meeting, plus NVIDIA earnings.
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Friday 18th May 2024
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There’s been a lot said about the Labor federal budget this week. One of the big questions is whether the energy subsidy alongside the tax cuts and rent assistance, will do enough to bring down inflation. In this Weekend Edition JB Were’s Sally Auld argues that, whilst we might see a reduction in headline inflation, the government’s fiscal expansion is at odds with the RBA’s monetary policy and it is likely to delay any moves down in interest rates. The extra government spending might be worthwhile if it can be shown to improve productivity, but its not clear how that will happen. There is recognition, however, that these are unusual times and the need for greater onshoring and a need for governments to fast track support for emerging sectors. But how?
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Friday 17th May 2024
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Even though equities fell form their record highs of yesterday, that wasn’t until after the Dow passed the 40k mark for the first time ever. JBWere’s Sally Auld is surprised at the confidence in US equity markets, particularly as data is showing more signs of softness and Fed speakers continue to talk about waiting longer for cuts. JPMorgan’s James Dimon also expressed concerns about the inflationary impact of the rising US deficit. There’s also discussion about yesterday’s Australian employment numbers, which saw the unemployment rate rise more than expected.
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Thursday 16th May 2024
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US CPI came in broadly as expected overnight, but the markets reacted anyway. Perhaps they feared another upside surprise. NAB’s Taylor Nugent says the slowdown in retail numbers also raised expectations slightly that the Fed will squeeze in two rate cuts before the year is out. But what about the RBA? The wages data yesterday was helpful, but not enough to move the goal posts. What about the employment numbers today?
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Wednesday 15th May 2024
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Markets are waiting for US CPI later today. There was some market reaction to he producer price numbers from the US, which NAB’s Gavin Friend described as sticker shock. The core number for April was higher than expected, but markets quickly retraced steps when the March number was revised down. In short, not such a big move after all. UK employment numbers were a little stronger than expected in March, along with wages data. Australia gets its wage inflation data today, as markets come to terms with last night’s Federal Budget.
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Tuesday 14th May 2024
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It is of course, budget day in Australia today. NAB’s Rodrigo Catril says government subsidies will help bring headline inflation down, but the rise in household spending could delay the slowdown in the underlying inflation rate. The speed at which inflation will fall continues to be the question on everyone’s lips around the world. For the US the PPI (producer prices index) will be watched keenly because it feeds through directly to the Fed’s preferred inflation measure. CPI numbers tomorrow will add to the picture. The UK’s employment and wages data today will show whether the upside surprise in GDP in the last quarter is being reflected in the labour market, which could also delay the slowdown in inflation.
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Monday 13th May 2024
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There were a few signs that inflation globally might be taking longer to fall. Canada’s surprise employment numbers pushed yields higher, and the UKs CPI was an upside surprise on Friday as well. Consumer inflation expectations in the US also came in higher. NAB’s Tapas Strickland says al these factors could push back rate cuts a little further. And what about locally? What is the potential impact of more government spending and wage increases in the budget tomorrow? Meanwhile, demand is more of an issue for China than inflation. Aggregate financing fell for the first time in 20 years and Joe Biden is expected to announce a 100% tariff on Chinese EV imports this week.
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Thursday 9th May 2024
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There wasn’t any tier one data overnight to give markets any clear direction. You could say there was an air of subduedness. The Riksbank cut rates, as suggested yesterday, but one ECB member is concerned that going too early, against a Fed that keeps rates on hold longer, could drive the Euro lower and add to inflation concerns. NAB’s Gavin Friend says the problem emerges after one or two cuts, alongside a Fed that’s not moving. So what’s the Bank of England’s strategy? August seems the most likely month for a cut, says Gavin, but we’ll find out more at the meeting and the press conference that follows.
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Wednesday 8th May 2024
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NAB is still expecting that the RBA’s next move will be a cut in November, because yesterday’s meeting did raise the possibility of a rate hike if inflation remains too persistent. NAB’s Skye Masters says the market reaction was tame because none of this came as a surprise. We’ve known that inflation was taking time to come down, and the revisions to the RBA’s inflation forecasts yesterday simply reaffirmed that belief. Neel Kashkari from the Minneapolis Fed also spoke of the possibility of a hike if inflation and jobs remained strong. In Europe it’s a different story and there’s a real possibility that the Riksbank will cut rates today.
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Tuesday 7th May 2024
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The RBA meets today and is expected to keep rates on hold. They also release their revised inflation forecasts in the latest Statement of Monetary Policy. NAB’s Taylor Nugent says there will be some market sensitivity around these numbers, as well as the press conference, although there’s a firm expectation that rates won’t budge today. There is one central bank that might cut rates this week though. Listen in for more on that, plus the hopes of a peace deal in the Middle East and a sprinkling of second tier Euro data.
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Monday 6th May 2024
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The non-farm payrolls in the US came in lower than expected, with a rise in the unemployment rate. NAAB’s Ken Crompton says we shouldn’t get too excited by the unemployment rate because it’s a small move when you take it to the second decimal place. The Services ISM was also weaker, falling into contraction territory. The impact has been to bring forward rate cut expectations a little, with a 75% chance the Fed will move in September. In Australia home loans data wasn’t particularly encouraging reading. The focus is now on the RBA tomorrow, then state budges later in the week. Will spending add to pressure on jobs, slowing the fall in inflation?
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Friday 3rd May 2024
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They dominated the global share market last year and many have enjoyed tremendous growth so far this year, with NVIDIA as the clear outperformer. Whilst there’s a been a bit of an adjustment lately, Katie Stockton, founder of Fairlead Strategies in Connecticut, says there’s still plenty of momentum and their own analysis points to prices pushing higher. Katie’s approach is to build a portfolio based on technicals. “I do read macro strategists work”, she says in this weekend’s podcast, ”but it won’t drive our decision making process”. In other words, any macro development will be reflected in the indicators they follow at some point. And those technicals are painting a positive picture for most of the big tech stocks right now.
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Friday 3rd May 2024
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US productivity has slipped quite markedly in Q1, that’s pushed up labour costs – is that something to worry about? Phil puts the question to NAB’s Gavin Friend, who says markets are still responding to yesterday’s dovish slant from the Fed. Non-farm payrolls will be watched keenly tonight, along with US Services PMI. Locally Australia’s home loans data is out today. Phil and Gavin also talk through revisions to the OECD’s growth forecasts for the US, Australia, Europe and the UK.
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Thursday 2nd May 2024
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The Fed kept rates on hold for the sixth meeting in a row this morning, warning that there had ben a lack of further progress towards their 2% inflation target. NAB’s Ray Attrill says it didn’t really change market pricing for a cut, with the first fully priced move still looking like December. But there was a fair bit discussed during the press conference, from the terminal rate, the impact of the election and the possibility of a rate hike. Jerome Powell gave a cautious ‘no’ to the rate hike. Listen in for the latest from the Fed and the latest data, including JOLTS from last night and Australia’s trade data today.
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Wednesday 1st May 2024
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A month-end a day out from the Fed decision in the midst of some earning results for some heavyweight stocks, its hardly surprising we saw a lot of volatility in bonds, currencies and equities in this session. NAB’s Skye Masters says yields pushed higher on the release of US employment costs, which were higher than expected, contribute g to more of a push back in the timing of Fed rate cuts. Jerome Powell would have to be uber hawkish to pish rates any higher says Skye, but we’ll know this time tomorrow.
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Tuesday 30th April 2024
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German inflation numbers overnight were stickier than expected, presenting a challenge for the ECB, one of the few central banks that has been talking-up the mid-term rate cuts. Phil asks NAB’s Rodrigo Catril if this puts June cut in jeopardy, or the expected follow-up cuts later in the year. Elsewhere we saw a sharp reversal in the value of the Yen. Has it been driven by intervention, or at least the anticipation of it? Australia’s retail numbers will be the focus locally today.
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Monday 29th April 2024
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The US March PCE Deflator number on Friday was broadly in line with consensus, but NAB’s Tapas Strickland says upward revisions to the January and February numbers show inflation remains persistent which delays further the timing of cuts by the Fed. There weren’t big moves in bond yields but that could all change with a busy week for US data, including ISMs and Payrolls, along with Wednesday’s FOMC meeting. To add some spice to the equation The Wall Street Journal reported that Donald Trump, if he were to become President again, might challenge the independence of the central bank. There was a strong move down in the Yen on Friday after the Bank of Japan did little to support the currency and there’s a question as to whether they will lift rates at all this year. With inflation so low, do they need to?
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Friday 26th April 2024
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Australia is well placed in terms of natural resources for the green energy transition. We are already one of the world’s largest exporters of lithium, in-demand for the production of batteries, primarily for electric vehicles. Alison Reeve, Energy and Climate Deputy Program Director at the Grattan Institute, joins Phil to talk about how Australia can gain maximum benefit from the drive for NetZero. Can we, for example, move up the renewables value chain, so we don’t simply extract minerals and ship overseas. There’s an enormous opportunity, says Alison, provided we recognise the strengths we provide and where in the chain we stop adding value. In this wide raging discussion they also look at the growth of sodium-ion batteries, hydrogen’s place in Australia’s future and the pitfalls of localised solar cell production.
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Wednesday 24th April 2024
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Is stagflation on the horizon for America? It’s a question Phil puts to NAB’s Rodrigo Catril after we saw slower growth and rising prices in data out on Wednesday. Could slow growth impact the euphoria around the Magnificent Seven? Well not just yet, as Microsoft and Alphabet have both enjoyed double digit percentage growth in after-hours prices o the back of strong earnings data. They also discuss Australia’s latest CPI data which will mean a revised forecast from the RBA, but what does it do to the speed of rate cuts? And could the Bank of Japan surprise today, as the Yen hits another low?
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Wednesday 24th April 2024
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PMIs showed some strength in Europe, but were generally weaker than expected in the US. NAB’s Taylor Nugent says it’s the US numbers that generated a market reaction because it adds to the leading indicators that challenge the notion of US exceptionalism and that the gap between the US and Europe is closing. Today the quarterly CPI print for Australia is unlikely to move the dial on RBA cuts, even if it comes in slightly lower than expected. Plus, Tesla’s earnings results, which have seen a rise in after hours pricing.
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Tuesday 23rd April 2024
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The force of AI is strong it seems. It’s certainly pushing equities back up again in the US ahead of earnings results for several of the Magnificent Seven later this week. Meanwhile, bond markets and currencies have calmed down, although the pound is weaker on expectations for an earlier cut by the Bank of England. Today PMIs for the UK, US and Europe will give a clearer indication of the relative strength of each economy and, perhaps, justify the different schedules being pursued by the various central banks. JBWere's Sally Auld talks through it all on today’s podcast.
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Monday 22nd April 2024
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The magnificent seven have been taking a hit in the US share market. NAB’s Ray Attrill says the forward-guidance for Netflix wasn’t received well, and four more of th large tech stocks report this week. Meanwhile, there were further signals of delays in Fed rate cuts, whilst the impetus in Canada, Europe and the UK seems to be, if anything, moving the other way. But, assuming no further escalation in the Middle East, it seems likely that US equities might be the focus in the early part of this week.
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Friday 19th April 2024
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This week we saw the divide between European despondency and American exceptionalism widen a little further. The IMF upgraded their US growth forecasts, whilst nudging Europe’s a little lower. But it’s not all doom and gloom. Melanie de Bono, senior Europe economist at Pantheon Macroeconomics in London, says the economy is already benefiting from real wages growth which should accelerate domestic demand, whilst a June cut by the ECB seems likely, with Pantheon predicting four cuts in total this year. That’ll free up even more household spending whilst boosting the investment opportunities for business. But is there the confidence in the economy to support that shift in demand and production? And what of a likely trade dispute with China and the potential of increased geopolitical volatility in the Middle East? Could they impact inflation and hinder Europe’s relatively lacklustre growth opportunity?
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Friday 19th April 2024
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Fed speakers are increasingly pushing expectations for cuts further back in the year. John Williams even suggested he’d entertain the idea of a rate rise if it was warranted. That’s coming from one of the more dovish members of the FOMC says NAB’s Ken Crompton. Ken also takes us through yesterday’s employment numbers for Australia and looks ahead to Japan’s CPI and UK retail numbers today. And we give you the latest Netflix earnings – a knockout for new subscribers. Plus a taste of what’s to come on the Weekend Edition.
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Thursday 18th April 2024
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Markets were mixed overnight. The dollar lost a bit of ground, AUD and NZD outperformed, bond yields fell, while US equities have continued to struggle. The only geopolitics to speak of came from Joe Biden talking upping the need to impose hefty tariffs on Chinese steel and aluminium imports. NAB’s Rodrigo Catril says it as a bit of electioneering and pacifying the US steel industry. Today Australia’s employment numbers will be the focus. The unemployment rate rose considerably in February but as Rodrigo points out, these numbers can be very volatile.
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Wednesday 17th April 2024
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There’s been a significant shift in sentiment from central bankers at the IMF meeting in Washington. Jerome Powell, who had previously seemed happy to accept rate cuts relatively soon, is now signalling it will take longer. IMF forecasts that significantly upgraded US growth for this year might have added to the pressure to cool things a little. Meanwhile, Andrew Bailey from the Bank of England, who it was assumed was prepared to wait till after the Fed, is now talking about inflation coming down, suggesting a cut sooner might be possible. Perhaps a sharp rise in unemployment influenced his thinking. NAB’s Rodrigo Catril joins Phil to talk through the latest data and words from the mouths of central bank speakers.
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Tuesday 16th April 2024
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The latest retail numbers showed the resilience in the US economy. NAB’s Ray Attrill says its surprising given the fall in household savings, but there are more people in work feeding the spending habit. These stronger than expected numbers haven’t changed expectations for the timing of rate cuts by much, but bond yields have pushed higher and lifted the US dollar a little further too. A weaker Yen and Aussie dollar have been two of the consequences. Today employment data for the UK, CPI for Canada and GDP for China. Plus the latest forecasts from the IMF.
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Monday 15th April 2024
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How markets respond to the Middle East situation this week really depends on whether Israel retaliates. The expectation of the weekend’s drone attack on Israel by Iran pushed the US dollar higher, bond yields lower and caused some damage to equities. NAB’s Taylor Nugent says there hasn’t been much response in early trade today, but Bloomberg Economics is predicting a sizeable spike in oil prices if this broadens to a regional war, with the subsequent impact on global GDP and inflation. There’s also discussion on China’s trade numbers from Friday, the weakening Michigan Consumer Sentiment survey and what to look out for today, besides the latest geopolitics.
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Friday 12th April 2024
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Financial advisors could be missing a trick. So many of them are men, used to dealing with men, yet the customer base is shifting. High net worth women are accumulating their own assets, from their own lucrative careers, from intergenerational wealth passed to them, from managing their parents asets or as proceeds from a divorce. Data from last year showed that male millionaires were growing at a rate of 3.6% per year, whereas female millionaires were growing at 5.7% per year. So, is this industry geared up for this?
JBWere CEO Maria Lykouras doesn’t think the industry is adapting fast enough, which is why she commissioned research, summarised in a new report on the Growth of Women and Wealth (pdf). On the Weekend Edition she explains where the industry is falling short and how it can adapt, and what she is doing to get JBWere up to speed on the opportunity.
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Friday 12th April 2024
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Christine Lagarde said a few members of the ECB were ready to cut rates now, even as the ECB President announced that, for now, rates will stay on hold. Was this the strongest suggestion yet that a June cut will happen? Phil asks NAB’s Gavin Fiend what he took from the ECB meeting overnight. Meanwhile, US PMIs didn’t help the case for those looking for signs of US prices falling faster. Quite the reverse. Bad news for the UK too, with one MPC member saying the BoE shouldn’t cut before the Fed, although that simply supports NAB’s base case that the BoE is some way away yet.
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Thursday 11th April 2024
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US inflation is not coming down quickly. There’s been a lot of evidence for that lately and the latest CPI numbers can be added to the list. The response from markets have been quite pronounced, with a significant rise in yields, a sharp climb in the US dollar and a fall in equities. NAB’s Sky Masters says the moves reflect markets who have been holding out for a June rate cut – now reality has hit. The Bank of Canada and RBNZ both kept rates on hold, with a similar message that they need more time before considering cuts. It seems the ECB might be the first to cut – we’ll get some fresh insights at their meeting later today.
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Wednesday 10th April 2024
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US CPI numbers are out today along with a couple of meetings of central banks - the Bank of Canada and the RBNZ. NAB’s Taylor Nugent talks through the expectations for both those meetings, although clearly both are expected to be on hold. So which one will make the move first? We also discuss yesterday's NAB business survey and consumer confidence, as well as diving into the surprising results from the NFIB business optimism index in America which is at its lowest level since 2012. And Phil eats some humble pie.
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Tuesday 9th April 2024
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10 year Treasury yields hit a year to date high overnight as markets continue to push back expectations for the number and timing of FOMC cuts this year. NAB’s Ray Attrill says the Fed’s Goolsbee described the US economy as being in a normal boom-time – not the environment for cuts. But there are signs that other parts of the world might be recovering a little faster. Een Europe is showing signs of a recovery. At home yesterday’s housing finance was stronger than expected, another factor that could delay the RBA. Today the NFIB small business survey is out, but ray says the key small business number is already out. Listen in for more.
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Monday 8th April 2024
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US non-farm payrolls showed many more new workers than expected last month, but an increase in the participation rate meant the unemployment rate actually fell. Phil asks NAB’s Rodrigo Catril why the numbers have pushed back market expectations for a rate cut by the Fed. He says, surely they’d be happy to see a broader workforce because it would ease wage inflation pressures? There’s also discussion on rising commodity prices, the record price of gold and yet a falling Australian balance of trade. Three central banks meet in the week ahead. Listen in for more.
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Friday 5th April 2024
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China is forecasting GDP growth of 5 percent this year. The China Daily suggested last week that the economy was on track to see sustained growth of 4.5 percent each year until 2035. Just how realistic are those ambitions for a country steeped in debt, with large scale developments being forced into administration? Diana Choyleva is Chief Economist at Enodo Economics, a research company based in London that focuses on China. She suggests the short-term target is likely achievable, but the longer term proposition is less certain as the economy struggles to create increased domestic demand whilst undergoing more decoupling from the west.
There are further insights available from the Enodo Economics website, including this paper: China Unveils Expansionary Policy In Support Of Xi's Security Objectives - https://bit.ly/3U2xiAE
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Friday 5th April 2024
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The latest building approvals for Australia show just how bad the housing situation is becoming. NAB’s Rodrigo Catril says it’s a structural problem that adds to the difficulties the RBA faces in slowing inflation. He talks through the latest NAB forecasts for CPI ahead of the next release later this month. Meanwhile equity markets have been choppy ahead of tonight’s payrolls numbers in the US, whilst the ECB minutes reaffirm that a June cut is likely. But then what?
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Thursday 4th April 2024
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Jerome Powell spoke at the Stamford Forum overnight, reiterating that the Fed was prepared to wait before cutting rates. JBWere’s Sally Auld says markets are now stating to come to terms with the fact that a June cut is almost certainly off the cards, and three cuts this year are looking less and less likely. But how long do they wait for? The Services ISM was weaker than anticipated, could a delay in cuts cause unnecessary damage to the economy? A June cut is far more likely in Europe, where the Eurozone CPI read came in lower than expected. The ECB meeting minutes out today will be eagerly perused for any indication to the contrary.
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Wednesday 3rd April 2024
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Bond yields continued to rise in the US overnight, with Europe playing catch-up as it returns from a long Easter weekend. NAB’s Ken Crompton talks through the adjustment markets are making to their rate cut expectations from the Fed. European bonds also rose even though today’s Eurozone inflation number could be lower than expected. There’s also discussion of the RBA minutes, which seem a little more hawkish than the tone set in the statement and press conference.
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Tueday 2nd April 2024
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The US manufacturing ISM this morning was stronger than expected. Phil asks NAB’s Ray Attrill if we are seeing more soft-landing evidence from the US, with the Core PCE deflator read on Friday showing prices are rising just 2.8% year on year, whilst spending is rising, and job claims fell last week? Rau suggests its more of a ‘no landing’ situation, if the data holds out. There was good news from China too over the weekend. It might be a short week, but it’s a busy one. Phil and Ray talk through what to expect.
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Friday 22nd March 2024
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Bronwyn Curtis OBE is an Australian economist living in the UK with an illustrious career in finance. She’s headed Currency and Fixed Income at Deutsche Bank, then later at HSBC, as well as working fo the World Bank in Latin America and Asia, and overseeing development of Bloomberg’s European broadcast operations.
Bronwyn joins Phil Dobbie to give her take on where monetary policy is right now and you’ll find some of her observations contradict the consensus. The Fed, for example, she thinks will move later and are unlikely to see through the three cuts markets are expecting. The ECB, meanwhile, have every reason to cut sooner. Longer term she thinks interest rates around 3 percent will be healthier for a growing economy.
Listen into a wide-ranging discussion covering Europe, the US, China and the influence of Trump.
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Thursday 28th March 2024
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A early Easter this year is creating the potential for extra volatility the last day or two of the quarter. Even though the Core PC deflator numbers are out at the end of the week, the markets are closed on Friday. That means markets finish the quarter still speculating on the direction inflation is taking. Adding to the volatility is the question about how much intervention we can expect from Japanese authorities as the Yen fell to its lowest level since 1990. JBWere’s Sally Auld talks through the days action and looks bac at yesterday’s Australian CPI, as well a s highlighting a new JBWere report looking at the shift in wealth to Australian women. We also look ahead to this afternoon’s Weekend Edition.
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Wednesday 27th March 2024
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It’s been a session low on significant data and low on market moves. Bond markets have managed to absorb sizeable auctions however, and equities have bounced back as we approach month end and the US inflation data at the end of the week. NAB’s Ken Crompton talks through those moves, some of the softer data out f the US and looks ahead to Australia’s CPI today, explaining why this release is more useful than the last. And breaking the glass? Hear comments from on member of the Bank of Canada who says they are facing an emergency when it comes to productivity.
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Tuesday 26th March 2024
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The CNY climbed higher today, as the PBoC set a higher reference rate, reversing expectations that perhaps authorities were willing to see the currency drift a little lower. NAB’s Rodrigo Catrl talks through the moves, and the warning from one senior Japanese official that speculation driving down the Yen will not be tolerated. Meanwhile bond yields in the US and Europe push higher, ahead of inflation data later in the week. Data is light today, but we get consumer confidence data for Australia, Germany and the US (conference board). But as Rodrigo points out, how people feel and what they do are often very different things.
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Monday 25th March 2024
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The CNY fell sharply on Friday after Chinese authorities set the daily reference rate weaker than expected. NAB’s Taylor Nugent talks through the consequences and repercussions of an approach that might be less contained. Meanwhile markets are responding to the commentary form Central banks last week. How would you sum it up in one word, asks Phil? Later? No, quite the reverse says Taylor. Particularly in the UK. Although ‘later’ still applies to the RBA and perhaps, to the FOMC. It’s a quiet, short week, but a lot off the key data emanates from Australia, including CPI on Wednesday.
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Friday 22nd March 2024
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Foreign students are back and more than ever. Julie Hare, education editor at the AFR, says its more than just a rebound and catch-up from COVID. Something has shifted. So, what does that mean for the economy? NAB’s Taylor Nugent says there are economic consequences – good and bad. It has alleviated some of the tightness in the labour market, but its also added to inflation pressures. Phil asks, without it, how well would the economy be faring? Looking ahead the picture is complicated. On this week’s podcast we look at how international demand is not matched by the domestic appetite for higher education, despite the government’s aims to increase the numbers and diversity of students. Plus, how are educators coping with new regulations aimed at clamping down on those cheating the system to gain access to work in Australia?
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Friday 22nd March 2024
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Equity markets ushed higher, presumably on expectations of looming rate cuts by various central banks. NAB’s Gavin Friend in London says a move in August is still expected by the Bank of England, as the two hawks who voted for a rise last time fell in line in the latest meeting. In fact, one central bank did cut rates overnight. But what about the impacts of local data yesterday. Was the Australia unemployment number too low for the RBA, and the NZ GDP read too soft for the RBNZ?
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Thursday 21st March 2024
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Inflation has eased, but not enough yet says Jerome Powell, as the Fed keeps rates on hold, and Fed members point to a slightly higher long-term nominal rate. NAB’s Taylor Nugent dissects the announcement and the press conference, before looking ahead to the Bank of England. UK inflation yesterday was a little weaker than expected. But not enough to change the dial at the BoE. Services inflation remains persistently high. Also today, GDP for New Zealand and Australia’s employment numbers. So, what would the RBA like to see today?
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Wednesday 20th March 2024
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With the RBA and bank of Japan out of the way, markets are readying themselves for the FOMC tomorrow, with yields drifting a little lower today in anticipation. NAB’s Ken Crompton says the RBA has removed its tightening bias – now, nothing is ruled out or in. The next move is expected to be down, but the question that remains is when? The bank of Japan lifted themselves out of negative interest rates, as expected, but Ken says they did a good job of dampening any expectations of a rigorous tightening cycle. Tomorrow, the FOMC meets, with the focus on the dots plot – how many and what will be the endpoint?
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Tuesday 19th March 2024
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Two central banks meet today, but the outcomes seem predictable. The end of negative rates by the Bank of Japan seems to have been well signalled, and the RBA continues its restrictive policy settings. NAB’s Skye Masters says we continue to look to November as the first possible rate cut in Australia. Meanwhile bond yields in the UW continue to push higher, ahead of the FOMC meeting later in the week. Phil asks if 2-year yields could push as high as 5%. Elsewhere, positive data from China yesterday, the ZEW survey for Europe today and Canada’s inflation print.
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Monday 18th March 2024
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This week we hear the interest rate decisions from the RBA, the Fed, the BOE, the Bank of Japan, Norge’s Bank and the Swiss National Bank. Will any of them move rates? NAB’s Rodrigo Catril looks at what to expect and when, including the growing possibility that we’ll see a lift in rates and an end to yield curve control by the BoJ. Generally, though, the tone seems to be higher for longer as many indicators are showing inflation is taking a while to get under control.
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Friday 18th March 2024
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A pandemic, water shortages, labour supply issues, the cost of finance, China’s slow recovery, climate change. It seems like the agricultural sector faces massive headwinds, but NAB’s Lea Jurkovic says there’s still an immense amount of optimism within the sector, with plenty of upside potential in Australia’s export markets. That optimism is shared by Lachlan Marshall, who runs the Yurunga Farms Partnership, a diary and cattle operation near Deniliquin. He joins Phil and Lea to talk about how he is using mechanisation and data to drive efficiencies, that enhance the productivity and long-term viability of his farm. “I’m scaling up to thrive rather than survive, he says on this week’s Weekend Edition.
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Friday 15th March 2024
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Reality is starting to bite. Pesky inflation is taking longer to come down, even as other data is showing slower economic growth. NAB’s Ken Crompton says its only one day, but stronger producer prices and slower retail growth is your classic stagflation data print. It’s clearly too early to make that call, but markets are worried, with equities taking a hit and expectations falling further for a rate cut in June. Bond yields have oved markedly higher, although oil prices are rising as the IEA forecasts stronger demand this year, which hardly fits the stagflation argument. But clearly, whatever the outcome, it’s taking longer to get there!
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Wednesday 13th March 2024
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Another big auction overnight showed strong appetite from investors for long-dated US bonds. NAB’s Gavin Friend says the resilience in US data refuses to give up and the timeline for when the Fed will cut rates continues to get pushed back. Markets are not even fully pricing a cut in June now and there’s the question as to whether the Fed dot plot next week will drop to two cuts this year. Meanwhile, expectations are rising for a rate rise by the BoJ next week, as wage negotiations in Japan show many workers are seeing pay rises in excess of 5 percent. Gavin talks through the likely impacts on currency markets.
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Wednesday 13th March 2024
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US inflation came in hotter than expected ion data out overnight, but NAB’s Taylor Nugent says it was only marginally above expectations, rounding just makes it seem worth. It’s not changing expectations for a June cut, he says. The NAB Business Survey provided more signs of why the RBA isn’t in any rush to cut rates, with a reacceleration in business conditions. We also discuss what was said by the RBA’s Sarah Hunter yesterday, the weakness in UK jobs and a Bloomberg story that has the BoJ on the cusp of lifting rates.
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Tuesday 12th March 2024
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US CPI is out today. A core monthly read of 0.3 percent is expected. JBWere’s Sally Auld says that’s too high to meet the Fed’s target so we’ll need to see CPI down to 0.2 percent over successive months before they can be certain they are on track. Japan’s GDP growth was lower than expected, although the country is now officially out of recession, but only by the tiniest margin. Could the BoJ really be planning rate hikes in such an environment? Iron ore prices took a hit overnight, whilst gold and Bitcoin are at or near all time highs. There’s clearly a lot of uncertainty out there.
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Monday 11th March 2024
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US payrolls data was initially a surprise on Friday. NAB’s Ray Attrill says there was an initial algo-driven market response, before the human s stepped in on realising that substantial downward revisions in the previous two months meant jobs data was weaker than anticipated. Hence, expectations for a June cut haven’t really shifted. Canada’s employment data, which was higher, passed by with little fanfare. China’s inflation numbers were a surprise over the weekend, coming in at the highest month on month level in a year. Japan’s GDP read is expected to be revised higher today, but the biggest influence on the BoJ strategy will come later this week with the early results of spring wage negotiations.
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Friday 18th March 2024
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You would be right in assuming that equality for women is less prevalent in Japan than it is in Australia. There are 200 listed companies on the Nikkei who don’t have a single female board member. But things are changing. Melanie Brock is an Australian who has lived in Tokyo for 25 years, helping businesses invest and partner in Japan. She serves on four boards, having just been appointed to Asahi Group Holdings. Today she talks through the challenges women face, but also why the economy depends on the career advancement of women. And there’s at least one lesson Australian businesses can learn from Japan about how to advance diversity in the workforce.
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Friday 8tth March 2024
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NAB’s Gavin Friend says you only need to look at the falls we’ve been experiencing in yields lately to recognise that there’s a renewed acceptance that rates will be cut, probably by the middle of the year, in the US and Europe. At the ECB meeting Christine Lagarde talked about good progress being made on bringing down inflation, as they released a downgraded inflation forecast. In front of the sente Banking Committee in the US Jerome Powell talked about not being far from having the confidence to cut rates. That’s why all eyes are back on June. Of course, a surprise result in non-farm payrolls tonight could easily change all that.
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Thursday 7tth March 2024
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The Aussie dollar has led the major sin currency gains today. NAB’s Skye Masters says it follows a fall n the US dollar, with the DXY at its lowest level in over a month. The rise in the Aussie happened despite a lacklustre GDP report for Australia, although the results won’t change the dial on RBA timings. The BoC kept rates on hold and gave no timing on when cuts will happen. The message everywhere – including in Powell’s testimony to the House Financial Services Committee – is that more reassurance is need that inflation is heading sustainably lower. That’ll almost certainly be the message delivered at the press conference after the ECB meeting early tomorrow morning (Australia time).
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Wednesday 6tth March 2024
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The US ISM services index showed a larger than expected slowdown. As NAB’s ray Attrill describes, that’s driven interest in bonds, helped by another fall in US equities, driven by falls in tech stocks. Here’s also been a rise in Bitcoin and gold, both hitting record highs. Interestingly, the services PMIs for Europe were generally a little better than expected. So does any of this change the timeline for anticipated cuts by the Fed and ECB? Today, Australia’s Q4 GDP is the big number to watch, along with the US job openings numbers. And get the popcorn ready for the results from Super Tuesday, but I think we know who wins.
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Tursday 4th March 2024
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US shares have taken a rest for now. Perhaps a $1.8 billion fine on Apple over music streaming has reminded big tech investor that regulators have power. Today, NAB’s Ken Crompton talks through the impact of yesterday’s GDP partials for Australia, much of it driven by mining, with lower inventories and higher corporate profits. The Peoples Congress is underway in China today, with reports suggesting Xi Jinping will confirm that the growth target for 2024 remains at 5 percent. The US releases its PMI Services number today, but the market is really hanging out for Friday’s non-farm payrolls. It’s Super Tuesday in the US today, but we already know who is going to win, for each side of politics.
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Monday 4th March 2024
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The US Manufacturing ISM was weaker than expected don Friday, with new orders, production and employment all contracting. Phil asks NAB’s Taylor Nugent whether this accounts for a fall in front end yields on Friday and whether its impacted expectations for the timing of the first Fed rate cut. In Europe the latest CPI numbers show inflation is coming down more slowly than expected, ahead of the ECB meeting this week. Could this push back the timing for cuts? It’s a quiet start to a busy week – a week that includes US non-farm payrolls and Services ISM, Australia’s GDP and a House testimony for Jerome Powell.
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Friday 1st March 2024
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This week Kate Griffiths from the Grattan Institute warns that the recent budget surplus is hiding the fact that the long-term balance between Australia’s tax intake and the expectations for government spending don’t stack up. As the population ages and the ratio of those in work reduces, the tax base will narrow whilst demand for aged services will expand. Kate argues the case for a roader tax system, less reliant on income tax as the main source of government revenue. Phil asks hat tax reform should set out to address. Is it just about increasing revenue, or is wealth redistribution just as important? And what about the tax efficiency. How many tax loopholes need to disappear. Then there’s taxes with unintended detrimental consequences. There’s a lot to consider.
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Friday 1st March 2024
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Markets were relieved that the US PCE deflators came in in-line with expectations. But, as JBWere’s Sally Auld points out, the six-month annualised rate is ticking up a little, hence the desire by th Fed to see more data before committing to rate cuts. Ion a busy episode today we look at European inflation, Australian retail sales, house prices, Canada’s GDP and words from one BoJ governor suggesting the time is right to lift rates.
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Thursday 29th February 2024
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Markets responded sharply to the RBNZ hold decision yesterday, even though it was largely expected. The tone from the press conference that followed left most assuming there would be no more hikes, even if it’ll take a while for rates to come down. NaAB's Ken Crompton talks through how the markets reacted. He also suggests an above-consensus bounce back in Australian retail numbers today. US core PCE – the Fed’s preferred inflation measure – is also expected to lift a little, whilst US GDP was revised down ever so slightly. And happy leap day!
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Wednesday 28th February 2024
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Japan’s inflation is down, but not quite as much as expected. That’s raised expectation from some that the BoJ will use this as a reason to lift rates. Phil asks NAB’s Taylor Nugent whether they need to. Japanese exports seem to be benefiting from a lower Yen right now. Meanwhile US equities have plateaued. Warren Buffet described it as a casino, suggesting investors focused on stocks that it would be hard to imagine doing without. Like coca cola. Vested interest perhaps? Today the focus is on what the RBNZ does. NAB and BNZ are not expecting a rate rise, but the language at the press conference should be interesting. Inflation is proving troublesome.
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Tuesday 27th February 2024
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Tomorrow is looking a lot more interesting than today, with Australian CPI and the RBNZ. Overnight though, we had more talk from the ECB, including a curious comment from the Bank of Greece Governor, seemingly reinforcing the suggestion that June is the month for cutting. Today we see CPI numbers for Japan, but it’s unlikely to influence the timing of any moves by the BoJ, should they ever move. NAB’s Ray Attrill talks through all of that, plus the outcome of bond auctions in the US overnight, with yields pushing a little higher.
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Friday 23rd February 2024
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Central bankers are being very elusive when it comes to the timeframe for cutting rates. The Fed’s John Williams said on Friday that he believes rates will come down this year, even though markets are expecting a move in June. The ECB’s Christine Lagarde says she wants more persistent evidence that inflationary pressures have dissipated, even though the German economy shank by 0.2 percent last year. And there’s the outside chance that he RBNZ will lift rates this week, although that seems unlikely. Meanwhile Australian CPI and retail sales this week will be waited for with anticipation by the RBA. So, when it comes to rate cuts, it won’t happen overnight, but it will happen. Trivia question: who said that?
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Friday 23rd February 2024
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The US has been enjoying healthy share prices and a market preparing for lower interest rates, with the much-vaunted soft landing. But how much of this good will could disappear if Donald Trump returns to the White House next year? The FT’s Katie Martin says markets haven’t been preparing much just yet because, well, it may not happen. But there’s also the question of how big the gap is between what Trump says he’ll do and what eventuates. Katie suggests corporate America will advise him of the consequences if he were to push ahead with a 55% tariff on all Chinese imports. We can assume he will be far less supportive of green initiatives. We also know he tends to measure economic success by share market performance. The unknown element is his approach to foreign policy. That might mean it'll be time to derisk.
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Friday 23rd February 2024
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The caution we’ve been seeing in the US share market has dissolved completely since the release of NVIDIA earnings yesterday. NAB’s Ken Crompton says the euphoria has even spread as far as Japan. But is too much good news taken by the Fed as another reason to delay rate cuts? You could also question whether the ECB will delay longer than June. The minutes of their last meeting note the risk of cutting too early if greater than the risk of a delay. Today the diary is light, with retail sales for New Zealand the focus. A weak result would surely remove the chance of a hike by the RBNZ next week?
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Thursday 22nd February 2024
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The FOMC minutes this morning didn’t provide many surprises, except warning that inflation could pick up and more evidence was needed. All reasons to delay cuts until, possibly June. Meanwhile, as NAB’s Gavin Friend points out, the ECB has almost committed verbally to a June cut. Now we’re seeing louder voices inside the BoE warning that delaying cuts will have harmful impacts on the economy, which has the potential to also move to a June cut. No such luck with the RBA though. Yesterday’s wage inflation data, even though it came in almost as expected, it’s still too high for the policy makers to feel comfortable.
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Wednesday 21st February 2024
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Canada’s latest inflation rate came in lower than expected overnight, prompting the inevitable speculation about an earlier cut from the Bank of Canada. April perhaps? Phil asks NAB’s Skye Masters whether this means they’ll be the first major central bank to move lower, as others seem to be pushing expectations back a little. Although UK gilt yields dropped after the BoE’s Andrw Bailey said to a government hearing that market expectations for a rate cut this year are not unreasonable. Today Australia’s wage rice index is released. NAB expects it to come in line with RBA forecasts, but we’ll see.
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Tueday 20th February 2024
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It’s been quieter than quiet the last 24 hours. The US has been off for Presidents Day, and elsewhere only glacial movements in bonds and currencies. Why? Well, as Phil discusses with NAB’s Ken Crompton, its because there’s not much in the way of data releases to move markets along, those that are open. On eof the strongest currencies was the New Zealand dollar, that saw a slightly stronger than expected PSI read yesterday. Ahead we have the RBA minutes and Canada’s CPI to look forward to. Beyond that, we’re clutching at straws a bit!
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Monday19th February 2024
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There was some dismissing of the US CPI numbers last week as not being the Fed’s preferred measure of inflation. But the producer prices on Friday, which do input into the Fed’s preferred Core PCE number, also showed prices ticking higher in January. Evidence of the bumpy path that the Fed’s Michael Barr was talking about on Thursday, perhaps? But NAB’s Taylor Nugent says, as with the CPI numbers, seasonally adjusting January’s numbers is notoriously difficult. In any case, we won’t see further market reaction in the US today because its Presidents Day holiday. So, a quiet start to a week which includes the latest flash PMIs and Australia’s wage price index.
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Friday 16th February 2024
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In the consumer space there are only really two ways tech firms make money. They either sell stuff – usually subscriptions – or they offer free content supported by advertising. Advertising is as old as the hills so you might be mistaken for thinking that its days are numbered. But Debra Aho Williamson, an independent tech analyst from Seattle, says online will continue to grow its share of an expanding global advertising market, and AI will help improve the efficacy of the budget of advertisers. But advertising isn’t the only way forward and each of the major tech firms has their own approach. Listen in to the discussion to help gather your own thoughts on who is in the strongest position right now.
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Thursday 15th February 2024
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There have been some surprises in the last 24 hours but it seems none of it will change the dial for central banks. Australia’s unemployment ticked above 4% yesterday, but JBWere’s Sally Auld explains why you have to be cautious about January numbers and why it doesn’t really add to the pressure for the RBA to cut sooner. The latest GDP numbers in the UK, which showed the country has been in recession for the last two quarters, but the BoE was quick to respond on the need to see inflation falling more consistently before they act. Japan also moved into a recession which surely challenges the notion that the BoJ will lift rates. And US retail sales showed the biggest fall in almost a year. So, lots of data, but nothing to change central bank thinking.
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Thursday 15th February 2024
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Central banks seem to be sounding a little more dovish, with the exception of the RBA and RBNZ of course. NAB’s Ray Attrill says market expectations are driving away from the higher-than-expected US CPI read, like a speeding car. Hence, bond yields have bounced back today. They rose even further in the UK where inflation came in lower than expected. With GDP numbers later likely to show an economy in recession, can the BoE really hold out much longer? It’s a movable feast, and in the midst of that movement NAB has released the latest FX forecasts, which effectively pushes the growth in the Aussie dollar back a quarter, against a stronger US dollar. But there are a few significant caveats, discussed on today’s podcast.
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Wednesday 14th February 2024
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US CPI numbers showed that inflation isn’t coming down as fast as expected. The market reaction was swift as markets repriced their expectations for the timing of rate cuts. Equites fell sharply, bond yields rose as the US dollar gained ground.. NAB’s Taylor Nugent says there are good reasons not to take too much signal from the January data alone. Perhaps the exercise will be repeated with UK inflation numbers later today although there a small rise is already expected. Today New Zealand’s price indices will give an early indication of inflation, as the market pares back rate hike expectations after the surprising call by (another) major bank this week.
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Tuesday 13th February 2024
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Maybe not as exciting as the Super Bowl, but the CPI numbers out in the US early tomorrow morning (Australia time) could have a more significant impact on the US economy and the speed of cuts from the Fed. NAB’s Rodrigo Catril says the headline rate is expected to start with a 2, instead of a 3, but will it fall faster than expected putting pressure on the Fed to move more quickly. Ahead of all that, we get the NAB Business Survey, the ZEW survey results for Germany and the Eurozone, and employment numbers for the UK. At last, the data calendar is hotting up.
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Monday 12th February 2024
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Talk about an anti-climax! Markets were on tenterhooks ahead of the revision to US CPI on Friday but, it turns out, there was nothing to see. NAB’s Tapas Strickland points out that the revision was one basis point higher for the three-month average. Now markets can focus on the next CPI print, which is out this week. Friday’s excitement in our region came from one bank’s call for the RBNZ to raise rates in February and April. Michelle Bullock didn’t rule out a rate rise for the RBA when she fronted up to parliament on Friday, but it seems unlikely. It’s a quiet start to the week, with China on holiday for the New Year, but Tapas takes us through some of the data highlights for later in the week.
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Friday 9th February 2024
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Australian tourism was enjoying record highs for visitor numbers before the pandemic. Then we closed the borders. Visitor arrivals are picking up again, but are still not back to 2019 levels. But Samantha Palmer, general manager of Austrade’s visitor economy and client programs division, says we’ll break that record for visitor numbers in 2025 and exceed the spend record this year. That makes tourism infrastructure a solid investment promotion. But what sort of product is required and how can you finance all that upfront investment when a brand-new offering could take a while to provide cash returns?
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Friday 9th February 2024
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The Fed and several other central banks are united in their message that there’s no rush to cut rates. Thomas Barkin was the latest to deliver the message from the FOMC, suggesting they won’t ‘toggle’ rates until they’ve had a few more months of data. Meanwhile, NAB’s Skye masters says as we await more data bonds are drifting, looking for direction. There will be some trepidation about the possibility of a revision to US CPI numbers later and there are more solid numbers to help support whatever side of the timing of the toggle you sit on.
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Thursday 8th February 2024
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Once again central bankers have been out pushing the message that rates will not be coming down quickly. What’s more, the neutral rate is likely to be higher than before. There was a lacklustre response from bond markets, which managed to absorb $2 billon worth of new issuance. The market moves have been in equities, with the S&P close to, but not quite hitting - 5,000. Phil asks NAB’s Tapas Strickland whether this is misplaced optimism.
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Wednesday 7th February 2024
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It was a busy day for Australia yesterday, with the RBA announcement, the statement of monetary policy, and the press conference. For all of that there wasn’t any wild fluctuations in markets, despite the hawkish tilt and the spectre of a rate rise given as one possible course of action if services inflation remains too resilient. But, as NAB’s Gavin Friend points out, most of the market action was in US bond markets, where yields fell significantly overnight. It’s the lack of tier one data, says \gavin, driving speculation.
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Tuesday 6th February 2024
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Stronger than expected ISM services data yesterday has dampened further the likelihood of a March rate cut. Meanwhile, China is taking more steps to stem the outflow from equity markets. Australia, meanwhile, readies itself for the first RBA announcement of 2024. But its not just an announcement, it’s the release of the Statement on Monetary Policy and a press conference. NAB’s Rodrigo Catril talks us through this new look RBA performance and why it could prove to be choppier for bond and currency markets.
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Monday 5th February 2024
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US payrolls numbers on Friday showed a surprisingly large upswing, mirroring the ADP numbers earlier in the week. The data also showed a higher-than-expected increase in wages. NAB’s Ken Crompton says this puts paid to any hopes of a March rate cut, with the first fully priced cut expected in June. He adds there’s a chance that inflation data could be revised up a little later this week. The BoE’s Huw Pill meanwhile has been promoting the need to wait longer before cutting, adding to the underperformance of Gilts on Friday. It’s a quiet start to the week, but the main interest locally is obviously the RBA tomorrow, with the rates announcement coinciding with the publication of the Statement of Monetary Policy, followed by a press conference by Michele Bullock. A lot to take in.
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Friday 2nd February
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Sydney and Melbourne property prices are down from their peaks, whilst Brisbane, Adelaide and Perth reached all time highs last month. But for how long? Will Sydney and Melbourne bounce back? Phil talks to Eliza Owen Core Logic’s Head of Residential Research about recent trends in the property market which, despite everything, continues to enjoy rising prices, but for how long? What impact is migration having on demand for dwellings in Sydney and Melbourne. What’s driving the widening gap between house prices and apartments? And what are the trends Eliza thinks we’ll see this year that might surprise you. Even if you are not a property investor, or considering a housing purchase, this is compulsory listening for anyone gathering ammunition for Australia’ favourite dinner party conversation – house prices!
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Friday 2nd February 2024
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It wasn’t a unanimous decision by the Bank of England overnight. Some of the board wanted to lift rates, the majority wanted to hold, but there was one who still wanted to push them higher. All in all a March cut is now extremely unlikely according to NAB’s Gavin Friend, who says those pricing in 100bp of cuts this year have probably got it wrong. We also look at the fed’s decision, one day on. Shares are higher and bond yields lower, so it seems the prospect of delays in cuts hasn’t phased the markets too much. The latest ISM report painted a slightly more optimistic picture for US manufacturing, but prices remain a concern. Wages will be watched keenly, of course, in the non-farm payrolls out on Friday in the US. Jerome Powell said this week he was looking for more “good data” – maybe this will be one of those reports.
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Thursday 1st February 2023
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At the FOMC today a unanimous decision was made to keep rates on hold, but there was suggestion that they’d be cutting rates anytime soon. JBWere’s Sally Auld says this will dent the optimism of those hoping for a lower rate in March. Australia’s inflation numbers yesterday are also unlikely to change the stance of the RBA next month. The Bank of England meets later today – three of the nine board members voted for a hike last time.
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Wednesday 31st January 2024
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We are less than 24 hours away from the next FOMC meeting. NAB’s Tapas Strickland says an indication that the Fed was dropping its tightening bias would help validate the higher expectations for cuts in market pricing. But will it happen? Even though inflation is falling, consumer confidence is also on the rise and there are more than 9 million jobs looking for employees. Also today we discuss Australia’s retail numbers yesterday, what we can expect in today’s CPI and the latest forecasts from the IMF, which paints a slightly rosier picture in their latest World Economic Outlook.
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Tuesday 30th January 2024
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For all the delaying tactics of central bank speakers, markets are still pricing cuts earlier for the fed and the ECB. So who goes first? NAB’s Ray Attrill says it’s a two-horse race, although markets are pricing in early cuts in Europe. That could all change, of course, depending on what’s said by the FOMC tomorrow. Europe’s destiny will be somewhat shaped by it’s GDP numbers today, which are expected top show that the Euro area is in recession. There’s also discussion about Australia’s retail numbers out today, which are expected to show a fall in December in response to the bounce in sales (because of sales) in November.
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Monday 29th January 2024
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You want busy, we’ll give you busy.The FOMC and the Bank of England meet this week and five of the magnificent 7 report earnings. We’ll also see the latest Australian CPI read and payrolls data from the US. NAB’s Rodrigo Catril joins Phil to catch up on data from the tail end of last week, which saw US core-PCE dip below 3%, whilst European data continues to show more of a downturn, with signs that the ECB may be changing its tune on waiting till June to cut rates.
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Thursday 25th January 2024
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By and large investors will have seen slim returns from Australian equities in 2023, but they would have made far more from US shares and, in particular, the magnificent seven. So, does the same apply for this year? Phil asks Gemma Dale, Director of SMSF and Investor Behaviour at nabtrade, who says 2023 wasn’t too bad when you factor in dividends. But 2024 could be better. Rates are coming down at some point, bond yields are falling and, you’d hope, the consumer will have more cash to spend. All of that, you’d assume, points to a rosier picture for equity investors, but which sectors will do the best?
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Thursday 25th January 2024
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Theres a more risk positive mood this morning NAB’s Rodrigo Catril says its being driven by moves in China to drive an economic recovery, including a half percent cut in the reserve requirement ratio for lenders. There’s been more attention ,though, to talk of a (long awaited) fiscal stimulus. Japan’s currency moved higher as investors mulled over the commentary form the bank of Japan, suggested a move into positive rates was looking more likely. Whilst the Bank of Canada highlighted that the days of rate rises are over for now, without giving any timeline for cuts. In PMIs Europe showed further weakness against US strength. Another reason for the ECB to cut rates sooner rather than later, but few expect that to happen at tomorrow’s meeting.
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Wednesday 24th January 2024
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The Aussie dollar gained a bit of ground briefly yesterday on reports of China launching a rescue package to placate their retail investors, with shares now the furthest they’ve ever been behind the US. NAB’s Ray Attrill says there’s a question mark as to whether they are addressing the symptoms rather than the root cause. The European economy has had more bad news, with loan data showing companies still are not borrowing, whilst consumer confidence is falling. Is the ECB wrong to consider delaying cuts till June? Today’s PMIs will shed some light on what has been a widening chasm between US and European economic health.
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Tuesday 23rd Janaury 2024
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US equities hit new highs again overnight, reflecting the optimism for an economy that’ s beating inflation and escaping recession. Even the continuance of weak data and pessimism for the Chinese economy is failing t impact US ebullience. NAB Skye Masters says bond markets were more contained, reflecting a day light on news or data prints. There’s not expected to be a policy change fr the Bank of Japan today, but there is a press conference and we get to see revised quarterly forecasts which could help determine when or if there will be future policy changes. Locally, the NAB Business Survey is out today.
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Mondaay 22nd January 2024
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The S&P hit its first high since January 2022 on Friday, driven largely by the major tech stocks. Phil asks whether there’s just too much exuberance? NAB’s Tapas Strickland says it’s an important week for tech earnings this week, including Netflix, Tesla and IBM. US positivity was also reflected in the Michigan consumer sentiment survey, which came in much higher than expectations. The UK and Europe are on a very different trajectory, with a significant fall in retail sales in December possibly leading the economy into a recession. This week Athony Albanese is expected to announce further stimulus measures to ease the cost-of-living crisis which could delay the speed of rate cuts by the RBA. The detail is expected to be ironed out before his National Press Club address on Thursday.
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Friday 19th January 2024
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Our guest on the Weekend Edition this week says Bitcoin started as an anarchic response to the rapidly rising quantity of Fiat currencies. UK economist and writer Frances Coppola still believes the value of Bitcoin is tied to the policies of central banks, particularly when it comes to cycles of QE and QT. But does it really? Many argued it was a hedge against inflation, but that never came to pass. So what changes with Bitcoin now the USD regulator has cleared the way for ETF’s to offer the chance for regular investors to easily buy or sell out of Bitcoin linked securities? Is it now a more respectable investment choice? Will it lose its volatility? And, if it does, what’s the point of it?
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Friday 19th January 2024
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US bond yields continue to push higher as the expectation for delayed cuts mounts. The weekly jobless claims will help the Fed’s case here, with a surprise fall showing how tight the labour market still is. But these are volatile numbers, says NAB’s Gavin Friend, particularly over the holiday period. The same applies to the surprise drop in Australian employment numbers yesterday, although the trend is still showing a rise and there’s nothing to change the RBA’s path for now. Plus, peace hopes for the Middle east and a preview of our first Weekend edition of 2024.
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Thursday 18th January 2024
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Markets are pricing more and more for delays in rate cuts. NAB’S Ken Crompton says even with pricing for cuts of 13bp in February that still shows some “irrational exuberance”. The expectations for delays in rate cuts follow Christopher Wallers comments earlier in the week that, with the economy seemingly in good health, why the rush? That view was supported by a range of positive data releases, including retail sales growth continuing into December. In the uK markets were a little surprised by a rebound in UK inflation, delaying chances of cuts by the BoE. In Australia NAB has revised its expectation for a rate rise by the RBA, but there’s a chance that it will stick with its current rate to the tail end of the year.
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Wednesday 17th January 2024
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Bond yields have ushed higher in the US after the Fed’s Christopher Waller made a speech on the economic outlook at The Brookings Institute, called ‘Almost as Good as it Gets, but will it last?’. NAB’s Rodrigo Catril says he appeared less dovish than anticipated, hence expectations for rate cuts have been pushed back. Now the question is, will any central banks be cutting in the first half of this year? Today we look at the latest European data, the UK’s muddy employment numbers, as well as looking ahead to a busy 24 hours, with a swathe of China data, UK inflation and US retail number.
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Tuesday 16th January 2024
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German GDP fell 0.3% last year, even if they did manage to narrowly avoid a technical recession. Europe’s industrial production also fell in the latest data. Yet ECB members continue to talk down expectations for rate cuts at least until the middle of the year. Phil asks JBWere's Sally Auld about the wisdom of keeping rates higher in an economy that is slowing, and does that explain why markets are out of kilter with the central banks rhetoric?. In the US there will be a air bit of focus on what the Feed’s Christopher Waller has to say on rate cuts. There’s also discussion about why the PBoC didn’t cut their medium-term lending facility. Data wise we see Australia’ s consumer confidence today, along with UK wage data, Canada’s CPI and NZ’s quarterly survey of business opinion. Plus the results of the Iowa Caucus.
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Monday 15th January 2024
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There were big falls in 2 year Treasury yields on Friday. NAB’s Ray Attrill says this can be attributed to softer than expected producer prices in the US, which feeds through to the PCE deflator number that the Fed uses as its inflation measure. So what has this done to rate cut expectations? Ray says we’re still not back to where we were in the lead up to Christmas. Inflation is coming down much more slowly in Europe. Will it be delayed further by the crisis in the Red Sea? China published weaker loans data at the end of the week, and the PBoC is expected to lower the medium-term loan rate today. We’ll also see whether there’s any response from China to the Taiwan election result whilst the US holds the first Republican Caucus, in Iowa, where Trump is well ahead in the polls.
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Friday 12th January 2024
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US inflation was a little bit of a surprise. Whilst the headline rate was expected to rise a little, it came in higher than forecast, whilst the core rate didn’t fall as much as had been hoped for. NAB’s Ken Crompton says the Fed’s super core measure is the part of the inflation picture that refuses to come down, all of which could impact the speed at which the Fed will bring rates down. Meanwhile NAB has revised the forecast for Q4 CPI for Australia on the back of this week’s November data. It provides a CPI rate lower than the RBA’s forecast, so does that mean we can expect rates in Australia come down faster?
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Thursday 11th January 2024
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Australian inflation fell faster than expected in November. Phil asks NAB’s Taylor Nugent what this means for the rate path from the RBA. He says the monthly data is a relatively new indicator and is still volatile, so we should be cautious in interpreting the numbers and certainly there wasn’t anything to make the RBA too comfortable. We can expect a more definitive market response to US CPI later on. If the number falls below consensus and highlights potential for a faster cutting cycle from the Fed expect that to drive the US dollar lower.
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Wednesday 10th January 2024
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Markets have started the year rather cautiously. Bond yields have held up and equity markets are clearly nervous, suggesting many investors are questioning the speed of the path to rate cuts, particularly in the US. Could Friday’s strong non-farm payrolls read last Friday add to the case for delays by the Fed? NAB’s Ray Attrill suggests the markets might be too cautious. We also look at yesterday’s retail numbers for Australia and expectations for the November inflation read out this morning.
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Friday 22nd December 2023
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In our final edition of The Morning Call for the year JBWeir’s Sally Auld joins Phil to look back about the surprises of 2023, and to give some of her predictions for 2024. Few expected interest rates to rise as high as they did, but even so, there was a lot of recession talk. Yet, somehow, we avoided it, with much greater expectations for a soft landing. So, is that the story for 2024? Perhaps, but Sally springs five potential wildcards on us that we should have in the back of our minds. 2024 is certainly not going to be a year low on risk.
This is our last Morning Call of the year. Thank you for joining us each weekday, and we hope you’ve enjoyed the addition of the Weekend Edition. We’ll be back on Wednesday 10th January ready to interpret whatever the new year throws at us.
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Friday 22nd December 2023
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Well, you could argue that if the US wants to get inflation down to 2% that its already there. Why? NAB’s Ray Attrill points out that the latest quarterly PCE read – the Fed’s preferred inflation measure – has been revised down to an annual figure that falls within their target range. The monthly number for November, out tonight, could well reinforce this argument and add more weight for rate cuts early in 2024. In other news, Joe Biden has been discussing increased tariffs on the import of EVs from China. Australia could feel the repercussions of that and could be one factor stopping the Aussie dollar reaching 70 US cents anytime soon. Today, Japan’s CPI and the latest revision to UK GDP. Just like the US numbers, could they also be a downward surprise and reopen recession speculation?
This is our last daily edition until January 10th, but this afternoon JBWeir’s Sally Auld gives her thoughts on where we’ve been this year and the prospects for 2024. To be listened to at your leisure over the Christmas break.
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Thursday 21st December 2023
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UK inflation fell much faster than expected and more than the Bank of England predicted. NAB’s Gavin Friend in London says its clear that there will be no more rate hikes in the UK, reflected in markets today with a sharp rise in equities and a significant drop in bond yields. There was another Christmas gift in the US Conference Board’s consumer confidence read which showed heightened optimism for the new year. The only negative sign was, perhaps, a rise in the jobs plentiful index which could arguably delay the fall in wage growth. Meanwhile, the EU is clearly ready to move on from worrying about inflation to focusing on government debt, with finance ministers today agreeing that all member states should return to a debt to GDP ratio of 60%. Good luck with that!
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Wednesday 20th December 2023
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The RBA minutes yesterday were more hawkish than expected. NAB’s Rodrigo Catril talks about how the central bank is aiming for the mid-point of their 2 – 3 percent target range, rather than the top, raising the prospect of rates staying higher, or a more concerted effort to bring inflation down faster. This adds to the speculation that interest rates will be lifted in February, although a lot will depend, of course, on Q4 CPI, out late in January. Elsewhere, the Bank of Japan did and said little and Canada’s core inflation bounced back up a little. A reminder to all that it isn’t beaten yet.
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Tuesday 19th December 2023
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US bond yield rose higher overnight, along with equities, as the prospect of a slower path of rates cuts by the Fed sinks in. NAB’s Skye Masters says it’s a settling down after the rally in bonds we’ve seen in the last month or so, helped by more Fed speakers overnight talking down the prospect of early rate cuts next year. In other news, the German IFO reader can be added to the list of releases showing a European slowdown. The focus today will be on the RBA minutes. Skye isn’t sure there will be much to gain beyond the statement earlier in the month, but never say never. The same applies to the Bank of Japan meeting today – they are not expected to lift rates, or give an indication of when they will, but they have provided a pre-Christmas surprise before.
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Monday 18th December 2023
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The US Fed’s John Williams said on Friday that it was too soon to be looking at rate cuts, despite the FOMC dots plot showing members expecting several cuts next year. Phil Dobbie asks NAB’s Tapas Strickland about Williams’ motivation and the market response. Meanwhile, as data from China remains soft the PBoC is pumping 800 billion Yuan into the economy. Tapas explains the approach and whether it will work. European PMI data came in softer than expected, whilst the UK seems a little more resilient in the services sector. But with a central bank governor reluctant to move too quickly, is stronger data good or bad for Britain?
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Friday 15th December 2023
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When it comes to the use and deployment of AI a Deloitte report reckons many Australian businesses are slow to catch on to the risks and opportunities it presents. This week Phil Dobbie talks to Rhiannon Yetsenga, a manager in the Economic Analysis and Policy team at Deloitte Access Economics, about a recent survey of 2,500 Australian employees and students, which highlights how Generative AI in particular is transforming the workplace.
Rhiannon says, unlike many business transformations, this one is being employee led. Companies need to be aware that it is happening, learn how to manage risk and take advantage of the opportunities it presents, as a first-step to more complex AI projects.
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Friday 15th December 2023
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Whilst the FOMC signalled the likelihood of several rate cuts next year, NAB’s Gavin Friend says the Bank of England and ECB are giving nothing away, with both saying there is more to e done to bring inflation under control. One European bank even managed to slip in a rate rise ahead of Christmas – the Norges Bank pushed rates up to 4.5%, concerned about a rebound in inflation. Markets continue to respond to the dovish FOMC meeting yesterday, even with jobless claims and retail numbers both showing surprising resilience in the US economy. There’s lots more economic data today, including the December flash PMIs for Europe, the UK and US.
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Thursday 14th Decenber 2023
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A Fed that is happy to hold, and is expecting to cut three times next year. That’s the takeout from the FOMC meeting this morning. Markets have responded swiftly, with sharp moves down in the US dollar and bond yields, with the Aussie dollar making the biggest gains this morning. NAB’s Taylor Nugent says yields were already falling on the back of slower rises in producer prices, adding to the evidence that inflation is easing in the US. The Bank of England meets later today, along with the ECB. Both are expected to stay put, with the UK having much lower than expected GDP growth in October. Australia’s employment numbers are released today, after yesterday’s Seek job ads show more labour market easing.
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Wednesday 13th December 2023
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In numbers out overnight the headline US CPI rate fell a little, but no more than expected, whilst core inflation remained stuck at 4%. JBWere’s Sally Auld says it again showed the dichotomy between core goods, which fell 0.3% in the month, and services which rose 0.5% in the month. It’s not expected to change the Fed’s decision tomorrow, or the outlook for cuts in the first half of 2024, but that could change with the dots plot from the FOMC. Elsewhere, the latest ZEW survey from Europe showed a surprise lift, whilst oil continues to slide lower. In short, not a huge reaction to an unsurprising CPI, and all now rests on what’s said and forecast tomorrow.
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Tuesday 12th December 2023
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The Yen is the biggest currency move overnight, losing some of the recent gains. NAB’s Ray Attril says it comes from a Bloomberg story overnight which doused expectations that there will be a ‘surprise’ policy change next week. Otherwise, markets are largely treading water ahead of the US CPI number later today, followed quickly by the Fed later in the week, along with four other central banks.
Also on today’s podcast we look at four decades of a free floating Aussie dollar. It’s 40 years ago today that the AUD floated freely for the first time. Ray takes us through some of the highs and lows.
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Monday 11th December 2023
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The US non-farm payrolls data came in a lot higher than expected on Friday, with 200k extra jobs added last month. Wages grew a little more than expected. Not what you’d expect for an economy that is supposedly cooling. So, were the numbers too hot? Phil asks NAB’s Rodrigo Catril whether this changes assumptions around the timing of rate cuts by the Fed. He says some of the new jobs were one-offs, and the trend is still downwards, but markets have repriced their expectation for cuts in the early part of next year. There’s also discussion on Europe’s new AI laws and China’s worse than anticipation deflation.
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Friday 8th December 2023
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It’s been fifty years since the UK signed an agreement with the European Economic Community. That had a profound impact on Australian exports. We’ve built a far more diverse export base since then, of course, but now, since Brexit, with a new free trade agreement (FTA) in place, there’s a chance to redevelop our trading relationship with the UK.
Elisabeth Bowes, Australia’s Deputy High Commissioner to the UK, was deeply involved in negotiating the UK Australia FTA. She said, it made her proud as a Queenslander to see, back in September, the first tariff free shipment of sugar in fifty years to arrive in the UK.
On this edition of The Weekend Edition Elisabeth outlines how Australian businesses can benefit from the agreement, whether its exporting goods, procuring UK government business, establishing a foothold within Europe, or recruiting expertise from Britain.
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Friday 8th December 2023
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Probably not, is the answer to our headline, but NAB’s Ken Crompton says markets are pricing in a heightened expectation of the BoJ moving from negative rates sometime soon. The sharp rise in Japanese government bond yields yesterday and overnight almost wiped out the falls over the last month, but yields remain well below early November, when they almost touched 1%. Elsewhere, Australia’s trade surplus increased but it was largely due to a fall in capital goods imports, reversing the recent rise. Europe showed more signs of a slowdown, with German industrial production down and Q3 GDP revised lower. The focus now is now on non-farm payrolls. Ken says there’s more upside potential for bond yields if we assume markets have been too optimistic in their pricing of rate cuts next year.
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Thursday 7th December 2023
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Falling inflation and lowering interest rates is definitely the consensus view now. It comes at the cost of weaker demand, evidenced by the continued drop in oil prices. NAB’s Ray Attrill says falling fuel costs are no doubt helping European equities, which finished higher today whilst US share indices struggled to get traction. Markets are now pricing in 150bp in cuts from the ECB next year, although Ray suggests that’s overly optimistic. Australia’s GDP growth was much slower than expected last quarter, but there’s not been a strong response to it on currency and bond markets. The consumer is still finding money to keep spending and productivity isn’t making the gains the RBA would like to see. Now the focus is on jobs, with the weekly US jobless claims tonight ahead of the monthly non-farm payrolls tomorrow.
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Wednesday 6th December 2023
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The RBA kept rates on hold, didn’t change too much in their statement, but Australian bonds still rallied. JBWere’s Sally Auld says it was a curious reaction, but just about every market wants to avoid contemplating that rates could go higher even if that might still be the case here. Globally the mood is being driven by weaker CPI data. The OECD revealed that it has fallen to the slowest pace since October 2021 in its member countries. And ECB hawk Isabel Schnabel has completely changed direction, suggesting rates there will fall next year. In the US the Services ISM rose a little and the jobs market eased a bit, helping contain wage price concerns. In short, it was generally a good news day. Although equities are still mixed and oil continues to head south.
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Tuesday 5th December 2023
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With shares falling and bond yields rising, markets might have taken a step too far when it comes to anticipating the timing of rate cuts next year, but NAB’s Tapas Strickland says cuts are still expected. They have just priced in a little more risk ahead of a series of key data releases this week, including payrolls (Friday) and services ISM (today). The RBA meets today and the accompanying statement could be a little dovish, given weaker inflation data, but there’s resilience in consumer and housing data that makes NAB believe a February hike is still likely. As well as the US Services ISM tonight, there’s also the JOLTs numbers (job openings and quits) which has had the power to move markets recently.
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Monday 4th December 2023
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When it comes to predicting rate cuts by the Fed, will the chair Jerome Powell be the last one to shift his position? During his ‘fireside chat’ on Friday he said it would be premature to assume they have achieved a sufficiently restrictive stance. As NAB’s Taylor Nugent points out, markets clearly aren’t paying too much attention, with yields falling sharply lower at the end of the week. Although there were two words in Powell’s talk that could support the idea of cuts sooner rather than later. Meanwhile two central banks are expected to keep rates on hold – the RBA tomorrow and the Bank of Canada later in the week. And focus now switches to employment numbers, with US non-farm payrolls data out on Friday.
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Friday 1st December 2023
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On The Weekend Edition NAB CEO Ross McEwan says his focus next year is on keeping customers safe from cybercrime, fraud and scams. Phil Dobbie also asks him about the role of AI to help counter cybercrime as well as help in the day-to-day operation of the bank. In a wide-ranging discussion, they also look at the economic outlook for 2024, fixing Australia’s housing affordability and getting people back into the workplace.
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Friday 1st December 2023
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European inflation fells a little faster than expected. It’s knocked the Euro a little today, but JBWere’s Sally Auld says for the Euro to really see some gains it’ll take a combination of US rate cuts alongside strong growth outside the US, to help drive down the dollar. Meanwhile, the dollar ticked up a little today, with no surprises in the Core PCE numbers, and some unsurprising high-for-longer sentiment from Fed speakers. Jerome Powell will no doubt follow the same script in his fireside-chat later today. Aussie yields rose quite a bit higher overnight, perhaps because data is showing some resilience, particularly in housing. China’s PMI’s yesterday though, showed just how fragile their recovery is.
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Thursday 30th November 2023
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Australian inflation was lower than expected yesterday. It was the same in Germany. And US quarterly PCE prices were revised lower. All signs that seem to be indicating price growth is slowing and central banks will be pushing rates lower. But there are some caveats to all that. NAB’s Gavin Friend reminds us that the monthly CPI numbers in Australia are heavily influenced by the sample rotation, which will have underplayed services inflation, so it’s too early to take NAB’s prediction of another hike off the table. In New Zealand, even though the RBNZ kept rates on hold yesterday, higher demand from immigration could force another move higher. Today’s US monthly core PCE deflator and the inflation numbers for the whole of the Eurozone will give a clearer picture. For now though, bond markets are enjoying the ride.
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Wednesday 29th November 2023
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Bond yields pushed lower as markets continue to expect rate cuts by the Fed next year. Tapas Strickland says NAB’s own modelling based on recent data supports significant cuts next year. The Fed’s Chris Waller, who had previously flagged concern about the pace of growth saying “something’s gotta give”. Now he’s saying it’s the pace of the economy that is giving and the Fed is in a good place to return inflation to 2%, eventually. Comments like that have helped push bond yields lower. Today the focus is on the first bits of CPI data from Europe, and Australia’s monthly CPI read.
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Tuesday 28th November 2023
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It’s an in-between day, with little ion the way of economic news, but inflation data just round the corner, in the form of Australian CPI and US PCE. There were sizeable auctions of 2 and 5 year Treasuries this morning, with softer demand, but that hasn’t driven the direction of bond markets says NAB’s Skye Masters, because yields are down. Instead it adds to the mood that the Fed will cut rates, perhaps early next year. Softer US data, such as weaker new home sales and drops in employment in the Dallas Fed manufacturing index, add to the supporting evidence. Today Australian retail sales are released, and we talk through some of the findings in the latest NAB Online Sales Index.
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Monday 27th November 2023
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At the end of a quiet week we saw the US dollar fall a little further on Friday. NAB’s Ray Attrill says this reflects the expectation that there will be no further hikes from the Fed. The Aussie dollar hasn’t realised the full potential, largely because of question marks over the speed of the Chinese recovery. There was mixed economic news at the end of the week; US PMIs were a little softer than expected, particularly for manufacturing. It seems Black Friday online sales were strong, and retail sales in New Zealand and Canada were better than expected. So, will too much resilience add to inflation woes. The BoE’s Huw Pill says supply constraints continue to be the issue so they need to hammer demand down to meet it. The key number this week will be the PCE inflation data out of the US. Nobody wants to see that tick up again.
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Friday 24th November 2023
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Consolidation will continue in the superannuation industry as a way of provided better returns for members. That’s the prediction from Mercer’s Chief Investment Officer Kylie Willment, talking to Phil on the Weekend Edition. Mercer recently merged with BP Super, of course, and Kylie says they are always on the look out for other opportunities. They are also focusing more on unlisted assets, that can provide value with more predictable returns. She talks through their key areas of focus. Finally, the Achilles Heal of Australian super is how funds manage the post-retirement relationship with members. Kylie says it’s what stopped Australia getting an A+ grade in the latest Mercer CFA Institute Global Pension Index.
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Friday 24th November 2023
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Markets were relatively quiet overnight with the US off for Thanksgiving, but stronger PMI data from Europe created some interest, pushing the Euro higher, but NAB’s Ray Attrill still says German can expect to enter a shallow recession. The pound performed slightly better because it provided the only PMI number that actually indicated growth. The Riksbank surprised by keeping rates on hold and right-wing anti-EU candidate Geert Wilders won the most votes in the Dutch general election. Today US PMIs will provide a useful comparison to the European numbers, and one month out from the next BoJ meeting we’ll get to see Japan’s CPI numbers today.
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Thursday 23rd November 2023
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Australian inflation is now driven by local factors. That’s what the RBA’s Michelle Bullock said at the Australian Business Economists dinner last night. JBWere’s Sally Auld says it doesn’t sound like a central bank that’s done with interest rate hikes, and points to how we are sitting 100 basis points below our economic peers. So can we really expect to get away with just one more rate hike? Meanwhile softer data from the US, mixed, curiously, with rising inflation expectations. Oil is choppy ahead of the delayed OPEC+ meeting – Sally explains the significance of the delay. And the UK’s min-budget delivered little except a forecast for growth next year, light on business investment and heavily dependent on government consumption, whilst the Chancellor’s rhetoric promised the opposite. European PMIs are the big numbers today but trade will be light tonight as the US starts Thanksgiving.
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Wednesday 22nd November 2023
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The FOMC minutes were cagey when it came to the prospect of rate cuts. The RBA minutes were the same, with Michelle Bullock also reiterating her concerns about persistent wage inflation. And the Bank of England’s Andrew Bailey told UK politicians that markets were getting ahead of themselves when it came to pricing rate drops. Hence the mood is a little more sombre, with falls in equities and little movement in bonds. Oil has also been up and down today ahead of OPEC+ at the weekend. There are geopolitical factors at play too – a budget crisis in Germany and fears Iran is supplying ballistic missiles to Russia. Today it’ll be interesting to see if the inflation expectations from the University of Michigan survey fall back down, after their surprise lift last time.
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Tuesday 21st November 2023
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There was a big 20-year Treasury auction today, which went better than expected. NAB’s Rodrigo Catril says markets had assumed a flood of new issuance in a short week would suppress demand, but that wasn’t the case. Elsewhere, the overseas Yuan hit its highest level since early September. More positive sentiment from China is helping lift iron ore prices further, which is positive for the Australian dollar. Two sets of minutes are out in the next 24 hours – from the RBA and the FOMC. The Fed minutes were quickly outdated by the softer than expected inflation data in the US.
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Monday 20th November 2023
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It was a quite day on Friday with very little of earth-shattering consequence to report. NAB’s Ken Crompton joins Phil to talk about just how devoid of new sit was. We did see a downside surprise in UK retail numbers but, as flagged on Friday podcast, it was a very wet month. Loil is up on the news that OPEC+ will extend its production cuts into the new year. Today is equally as quiet – if not more so – for data releases, but things do hot up later in the week with the release of PMIs, just as America sits down to its roast turkey dinner.
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Friday 17th November 2023
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Ethical investment, or ESG; it’s being talked about more and more. It seems more people want to be involved, so long as it provides the returns they expect. This week Phil is joined by Maria Loyez, Chief Customer Officer at Australian Ethical, a fund manager specialising in responsible investments. How does she see the balance between making the right choice for the planet and seeing a worthwhile return for investments by your business, your customers, or your own personal fund? Can you make money and save the planet? Yes, you can, says Maria so long as you recognise that ethical investments do not perform in the same way as an index fund. There’s also discussion on the findings in this week’s ‘2023 Responsible Investing Report’, published jointly with industry research firm Investment Trends.
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Friday 17th November 2023
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So, after the excitement of softening inflation in the US comes concern that its being accompanied by a delayed slowdown in the economy. That was certainly reflected in some of the second tier US data, and could explain a further fall in oil prices. NAB’s Tapas Strickland says Walmart reported weak sales too in October but highlighted an expected period of deflation in the months to come. Put all the pieces together and markets are increasing the expectation for rate cuts next year. It'll be a while before the RBA cuts rates, but at least yesterday’s surprise increase in employment numbers wasn’t enough to raise the likelihood of a December hike. Instead they’ll wait for the next set of inflation numbers.
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Thursdsay 16th November 2023
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Goldilocks continues to deliver what America wants, with softer producer prices and only a slight move down in retail sales. Equity markets continue to enjoy the party, although bond yields are back on the rise. Hardly surprising given the scale of the moves this week, says NAB’s Tayor Nugent. A fall in oil should also not be over-interpreted, given the recent moves. Has the Goldilocks effect also moved to the UK. Okay, the economy isn’t as strong, but CPI has come down faster than expected, adding to the belief that the BoE has probably done all it need to do. The same isn’t being said about the RBA. Will they be influenced by today’s employment numbers?
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Wednesdsay 15th November 2023
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US inflation fell further than most expected – although NAB had predicted a downward surprise. NAB’s Gavin Friend talks about the market response, which has been felt in equities, bonds and the dollar. It follows two big drops in Eurozone inflation, adding to the view that the worst is over and central banks can start focus on dropping rates rather than lifting. The US CPI comes in the thick of a range of critical data, including UK employment, Australian wages data, UK CPI, Japan’s CPI and a plethora of China numbers too. No wonder the markets are busy, and keen to party.
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Tuesday 14th November 2023
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The NY Fed’s consumer inflation survey overnight had expectations fall a little over last month, in contrast to the University of Michigan survey last week, which had inflation expectations rising. So who do you believe? You believe the hard numbers, says NAB’s Ray Attrill, which are out tonight (Australia time). Market moves have been fairly restrained in the build up to the US CPI release, but the response could be quite marked. Ray says it’s worth looking to the second decimal place to get a real handle of the speed of travel. Locally the NAB Business Survey is out today along with the latest consumer sentiment read. The UK has employment numbers, the NFB small business survey is out and the ZEW survey for Germany. A busy day.
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Monday 13th November 2023
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It seems the more dovish sentiment in the US has been reversed by Jerome Powell suggesting the Fed might have more to do to keep inflation in check. NAB’s Skye Masters says the weak 30-year auction on Thursday has also seen yields push lower, along with upward pressure on inflation expectations. Moody’s also moved the US outlook from rating from stable to negative, which might have impacted yields at the margin. In Australia the Statement on Monetary Policy provided revised forecasts for Australia, which could be used as an argument for more rate hikes. Yet the language of the Statement was quite dovish. No wonder markets are confused. The key release this week, is US CPI tomorrow.
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Friday November 10th 2023
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With the risk of interest rates going even higher, and a slug of the Australian population yet to move onto variable loans, are we about to see a sudden change in consumer spending as more households step off the fixed rate cliff. This week Sonia Straumann, NAB’s Executive, Credit Risk, says households have already modified their behaviour in readiness. But how much of their spending now is dependent on eating into cash reserves built up during the pandemic? And how will small businesses cope with a sustained period of lower consumption. Sonia says that’s one of the big risk factors, alongside commercial real estate, construction and farming. What else is keeping her awake at night?
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Friday 10th November 2023
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Bond yields kicked higher in the US after a $24 billion 30 year auction attracted less interest than expected. NAB’s Tapas Strickland says the auction yields were 5 basis points higher than pre-sales. We discuss why interest in long duration bonds is falling. Markets are also preparing for words from Jerome Powell later today, following fairly dovish talk from other Fed speakers. Today the RBA releases forecasts in the Statement of Monetary Policy. So, what will Tapas be looking out for?
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Thursday 9th November 2023
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It looks like there’s heightening expectations of a global slowdown, evidenced by further significant falls in oil prices today and an end to the equities rally in the US. NAB’s Ray Attrill says one former ECB Governor has added to the melancholic tone by suggesting Europe is heading for a recession next year, whilst inflation expectations one year out have risen by half a percent in one month. But generally, today, a few non definitive words from central bankers, otherwise, it’s been slim pickings.
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Wednesday 8th November 2023
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The RBA lifted rates, as expected, yesterday, with the possibility of another hike to come. JBWere’s Sally Auld says the central bank had always assumed it was different to others, with the flexibility of a longer runway to bring inflation down without damaging the economy. That premise is being challenged now as inflation itself is taking longer to come down, so the RBA could still be lifting rates just as other central banks start to acknowledge market expectations for rate cuts next year. So late to the party, and last to leave?
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Tuesday 7th November 2023
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NAB still firmly expects the RBA to lift interest rates today. As Talor Nugent observes, in a Bloomberg survey, 29 of 32 economists are expecting a hike. It’s a safer punt than anything on the Melbourne Cup today, although markets are still pricing a 30% chance that the RBA will keep rates on hold. We also get a sneak peak at the RBA’s forecasts today, with the detail provided in Friday’s Monetary Policy Statement. Meanwhile, markets have turned a little, after last week’s bond and equity rally, built on the growing belief that the Fed will drop rates starting mid-2024. Elsewhere, the BoJ Governor has reiterated a lift in rates this year is very unlikely – hardly a surprise given its November – and Robert Holzmann has said the ECB could still raise rates, if necessary.
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Monday 6th November 2023
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Softer ISM data and weaker than expected jobs data in the US on Friday has seen a rally on bonds, pushing yields down and taking the US dollar down with it. As NAB’s Rodrigo Catril points out, not only have markets reduced their expectations for future hikes, but an increasing number of investors are expecting rate cuts by the middle of next year. It’s a different story for Australia though. The RBA is likely to show the job isn’t done with a rate hike tomorrow, with the possibility of another to follow.
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Friday 3rd November 2023
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We’ve been through a tumultuous time, with COVID, inflation, geopolitical unrest. Go back a few years we were also struggling with sluggish growth. It’s been a tricky time for businesses, so what is the magic sauce that has seen successful businesses navigate their way through and come out on top?
Ann Sherry has a wealth of business experience. She’s worked in banking, tourism, and education. She is Chancellor of Queensland University of Technology and sits on the boards of NAB, the Enero Group and the Port of Townsville. She headed Carnival Cruises during a period of turmoil, but managed to reinvent the brand and restore goodwill.
On this edition of The Weekend Edition Ann talks about how companies should be reinventing themselves to cope with changing habits. And how investors can determine which companies are heading in the right direction. She suggests there’s not enough focus on forward indicators that show you how well a company is performing internally.
It’s a useful and entertaining twenty minutes for business managers, entrepreneurs, and investors alike.
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Friday 3rd November 2023
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Bond yields are much lower across the board today. Phil asks NAB’s Ken Crompton if bonds are back in fashion. They are for now, says Ken, but he doesn’t discount the idea that we’ll see 10 year Treasuries hitting 5% sometime soon. Pauses from central banks are certainly helping to push risk assets higher, with equity markets doing particularly well. The Bank of England and Norge Bank both kept rates on hold yesterday, with the BoE revising its UK growth forecast down to zero for 2024. Tonight, non-farm payrolls will be watched closely.
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Thursday 2nd November 2023
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The Fed kept rate son hold this morning, but there are no signs that they have finished yet. Jerome Powell was clear to point out every meeting remains live. NAB’s Gavin Friend says the statement has been updated to include financial conditions as one of the determinants of future policy, reflecting the recent rises in long end bond yields. Will those yields influence future policy decisions? Powell said it was possible if a few conditions are met. Later on, the Bank of England and Norges Bank – both expected to remain on hold. Will the RBA next week be out of kilter with the other central banks?
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Wednesday 1st November 2023
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The Bank of Japan is loosening its grip on yields. Today NAB’s Skye Masters explains what the move means and how markets responded. A sharp move down in the Yen suggests that more was expected. Also today further weakness in Europe – in growth and inflation – shows the ECB has almost certainly run its course, and more talk of how quickly they will start to lower rates. Meanwhile, all eyes today on the FOMC tomorrow morning, just before Thursday’s podcast and why, even though the will keep rates on hold, it’s not plain sailing for the US by any means.
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Tuesday 31st October 2023
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US equities have risen today, alongside a fall in oil prices, as hopes rise that the Gaza war will not see contagion throughout the region. Meanwhile, Germany delivered slower GDP growth and falling inflation, ahead of the Europe wide data today. NAB’s Taylor Nugent says the pressure is off the ECB, who could likely reached their terminal rate, although at least one ECB member is saying there could be more. There will certainly be more from the RBA after yesterday’s retail numbers in Australia, which came in stronger than most had expected. Plus, the Bank of Japan meets today, amidst expectations that they will lift the cap on long end yields. We also we get confirmation of the size of US bond issuance today – and the makeup of that issuance later this week. Each event will have an influence on bond yields and currencies.
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Monday 30th October 2023
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Are equity markets ahead of the curve? US firms have reported better than expected earnings and consumer spending is still growing. Yet shares are lower, with S&P entering correction territory. NAB’s Rodrigo Catril talks about how the tide is starting to turn. Earning projections are less promising, US person income is lower than spending and consumer inflation expectations are rising. The escalation in the war on Gaza over the weekend will add to concerns. It’s a tricky time for the FOMC meeting this week, and for the Bank of Japan tomorrow, faced with rising inflation.
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Friday 27th October 2023
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In these uncertain times, of high inflation, high interest rates, changing consumer patterns, there are some things that seem a little more certain, like our shift to renewables and our need for investment in infrastructure as the climate changes, populations grow and consumer behaviour is transformed to the online world.
Georgia Hall, ESG Analyst at Maple-Brown Abbott, joins Phil to talk about how they have given a priority to investing in long-term infrastructure plays, with geographic monopolies. What are the key ingredients for ensuring you have a safe long-term investment?
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Friday 27th October 2023
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US GDP came in higher-than-expected driven by strong consumer spending. But the core PCE index grew at the slowest rate since Q4 2019. So, inflation cooling, consumption rising. Phil asks NAB’s Tapas Strickland whether it will last and, if so, why are equiites struggling to much? Meanwhile, there’s growing consensus that the RBA will lift rates. We look at what was said in front of Senate Estimates yesterday. And the ECB on hold. Did they have any choice? Plus, some more big earnings results from the US.
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Thursday 26th October 2023
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Inflation numbers for Australia were higher than NAB’s expectations, which were higher than market expectations. The number is also well above the RBA’s own forecasting which, NAB’s Gavin Friend say, leaves them with little choice than to pursue at least one more rate hike, starting next month. Elsewhere markets have returned to a more cautious approach, as hopes fade of a diplomatic resolution to the situation in Gaza and Israel. The Bank of Canada kept rates on hold and the ECB may well do the same, but have they both reached their peak?
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Wednesday 25th October 2023
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Markets are displaying a degree of hope this morning, presumably because there has been no ground movement by Israelis into Gaza, but press reports seems somewhat less optimistic. Meanwhile, NAB’s Taylor Nugent says the latest PMIs show the continuing divide between the US and Europe, with the EZ Services and Manufacturing numbers both pulled lower. The UK employment numbers have become somewhat unreliable, meaning the BoE has less certainty in one of the key indicators it tracks. For the RBA the most important number is released today – CPI for Q3. NAB believes the number will be high enough to see interest rates lifted in a couple of weeks. Plus, earnings results for Alphabet and Microsoft.
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Tuesday 24th October 2023
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There were no strong data releases over the last 24 hours to give markets direction and some have clearly made the bold assumption that no ground movement into Gaza is a sign that tensions are easing. As a result, we’ve seen bond yields pull off recent highs, equity markets rise, gold fall and the US dollar down. JBWere’s Sally Auld says the geopolitical uncertainty and the sell-off in bond yields has rattled investors and there’s plenty of reason to sit on your hands, which is why we are range trading, albeit with large intraday swings. Todays PMIs might give a little direction, whilst locally eyes and ears will be on Michelle Bullock, the new RBA Governor.
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Monday 23rd October 2023
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US 10-year treasuries got up to 4.996% last week – not quite making it over 5%. So, does that mean they have peaked? Phil puts the question to NAB’s Ray Attrill at the start of what could be a volatile week, as uncertainty remains over the conflict in Israel and Gaza. The key data point for Australia this week is the Q3 CPI numbers, which Ray says will be the arbiter as to whether the RBA does lift rates at the start of November. Elsewhere, the Fed’s Loretta Mester suggested one more hike should do it for the US. Then job done?
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Friday 20th October 2023
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We invited UK-based economist Vicky Pryce on to talk about why Europe was struggling with growth whilst the US was on the road to recovery? How much is down to the issue of applying a single monetary policy across a diverse range of EU member economies? How much is the fact that Europe hasn’t injected as much fiscal stimulus as the US, with its Inflation Reduction program? All of the above applies, but Vicky suggests, with inflation on the way down, the ECB, BoE and other central banks shouldn’t be delaying lowering interest rates, to enable economies to recover. Central banks need to change their rhetoric so bond yields subside, and they need to ease off quantitative tightening until a more appropriate time. A very different perspective to the IMF that has warned that easing too quickly can cause inflation to re-emerge.
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Friday 20th October 2023
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It’s been a day that has seen sell-offs in equities, treasuries and the US dollar. So where is the money going? NAB’s Ken Crompton says some of it is still pouring into oil, as uncertainty mounts over the Israeli-Gaza war, but we’re also seeing a little diversity between the US, which continues to show signs of resilience, and Europe, where the news is less positive. Australia saw a fall in the unemployment rate yesterday, so there’s also discussion about what that means for the RBA.
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Thursday 19th October 2023
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Bond yields reached new multi-year highs overnight, with sharp rises on 10 years in the US and the UK. NAB’s Ray Attrill says, this time, it isn’t further central bank speculation driving yields higher, it’s the rising tensions in the Middle Easta and concerns about oil prices. Nonetheless, yields might be influenced by the much-anticipated Jerome Powell talk in the early hours of tomorrow morning. The RBA’s Michelle Bullock had a fireside chat yesterday – we give the lowdown on that and what to expect in Australia’s labour market numbers today.
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Wednesday 18th October 2023
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Markets are now more focused on central bank expectations, with the hope that world leaders can contain the war in Israel and Gaza. NAB’s Tapas Strickland talks through the stronger than expected US retail numbers, as inflation expectations rise. The RBA are also sounding more hawkish, with the minutes of the last meeting talking of lower tolerance for the slower return of inflation. UK CPOI today could fuel a hike by the BoE as well. But, two central banks are likely to be on hold, with Canada and New Zealand both seeing inflation come in lower than expected. Plus, which well-paid deejay is hanging up his headphones?
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Tuesday 17th October 2023
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Markets have backtracked on their measure of risk emanating from the middle east, with hopes that some sort of resolution will be brokered to avoid a regional war. NAB’s Skye Masters says it’s a response to the fact that things haven’t escalated in the last 24 hours. Meanwhile, in the world of central banks, markets are waiting in anticipation for a Jerome Powell address later in the week to see if he mirrors the suggestion from others at the Fed that higher yields could negate the need for further hikes in rates. It’s a different message from the BoE’s Huw Pill who said the question of more rises was ‘finely balanced’. Lots of data today, including US retail sales, CPI for NZ and Canada, UK wages data and the RBA minutes.
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Monday 16th October 2023
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The uncertainty surrounding developments in the Middle East is seeing a rush to safe-haven assets, including a sizeable lift in gold prices. NAB’s Tapas Strickland wonders whether many investors had been caught short, buying in on central banks’ higher for longer narrative, without factoring in the risk of geopolitical uncertainty. The Israel Gaza conflict s now being taken seriously, with sharp rises in oil as questions remain around how much of a regional war could emanate from the unrest. Meanwhile, the question remains about how well contained inflation really is? The Michigan survey showed inflation expectations rising slightly. Rising oil prices will only add to that. Plus, an important week for Australian releases, Tapas talks us through it.
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Friday 13th October 2023
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Our super contributions are designed to ensure we have a happy retirement, so is that working? The median balance for a man in his early sixties is $212k, for a woman its $158k. When will we reach an adequate level for most to lead a comfortable life? And, as the size of Australian superannuation assets grows, where do the investments go? Phil talks to Diane Somerville, Principal for Superannuation Consulting at Deloitte Australia about the growth of Australian superannuation, consolidation within the industry and the impacts of COVID.
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Friday 13th October 2023
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US inflation came in stronger than expected, pushing yields higher and strengthening the US dollar. NAB’s Gavin Friend suggests that markets are questioning the suggestion that higher yields would negate the need for further rises. Elsewhere oil has been steadied somewhat by diplomatic efforts from the US and China. UK GDP came in weak, and there’s a wealth of China data today. Also on the podcast Phil talks to Jennifer Mackinlay, Austrade’s General Manager for Europe, about how they are flying the flag for the Aussie renewables industry.
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Thursday 12th October 2023
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Whilst central banks, particularly the Fed, are increasingly cautious about further rate hikes, the RBA’s Christopher Kent hinted that more might need to be done to slow the Aussie economy. NAB’s Tapas Strickland says a hike in November is likely to get the market speculating on another one early next year. Meanwhile, there’s very little caution being displayed in the Middle East, with volatility in oil prices as the question remains as to whether Iran will be implicated in any way and face sanctions that could cut global oil supplies.
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Wednesday 11th October 2023
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There have been a few surprises so far this week. Obviously the Hamas attacks on Israel is a bad start, and there’s every chance that will escalate further. Secondly, the more dovish approach from Fed speakers, heightening the expectation that the Fed will not lift rates again this year. JBWere’s Sally Auld says there’s still a string chance that another hike will happen, and that the US will face a recession down the track as a consequence. The third surprise, if it happens, is a one trillion Yuan stimulus measure reportedly being considered by China. All, of that, ahead of the US CPI numbers later this week, which may add to the list of surprises.
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Tuesday 10th October 2023
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The market action this morning is perhaps less pronounced than could be expected, given the scale of the conflict between Israel and Gaza. NAB’s Rodrigo Catril says some of the turnaround in US equities came from Fed speakers who seem to be shifting their bias away from more hikes to keeping cash rates where they are. That’s acted as a distraction from the main event, but individual shares match what you’d expect from a war setting, with airlines down, defence stocks up, and the same with oil. Locally, the NAB Business Survey is out today. Will it show more resilience that cold further enhance the case for further hikes by the RBA?
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Monday 9th October 2023
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US non-farm payrolls numbers on Friday surprised many. NAB’s Taylor Nugent says the 336k new jobs was well above expectations and pricing for another hike by the Fed this year increased slightly. But a clearer picture of the direction of the Fed can be gauged after the release of US CPI later this week. Canada’s employment numbers told a similar story on Friday, coming in higher than forecast. There will be some unease around today, depending on developments in the confrontation between Hamas and Israel, as to whether Iran becomes embroiled in it all. That could push oil prices higher today.
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Friday 7th October 2023
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There are tentative signs that China’s domestic economy is picking up. On The Weekend Edition Sheana Yue from Capital Economics in Singapore says early indications are that the Golden Week this week has seen increased demand for housing and other goods and China could meet is 5% growth target this year. So, is there more reason to be optimistic about the world’s second largest economy? Sheana explains how, in the mid-term, the focus is less on major construction projects and more on IT and green technologies. Listen in to find out what that all means for the Australian economy.
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Friday 6th October 2023
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There has been so much volatility in bond and equity markets lately it’s hard to imagine that the non-farm payrolls data tonight won’t prompt some sort of response. But what are we expecting? NAB’s Ken Crompton talks through the latest movements, which have been fairly relaxed over the last 24 hours. The Fed’s Mary Daly has suggested that rising 30 year yield shave been doing the work for the Fed, which could reduce the need for another hike. In the UK Bren Broadbent has suggested weaker data could see off any further hikes. And a lot of recent trade data suggests weakening demand, echoed by falling oil prices again today.
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Thursday 5th October 2023
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The bond sell-off that dominated the early part of the week has been put on pause today, with yields down a little and a largely positive picture for equities. NAB’s Taylor Nugent talks through what’s driving this change of sentiment. He doesn’t believe it’s one key thing but it could be down to lower jobs numbers in the latest ADP report, sharp falls in oil prices, no big surprises in the US Services ISM and the danger of a US shutdown back on the list of concerns. All of these factors could lessen the chance of another Fed hike before Christmas, but it’ll be Friday nights non-farm payrolls data that really sets the direction for the start of next week.
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Wednesday 4th October 2023
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Yesterday we asked how much higher US yields could go. The answer today is more than yesterday. Yields pushed higher again, the US dollar gained strength on the back of it, with the Aussie dollar, a day after the RBA kept rates on hold, being punished the most. So, how much higher for Treasury yields now. NAB’s Rodrigo Catril says its not unusual for the 10 year rate to reach the same level as the cash rate, so yields could easily push above 5%. How does the RBA react if stronger yields in the US keep hitting the Aussie dollar? Plus, the significant moves in the Yen today as well. All because the JOLTs data came in higher than expected.
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Tuesday 3rd October 2023
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US bond yields have pushed higher this morning on the weekend’s news that a shutdown of US government has been pushed back, but the same yawning chasm exists between both parties. Yields have also risen on the latest Manufacturing ISM, which came in stronger than expected. NAB’s Skye Masters says we are seeing a strong response to any data, as markets look for clues about when rates will be lifted, and how long before they start moving down. Another case in point is today’s rise in UK Gilt yields, as the BoE’s Catherine Mann suggests inflation might be more persistent than their own forecasts. Today Michelle Bullock chairs her first RBA meeting, but there is a low expectation that rates will rise – not yet anyway.
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Friday 29th September 2023
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The races is on to meet the 2050 NetZero target, and the 2030 target of 82% renewable energy. Australia isn’t the only country racing for the same finish line. Virginia Christie says the demand for inputs to build the infrastructure, and the expertise needed to manage it, will be inflationary, in the same way the mining boom was. Virginia is a governing body member of WA’s Economic Regulation Authority and, before that, spent many years at the Treasury and the RBA. Both of those bodies face a challenge about how, not only to meet the 2050 target but how to navigate through the unavoidable high inflation environment that precedes it. It’s a thought-provoking episode that’s definitely worth a listen.
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Friday 29th September 2023
US confidence seems to be building, whilst Europe is still in the doldrums. US equities have risen, perhaps helped by the hopes of a visit by President Xi later this year. Europe could have made more of falling inflation in Germany, but is perhaps more concerned about rising debt in Italy. NAB’s Ray Attrill talks through the differences, which has also seen an increasing spread in yields across the Atlantic. The imminent government shutdown could have a lot to do with it. It’s a busy day for data, including US PCE deflators and, over the weekend, China’s Caixin PMIs.
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Thursday 28th September 2023
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It’s It’s the same story again today – equities hurting, the US dollar higher and bond yields reaching 16 hear highs. What’s changed today is a sharp rise in oil prices. NAB’s Tapas Strickland says there’s a great deal of nervousness that supplies in the US have been destocked too far, down to levels last seen in 2014. Meanwhile, bond yields continue to push higher with little to dissuade investors away from the high for longer mantra. Hence, a town-hall session with Jerome Powell today will attract a lot of interest. Meanwhile, sticky services inflation in Australia yesterday added to the likelihood of an RBA hike in November.
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Wednesday 27th September 2023
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Markets are still a little directionless, with no substantial or surprising data to evoke any substantial moves in any asset classes. The only real movement is in equities, which continue to fall now the higher for longer message has sunk in. NAB’s Gavin Friend describes it as a wall of worry. But will we see a shift in direction from today through, as the rest of the week is filled with inflation data, starting with Australia. Could the services CPI be enough to force the RBA to make a move? Not just yet, reckons Gavin. Later in the week European CPI will add to the global picture about whether or not we are over the worst of it, before the US core-PCE, the Fed’s preferred measure of inflation.
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Tuesday 26th September 2023
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There were big moves higher in bond yields overnight, particularly at the long end. It’s been significant bear steepening, says NAB’s Skye Masters, pointing to the hawkish statements from central banks indicating rates will remain at restrictive levels for quite some time. That’s happening despite more indicators suggesting there is growing weakness in the global economy, but bank boards will want to see reductions in inflation before they change that stance. If the bond markets seem a little directionless right now, maybe inflation numbers later this week will help them see the light.
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Monday 25th September 2023
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The path of central banks does seem to be having as many twists and turns as a Dickensian novel. NAB’s Ray Attrill says the path of bond yields at the end of the week showed how the UK is taking a divergent path from the US, where central bank speakers are still suggesting there will be more hike(s) to come. PMIs on Friday continued to show that the US economy seems to be faring better than Europe. But the US soft landing rhetoric is being challenged, with equity markets taking a hit, the automotive workers strike likely to have more impact and the prospect of a government shutdown at the end of the week all the more likely. This week the data in Europe, the US and Australia will be focused on inflation, naturally.
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Friday 22nd September 2023
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It’s a tough time for small businesses in Australia and the road back from COVID seems to be a lot longer one that most expected. In this episode of The Weekend Edition Phil talks to Ana Marinkovic, NAB’s executive general manager of the Small Business Bank, who describes a two-speed recovery, between those who have been able to cut costs and embrace online, and those who haven’t. Those unable to find cost effective labour are being hit particularly hard. But many businesses hit with rising costs are reluctant to push their prices up, taking a margin hit instead. So, looking closely at your operating costs and not being afraid to reprice are some of the key takeouts from Ana on this week’s podcast.
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Friday 22nd September 2023
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The Bank of England has kept rates on hold for now. Many other central banks have met over the last 24 hours – some have been on hold, some continue to raise rates, one has even cut rates. But bond yields continue to rise and equity markets have taken a hit. JBWere’s Sally Auld says it’s a sign that investors aren’t convinced that the tightening cycle is over just yet. US continues to display resilience that could suggest the Fed will do more. Even New Zealand, where the RBNZ has pushed rates have gone further than many, GDP has shown a strong comeback. So, the future is still uncertain. The Bank of Japan is next to meet. It’s safe to assume they’ll be on hold but, again, for how much longer?
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Thursday 21st September 2023
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The response to the FOMC announcement this morning was swift, with 2-year Treasury yields hitting a 17 year high. The equity markets switched into negative territory too. Why? NAB’s Gavin Friend says the fact that rates are on hold wasn’t a surprise, it was the rise in the median rate forecasts for next year and the year after. Higher for longer is slowly sinking in, but now, perhaps, it's even longer than many had imagined. Gilt yields took a hit as UK CPI came in much lower than anticipated. Could this mean the BoE will keep rates on hold? And a swag of other central banks today, plus New Zealand’s GDP. They are expected to claw out of recession, but for how long?
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Wednesday 20th September 2023
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This time tomorrow the Fed will have decided, and the assumption is that they will keep rates on hold. But for how long? NAB’s Taylor Nugent says there’s an assumption of at least one more hike, which is being strengthened by further signs of persistent inflation. Oil nearing $100 isn’t helping and neither is higher than expected inflation numbers from Canada. But the soft-landing story remains, demonstrated further by revisions to the OCED’s GDP forecasts, which has upped growth for the US and downgraded Europe. We also delve into the RBA minutes from yesterday, looking for clues about the direction from here.
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Tuesday 19th September 2023
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As we wait for the barrage of central banks in the second half of the week, starting with the Fed, a Reuters report suggests the ECB is looking at reducing the high level of excess reserves which could be impacting the effectiveness of monetary policy. NAB’s Skye Masters says it’s only natural for them to consider reducing their balance sheet once they near the end of the rate cycle. In the US, meanwhile, the BIS has warned of too much leverage in short positions on US Treasury Futures. Nothing that the Fed hasn’t previously warned about, says Skye. A bigger concern is the rise in oil, with some commentators suggesting it could peak at $100 this week. How does that play in the strategy for central banks? And, locally, RBA minutes. Surprises are unlikely this time round, but you never know!
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Monday 18th September 2023
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The Fed isn’t the only central bank making a call this week. There’s also that expected hike from the Bank of England, plus the central banks of Japan, Switzerland, Sweden and Norway. Plus, the RBA minutes and day one in the new job for Michelle Bullock. NAB’s Tapas Strickland says opinions are still very divided, even within central banks, about whether they need to continue lifting rates to beat inflation. Hence yields lifted further on Friday.
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Friday 15th September 2023
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The BoE’s Huw Pill recently likened the path of interest rates to Table Mountain, as he gazed out the window of a conference in Jo’burg. The FT’s Markets Editor Katie Martin says markets have finally accepted the high for longer mantra from central banks, but says it’s not been an easy time for analysts in financial markets, particularly those who had been telling clients to prepare for the US recession that never came. Does that mean it won’t come? And if it doesn’t, what’s the impact of prolonged strength in the US dollar which could add to inflation pressures elsewhere? Then there’s the question of politics. Will interest rates start to come down – like they have in Poland – because of political pressures. The Morning Call’s Phil Dobbie talks to Katie about the unchartered waters that lie below the smooth surface of central banks’ Table Mountain trajectory.
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Friday 15th September 2023
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Just as NAB predicted, the ECB has lifted rates again, with a swift response in European bond yields and the value of the Europe. NAB’s Gavin Friend talks through the announcement, the response and the question of whether there is more to come. The ECB also revised down its growth forecast, and upped its inflation expectations a little. Elsewhere, the US reported strong retail numbers., following on from Australia’s higher than expected employment data yesterday. Is read likely to lead the respective central banks to take a more hawkish line? Lots of data from China today – will any of it knock the wind out of the Aussie dollar, which is on the rise against a rising US dollar this morning.
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Thursday 14th September 2023
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Even though US core CPI came in higher than expected, there was little movement in bond and currency markets. NAB’s Tapas Strickland explains how the market can sometimes expect more than expected! Plus, weaker GDP numbers for the UK. Are they entering into a recession? And will softer data in Europe recently mean a pause by the ECB. NAB isn’t expecting it. Plus what the latest NAB spending data tells us about the state of the Aussie economy right now, ahead of labour market data today.
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Wednesday 13th September 2023
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The NAB Business Survey yesterday showed that price growth remained elevated and business conditions rose. NAB’s Ray Attrill says an interesting takeout is the contrast between the resilience showing up in business surveys, against consumer confidence. Even though individual consumer spending is slowing, higher levels of immigration means businesses are still seeing growth and in a position, for now, to pass on costs. It’s a different story n the UK, where wages continue to rise, but markets are lowering their expectations for a hike from the Bank of England this month. Listen in to find out why. And the elephant in the room – the price of oil. Expect to see it reflected in the headline US CPI rate today.
Tuesday 12th September 2023
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How soon will Japan move from negative interest rates? Maybe sooner than we thought after Gov Ueda’s interview over the weekend. NAB’s Ken Crompton talks about the response in Japanese Bond Yields yesterday and overnight. That, combined with a stronger push in the CNY reference rate by the PBoC, pushed the US dollar lower and helped boost the Aussie dollar, to be one of the strongest currency performers. In Europe the EC lowered its growth forecasts, whilst the words from BoE speakers was sounding more hawkish. Today, the NAB business survey will be keenly watched, along with New Zealand’s Pre-Election Economic and Fiscal Update which, Ken says, could signal the need for more government borrowing.
Monday 11th September 2023
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The G20, unsurprisingly, didn’t come up with any solid plans about tackling the global economic downturn and inflation concerns. Perhaps it exposed the size of the agenda gap between the west and the BRICs component. China continues to avoid any solid plan of its own, to lift its growth, with the WSJ suggesting President Xi’s tight grip on policy is a big part of the problem. Japan’s currency, meanwhile, continues to weaken, so the USA dollar continues to strengthen. NAB’s Skye Masters talks about how markets are positioned at the start of a week that is quite rich in data, with US CPI, UK GDP and Australian employment, plus the ECB rate decision.
Friday 8th September 2023
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Australia is chasing two climate targets. First, to reduce emissions to 43% below 2005 levels by 2050, and NetZero by 2050. That’s going to take massive investment in infrastructure and capabilities. But, as Deloitte’s Claire Ibrahim explains, if we only focus on the lowest-cost approach to meeting those targets we are likely to miss out on the upside opportunity. The real question is, how can Australia benefit from the low carbon future? Phil talks to Claire about the NAB sponsored report “All Systems Go: Powering Ahead”, and more generally, how are we positioned to take full advantage of what lies ahead.
Friday 8th Septembr 2023
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The US dollar continues to hold its strength against weak economic data from Europe and a continuing slide in the Yuan, which has hit a 16-year low. But, JBWere’s Sally Auld says there was a glimmer of hope in China’s trade numbers for August, with signs that export activity is stabilising after significant falls earlier in the year. But we shouldn’t expect any massive upswing anytime soon. Australia’s trade surplus narrowed with a fall in export growth, but a rise in imports, driven in part by people buying cars. Philip Lowe used his farewell speech yesterday to reemphasise his concerns over Australia’s falling productivity. Europe delivered further signs of weakness. Over the weekend China delivers CPI and PPI.
Thursday 7th September 2023
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Bond yields pushed a bit higher overnight as US Services came in a bit higher than anticipated, along with wage growth. NAB’s Gavin Friend talks through how it has been interpreted. The Beige Book is out and has soft landing written all over it, even if it is not explicitly spelt out. In the UK the BoE Governor is hinting that rate hikes are not a full gone conclusion. They didn’t happen in Canada yesterday. There’s also discussion on Australia’s GDP numbers yesterday and the trade numbers to keep across today.
Wednesday 6th September 2023
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It came as no surprise to anyone when the RBA announced no change to rates yesterday but, as NAB’s Tayor Nugent explains, there were references to further tightening if necessary. NAB still expects there will be one more hike before Christmas. So, can Australia pull off a US-style soft landing? The Aussie dollar fell sharply yesterday, in part because of a weaker than expected Caixin Services PMI. Rising oil prices could present a threat to headline inflation rates, as Saudi Arabia an Russia confirm their production cuts will continue until December. Australia’s GDP read is expected to show modest growth today, and the US Servies ISM will, presumably, continue to support the notion of a soft-landing.
Tuesday 5th September 2023
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Philip Lowe holds his final RBA meeting today. No press conference either. The expectation is that rates will be kept on hold for now. Bond yields have pushed a little higher, perhaps on the expectation that rates will push higher later in the year, which is NAB’s prediction. Europe saw some more soft data, along with words from ECB’s Christine Lagarde apologising for not always getting forecasts right and saying they needed to be more humble. Part of that humility was giving no indication of what t the ECB will do next. Trading was thin with the US on holiday for Monday, with share and bond markets closed.
Monday 4th September 2023
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The number of American jobs rose in data released Friday. Normally this would be seen as a sign of a tightening labour market, but a sharp rise in those entering the labour force means the unemployment rate has actually increased, whilst wage increases have slowed. NAB’s Ray Attrill says the Fed and Joe Biden couldn’t have hoped for anything better, even if they wrote the numbers themselves. All in all it has reduced the expectations of a Fed rate hike later this month. Locally, there’s little chance of a rate rise in Philip Lowe’s last meeting at the RBA, but NAB still expects at least one more hike before the year is out. So, what data will drive that decision?
Friday 1st September 2023
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It started out as a transitory problem driven by post-COVID supply constraints. Central banks thought it would pass. Then the mood switched and monetary tightening kicked in. But different central banks started at different times, hiking at different speeds to end up in very different places. But is monetary policy effective in an environment like this? And what about governments choosing to use fiscal stimulus measures, does that help or hinder the quest for lower inflation? Phil Dobbie talks to JBWere’s Chief Investment Officer Sally Auld about the variety of approaches being taken to tackle inflation. Importantly, how does Australia fare? Her views on that are certainly worth a listen.
Friday 1st September 2023
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Speaking in Cape Town the Bank of England’s Huw Pill has likened their policy approach to Table Mountain, with interest rates remaining flat for some time before falling away quickly. So, does he mean they’ve reached the summit. It seems likely that the ECB is still in the cable car on the way up, with inflation remaining persistent. NAB’s Ken Crompton says markets have priced in only one more rise, which is a bit optimistic he suggests. The Aussie dollar has been helped by positive capex figures locally yesterday, together with more positive signs from China, including an improvement in PMIs. The key number today, of course, is non-farm payrolls for the US. The markets will be very responsive to any surprises.
Thursday 31st August 2023
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There seems to be lots of good news in data from the US lately if the assumption is that soft data is good right now. NAB’s Rodrigo Catril says we’ve been seeing a bit of that this week, including a downward revision in US GDP and the latest ADP jobs numbers reaffirming that the tightness in the labour market is continuing to ease. It’s a different story for Europe, where inflation remains persistent. The full Eurozone CPI number is published today, but data from Germany and Spain shows the ECB has more to do. Locally, the RBA is likely to be on hold next week after yesterday’s softer CPI read, but don’t assume inflation has gone away or that the RBA won’t hike again. As we explain in today’s episode.
Wednesday 30th August 2023
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Job openings declined more than expected in the latest data from the US. That’s seen bond yields drive lower as investors hope this slight weakening in the labour market will see off any further hikes by the FOMC. NAB’s Taylor Nugent says it’ll have to be confirmed with the non-farm payrolls numbers on Friday night. The ADP employment numbers later today have been a notoriously unreliable indicator lately, but markets are still likely to respond if the number falls outside expectations. Locally, Australia’s CPI data is out today, ahead of the RBA next week. Taylor talks through what to look out for in today’s numbers.
Tuesday 29th August 2023
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Australian retail numbers were a little higher than expected last month, but NAB’s Ray Attrill says the Matildas Effect will be partially responsible for that. Generally, though, the trend is weaker, particularly given the rising population base, so there’s no reason to expect the RBA to see it as a sign of stubborn resilience in consumption. There’s some discussion on the podcast about how signs are showing the opposite, here and in the US. China has announced measures to encourage extra investment, but markets lost their initial enthusiasm fairly quickly. New Zelaand meanwhile, has had its report card from the IMF and has announced plans to cut government spending but, as Ray suggests, not in any meaningful way.
Monday 28th August 2023
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If markets were hanging out for some unique wisdom from any central banks at Jackson Hole they would have been disappointed. All it did was dismiss any hopes of a more dovish take from Jerome Powell and his compatriots. NAB’s Skye Masters says the focus on Wyoming, meant less attention was given to the University of Michigan Inflation Expectations survey, which has been heading higher for the last two months. “That stickiness is inflation is a little bit concerning”, she says. With Jackson Hole behind us, the focus is now on a week rich in important data, including Australian retail sales (today) and CPI (Wednesday), and US payrolls numbers on Friday.
Friday 25th August 2023
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Australia’s falling productivity is in focus as we emerge from the pandemic. The Productivity Commission has provided recommendations for helping resolve the issue, and earlier in the week the Business Council released its ‘Seize the Moment’ report about how the government and private sector can grow the economy. But how much of the fall in productivity is simply the transitional impact from a rise in the services sector. It’s a question Phil Dobbie puts to Melissa Wilson, Senior Economist (NSW) at the Committee for Economic Development of Australia (CEDA). They discuss how productivity gains can come from businesses across all sectors, and a part of it comes from a more adaptable approach, highlighted in CEDA’s recent Dynamic Capabilities report. So, whilst an industrial strategy for Australia would be useful, a lot of work can come from businesses taking a look at the way they operate. On that point, Melissa provides some useful insights on ‘The Weekend Edition’.
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Friday 25th August 2023
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Markets lost confidence all of a sudden despite the standout earnings result and forecast from NVIDIA after the close yesterday. It did seem strange that there was such a focus on AI. Today shares are well down and NVIDIA has wiped out all of its gains. NAB’s David de Garis says there’s concerns that Jerome Powell will pull another rabbit out of his hat at Jackson Hole. There is a track record for markets being driven by central-bank speak at the Wyoming get together. Otherwise, there’s no clear reason for such an about turn. Jobs data held up in the US, durable goods orders were down, but largely accounted for by aircraft orders, and the Chicago Fed activity index was up. None can account for such an about turn.
Thursday 24th August 2023
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Bond yields pushed lower on the back of weaker than expected PMI umbers, particularly in the UK and Europe. The drop was less pronounced in the US but yields still pushed lower on the back of the European slowdown. Equities rose sharply, presumably on the prospect of less in the way of hikes from central banks. But JBWere’s Sally Auld says that’s unlikely in the case of the Bank of England, given inflation and wage pressures are still strong. Does this mean they will have to force the country into recession? The Aussie dollar has benefited from the yield and currency moves today, but it doesn’t change the outlook. And shares will be buoyed further by a stronger than expected result from NVIDIA, beating analysts’ forecasts for Q3.
Wednesday 23rd August 2023
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The Fed’s Thomas Barkin has warned that strong consumer data from the US lately could mean a reacceleration in inflation is possible although, as NAB’s Rodrigo Catril points out, he also suggested that if inflation does come down then America is likely to see a soft landing. Inflation could rise in Europe for a different reason, if we see a reemergence in rising gas prices. If the temporary peak we are seeing now becomes sustained. A rapid recovery in China looks less likely by the day, but they at least have a plan, for a tech driven future where, supposedly, most of the existing growth is coming from. Still, that’ll take time – part of the reason NAB has revised it’s forecasts for the Aussie dollar. We talk through the revisions on today’s podcast.
Tuesday 22nd August 2023
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US Treasury Yields have hit new post GFC highs, but NAB’s Skye Masters says its hardly a surprise given where Fed funds rates currently are. She reminds us how last year 10-year Treasuries were trying to break 3%, hitting equity markets. Now yields are breaking above 4% and equities are rising. Does that support the soft-landing narrative, which is the expected outcome now by most US economists. Meanwhile, it seems we have to reassess expectations for the level of fiscal and monetary support for China. The PBoC eased the one year prime loan rate, but only by 10 basis points. That’s not going to move mountains, but it also didn’t have a profound impact on the broader market either.
Monday 21st August 2023
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Central bankers descend on Jackson Hole at the end of the week for their annual symposium. Phil asks NAB’s Tapas Strickland whether we actually have a clear idea of the tack Jerome Powell will take when he talks on Friday. In the past Fed governors have been a little less guarded at this event and there are mixed signals about how much further rates need to rise, if it all, and how long before they start to come down. Meanwhile, the week kicks off with question marks over how China addresses struggling debt and a slowing economy, whilst Japan was confronted with higher-than-expected inflation numbers at the end of last week. How will the Aussie dollar cope with this sea of uncertainty? And, by the way, The Morning Call is seven years old today.
Bond markets have been on a tumultuous rollercoaster ride. We saw a heavy sell off of last year as inflation picked up alongside rising interest rates. Now, they’re back, as a buying opportunity. So, are fund managers can seeing them as a growth asset rather than the customary defensive play? Phil puts that question to Katie Dean, head of FICC at Australian Super, Australia’s largest super fund. Katie also gives her views on how the macro picture is influencing purchase decisions. For example, she’s not a big advocate of the US soft landing scenario. Listen in for some useful insights and discussion points. Bonds are not boring, and neither is Katie!
Friday 18th August 2023
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It's becoming a familiar pattern lately, with bond yields pushing higher and equities taking a clobbering. The Aussie also continues to suffer as noises come from China about tackling their economic slowdown, but very little still in the way of sold action. Australia’s rise in unemployment yesterday might ease the pressure on the RBA to lift rates, but NAB’s David de Garis says, only for a month. It seems no country can now assume they have finished their tightening cycle.
Thursday 17th August 2023
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The tide seems to be turning as investors and policy makes toy up the risk of inflation starting to climb again. NAB’s Gavin Friend says there was a strong suggestion of it in the FOMC minutes, released this morning, although that wascounteracted by two Fed members calling for rates to be held steady. There was clear evidence of the need for more tightening in the UK, where the headline CPI level fell, but core inflation remained resilient, and services inflation ticked higher. So, what’s the risk on the home front? Today’s Australian employment numbers will be a crucial element of the RBA decision making.
Wednesday 16th August 2023
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It’s been a busy day for data releases, having a profound impact on markets. NAB’s Ray Attrill talks through what’s happened, not least of which is the continued signs of slowdowns in the Chinese economy. Japan too has shown a fall in consumption, even though GDP rose (it was all through exports). The Bank of Canada might not be done with rate hikes with a CPI surprise, and the Bank of England has to contend with higher-than-expected wages growth. Even the US is starting to question hopes of a soft landing. It’s been a session rich in data that’s raised more questions than its answered. It was a day light on good news. Maybe the Matildas can put that right.
Tuesday 15th August 2023
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It’s been a quiet session, but bond yields have continued to push higher and the US dollar has climbed with them. JBWere’s Sally Auld says markets are continuing to adjust to an outlook where the US economy is growing faster than expected, and how that could push out the path of easing from the Fed. Whilst trading has been thin on very little data, get ready for a deluge today. On the home front, Australian wages data, along with Chinese activity data, Japan’s GDP, UK employment, Canada’s CPI and US retail sales. When it rains it pours.
Monday 14th August 2023
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Markets responded positively to softer than expected US CPI last week, but the dial was turned back quite a bit on Friday when producer prices showed an unexpected increase, particularly in the services sector. NAB’s Taylor Nugent says there’s still an open question about how much wage growth and nominal demand are in keeping with the expected fall in inflation. Bond yields rose markedly in the UK as GDP came in higher than expected, suggesting the BoE will want to do more to slow demand there. A quiet session lies ahead, but we take you through the data to look out for this week.
Friday 11th August 2023
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We are in the midst of the Australian reporting season, so what does it hold for Australian businesses and the share market? Gemma Dale is director, self-managed super funds and investor behaviour at NAB Trade. She joins Phil on this weekend’s podcast. They talk about how global events are playing on local shares, the role of tech in Australia, the impact inflation on growth businesses and finding the high “moat” businesses. If you are struggling to value businesses in these uncertain times, this weekend’s podcast is worth 15minutes of your time.
Friday August 11th 2023
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US inflation has eased, by almost any measure you care to use, and jobless claims are heading the direction the Fed would like to see as well. All that is pointing to heightened expectations that they will hold at their next meeting. Yet bond yields are higher today. Why is that? NAB’s Ken Crompton says yields started rising after a weak 30-year Treasury auction a few hours after the CPI release, which shows there are some nerves about absorbing long duration government debt. There’s also discussion about further weakening of the Yen, UK’s GDP today and further economic indicators for the US later on today/tonight.
Thursday 10th August 2023
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As expected, latest CPI data from China shows a country suffering the impact of deflation. It raises many questions including, could lower prices help calm inflation elsewhere. NAB’s Rodrigo Catril gives some perspectives today. Plus, oil and gas prices rise, for different reasons. We examine that. Latest spending data shows Australians continue to spend more, whereas New Zealanders have put a cap on their spending. Does that reinforce the expectations for the respective central banks and what is that doing to the spread of trans-Tasman bond yields? The key metric today, everyone is hanging out for, is the US CPI, out late tonight Australia time.
Wednesday 9th August 2023
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It’s been a bad session for banks in the US and Italy. NAB’s Tayor Nugent says there are three things that have sucked the optimism out of markets in the last 24 hours, two relate to banks. Moody’s has downgraded the credit rating for some mid-sized banks in the US, whilst Italy has introduced a 40% windfall tax on its banks. The third hit to sentiment came form China’s trade numbers, which showed a substantial fall in exports and imports. Locally, the NAB Business Survey showed a resilient economy with rising wages, which could challenge the notion that the RBA can hold for longer.
Tuesday 8th August 2023
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Stocks are bouncing back in the US after a bad week last week. What’s the reason for this positive speculation? Hopes of a weakening of inflation in the US CPI and PPI numbers later in the week perhaps. NAB’s Skye Masters talks through the moves in bond markets, also influenced by inflation speculation, mixed with some hawkish central bank speak and a fair amount of bond issuance this week. NAB’s monthly Business Survey is out today. Skye tells you what she’ll be looking out for.
Monday 7th August 2023
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Last week we did suggest there would be a response to Friday’s US payrolls numbers come what may, and that was certainly the case. Softer numbers and downward revisions saw bond yields retrace their steps on last week’s gains, as investors bet on less in the way of rate hikes. And yet, as NAB’s Ray Attrill points out, wages growth remains sticky and that will be a concern to the Fed. Canada also saw softer employment data pushing the Canadian dollar down on Friday. The Aussie climbed, but still saw a hefty fall last week. We look at why. Meanwhile a slow start to today – time then to go back and listen to our weekend edition, if you haven’t already.
Friday 4th August 2023
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Figures this week from Core Logic show that house prices in Australia continue to rise – five straight months now – but the speed is slowing. Bounce backs invariably have gone further than the prior downturn, but maybe that won’t happen this time. We’re well above pre-pandemic levels, but are we reaching a ceiling? Phil Dobbie puts that question to Eliza Owen Core Logic’s Head of Residential Research for Australia. In particular, can we expect a slower recovery in the investment market, as those searching for yield look elsewhere, where risk may be lower?
Friday 4th August 2023
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Bond yields pushed higher in this session, with equities left going nowhere, at least until after hours trading with a couple of significant earnings results – Apple and Amazon. JBWere’s Sally Auld says the bond sell-off is a conflation of several factors, including this week’s BoJ moves on YCC, the increased net borrowing from the US government and continued resilience is the US economy. There’s also the uncertainty around what to expect from the non-farm payrolls numbers tonight. If they echo the ADP numbers it’ll be an unpleasant surprise for the Fed. But there are further soft-landing signs for the US in data out overnight, including falling labour costs and rising productivity.
Thursday 3rd August 2023
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US ten-year Treasuries hit a fresh high for the year. The downgrading of the US credit rating by Fitch had a little to do with it. The ADP employment numbers also drove yields higher, but NAB’s David de Garis says it is likely the numbers ere a big overstatement, hence yields reversed a little. But there’s also the increase in bond issuances after the massively recalculated US government borrowing this week. All of this is making bonds more attractive than risk assets, with shares well down again. Looking forward, the Bank of England meets today, with the outside chance they’ll lift rates as much as 50 basis points. And the US Services ISM read will be important for those hoping for a no-lading future for the US economy. Plus, why is the Aussie dollar down again so much today?
Wednesday 2nd August 2023
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NAB’s Rodrigo Catril says the Aussie dollar has been pulled down by three factors. First, the RBA decision to hold. Although most expected it, there was some pricing for a rise that didn’t materialise. Secondly, the US dollar is higher, on further hopes of a soft landing. US bond yields are also higher because higher than planned government borrowing will see a lot more being issued. Thirdly, China. The Caixin Manufacturing PMIs were soft, and there’s still no clear sign of an effective strategy for mitigating the country’s downturn. Cricket was not one of the reasons.
Tuesday 1st August 2023
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The Yen is back where it was a week ago, despite all the excitement towards the end of last week. NAB’s Tapas Strickland says it's clear the BoJ didn’t want yields to rise too quickly and intervened to stop a sudden rise to 1%. Bond markets are suddenly less excited, so yields moved little in other parts of the world. The Aussie dollar rose over one percent overnight, along with Chinese equities, as more detail was fleshed out about what would be done to boost consumption in China, although there’s no evidence of any solid fiscal support yet. The RBA is the main focus today, with NAB expecting they will keep rates on hold.
Monday 31st July 2023
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Bonds markets led moves in currency markets on Thursday on news of changes to Japan’s yield curve control. A lot of those changes were retraced on Friday, o the back of softer inflation numbers for Europe and the US. So, what exactly happened? NAB’s Ray Attrill talks through how a decision over Japanese bond yields impacted yields on bonds in many other markets, including Australia. And , even though moves were retraced somewhat on Friday on inflation data, will there be a longer lasting impact on bond yields elsewhere as a result of the BoJ policy decision? Listen in for a crash course on yield curve controls.
Friday 28th July 2023
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Currency markets were particularly choppy overnight. NAB’s David de Garis says the moves were driven by the stronger than expected GDP read from the USD, which saw the US dollar much higher, pushing other major currencies – except the Yen – much lower. There was less of a response to the ECB, because there were no surprises. Rates were lifted by 25 basis points and Christine Lagarde spoke again about data dependency. Hard to get excited about that. But equities have taken a solid hit in the US. We can expect more volatility as inflation and GDP data is released for Europe today and early next week, plus rebalancing for the end of Q2. As Dave puts it on today’s podcast, expect things to be whippy!
Thursday 27th July 2023
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The FOMC lifted interest rates by 25bp as expected, and the ECB is expected to do the same tonight. But in each case, it’s unclear where the central banks go next. But NAB’s Ken Crompton says the RBA is unlikely to lift rates next week, given the softer than expected Australian CPI print yesterday. But again, it’s unclear where they go from there. There were no strong market moves during or after Jerome Powell’s Fed press conference this morning. He clearly didn’t want to appear too dovish or too hawkish, just data dependent. He did reiterate his personal belief that the US will navigate a soft landing. Listen in for more on what was said.
Wednesday 26th July 2023
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There was a more substantial build in the Aussie rally yesterday, says NAB’s Ray Attrill which built further overnight. The reason, China, with the Politburo making announcements that suggest they are serious about stepping up macro policy support after the weak Q2 GDP numbers. That’s helped the Aussie and commodities. Meanwhile, the US is languishing in more evidence of a soft-landing, whilst Germany and most of Europe face a tough future. WE don’t have to wait long to see just how that will be reflected in central bank policies, starting with the FOMC first thing tomorrow. Strong earnings results for Alphabet and Microsoft too.
Tuesday 25th July 2023
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Markets are still expecting that the Fed is near the end of its tightening cycle, with equity markets continuing to push higher today. But what if the Fed sounds particularly hawkish this week? And what if the plethora of big tech earnings results come in much weaker than expected? It could be a choppy second half to the week. PMIs for Europe came in weaker than expected, and NAB’s Skye Masters says that opens up the question about what the ECB does after this week’s meeting.
Monday 24th July 2024
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The FOMC, the ECB and Bank of Japan all meet this week. No change of direction is expected from the Bank of Japan despite their sticky core CPI number last week. The FOMC and ECB are both expected to lift rates, but does it end there? That’s a question put to NAB’s Rodrigo Catril, on a day when we will be festooned with data – the flash PMIs are out for the US, Japan, UK, Euro area, France and Japan. Will they factor into central bank decision making?
Friday 21st July 2023
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Markets are back to worrying about jobs data, it seems. Aussie yields rose after yesterday’s much stronger than expected employment numbers. The Aussie dollar is higher, even against a rising US dollar, which is also in part down to job concerns after a fall in unemployment claims last week. NAB’s David de Garis says we shouldn’t get too carried away by one week’s report on jobless claims, which are known for their volatility. UK retail numbers are expected to fall again today, but it’s an economy that keeps surprising us. And Japan’s CPI are out, but are unlikely to change the direction of the BoJ anytime soon.
Thursday 20th July 2023
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Markets were buoyed a little further on the back of UK CPI numbers. Seemingly, if the UK can see core inflation fall a little further than expected then there’s hope for everyone. NAB’s Tapas Strickland says, although the fall wasn’t dramatic, it adds to the global view that inflation has peaked and it could fall rapidly from here. New Zealand’s CPI also fell, but Europe’s final CPI read was revised up a little. The RBA will be watching Australia’s employment numbers today, but Tapas warns that the numbers have been subject to some volatility lately so it should be treated with caution.
Wednesday 19th July 2023
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Markets are still excited about the prospect of inflation cooling, with equities pushing higher in the US. JBWere’s Sally Auld says the fall in the headline inflation rate in Canada was also encouraging, but there was a marginal move down in core inflation. There are more inflation numbers today, with CPI for New Zealand and the UK. The UK will be a focus, with its core rate expected to remain stubbornly high. If it does come in lower than expected that will only fuel hopes that we are fighting the final battles for inflation. But a higher reader could see the BoE pull a 50bp hike out of their hat.
Tuesday 18th July 2023
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There was further evidence of a slowdown in the Chinese economy in yesterday’s GDP print. NAB’s Rodrigo Catril says it reinforces the need for targeted fiscal measures to keep the economy on track for the target 5% annual growth. The Aussie moved down lower on the news and could take a further hit if the RBA minutes suggest a delay before they hike again. There was a sprinkling of US data that reinforced the soft-landing scenario, supported by words from Janet Yellen suggesting a recession won’t happen given the strong labour market, with more people returning to work.
Monday 17th JUly 2023
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After all the confidence displayed last week following the lower-than-expected US inflation numbers, markets changing direction on Friday, with the US dollar rising, bond yields also increasing and equities losing some of their vigour. NAB’s Rodrigo Catril says in part this is a response to Friday’s consumer inflation expectations survey, mixed with a bit of natural adjustment after so much mid-week exuberance. If the UK’s CPI number this week also comes in lower than expected then we can expect hopes to be raise higher, but that is much less likely to happy. Instead, lets focus on Aussie employment numbers and China’s GDP read, both of which will influence local sentiment and the direction of the AUD, which clearly wants to avoid hitting 70 US cents just yet.
Friday 14th July 2023
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There’s been no backtracking (so far) on the positive response to the US CPI numbers on Wednesday. US equities rose higher on Thursday, bond yields fell further and so did the US dollar. NAB’s Gavin Friend talks us through the market moves, including the rise in the Aussie dollar, despite weaker than expected trade data from China. The UK also had some positive news, with GDP managing to avoid going into the red, just. A quiet end to the week, with Euro area trade data the only notable figures, along with the Michigan consumer sentiment survey.
Thursday 13th July 2023
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There was quite a response to the cooling in US inflation last night, pushing US equities to 15-month highs and sending bond yields lower. NAB’s Tapas Strickland delves into the CPI numbers and the market reaction, and what it means for future expectations from the Fed. There’s also discussion about Philip Lowe’s speech yesterday, giving the RBA’s response to suggested reforms for Australia’s central bank. Plus, decisions from the RBNZ and the Bank of Canada. Today’s data highlights include China’s trade balance and the US jobless claims.
Wednesday 12th July 2023
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Some parts of the world are showing clear signs of an economic slowdown. Like, Europe, where the latest ZEW survey shows a deteriorating outlook. In the UK unemployment rose more than expected yesterday, but so did wages. And, as Ken Crompton explains, yesterday’s NAB Business Survey show’s there’s still resilience in the Australian economy, something that RBA Governor Philip Lowe will no doubt talk about in his lunchtime address today. But all eyes will be on the latest CPI numbers for the US tonight, along with rate decisions by the RBNZ and the Bank of Canada.
Tuesday 11th July 2023
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The speed of China’s economic recovery continues to cause concerns. NAB’s Rodrigo Catril says the fall in the CNY continues to pull the Aussie dollar lower, even against a weaker US dollar today. US Treasuries have fallen, despite more hawkish talk from Fed speakers overnight, including Loretta Mester saying rates need to be ‘somewhat higher’. Does that sound like more than two hikes? Today the focus will be on the NAB Business Survey locally, and employment data for the UK.
Monday 10th July 2023
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Markets will have breathed a collective sigh of relief on Friday when the US non-farm payrolls read came in below consensus, after the worrying upside surprise in the earlier ADP employment numbers. NAB’s Skye Masters says it doesn’t change the path for the Fed, though, particularly as the unemployment rate fell in Friday’s numbers. Elsewhere, Janet Yellen continued to sound hawkish, saying the need was to focus on company profits alongside rising wages. US CPI is the key data release this week.
Friday 7th July 2023
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Clearly markets are very concerned about jobs data being too-strong after a big rise in the latest ADP numbers and in the employment component of the latest services ISM survey. The JOLTs numbers also showed an increase in job openings. All running contrary to the expectations of the Fed. NAB’s Gavin Friend says it adds to the overarching theme of resilience in the US economy – a word frequently mentioned in the last Fed minutes. The result has been a sharp rise in bond yields today, drops in equities and a significant fall in the Aussie dollar on the back of the rising risk sentiment.
Thursday 6th July 2023
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It's been a quiet week so far, but that changes today with US Services ISM out later, along with the start of US jobs numbers, including the weekly jobless claims, the JOLTs job openings and the ADP employment release, ahead of tomorrow’s non-farm payrolls. Trepidation ahead of those releases might partially account for the sharp increase in 10 year Treasury yields, but NAB’s Ken Crompton says it’s also linked to forecasts from JP Morgan that UK rates will push as high as seven percent. 10-year Gilt yields also moved up accordingly.
Wednesday 5th July 2023
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The RBA decided to keep rates on hold yesterday, but there are still expectations of two more hikes even though the commentary from the central bank was more about slowdown concerns that the prospect of inflation worsening or taking longer to come down. NAB’s Taylor Nugent says this should be taken as a sign that they want to move more slowly, rather than this being the endgame. It’s a clearer picture in NZ though, where a much softer Quarterly Survey of Business Opinion has been taken as another indicator that the RBNZ’s job is done. Today, as America returns to work, we get the FOMC minutes and the Caixin services PMI for China.
Tuesday 4th July 2023
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The RBA meets today. Thank goodness, otherwise it would be a desperately quiet day ahead, with the US on holiday with markets having closed early afternoon on Monday. Data on both sides of the Atlantic pointed to a manufacturing slowdown. The US ISM came in lower than expected and Germany’s PMI was revised down, to a level close to the pandemic low, when workers were in lockdown. NAB’s Tapas Strickland says we knew the US manufacturing sector was experiencing a slowdown and the German number can be attributed to lower demand from China. But what of the RBA? Today’s meeting comes a day after surprisingly strong housing data yesterday.
Monday 3rd July 2023
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Consumption data and the core-PCE inflation read both came in softer than expected on Friday, after a spate of stronger than expected economic data for the US. NAB’s Rodrigo Catril says there’s not enough in these numbers for the Fed to change its current hawkish path, and markets moved only marginally lower in their expectations of the terminal rate, but what if it is compounded by weaker jobs data and falling wage growth on Friday? It’s all discussed in today’s podcast, plus Europe’s inflation remains sticky and a new head on the way for the PBoC.
Friday 30th June 2023
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The resilience in the US economy is not giving in. Q1 GDP was revised up, showing 2 percent growth QonQ, whilst consumer spending was up 4.2% on the quarter. NAB’s Gavin Friend points out, Q1 was a while ago now, and everyone knew it was a strong quarter. Yet a fall in jobless claims added to the idea that the Fed has more work cut out to bring down inflation, hence a strong move up in bond yields. Australia too is showing resilience, reinforced by yesterday’s retail numbers. And there was no respite in German inflation, with all eyes on the Euro area CPI number out today, along with the US core-PCE. Both could add to central bank woes.
Thursday 29th June 2023
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Big fall in the Aussie and Kiwi dollars yesterday and overnight. NAB’s Tapas Strickland says the fall in the Aussie was a combination of the falling CNY and the fall in Australian CPI yesterday, although he cautions into getting too hopeful on the inflation read. At Sintra central bankers stuck with their hawkish sentiment, except Gov Ueda from the BoJ who believed inflation would come down. Concern over Japan’s plight might account for some of the fall in the NZ dollar, although some of it is also being put down in money moving across the Tasman to buy Taylor Swift tickets! CPI for parts of Europe are released today and the Riksbank is the next to lift rates – maybe by as much as 50bps.
Wednesday 28th June 2023
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There was strong data from the US overnight, with a lift in durable goods orders, housing sales rising and consumer confidence also strong. NAB’s Skye Masters says the Fed won’t take any delight in these numbers so late in their tightening cycle. Meanwhile, Christine Lagarde gave a hawkish speech at Sintra. But maybe the Bank of Canada can take a rest, with core inflation a little lower than expected. Today Australia’s monthly CPI report is out, and the clash of the central bankers on a panel at the close of the Sintra symposium.
Tuesday 27th June 2023
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We saw no response on the markets to the attempted Russian rebellion, instead all eyes are on Sintra in Portugal, where some of the world’s leading central bankers meet for a chinwag. NAB’s Ray Attrill says we are bound to get something out of it, particularly with Governor Ueda present from the Bank of Japan. Otherwise, a quiet session, although Canada’s inflation number will be important in determining the path for the BoC.
Monday 26th June 2024
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Bond yields fell on Friday as PMI reads came in softer than expected. As well as further falls in manufacturing, as NAB’s Taylor Nugent points out, the outperformance of services has weakened, particularly in Europe where the Services PMI in France fell into contraction territory. Does this mean central banks will be less hawkish? The Fed’s Bostic said at the weekend that perhaps the FOMC has had its last rise and all that’s needed now is time for the impact of their policies to kick in. It’s a busy week for inflation numbers, including the monthly Australian figure, ahead of the RBA next week. And the shortest civil war ever. Could it pass by with no market impact whatsoever?
Friday 23rd June 2023
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The Bank of England and the Norges Bank both surprised markets, each raising interest rates by 50 basis points. NAB’s Gavin Friend says the mix of higher UK earnings and stubborn inflation numbers yesterday combined to drive this bigger than expected move. The question is, how much further will they go as the UK fights supply chain and labour supply issues and second-round effects? Certainly Jerome Powell is painting a less volatile path for the US economy, where further rate rises will come slowly, if at all. Yet yields are climbing higher again with all this central bank uncertainty, and oil prices have fallen sharply on an expected decline in demand.
Thursday 22nd June 2023
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At his testimony to the House Finance Committee overnight Jerome Powell suggested two more rate hikes would be a “pretty good guess”. But, as NAB’s Taylor Nugent points out, markets haven’t even fully priced in one more hike for the remainder of this year, so they clearly don’t believe him. It’s a safer bet that the Bank of England will raise twice, or maybe one big hit today, as they prepare to counter yesterday’s inflation numbers that showed the downward movement in the headline rate has stalled, and the core rate continues to push higher. Not a happy place. And they lost at the cricket.
Wednesday 21st June 2023
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The Aussie dollar has dipped to 67.8 us cents this morning. NAB’s Tapas Strickland says its in part because of the China slowdown story, but also the RBA minutes which were more dovish than expected? Does this mean a pause is more likely, or will recent data suggest otherwise? The RBA’s Michelle Bullock gave a speech yesterday indicating the importance of seeing unemployment getting back up to a non-inflationary level, suggesting more emphasis will be placed on jobs data. The UK gets its latest CPI data today ahead of the BoE tomorrow. An upside surprise could mean a 50bp rise by the UK’s central bank. And Jerome POweell spends a day in front of the US House Financial Services Panel later on.
Tuesday 20th June 2023
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We are a couple of days out from the next Bank of England meeting, where a rate hike of at least 25bp is expected, with more to come – but could it be 50? So, is there a danger of doing too much? Phil asks NAB’s Skye Masters whether the aggressive signalling from central banks is intended to modify behaviour without expecting to go quite as far as they are suggesting? The mood overnight was subdued, wit the US on holiday, but impacted a little by more cautious expectations for the Chinese recovery.
Monday 19th June 2023
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With the US on holiday, very little new data and not much out on Friday, today should be a very quiet day. But, as NAB’s Ray Attrill suggests, that doesn’t mean there won ‘t be fireworks later. Jerome Powell fronts up to two days of testimony, and the Bank of England will lift rates shortly after receiving the latest CPI print. Given a weakening US dollar could we see further strength in the Aussie, plus a brief discussion about an AFR article this morning suggesting the RBA might be preparing for QT.
Friday 16th June 2023
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The ECB hit expectations with their rate rise overnight, says NAB’s Ken Crompton. Markets have responded to Christine Lagarde’s clear expectation that there will be another rise at the next meeting. So, we have a slowing economy (technically in recession) with a central bank lifting rates. In the US, where the Fed has also signalled one or two more rises, we saw weaker data overnight, raising the question, will they actually have to go that far? Whilst in Australia the tight labour market – made tighter with higher job numbers yesterday – adds to the challenge for the RBA. And in China, the slowdown is set to promote more fiscal and monetary stimulus. Could that help push the Aussie dollar back into the seventies?
Thursday 15th June 2023
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Few will have been surprised by the decision of the FOMC to pause interest rates, after 10 successive hikes. But they have also signalled that rates could rise as much as 50 basis points, with one member wanting to see rates go over 6 percent. JBWere’s Sally Auld talks to Phil about the decision and take-outs from the press conference that followed. One thing is clear, although the pause was a unanimous decision the dot plots show the board members have wildly different expectations of where to go from here. The ECB is not ready to pause yet. And the next move by the RBA will be to some extent impacted by today’s employment numbers.
Wednesday 14th JUne 2023
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The CPI numbers from the US yesterday showed core inflation is roughly in-line with expectations, raising hopes that the FOMC will pause rates at their meeting on Thursday. Shares are higher in anticipation. It’s a different story in the UK tough, where a tight labour market continues to cause problems. Yesterday’s employment data saw unemployment fall, whilst wages increased further. NAB’s Taylor Nugent says two-year yields in the UK shot above the level reached during the brief Liz Truss premiership, when the BoE had to step in to protect pension funds. Somewhere in between, sits Australia, where yesterday’s NAB Business Survey with clear signs of a slowing economy. But, of course, that’s good for controlling inflation.
Tuesday 13th June 2023
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It’s a busy week ahead, with the Fed, the ECB, the Bank of Japan all meeting, and not a clear picture of what any will do in terms of rate rises. The Fed’s decision might be partially impacted by US CPI numbers out today. NAB’s David de Garis says there is talk of a skip, rather than a pause. In other words, one meeting missed so economic indicators can play catch-up before the Fed returns on its upwards rate path. Meanwhile, there seems to be an increasing amount of softer data, suggesting slowdowns are starting to occur. It’ll be interesting to see if UK jobs numbers fall back because, despite concerns about UK growth, employment numbers have been holding up. Is tis the day they turn?
Friday 9th JUne 2023
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The US dollar has fallen a fair bit, with bond yields down and equities boosted, following a higher than expected jobless claims number in the US. NAB’s Gavin Friend says the markets are reversing some of the early responses to the double shock of rate rises by the RBA and the Bank of Canada. Clearly, the job claims number was used as an excuse to show an economy slowing. But is it an over-reaction? It is if other markets show an equal degree of economic slowdown, which arguably, Europe has done by recording a technical recession in the latest GDP revision.
Thursday 8th June 2023
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Hot on the heels of the RBA, the Bank of Canada also lifted interest rates yesterday against market expectations. JB Were’s Sally Auld says markets are having to adjust to the new reality, that central banks aren’t done yet. That’s certainly been reflected in bond yields, rising sharply in the US, Canada and Europe. Philip Lowe yesterday did nothing to talk down the likelihood of another rise, pointing to rising wages against falling productivity as a problem that has to be overcome. China’s trade data has shown a big fall in exports, which has seen the CNY down against the US dollar, which Sally says challenges any potential rise in the Aussie.
Wednesday 7th JUne 2023
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The RBA lifted interest rates yesterday, against the prevalent market expectation. NAB’s Taylor Nugent says it was always a question of “when and not if”, but now there are expectations of at least one follow-up hike at some point this year. The reason, obviously is the central bank’s concerns over persistently high inflation, which OECD numbers yesterday showed was a persistent theme across the developed world. So, the questions ofr today – what will Philip Lowe say at his speech (with Q&A session) in Sydney this morning, and what will the Bank of Canada do later. Their decision is also finely balanced.
Tuesday 6th June 2023
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It's a line-ball call, says NAB’s Ray Attrill, as to whether the RBA will lift rates or not today. Markets have priced in a follow-up to the May rise, the question is whether it happens today or in a subsequent meeting. We look at the scenarios on today’s podcast. Plus, a weaker services sector in the US. Does that change expectations for the Fed? And oil responds to the OPEC+ cuts by Saudi Arabia, but the gains don’t last long.
Monday 5th June 2023
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With debt ceiling concerns taken away, its back to worrying about inflation and wondering how far central banks will push. NAB’s Rodrigo Catril says it’s still likely thew RBA will pause tomorrow, but a higher-than-expected rise in award wages in Australia on Friday have increased the chance that there will be a hike as soon as tomorrow. The Bank of Canada faces the same dilemma, hike again or hold and see? Oil is expected to rise today after the OPEC+ meeting over the weekend, when Saudi Arabia volunteered a million barrels a day cut in production.
Friday 2nd June 2023
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It's surprising that the markets have reacted so sharply to the passage of the debt ceiling bill. NAB’s David de Garis says there was always an outside chance something would go awry, but it’s already passed through the House and should clear the Senate today. Now the focus is on jobs in the US, with non-farm payrolls tonight. Wage pressure will be a significant focus, whilst at home the consequences of the Fair Work Commission’s award wage decision will be an important factor in determining the rate of inflation.
Thursday 1st June 2023
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The Aussie dollar has fallen further on the back of weaker than expected PMI data from China. NAB’s Ray Attrill says it adds to the view that the post-COID recovery is losing momentum. Australia was also hit with higher-than-expected inflation numbers yesterday, which has added to the expectations for a quarter percent rate rise by the RBA next week. European inflation reported so far has largely shown the worst might be over, but we get the Euro areas CPI figure today. If the US Fed is looking for an easing labour market there is little sign of it today, with job openings up and the Beige book reporting companies continuing to find it difficult to recruit people. There is plenty more US jobs data to come this week.
Wednesday 31st May 2023
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Once it’s over the hurdle of the US House Rules Committee, which is happening right now. NAB’s Rodrigo Catril says the feeling is that will pass easily and sets the scene for the vote in the House tomorrow. But many of the market moves are more to do with concerns of an economic downturn, as central banks push harder. That will certainly be the tone of questions RBA Governor Philip Lowe faces when he is in front of the Senate Economics Committee this morning. We also get Australian inflation data today, and numbers for France, Germany and Italy.
Tuesday 30th May 2023
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The timetable to sign off the agreement to raise the US debt ceiling is very tight. Does it matter if it’s a day or two late? "Not really", says NAB’s Tapas Strickland in today’s podcast, although it might make the markets nervous for a while. A bigger question is what happens beyond that, as the administration plays catch-up on the issuance of Treasury Bills. Also today, we look at the impact of the Fair Work Commission’s decision on minimum and award wages. At what point does the increase become problematic for the RBA?
Monday 29th May 2023
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The Democrats and Republicans reckon they have struck a deal over the US debt ceiling, which involves no growth in non-military government spending next year. The deal, could be voted on as soon as Wednesday, just in the nick of time, although as NAB’s Taylor Nugent pints out, Janet Yellen has revised the date for when the money runs out to June 6th. It’s not a done deal, of course, but we started to see early optimism reflected in markets in Friday and there’s no reason why that wouldn’t continue today, except the US and UK markets are largely closed for public holidays. Friday also showed resilience in US inflation and consumption, which has added to the likelihood of a Fed rate rise next month. Non-farm payrolls on Friday will be a key release for that too.
Friday 26th May 2023
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There is still no resolution on the US debt ceiling. NAB’s Gavin Friend talks about where markets go from here. Right now, it doesn’t seem to be worrying US equity markets, which have jumped on the forecasts from NVIDIA of am AI-led recovery in chip demands, pushing the company close to a one-billion-dollar valuation. Economc data overnight has shown an upside in the US, but a deterioration in Europe, with Germany having been in a recession for the last two quarters. Still, central banks are talking up the need to do more. Today Australian and UK retail numbers and more measures of inflation, the US PCE deflator and the Tokyo CPI print, which could be an uncomfortable read for the Bank of Japan.
Thursday 25th May 2023
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McCarthy and Biden finished their four hour talks on Wednesday with no resolution on the debt ceiling. Their division over spending continues to concern markets. NAB’s Ray Attrill looks at the market response, with a deal needed by the end of the week to allow time for the legislative process to run its course. There’s division within the FOMC too, evidenced by the latest minutes. There;’s also been a couple of surprises in the last 24 hours – the RBNZ indication that they may have stopped lifted rates, and the UK’s worrying inflation numbers now raising the possibility of a 50bp rate hike next time by the Bank of England. And rate hikes from the RBA might still have a way to go after Philip Lowe’s meeting with legislators.
Monday 24th May 2023
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There’s still no resolution on the USD Debt Ceiling. NAB’s Taylor Nugent says expectations are that a deal will be found in time, but markets are getting nervous, with falls in equities across the board (except energy). Inflation concerns continue to mount up, with the latest PMI data in the US and Europe showing that, in general, the service sector continues to expand whilst manufacturing falls further. The UK’s headline inflation rate will fall markedly, but it’s the core number that counts. And we see what the RBNZ is planning to attack persistent inflation – a 25bp is expected but there is an outside chance they will go harder today.
Tuesday 23rd May 2023
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If you look at Kevin McCarthy’s twitter feed you’d assume he is taking a very defiant stand against the Biden administration when it comes to movement on the US debt ceiling. But JBWere’s Sally Auld says that reflects the stakeholders he has to pacify, and you’d hope he’d be more conciliatory in the negotiations underway. But they’ll have to be quick if they want to reach a resolution and pass any necessary legislation before the default, yet markets remain clam, presumably assuming a compromise will be reached in the nick of time. Meanwhile the Fed remains divided too, although the general direction of travel seems to be more, not less, hikes. The same applies for the RBNMZ, with tomorrow’s expected rise unlikely to be the last. Today global PMIs will be keenly watched.
Monday 22nd May 2023
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Markets are distinctly uneasy at the start of the week, as the Republicans and Democrats are sticking to their entrenched position in US debt ceiling talks. NAB’s Rodrigo Catril says it’s a sharp contrast to the upbeat tone on Thursday, so we can expect a large amount of volatility unless they pull something out of the hat on Monday. Meanwhile Jerome Powell hinted over the weekend that the Fed could pause in June, despite the rhetoric from other board members last week. Whilst Christine Lagarde says the ECB needs to buckle up’ to fight inflation. Also today, what impact in inflation and the RBAS will a rise in Australian minimum wages that’s in-line with inflation? Plus, the PBOC’s concerns about currency fluctuation, what to expect from the RBNZ this week and is Japan the new un-China?
Friday 19th May 2023
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Markets are buoyed this morning by comments from US Republican House Speaker Kevin McCarthy that he sees a path towards a deal with the Democrats over the US debt ceiling. That’s pushed equities and bond yields higher. NAB’s Ken Crompton says it would be premature to suggest that yesterday’s weaker employment numbers would impact the path of future hikes from the RBA, just as the latest data from the US is too choppy to draw any conclusions on what it means for the Fed. But it seems the increased spending by the NZ government in yesterday’s budget could contribute to an extra rate hike by the RBNZ.
Thursday 18th may 2023
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Markets have chosen to be optimistic over the US debt ceiling today, with US House Speaker Kevin McCarthy, saying a compromise was “doable”, maybe as soon as this week. And, as NAB’s Rodrigo Catril points out, Joe Biden is also positive, and the negotiating team has been reduced in size to nut out a solution. Japan’s GDP surprised on the upside yesterday and Australian wage growth came in as expected, but there’s still potential for them to rise further. Australia’s employment numbers are out this morning. All are discussed in today’s podcast.
Wednesday 17th May 2023
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It was a finely balanced decision by the RBA to lift rates at the last meeting, with the bank now saying they are focusing on productivity and wages. As JBWere’s Sally Auld discusses today, they don’t have to wait long for the next set of quarterly wages data out today – but the next productivity data comes a day after their next meeting. So, will they pause? We talk through a lot of data releases today, with the tone a little downbeat, pushing equities lower. And uncertainty grows about the debt ceiling, with the clock ticking and no sign of a resolution.
Tuesday 16th May 2023
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Is the US careering towards a debt default? There’s only a couple of weeks until the point at which Janet Yellen has warned the US government could run out of money. But Biden and McCarthy are talking, so there is hope of a resolution. But NAB’s Skye Masters says its drawing a long bow to assume the slight increase in confidence in markets today is being driven by hopes on those talks. It was simply a session light on significant data to drive markets in any particular direction. It’s a different picture in the next 24 hours though, with a swathe of data, and growing uncertainty as each day passes without a debt ceiling resolution. In amongst the releases today, the RBA minutes, which will help explain the surprise decision to lift rates at the last meeting, with NAB now forecasting one more hike this year.
Monday 15th May 2023
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There was further nervousness in the markets at the end of last week. NAB’s Ray Attrill says a chunk of it came from the University of Michigan’s survey, which saw consumers raising the level they expected inflation to be at in five years’ time. It seemed an oversized response to a modest increase, but it is a statistic that the Fed likes to keep an eye on. The response could well be overturned by events this week, which include US retail sales, Canada’s CPI, UK labour market data and Australia’s wage price index and employment numbers. A busy week ahead, but a quiet start today.
Friday 12th May 2023
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The BoE has raised rates (not a unanimous decision), but they are also expecting a bit more growth in the economy. We’ll see how that’s tracking with UK GDP numbers out today. NAB’s Gavin Friend says this could be the last one from the BoE, but it really depends on the UK inflation number later in the month. Meanwhile, further signs of softness in the US – where jobless claims rose more than expected – and China, where loans are well below expectations. Banks continue to add to the uncertainty.
Thursday 11th May 2023
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US CPI has come in pretty much as expected, and yet we’ve seen falls in bond yields and increased talk of a Fed pause and rate cuts later in the year. NAB’s Ray Attrill says there was no doubt relief that the number didn’t go up. We’re heading in the right direction, albeit at a glacial pace. It’ll be a different story for the BoE this evening, with a 25bp rise expected, but how many more to follow? The ECB is also continuing its campaign of hawkish talk, with 4 more speakers in the next 24 hours. With a Fed on hold and the BoE and ECB still lifting rates, what does this do to the Aussie dollar?
Wednesday 10th May 2023
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The Australia federal budget last night didn’t contain any surprises. As NAB’s David de Garis explains, it’s clear that Australia’s fiscal position is better than most, but that doesn’t mean inflation is under control. In the US the fiscal position is a particular worry as the debt ceiling could be reached as soon as June 1st and Biden and McCarty are going into talks intent on not budging their positions. Meanwhile, the ECB has been in full-hawk mode, talking up the expectations for rate hikes. Today rings us the most important number of the week – US inflation.
Tuesday 9th May 2023
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Bond yields continued to rise yesterday and overnight as markets seem to accept a more for longer approach from central banks. NAB’s Rodrigo Catril says the Business Survey yesterday showed that there was a fall in retail prices and final product prices, suggesting, perhaps, that inflation was coming under control. In the US the Senior Loan Officers survey in the US showed that lending conditions were tightening, with am impact on business credit demand. Whilst industrial production in Germany fell further in March, driven down by the automotive sector. It’ll be interesting to see how weak data like these impacts on the attitudes of the ECB, with Lane, Vasle and Rehn all talking over the next day.
Monday 8th May 2023
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A surprise increase in US jobs on Friday but NAB’s Tapas Strickland says it probably won’t have scuppered expectations for a pause by the FOMC, unless there’s an unpleasant surprise in US inflation numbers this week. The question is, how much of the work of the Fed will now be done by the credit crunch? That makes today’s US Senior Loan Officers Survey particularly important. Also on today’s podcast, a look ahead to the BoE and a look back at Friday’s Statement of Monetary Policy from the RBA and why Aussie home loan commitments have picked up so much.
Friday 5th May 2023
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The ECB has lifted rates by 25 basis points and the expectation that there is more to come. NAB’s David de Garis said Christine Lagarde did raise concerns about credit tightening, but there was no suggestion of how that would change the rate path for the bank. Meanwhile, PacWest Bancorp looks likely to be the next US bank to disappear, with questions over how many other regional banks will follow. That uncertainty has led to a fourth day of falls in US shares. US payrolls are the main focus tonight, after data yesterday showed jobs are holding up, with wages still growing, and productivity falling. The Fed, obviously, wants to see none of those things.
Wednesday 4th May 2023
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The FOMC has met, lifted rates and there are suggestions of a pause. NAB’s Gavin Friend says its all down the removal of one the line from the policy statement: “some additional policy increases might be appropriate”. With that gone there was an immediate assumption that the Fed will stop lifting rates, but Jerome Powell seemed a lot less dovish in the press conference that followed. Listen in for a rundown of the decision and the takeouts from what followed. Next, it’s the ECB, which is also expected to lift rates by 25 basis points. But how much of the path is now determined by bank credit tightening, rather than traditional economic data like inflation and jobs?
Wednesday 3rd May 2023
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The RBA’s decision to lift rates seems to have kicked off a turbulent period on global markets. The US kicked off with big drops in oil prices, plunging share prices and rising bond yields. Not because eof the RBA. NAB’s Tapas Strickland talks us through the uncertainty in the US on the eve of the FOMC meeting, with more bank worries and falling US job openings – with fewer quits and more layoffs. The ECB meeting isn’t far behind. We digest the latest inflation numbers for the Eurozone. And on the RBA, was that the last rise, or has it laid the path for more?
Tuesday 2nd May 2023
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Markets seemed unperturbed by the demise of another US commercial bank. NAB’s Skye Masters says the mood in bond markets is risk positive, perhaps because the FDIOC stepped in and negotiated a sale to JP Morgan. Markets were also influenced by the US ISM manufacturing read, which showed a rise in prices and employment. The ECB will be interested in the Euro area core inflation read today, whilst the RBA will almost certainly keep rates on hold.
Monday 1st May 2023
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It’s a big week for central banks, with the ECB and FOMC expected to lift rates. The US employment cost index and PCI deflator on Friday showed that prices in the US are taking a while to moderate. In Europe GDP numbers showed the economy is starting to slow, but the market still has a rate rise priced in. But NAB’s Rodrigo Catril says the RBA is still expected to keep rates on hold tomorrow. Over the weekend China reported weaker than expected manufacturing numbers, and on Friday the Bank of Japan kept rates on hold and a continued dedication to yield curve control, even as Tokyo’s inflation numbers jumped higher.
Friday 28th April 2023
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Today NAB’s Ken Crompton joins Phil to talk through the latest GDP numbers from the US, reinforcing signs that the economy is slowing. But markets preferred to focus on the PCE read, showing prices are still rising, and the latest jobless claims which demonstrate how the labour market is easing at a glacial speed. Meanwhile equities are pushing higher helped by the latest earnings results, with Intel and Amazon the latest to report strong results. The focus today will be on how European GDP compares to the US slowdown, and the detail of the US employment cost index.
Thursday 27th April 2023
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The US share market is split between tech majors, doing well on the back of strong earnings (Meta is the latest on that front) and financials (and the rest) hit by banking uncertainty and recession fears. NAB’s Rodrigo Catril says there’s no evidence of systemic risk in the banking sector, but tightening credit conditions will weigh on the broader economy. Hence, big falls in oil today, which was one of two factors weighing on the Aussie dollar. The other, of course, is the weaker than expected inflation read for Australia yesterday. Could a more dovish RBA against a hawkish Fed see the Aussie fall further?
Wednesday 26th April 2023
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Equity markets took a hit after yesterday’s earnings results from First Republic Bank. JBWere’s Sally Auld says most of the movement overnight can be put down to the uncertainty this has created. The expectation that bank uncertainty had disappeared after just a few days was clearly a little optimistic. Softer economic data from the US overnight also dampened enthusiasm. But Microsoft and Alphabet shares kicked higher in after-hours trade, thanks to higher-than-expected earnings results. Today the focus is on Australia’s inflation numbers and what it means for the RBA.
Monday 24th April 2023
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Should we ignore the technical indicators? A recession seems even less likely after stronger than expected PMIs for the US and Europe on Friday. Phil asks NAB’s Tapas Strickland how central banks will respond to this, particularly if we see resilient employment costs and strong US and European GDP numbers this week. Locally, Australia’s inflation will attract the most attention. US earnings season is in full swing too, with some big tech names reporting tomorrow.
Friday 21st April 2023
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There’s definitely a more sombre mood this morning, with equities falling in the US and Europe. Phil asks NAB’s Ken Crompton how much is this down to Tesla’s price cutting, and the need for a squeeze in margins to maintain demand. Yields are also down, with softer employment, manufacturing an housing data from the US. Couple that with falling inflation in New Zealand and the question has to be asked, at least for today, how far do central banks really need to go? We’ll get an update on jJust how soft global economies are today with PMIs for the US, Europe and the UK.
Thursday 20th April 2022
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The UK’s inflation numbers were an unwelcome surprise yesterday, with the headline rate remaining in double digits, at 10.1%. NAB’s Ray Attrill says there are now expectations for three more hikes from the Bank of England, which has seen bond yields rising sharply. Other asset classes have seen very little movement, with the Fed’s Beige book describing a US economy that is, at best, stagnant. The proposed new structure of the RBA will be a focus today – we discuss the proposal in today’s podcast – along with NZ CPI out this morning.
Wednesday 19th April 2023
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Freedom has turned into a shopping frenzy in China, but it’s not reflected in capex or industrial production. Phil asks NAB’s Tapas Strickland whether this retail growth will be short lived and, if not, could it be inflationary? Meanwhile, inflation remains stubborn in Canada, employment numbers rise in the UK and the RBA minutes yesterday suggest a rate rise could still be in play next week. Central banks plan to do a lot more it seems.
Tuesday 18th April 2023
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It was a quiet session overnight with US equities struggling to get into the green until the very last gasp and bond yields pushing higher. NAB’s David de Garis says there will have been some encouragement from the Empire Manufacturing Index which moved from minus 24.6 to a positive 10.8, driven by strong forward orders. But there’s a lot of volatility in regional manufacturing reports, so will it stick? Today the RBA releases minutes of the last meeting and there’s a swathe of China data to absorb.
Monday 17th April 2023
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There remains some confusion over how far and fast central banks will move, as banking concerns subside. As NAB’s Taylor Nugent discusses today, the Fed is sending very mixed messages, with Christopher Waller suggesting the fight against inflation has only seen sideways moves so far, whilst Raphael Bostic seems happy to pause after one more hike. Yet last week Golsbee and Daly were wondering whether any further hikes were needed at all. Locally, NZ inflation this week will be one highlight, and could be a useful guide for the direction of prices in Australia.
Friday 14th April 2023
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Yesterday we saw a surprise increase in the number of Australians working last month. So, does that mean a greater likelihood of more hikes form the RBA? Certainly a higher Aussie dollar and rising bond yields are suggesting that. It’s a question put to NAB’s David de Garis. There’s also discussion about the UK’s stagnant outlook, with GDP flatlining and mortgage defaults rising. Hopes of easing inflation I the US were helped by a fall in producer prices. Maybe increased exports from China will help too. Perhaps a weakening in consumer demand through today’s US retail sales will add to that picture.
Thursday 13th April 2023
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The headline rate for US inflation fell and for a moment bond yield showed significant falls. But, as NAB’s Taylor Nugent explains, the core readings were less hopeful. It wasn’t long after the release that the Fed’s Thomas Barkin reiterated the need to do more to get inflation down to 2%. But there was some concern amongst the Fed’s ranks at the last FOMC meeting as credit conditions worsened. Could inflation come down by itself? The Bank of Canada is happy to sit it out, keeping rates on hold yesterday and still expecting to reach their 2% target next year. Today the focus is on Australian employment numbers and, perhaps, the weekly jobless claims in the US, which went down last time, suggesting more people in work.
Wednesday 12th April 2023
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There will be a lot of focus on the US CPI number tonight, with an expected fall in the headline rate. There could be quite a market response if there are signs that inflation hasn’t peaked. NAB’s Skye asters believes markets still have unrealistically high expectations of rate cuts later in the year, echoing comments that Jerome Powell gave at the last FOMC press conference. We get top read the full minutes of that meeting later today. This morning we also look into yesterday’s NAB Business Survey and Australia’s strong consumer confidence read, which was helped by the RBA’s ‘hold’ decision, again based on the assumption that inflation has peaked.
Tuesday 11th April 2023
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It’s the start of a what could be a volatile short week. NAB’s Ray Attrill says it seems markets have taken the non-farm payrolls at face value, seeing no dramatic fall in jobs as a sign that the Fed will stick with its hawkish tilt. But the weekly jobless claims have been revised upwards and there’s other evidence that job layoffs are increasing. As markets adjust to the jobs news, there’s also the anticipation of this week’s US inflation read, and a few major bank earnings results this week too.
Thursday 6th April 2023
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There wasn’t anything subtle about the RBNZ rate move yesterday, so why the sharp contrast with the action – or lack of it- taken by the RBA this week. NAB’s David de Garis looks at potential reasons, and helps to dissect Philip Lowe’s Press Club lunch speech yesterday. Also, more soft data from the US and further signs that non-farm payrolls on Friday could show a move south, easing pressure on the Fed.
Wednesday 5th April 2023
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We’re not afraid to admit we got it wrong on the RBA, who kept rates on hold yesterday. Unlike a certain US President we are prepared to plead guilty as charged. NAB’s Rodrigo Catril explains why the bank didn’t move and looks ahead to the next meeting and beyond. Meanwhile, we’re confident the RBNZ will lift rates today. Also today, further signs of softening in the US, including a fall in job openings, with more US employment data out later tonight.
Tuesday 4th April 2023
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Oil prices are up on the back of the OPEC+ cuts announced yesterday. That pushed bond yields a little higher. JB Were’s Sally Auld days rising prices could be problematic for central banks if they keep rising, but there current level is unlikely to have much impact. In fact, yields starting falling as US manufacturing data signified a slowdown in the sector, with a fall in the employment index suggesting that maybe non-farm payrolls on Friday will show an easing in the jobs market and help ease future inflation pressures. The key event today of course, is the RBA meeting, where NAB is still forecasting a 25 bp rise. If it doesn’t happen today, it’ll happen next month is the expectation.
Monday 3rd April 2023
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Inflation is showing signs of slowing in the US, with a lower than expected Core PCE deflator read on Friday. NAB’s Tapas Strickland says this was the primary reason for a fall in bond yields on Friday. But models pointing to lower headline inflation driven by lower energy costs will be in need of a revision today, as OPEC+ announce a daily 1.2 million barrel cut in oil production from next month. The announcement was unexpected. It’ll add pressure to European economies, where core inflation rose slightly last month. On todays podcast we look ahead to the RBA and RBNZ this week, and the consequences of the Aston by-election result over the weekend.
Friday 31st March 2023
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US banking stocks took a hit overnight as central bankers warned of a credit crunch and Joe Biden called for reforms to regulations. Other shares rose though, even though weekly job numbers showed continued labour market tightness. In Australia job vacancies have fallen a little and NAB’s Taylor Nugent talks about how the bank has revised its call on the rate path for the RBA. Today the focus will be on inflation in Europe and the US.
Thursday 30th March 2023
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Markets were calm overnight, but NAB’s David de Garis says that doesn’t translate to confidence. The market is still wondering what is round the corner, but he points out that a lot of the concern has been contained within the US. Meanwhile inflation in Australia came in lower than expected yesterday. Does that mean the job is done for the RBA? For the rest of the week inflation numbers will garner the most attention, starting with Germany and Spain today, and the US and the Eurozone tomorrow.
Wednesday 29th March 2023
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There wasn’t much happening yesterday and overnight, so markets were relatively calm. The US senate banking committee quizzed the regulator over banking collapses and perhaps reassured markets that the future looked more peaceful. But JBWere’s Sally Auld says we can’t assume nothing else will break as capital is repriced with rising rates. Australian inflation data is released today after a small positive move up in retail sales in February. It’s the last piece of data to feed into the RBA decision next week, with the evidence leaning to a lift either next week or next month.
Tuesday 28th March 2023
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Banking fears have subsided somewhat overnight, with a buyer found for Silicon Valley Bank and less concern, for whatever reason, over Deutsche Bank. Hence, equities have risen and so have bond yields, as focus returns on how far central banks will go. Quite a bit further if you listen to the likes of Isabel Schnabel at the ECB or Andrew Bailey at the BoE. But markets are still pricing in cuts later this year. NAB's Ray Attrill talks through why the discrepancy between central banks and markets and makes a bold prediction on what the RBA will do next week. Today’s retail numbers and inflation later in the week could still influence the outcome, of course.
Monday 27th March 2023
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Uncertainty returned to markets on Friday. NAB’s Rodrigo Catril says concerns over Deutsche Bank was the source of volatility for equity markets in Europe and in early trade in the US. It’s not clear whether there is anything to be concerned about - Olaf Schulz, the German Chancellor, says not. Meanwhile, central banks are determined to continue on their counter-inflationary path of rate hikes, with some I the Fed expecting a few more of them before they are finished. So, what of the RBA? We get the monthly inflation data and retail sales this week, but it seems likely they will raise next week.
Friday 24th March 2023
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Three more hikes in a day. Even though we reckoned yesterday that the Bank of England wouldn’t do it, overnight they did lift rates. NAB’s Rodrigo Catril says there is no hiding from a rising inflation rate, even if it proves to be a temporary blip in a more gradual move down, it’s still very high. He suggests it could serve as a reminder that the RBA also has to keep its eye on the ball. Only significant signs of a weakening economy will change the attitude of central banks, who have separated out their monetary goals from banking pressures. Todays PMIs will give a snapshot of how some of the leading economies are faring.
Thursday 23rd March 2023
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As envisaged, the FOMC meeting has agreed to a 25bp rate hike in the US, with Jerome Powell indicating there is more to come. But, as discussed with NAB’s Gavin Friend, the Fed chair has suggested that it’s possible that credit tightening from banks, after the recent turmoil, will do some of the work for them. Next, it’s the Bank of England. It seemed likely that there would be no move but could that change with a surprise increase in UK inflation announced yesterday.
Wednesday 22nd March 2023
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Markets seem to have cast off concerns about banking risk contagion. NAB’s Skye Masters says market confidence has been helped by reassurances from Janet Yellen that the US federal government is “resolutely committed” to mitigating financial stability risks. Authorities are also investigating ways to remove the upper cap on deposits covered by FDIC insurance. That’s all helped to boost equities and drive strong increases in bond yields. The question remains, has there been any lasting impact on the speed and destination for central banks? A 25 basis point hike is well-priced for the FOMC tomorrow, but the revised dot-plots will be of more interest. Catch all the news on that in tomorrow morning’s podcast.
Tuesday 21st March 2023
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Markets were relatively calm on the first day after the announcement of the Credit Suisse-UBS deal. One risk of contagion was in the AT1 (addition tier one) bond markets, as Credit Suisse wrote their $17 billion value down to zero, leaving bondholders with nothing. NAB’s Taylor Nugent says there seems to be some acceptance that this is a Swiss-only story, and AT1 bondholders would count before equities in the pecking order in the case of other banking right downs. So, now, as markets seem to be accepting that the banking crisis is contained, does that mean central banks – like the Fed this week – can push higher on rates?
Monday 20th March 2023
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A deal was struck over the weekend that sees UBS buying Credit Suisse for US$2billion, a fraction of it’s value at Friday’s close. NAB’s Ray Attrill talks about the consequences of this arrangement and the ongoing uncertainty in the US regional banking sector. Could this mean we see bond yields falling further and watered down expectations for central bank hikes, including the BoE and Fed this week? How can central banks tread the path between fuelling more banking uncertainty and pursuing their path for controlling inflation? The first central banker to face such difficult questions could be the RBA’s Christopher Kent, first thing today.
Friday 17th March 2023
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Whilst money is being poured in to solve liquidity issues at Credit Suisse, the ECB has been keen to stay on track with a 50bp rate hike yesterday. It’s been suggested that anything less would have been seen as a sign of bigger troubles and spread panic in a nervous market. Hence, bond yields and equities have come bouncing back overnight. But NAB’s Ray Attrill says markets are less sure of a rate hike from the RBA next month, even though Australia reported a strong increase in employment yesterday and an unexpected fall in the unemployment rate.
Thursday 16th March 2023
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Another day, another banking crisis. This time it’s Credit Suisse causing problems, somewhat bigger than SVB, but it’s hard to understand the fundamental reason for the concern, other than blind panic and a bank that has seen massive capital outflows last year. NAB’s Ken Crompton says it’s unlikely to stop the ECB from pushing ahead with a rate rise later today, but banking uncertainty has certainly switched attitudes in the US on where the Fed is heading, with growing expectations that they will start cutting rates in the second half of the year, possibly up to 100bp before Christmas. The Fed’s job has been made a little easier with softer data overnight, including a flat PPI read for February. Locally, New Zealand’s Q4 GDP is the focus today whilst elsewhere the question is, what happens next?
Wednesday 15th December 2023
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Is it crisis over. As CPI numbers came out in the US showing the Fed still had more work to do, it seems the focus shifting back onto rate hikes and away from major concerns about bank stability. JBWere’s Sally Auld says it’s not a total retreat. After yesterday’s CPI and last week’s US payrolls there would have been every reason to expect a 50bp hike next week, but markets seem more set on 25bp. Today’s retail numbers will play into that decision. Sally says the RBA is lucky that it’s next meeting is not so imminent, but yesterday’s NAB business survey showed labour costs picking up a little, which is a concern.
Tuesday 14th March 2023
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Just after Janet Yellen said there would be no bailout for SVB the US financial regulators stepped in promising that no depositor would be out of pocket. Good news for companies left exposed, but its done little to calm the markets with bond yields falling further and some analysts predicting an end to rises, at least for now, from the Fed. NAB’s Rodrigo Catril says its likely they will push ahead with their fight against inflation, but on a slower path. It’s still possible that the ECB will lift rates by 50bp this week. But what if the US inflation read today comes in stronger than expected? How do markets react then?
Monday 13th March 2023
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The collapse of SVB on Friday created turmoil in the markets. Bond yields fell across the board, but particularly at the front end of the yield curve. Equities were also hit and the US dollar took a hit, with the uncertainty meaning the Aussie didn’t benefit from the fall. So how does the Fed respond to this shock to the system, which has been facilitated in part by rising bond yields. NAB’S Tapas Strickland reckons the Fed will be more cautious with future hikes and a 50bp hike next week is looking less likely. The collapse overtook any interest in Friday’s non-farm payrolls, which showed an upside surprise in employment numbers but a rise in the unemployment rate. The surprise from the Bank of Japan was no surprise, with Kuroda leaving quietly with no change in policy. Meanwhile, the PBoC is sticking with Governor Yi at the helm, but possibly only fore a few months. There’s a bit of uncertainty to be navigated through, it seems.
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Friday 10th March 2023
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Markets are clearly preparing for a fall in payrolls numbers tonight, with bond yields falling markedly in the US and the dollar notably weaker. NAB’s Gavin Friend says markets have been influenced by the weekly jobless claims, which rose a little, and the Challenger jobs report, which showed a high number of layoffs in January and February. They clearly shrugged off the ADP umbers from a day earlier, which came in stronger than expected. Hopes of an end to rising inflation will have been helped by a negative PPI read from China. The Bank of Japan meets today, for the last time for Governor Kuroda. There’s been talk about a last-minute surprise, but could the surprise actually be no surprise at all.
Thursday 9th March 2023
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There’s a lot of water between where Jerome Powell sees the Fed heading and how Philip Lowe is seeing things from the RBA’s viewpoint. NAB’s Tapas Strickland says there’s been no market retreat from yesterday’s positions, when we saw the US dollar rise, Aussie dollar fall and a divergence in yields, with US treasuries rising and Aussie yields falling. Speeches from Philip Lowe and Jerome Powell have done little to change the mood. Meanwhile the Bank of Canada is on hold, with further rises possible. And US data overnight did nothing to dispel the idea that the labour market there remains tight, suggesting the Fed will stick with the plan to do more, with a rising expectation for a 50bp hike at the next FOMC meeting.
Wednesday 8th March 2023
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Big market moves overnight thanks to a slightly less hawkish RBA yesterday and a more hawkish sounding Jerome Powell in front of a US senate committee. NAB’s Rodrigo Catril says the RBA is still committed to further tightening but raised the potential for a pause in hikes, after yesterday’s 25bp lift. The usual caveat – that it’s all data dependent – still applies. It’s the same for the US of course, with payrolls on Friday and CPI next week two very influential data prints to look out for. Meanwhile Jerome Powell started his appearance overnight by saying “the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”
Tuesday 7th March 2022
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Australian bond yield s fell sharply yesterday ahead of the RBA meeting today. NAB’s Skye Masters says this shows there’s an expectation that the central bank will pause after today’s rate hike and we can expect some repricing in bonds if they instead signal a series of consecutive hikes. The uncertainty around what central banks do next was demonstrated by the ECB overnight, with speakers still divided between hiking, if so by how much, or pausing. As to the latest Fed thinking, Jerome Powell’s testimony tonight (Australia time) will be particularly important.
Monday 6th March 2023
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As NAB’s Ray Attrill puts it on this morning’s podcast, three central banks, two days of testimony from Jerome Powell,. Topped off by US payrolls numbers – what’s not to like. Provided you thrive on volatility, of course, because any of those events has the power to change the direction of markets. They finished last week with quiet optimism, with equities pushing higher and bond yields falling. We look at why that might be and suggest one surprise this week could come from the Bank of Japan, the last meeting of Governor Kuroda who might be prepared to spring a surprise, particularly as inflation keeps rising.
Friday 3rd March 2023
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Having pushed above 4 percent, US 10 year Treasury yields lurched higher still overnight, with yields up in Europe too and a sharper rise in Australian 10 year yields. NAB’s Ray Attrill says markets are responding to the revised Q4 numbers of US labour costs and productivity. Meanwhile European inflation was higher than expected yet it curiously wasn’t reflected in equities overnight. US Services ISM will be the key number to watch today.
Thursday 2nd March 2023
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It’s been a session of mixed news overnight. US 10 year treasury yields have hit 4 percent as expectations continue to mount for higher rates for longer. In China the PMIs came in higher than expected. NAB’s Ken Crompton says we are seeing the same picture we saw in western economies as they came out of lockdown, with a faster bounce back than anticipated. In Australia the GDP data showed a softening of demand, but yields reacted to a rise in the monthly CPI number. In the UK the central bank governor suggested there was not necessarily any need to raise rates, but the mood is very different in Europe with the region’s inflation number expected to kick higher today.
Wednesday 1st March 2023
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There’s a growing concern that inflation is creeping back into Europe. That’s the case in France and Spain, with Germany’s CPI numbers out today and the Euro Area inflation print tomorrow. NAB’s Gavin Friend says markets are already pricing in a higher terminal rate, with the ECB’s Philip Lane talking up more rate hikes for longer. So how far will they go? Meanwhile, the Canadian economy has ground to a halt, and NAB has downgraded its forecast for Australian GDP today.
Tuesday 28th February 2023
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The pound rose sharply higher today on the news that a deal had been struck with the EU over the problems of the UK’s internal trade with Northern Ireland. JBWere’s Sally Auld says markets have responded to the pragmatism of Rishi Sunak and the hope that it signals the start of a better future for UK-EU trade down the track. Meanwhile, US equities have bounced back today, even though expectations of a higher Fed terminal rate have settled in to place. Is it those buying the dip or the return of the soft-landing brigade? The drip-feed of EU inflation data will be the focus today, ahead of the full number tomorrow.
Monday 27th February 2023
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Markets were shaken on Friday when the Fed’s preferred measure of inflation – the core PCE deflator – showed an unexpected bounce back. NAB’s Rodrigo Catril says it was one of a series of strong numbers at the end of last week, and talks through the implications for the Fed, with some voting members talking of the need to be even more than previously signalled. The news has pushed bond yields higher, particularly at the front end of the curve. Meanwhile equity investors are being forced to question their optimism. And the damage is not restricted to the US with investors wondering whether this week’s European inflation read will tell a similar story.
Friday 24th February 2023
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US GDP has been revised down slightly for Q4. NAB’s Ken Crompton says its been driven by lower than expected consumption numbers. The Fed will also be concerned by the quarterly GDP deflator, which has shown prices rising more than anticipated. Eyes will be on the January numbers for prices and consumption out tonight. To add to the US woes, jobless claims fell last week adding to a string of data suggesting the tightness in the labour market is taking a long time to ease. We’re a week away from non-farm payrolls. Remember the impact last time?
Thursday 23rd February 2023
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There’s not a lot that’s new on the FOMC minutes out this morning, according to NAB’s David de Garis. Several members had talked of higher rate rises, but there wasn’t much too much for investors to change the expected path of hikes this year. But it might be a different story for the RBA with Australian wage inflation lower than expected yesterday. Meanwhile, wages are rising in Japan, higher than the rate of inflation adding extra pressure on the BoJ. And the UK government might increase the rate of public sector pay to try and break the strike deadlock the country is facing. It’s been a wage where wages have been front and centre.
Wednesday 22nd February 2023
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The latest PMI data has shown more resilience in the global economy, with service sector reads significantly exceeding expectations in Europe, the UK and the United States. NAB’s Gavin Friend talks about how this will impact central bank decisions, with bond yields rising on these latest findings. Also, the latest inflation numbers from Canada, fighting talk from Putin and Biden, and could the UK be on the brink of a meaningful Northern Ireland border solution? Ahead today Australian wages data and the RBNZ rate decision.
Tuesday 21st February 2023
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With the US equity and bond markets closed for President’s Day, trade was thin today and movement was slight. But, with the President choosing to spend his day in Ukraine and China reportedly ready to supply arms to Russia, could a bounce back in world trade be an optimistic outlook? NAB’s Taylor Nugent talks trough the days new releases, including PMIs for Europe, the UK and US, as well as inflation numbers for Canada. Could we see a strong reaction if the Canada numbers are an upside surprise. Plus, will today’s minutes shed any new light on the thinking at the RBA, or did Philip Lowe say it all last week?
Monday 20th February 2023
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Expect a quiet trading day today with the US enjoying Presidents Day and not much in the way of data releases. Still, as NAB’s Tapas Strickland points out, there’s plenty to look out for later in the week, including the RBNZ’s expected 50 bp rate hike, January’s global PMI numbers, Australian wages and the Fed’s preferred inflation measure. In the meantime, the question is, have yields peaked? Friday saw 10-year Treasury yields pull back a little, although 2 years are clinging to 4.6% and six month treasury notes sat above 5% for most of the day.
Friday 17th February 2023
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US Treasury yields pushed higher overnight as producer prices came in with a surprise month on month rise, whilst weekly jobs data shows only slight moves in the easing of the labour market. NAB’s Ken Crompton says there’s nothing to distract from the hawkish path being taken by the Fed, that was reinforced by Loretta Mester overnight, who expects rates to exceed 5 percent and stay there for some time. Meanwhile, in Australia yesterday’s employment numbers might be a headache for Philip Lowe when he faces questions in front of House of Reps economics committee. He is bound to be asked why, given such a fall in jobs, the RBA wouldn’t ease of on its rate path. But, as we discuss today, yesterday’s numbers might be a little misleading.
Thursday 16th February 2023
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US retail numbers for January were strong yesterday, giving no reason for markets to assume the Fed will move from its expected path of hikes following non-farm payrolls earlier in the month. At the same time industrial production was down, but the Empire State manufacturing number was better than expected. NAB’s Gavin Friend says a lot of these variations are weather related, alongside other factors, such as retail inventories. Hence, markets are struggling to get a coherent picture on the real strength of the economy. Australia meanwhile has seen discretionary spending holding up and an expectation that employment numbers will pick up again in figures out today. So, the message seems to be, resilient economies with inflation perhaps taking a bit longer than expected to slow down.
Wednesday 15th February 2023
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US inflation was shown to be moving down slower than many had hoped, sending bond yields higher. NAB’s Taylor Nugent says it cements in expectations for two more 25 basis point rate hikes in March and May. NAB has also announced a revised rates call for the RBA, which is discussed on today’s podcast. Plus, employment refusing to move down in the UK or across the OECD. And US retail numbers today are expected to show growth, despite the squeeze from the Fed.
Tuesday 14th Februarey 2023
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US CPI is released later today and NAB’s Rodrigo Catril says we can expect a market reaction whichever way it comes out. Certainly, markets are divided, with bond yields rising today suggesting rising expectations for central bank hikes, whereas equities are also up suggesting an easier path. That expectation of a path with less rate hikes comes from a New York Fed Inflation Survey which showed that household income is expected to fall this year, which it is assumed will ease price pressures. But we’ve also seen evidence of US retail spending picking up post-Christmas. Clearly opinion is divided on today’s number so, as Rodrigo puts it, ‘expect fireworks’.
Monday 13th February 2023
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Bond yields continue to rise as expectations heighten just about everywhere that central banks will push faster and further on rates. As NAB’s Skye Masters discusses today on the podcast, this hawkish sentiment wasn’t helped by employment numbers for Canada on Friday which, like the US the week before, came out much higher than expected. Central banks continue to be focused on the data, but there’s not much of that today. Instead markets will be jockeying for position ahead of US CPI tomorrow, the one number that really counts.
Friday 10th February 2023
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The 2s10s curve inversion increased further today, now the most inverted since 1981. NAB’s Gavin Friend says the blowout jobs numbers and ISM services read were a shot across the bows last week that is still reverberating in the markets. In the UK though, Bank of England members were in front of a parliamentary committee giving mixed messages about their future direction, from inflation concerns to worries about going too far and worsening the cost of living crisis. Today the RBA publishes the Statement of Monetary policy which, Gavin says, should add some colour to this week’s decision and the potential for two further hikes.
Thursday 9th February 2022
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It’s been quiet overnight news-wise, but a session rich with central bank speakers. NAB’s Ray Attrill says the main news came out of the ECB, where a 50 basis point hike at the next meeting seems nailed on, with talk now of another 50 possible in the May meeting as well. In the US equities have taken a hit, as expectations rise for more hikes from the Fed, with some expecting rates to touch 6% this year, although that’s not suggested by anyone in the central bank just yet. Today Germany’s delayed inflation numbers are out and will undoubtedly impact the Euro area CPI released last week. And the weekly jobless claims numbers tonight will be studied as some start to wonder whether last week’s non-farm payrolls was a bit of an outlier.
Wednesday 8th February 2023
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There wasn’t too much new from Jerome Powell when he was interviewed by the Wall Street Journal’s David Rubenstein, but that didn’t stop a rally in bonds for a short spell. It was followed by a swift reversal, perhaps on the realisation that he hadn’t actually offered anything new. NAN’s Rodrigo Catril says, nonetheless, it was a refreshingly open discussion reflecting the transparency of the Fed these days. At home a more hawkish RBA has seen bond yields rise sharply, with the expectation of more than one rise still to come.
Tuesday 7th February 2023
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Markets have had a chance to digest last Friday’s US jobs numbers and are clearly expecting a more hawkish stance by the Fed. JBWere’s Sally Auld talks about the potential for a higher terminal rate from the Fed and a more aggressive stance by the RBA. The expectation is that today they will lift rates by 25 basis points, but there’s the outside chance they will go further and a reduced chance of them pausing after this meeting. Tomorrow morning the Fed’s Jerome Powell is talking and its unlikely he’ll do much to soften the market’s stance.
Monday 6th February 2023
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The US payrolls numbers on Friday showed strong jobs growth, which surprised markets pushing bond yields higher and weakening the US dollar. And NAB’s Tapas Strickland says the ISM Services number adding to the view that the Fed might have to do more to contain US inflation. Could we see two more 25 bp hikes form the Fed before they pause? And does thus change the stance of central banks globally, including the RBA tomorrow. The expectation is there will be a 25-basis point hike tomorrow and again in March, but could the terminal rate be higher given the prospect of global inflation proving harder to contain.
Friday 3rd February 2022
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Three central banks have tried to sound hawkish this week, as they lift rates at levels already anticipated by the markets. But does the market believe them? That’s a question put to NAB’s Gavin Friend today, as US share prices rise and bond markets rally. It seems, despite central bankers (the Fed the ECB and BoE) continuing to say there’s more work to be done, there has been more focus on Jerome Powell’s line that “the disinflation process has started” and Christine Lagarde declaring “inflation risks in Europe are more balanced”. Where next depends on the data, of course, which will make tonight’s payroll numbers from the US important, along with the US ISM services index.
Thursday 2nd February 2022
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In the US the Fed has announced the expected 25 basis point rate hike, but this year’s prevalent hope of a soft landing seems to have diminished somewhat. The US ISM manufacturing number was lower than expected, whilst the ADP employment numbers showed less jobs, alongside more job openings in the latest JOLTs numbers. NAB’s David de Garis is asked whether that all points to an environment where inflation falls more slowly. Certainly, core inflation is holding up more than expected in Europe and data from Zealand yesterday showed that labour costs there are still high. So, central banks will think they still have much to do, which will be evidenced by 50bp rises by the ECB and Bank of England over the next 24 hours.
Wednesday 1st February 2022
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We are less than a day away from the next FOMC meeting, with the strong expectation that rates will rise in the US by 25 basis points. But in light of recent data suggesting inflation could be slowing, including last night’s wage price index, NAB’s Skye Masters says there’s increasing speculation that the Fed will pause after this meeting. Certainly the mood in markets today is positive, with increased hopes that the global economy will see a soft landing. That’s what was suggested in the latest IMF forecasts, with the notable exception of the UK. Strong earnings results and outlooks have also added to the mood. And there’s a lot more to come this week.
Tuesday 31st January 2022
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Spain’s inflation numbers provided an unpleasant surprise – core inflation has risen to 7.5%. Meanwhile Germany saw GDP fall in Q4 (QonQ). If these numbers are mirrored across Europe the cocktail of rising inflation and falling output is a challenging one for the ECB. NAB’s Taylor Nugent is asked if we should start talking about stagflation again. Also today we get to see the size of China’s post-lockdown bounce back, the impact of early Christmas shopping on Australia’s December retail numbers and, importantly, ahead of the FOMC, the wage price index for the US.
Monday 30th January 2023
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It's a busy week ahead for central banks, with the Fed, BoE and ECB all meeting to push their rates higher. To add to the potential volatility there’s a swag of high profile corporate earnings results in the US too. But tech stocks have been pushing higher and higher so far this month, presumably o the assumption that central banks will ease off on rates soon as economic indicators start to soften. But NAB’s Rodrigo Catril says age inflation numbers I the US will be of particular importance this week, as service inflation is taking more time to slow than goods inflation.
Friday 27th January 2023
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A strong GDP read from the US, together with with falling prices, provided grounds for optimism in markets overnight, particularly equities that were buoyed also by a strong earnings result from Tesla. But NAB’s David de Garis says it’s not all good news. Investment in equipment was down and durable goods orders, if you take out a splurge in aircraft orders, fell in the month. And the weekly job numbers suggest the labour market remains as tight as ever. Meanwhile, what must the RBA be thinking after Wednesday’s Australian inflation number, coming in much higher than expected? Perhaps today’s producer prices will show that things are moving faster in the right direction.
Wednesday 25th January 2023
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US shares have been shaky overnight, in the runup to earnings results and on the back of mixed economic data. JB Were’s Sally Auld discusses the latest PMI data, which again shows a recession risk for the US, more hope for Europe and a dismal outlook for the UK. The NAB Business Syurvey yesterday showed that business pessimism is not reflected by a fall in business conditions, including profitability. But there was also a sign that inflation might have peaked – something that could be confirmed in Australia’s CPI numbers out today.
Tuesday 24th January 2023
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There wasn’t a great deal of movement overnight, with little in the way of news, China on holiday and trade generally thin. The Aussie dollar was the standout performer in currencies, with NAB’s David de Garis suggesting this reflects the optimistic tone, reflected in US equities, with a substantial rise in the NASDAQ. Today the focus is on PMIs, which will give a clear indication of the expected recovery in Europe versus the US. In Australia the NAB Business Survey this morning will be watched to see whether the falling business confidence last time has translated into a drop in business conditions.
Monday 23rd January 2023
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As we enter the Year of the Rabbit the big question is, how big will the bounce back be in China? Could it push commodity prices higher and delay the slowdown in global inflation, as suggested by EBC’S Christine Lagarde on Friday? As NAB’s Ray Attrill points out, this is a big week for inflation data, including the US PCE deflator and CPI numbers for Australia and New Zealand. Last week’s soft employment numbers have already lefty many suggesting the RBA will be more dovish in its approach, with a significant drop in bond yields. So, what impact will the latest inflation numbers have this week?
Friday January 20th 2023
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There was a strong response to the lower-than-expected employment numbers yesterday, with 10 year bond yields falling more than 20 basis points. NAB’s Ken Crompton says this was an overreaction, because unemployment remains low and it won’t allay any of the RBA’s concerns about the tightness of the labour market, or encourage them to change their path on rate rises. No change was also the message from the ECB, reinforced by the minutes of the last meeting, and a speech at Davos by Christine Lagarde. There’s been little market reaction to the US debt ceiling. We’ve been here before and know that Republicans will use it as leverage against the BIden government, but all will be sorted by June. Today Japan’s CPI will reinforce the need for the BoJ to change policy direction at some point.
Thursday 19th January 2022
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Bond yields pushed sharply lower overnight, despite weaker data that some could argue would support a pause in Fed rate hikes. But, as NAB’s Gavin Friend points out, central bank speakers are arguing that there will be no deviation from earlier guidance. That’s the view in the US, as well as in Europe, despite the Bloomberg report earlier in the week suggesting otherwise. In the UK inflation fell, but not by much and wage pressures continue. In Japan the BoJ is continuing to pursue its yield curve control policy and markets will lump it till they see the flavour of Kuroda’s replacement. Locally, Australian employment data is out today, with the focus on any glimmer of reduction in the tightness of the labour market.
Wednesday 18th January 2023
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European equities rose overnight with the ZEW survey of analysts suggesting a more positive outlook and reports that the ECB might slow down its path of hikes. That’s in contrast to the US where the NY Empire State Manufacturing index came in much lower than expected, reported company earnings were mixed and equities were struggling to make gains. NAB’s Skye Masters says whatever the news lately US 10 year treasury yields are sticking close to 3.5% and doesn’t seem to be breaking lower, so data that will influence the Fed’s decision-making is crucial right now. Meanwhile, the BoJ is the focus today – and nobody is quite sure what they’ll do.
Tuersday 17th January 2022
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The Bank of Japan meets tomorrow with a question mark over the action they’ll take, if any. NAB’s Ray Attrill says there will be some changes as the bank faces the potential risk of increasing inflation. The Bank of England will be eyeing up UK employment data today, with Andrew Bailey already warning that the tight labour market and continued strike action could delay the reduction in prices. But couldn’t higher rates from the bank add to public sector wage demands? A slew of activity data from China today, and a multi-year high for the Aussie today – it touched 70 us cents for the ifrst time since August 2021.
Monday 16th January 2023
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It’s a quiet start to the week, but markets in the US finished last week assuming that inflation has peaked and the Fed will go no further than a couple of 25 basis point hikes. The increasing expectation is that the US will weather the inflation curse without going into recession. That seems less likely for the UK, even with a surprise (but marginal) increase in monthly GDP for November. Today on the podcast NAB’s Taylor Nugent looks at the week ahead, including the possibility of a widening of the tolerance band in the Bank of Japan’s yield control curve, and Australian employment data later in the week – the ongoing tightness of the labour market will be very influential in future RBA rate decisions.
Friday 13th January 2023
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As expected, US inflation numbers have lowered, but Fed speakers have been quick to point out that there’s still more work to be done, with further hikes, even if 50 or 75 basis point rises are not on the cards. NAB’s Tapas Strickland talks through the market response and expectations for where inflation and interest rates go from here. Meanwhile, a fall in China’s producer prices bodes well for helping inflation fall, whilst Australia has seen a big drop in job ads, likely to ease the influence of wage pressure on inflation. Markets will now look to the US earning season to answer the next big question, ‘what about growth?’
Thursday 12th January 2023
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US inflation numbers are out today and the expectation is that they will fall. The markets, it seems, have already decided that inflation has peaked. Today on the podcast we ask, are we over the worst of it? In Australia hard times haven’t really started. NAB’s David de Garis talks about how we will weather the storm better than most, with the retail sector showing massive resilience (evidenced by yesterday’s data), tightness in the labour market likely to be moderated by increased immigration and the re-opening of China ready to ease supply chains. Nonetheless, NAB expects further rate rises from the RBA at the next two meetings.
Wednesday 11th January 2022
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The year has started on a fairly optimistic tone, with US bond yields falling on expectations that the Fed might have to do less, leading to a fall in the US dollar. As NAB’s Ray Attrill explains, the major beneficiary of all this has been the Aussie dollar, up 1.3% so far this year. Hopes of more growth from China, with the zero COVID policy abandoned and the population moving quickly to herd immunity. But global optimism should be tempered with a reality check – COVID is still a concern and the war rages on in Ukraine. The ultimate reality check will be US CPI later this week? Has it peaked and, if so, how much has it fallen by?
Wednesday 21st December 2022
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The Bank of Japan has broadened the tolerance for its yield control curve target. NAB’s Ray Attrill says it surprised markets because Governor Kuroda had previously stated they wouldn’t be doing that. So, why the change and why has it had such an impact on global bond and currency markets? The Australian dollar fell against a US dollar which was itself falling, in part because of the RBA minutes yesterday. We look at what was discussed. And in New Zealand, business confidence hit an all-time low (well since the survey started in the eighties). Also, in this last edition of 2022 Ray explains why this was a bad year for risk parity strategies.
Tuesday 20th December 2022
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There are only five sleeps to Christmas, but central banks are still cramming in what they can to position markets for the start of 2023. The ECB is ramping up its hawkish messaging, whilst the Fed continues to deny that they will start reversing rates next year, even as the housing market struggles. The RBA, meanwhile, is giving very little away, which is why there is more than the usual interest in the minutes of the last meeting out today. Plus, the Bank of Japan meets with a likely review of their monetary approach and China is promising targeted monetary policy next year. NAB’s Rodrigo Catril talks us through all of that in the penultimate Morning Call of the year.
Monday 19th December 2022
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There wasn’t much risk appetite at the end of the week, after a hawkish Fed and the same from the ECB. It still seems markets doubt the Fed will go all the way to 5.1% and are looking for reasons to assume they will relent earlier. NAB’s Skye Masters says the inversion in the Treasury yield curve will remain for some time, but wonders how much of this is being drive by the after effects of QE. Meanwhile China is planning a major comeback next year, with one official at their Central Economic Work Conference last week describing a J-curve recovery.
Friday 16th December 2022
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As the UK and Europe weather a cold snap, central banks are heating up their rhetoric as the fight to cool inflation. On today’s podcast JBWere’s Sally Auld discusses the unexpectedly hawkish stance taken by the ECB, suggesting it was possibly a trade-off from pushing rates higher this time round. The Bank of England was split three ways on what to do, but ultimately lifted rates by the same amount – 50 basis points. We also look at moves by the Norges Bank and the Swiss National Bank. Meanwhile, Australia’s strong employment numbers add further pressure on the RBA , whilst the RBNZ next year has to tackle inflation in an economy that refuses to slow down. And lots of PMI numbers today, just to add to the information overload a week out from Christmas.
Thursday 15th December 2022
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Markets weren’t surprised by the FOMC raising rates by 50 basis points this morning – a unanimous decision by the board. But members are more divided on where to go next, with the Fed now predicting a median rate of 5.1 percent by the end of next year, even with talk of inflation having peaked. NAB’s Gavin Friend says this rise in the dot plot is based on continued labour market tightness. It could be a different picture for the Bank of England later today, and the ECB where wage inflation is not such a concern. In a feverishly busy day we also get Australian employment numbers, NZ GDP, China’s retail sales, industrial production and capex investment, and the Philly Fed’s business outlook. It’s the last gasp before Christmas!
Wednesday 14th December 2022
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US CPI numbers came in lower than anticipated, leading to the inevitable question about whether inflation has peaked, just in time for tomorrow’s FOMC meeting? The market response was swift fall in two-year Treasury yields and a rise in equities, although much of those gains has been pared back since. NAB’s Taylor Nugent says it creates a challenge for Jerome Powell, who will want to acknowledge the good news but remind markets there is still a long way to go. So, perhaps, tomorrow, he will be the Grinch who stole Christmas.
Tuesday 13th December 2022
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US equities have bounced back, but the rise in the VIX index, which measures market volatility, is perhaps a better measure of where we are ahead of the FOMC meeting this week. It’s risen, highlighting uncertainty about how far the US central bank will go. Nick Timiraos describes a very divided Fed in the Wall Street Journal this morning. Also today, NAB’s Ray Attrill takes us through yesterday’s UK GDP numbers, with employment data out later ahead of the BoE meeting later in the week. Plus, the NAB Business Survey out later today.
Monday 12th December 2022
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It’s a big week for central banks – the Fed, the BoE and the ECB amongst them. Plus US inflation numbers. There’s some hope that the US will head off a hard landing, with inflation expectations falling in the Michigan Consumer Sentiment survey on Friday, although producer prices showed a different story, adding to the US risk-off sentiment at the end of the week. So we can expect another volatile few days, but who will be the winners and the losers? NAB’s Tapas Strickland provides valuable insights to guide you into this busy week.
Friday 9th December 2022
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There was a bit more of a risk-on attitude in the US overnight, with equities rising for the first time in five days. Part of the reason could be a rise in jobless claims. But NAB’s David de Garis says you’d be clutching at straws to assume that means lower inflation and a less aggressive Fed. It’s just part and parcel of the volatility ahead of a bumper week next week, with US CPI, the FOMC meeting and the ECB. The last blast before Christmas. Equally as unexplained is the slow glide down in oil, when there’s every reason for it to be heading the other way. An oil leak on the Keystone pipeline saw WTI prices rise for a while, but they didn’t hold for long.
Thursday 8th December 2022
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US bond yields fell further overnight as US wages data showed slower growth than anticipated, adding to hopes that the Fed won’t be as aggressive as they’ve been letting on when it comes to future hikes. NAB’s Gavin Friend says that does seem to be the mood of the moment. Whilst the Bank of Canada raised rates by 50 basis points – when many had considered 25 was likely – it was a dovish rise, with suggestions that they won’t be doing too much more. The RBA is moving in smaller increments, and whilst a pause is not on the cards for the next few months, it could be that they too won’t move far beyond March, with Australia potentially leading the way in bounceback-ability, says Gavin. Further reopening news from China helped with this sentiment.
Wednesday 7th December 2022
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US and European equities have taken another hit. NAB’s Ken Crompton says markets continue to respond to the strong jobs data from the US on Friday and what that means for terminal Fed rates. There were no surprises from the RBA yesterday, with NAB’s Ivan Colhoun saying the central bank is very cognisant of lags in monetary policy, so it’s too early to expect any pause in the first part of next year. It’s a different story for the Bank of Canada tonight – who front-loaded hikes and the question is how close are they to reaching the end of their tightening cycle?
Tuesday 6th December 2022
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If you believe the ISM numbers this morning, the US services sector is growing faster than anticipated. Yet the PMI measure, supposedly monitoring exactly the same activity, showed the sector is slowing. So, who do you believe? NAB’s Tapas Strickland says markets were taking a more cautious approach before the ISM number after a WSJ article suggested the Fed might indicate a higher terminal rate at their meeting next week. A 25bps rise is expected from the RBA today even as indicators suggest private sector labour costs are rising.
Monday 5th December 2022
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The US non-farms payrolls numbers on Friday were an upside surprise for the number of jobs created and the increase in wages – both factors the Fed has been trying to control. Is the policy working? NAB’s Taylor Nugent says markets have responded with the expectation of a deepening recession as the Fed pushes harder.
Canadian employment numbers were also stronger than expected on Friday, so how does that impact the Bank of Canada’s rate decision this week? And, before that, the RBA – what’s their plan? Just because you’ve started opening your advent calendar don’t assume the action is slowing down for Christmas.
Friday 2nd December 2022
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Markets have not significantly retraced their moves after Jerome Powell’s speech yesterday. Equities have rebounded only slightly and bond yields have continued to fall. On today’s podcast NAB’s Tapas Strickland outlines why his speech created a more positive risk outlook. There was good news in amongst the data released overnight too, with ISM manufacturing showing a fall in prices paid. Abd China’s lockdowns could be easing further, with home detention now replacing quarantine centres for low-risk cases in Beijing. The focus tonight, of course, will be on US non-farm payrolls, in particular the average hourly earnings.
Thursday 1st December 2022
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It’s been a busy session, with NAB’s Taylor Nugent claiming Jerome Powell’s speech this morning was slightly less hawkish than markets were expecting. But the Fed chair still talked about there being a way to go to fight inflation and the need for sustained evidence of falling inflation before the battle is won. Signs of easing inflation in Australia should also be treated with caution, with yesterday’s new monthly data susceptible to the volatility we don’t see in the quarterly numbers. In Europe though markets have reacted favourably to falling inflation with the expectation that a 75 bps hike at the next ECB is now much less likely.
Wednesday 30th November 2022
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The Aussie dollar has benefited from a reversal in concerns over China. NAB’s Ray Attrill says an announcement of a more intense vaccination program for older people has markets assuming a recovery in the Chinese economy early next year. Germany’s inflation numbers came out lower than anticipated with the assumption that we will see a Europe-wide slowdown in data released data. It’s a different story for Australia though (although obviously from a lower base) with inflation expected to rise today, with NAB forecasting a greater rise than the consensus. Then the focus is on US jobs, with job openings and ADP employment numbers today, ahead of non-farm payrolls on Friday.
Tuesday 29th November 2022
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China is losing out on two fronts. It can’t keep its COVID numbers down and now its facing protests in major cities, which could add to the slowdown in the Chinese economy and, as JBWere’s Sally Auld suggests, it could delay the speed of the global recovery. We’ve already had two Fed speakers overnight suggesting rates might be higher for longer than markets are expecting. In Europe Christine Lagarde continues to take a hawkish stance (just ahead of Euro area inflation numbers), whilst the RBA’s Philip Lowe has been forced to apologise for misleading Australians on the speed and size of rate hikes from the central bank. It’s unlikely yesterday’s drop in retail sales will have any impact on the current path from the RBA – after all, it’s just one month and there are several factors influencing that number.
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Monday 28th November 2022
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Unrest is growing in China over the zero COVID policy, with protests over the weekend in Shanghai following deaths from an apartment fire, supposedly locked down. NAB’s Rodrigo Catril says we’ve already seen a response to this news with a fall in the Australian dollar as the market opened. Friday saw a sell-off in European bonds as the ECB sounded ever hawkish, and an increase in the pricing of a 75bps hike at the next meeting. And the numbers are in for Black Friday sales – they are at record levels but given the current inflation levels that’s not really saying much.
Friday 25th November 2022
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As you might expect, with Thanksgiving still going on in the US and everyone else watching the world cup it’s been a quiet session overnight. Still. NAB’s David de Garis joins in today to talk through the ECB minutes, Germany’s IFO numbers, the Riksbank’s interest rate decision and China’s likely response to record COVID numbers. There’s also a no-spoiler guarantee, for those recording the soccer to watch later.
Thursday 24th November 2022
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There’s a higher risk appetite again this morning, driven by the release of the FOMC minutes which NAB’s Gavin Friend says more or less confirmed that the Fed will lift rates by 50 bps at the December meeting. Before that, the response was to mixed data, with PMIs weaker than anticipated but strong US durable goods orders. There’s also an expectation that Russian supplies of oil might be higher than anticipated as the G7 and EU seem set to set the cap around $65-70, well above the cost of production. That might be good for inflation but a disaster in tackling Russia’s war effort, which has seen a barrage of cruise missile on Kiev overnight.
Wednesday 23rd November 2022
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America will be sitting down to a Turkey dinner tomorrow, but before that markets seem to be determined to spread hope of a pivot from the Fed – or at the very least a slowdown in rates. That’s helped equities overnight and whilst treasury yields are falling. NAB’s Skye Masters says it’s unlikely the Fed will be happy to see this sort of price action, it isn’t the message they are trying to send to markets. Less attention sems to be given to rising COVID numbers in China, which are now close to their all-time high in April and are resulting n more lockdowns in major industrial areas. And the RBA’s Philip Lowe warned about the danger of rising wages yesterday, whilst also suggesting interest rates may not return to the lows we saw before the pandemic.
Markets are still concerned about lockdowns in China, evidenced by the fall in US equities and a 2% drop in Apple’s share price. Oil has also been falling, but NAB’s Ray Attrill says the prospect of an increase in production by OPEC+ next month pushed prices lower for a while before people started asking, ‘why would they do that?’. The argument was it was to compensate for lost Russian oil as sanctions hit, with news reports that G7 and the EU might this week agree on the price cap beyond which they will not ship or insure Russian oil, irrespective of the destination. There’s also discussion today on the fall in German producer prices, what the RBNZ will do tomorrow and what the RBA’s Philip Lowe will say over dinner tonight.
Incidentally, today NAB trade donate the proceeds of today’s trading revenue to First Nations Foundation, to support the financial literacy of Indigenous communities. Or you can make a donation. Go to www.nabtrade.com.au/charityday for more information.
Monday 21st November 2022
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Friday was unusually quiet, with no big data releases and not much movement in markets. As NAB’s Tapas Strickland observes, the most significant move was the reversal in short-end yields, taking the 2-10 yield spread to minus 70bps, the highest negative spread in over forty years. Normally this would be a clear signal of an impending recession, he says, but we’ve been seeing these signs for most of the year and yet the economy remains surprisingly resilient. The last week has also seen significant falls in oil prices – we look at why. And look ahead to the RBNZ this week. But it’s likely to be a quiet week, with the US celebrating Thanksgiving on Thursday.
Friday 18th November 2022
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Another 32 thousand Australians had a job in October, making the labour market the tightest it’s been in decades. NAB’s Ken Crompton says this cements in the expectation that the RBA will lift rates by at least 25 basis points in December, continuing on in the first meetings of the new year. There’s less expectation of the Fed slowing down as well, thanks to James Bullard suggesting interest rates could rise as high as seven percent. That’s hit equities and pushed bond yields higher. In the UK the new Chancellor managed to issue a budget without a massive market response. Today Japan’s inflation numbers won’t be enough to convince Kuroda to move from the path of his ultra-easy policy but, as Ken, suggests, that could change when he moves on early next year.
Thursday 1th November 2022
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Thankfully, World War 3 wasn’t started by that missile strike on Poland. Now markets are back to betting on how far the Fed will go, rather than NATO. As NAB’S Gavin Friend discusses yesterday’s US retail numbers shows greater resilience than anticipated, adding to the work of the FOMC to moderate demand. Moderating demand is less of an issue in the UK, where headline inflation has hit 11.1 percent and household pressures will be hit even more with a cost cutting, high taxing budget expected later today. On the home front, could the evidence of wage pressures yesterday be enough for the RBA to rethink any ideas of a pause in rates before Christmas?
Wednesday 16th November 2022
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Just as we pressed the record button on this morning’s podcast news broke that Russia had fired missiles into Poland, a NATO m ember. As JBWere’s Sally Auld explains, until that point market sentiment had been very positive, as producer prices in the US eased, adding to expectations that inflation had peaked. The missile strike was a stark remainder of what was one of the major causes of the inflation I the first place and that conflict is far from over. Locally the Australian Wage Price Index is released today and is expected to show wage pressures are well contained, supporting the RBA’s policy of a more gradual approach to rate hikes compared to their overseas counterparts.
Tuesday 15th November 2022
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After the ebullient mood at the end of last week markets retraced their steps a little today, with shares on the rise and the US dollar regaining territory. NAB’s Rodrigo says Fed speakers, in particular Waller, have reminded the market that they will continue to lift rates until there are clear signs of a sustained drop in inflation. The question is, how determined will they be as we start to see more signs of a slowdown? The response to the easing of lockdowns in China seems to have persisted, with the Hang Seng strong yesterday and the Aussie dollar rising against a rising US dollar, helped by iron ore prices. And Presidents Xi and Biden have met and agreed to talk more. That’s another bit of good news ahead of G20.
Monday 14th November 2022
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There was a trifecta of good news at the end of last week that sent equities rising, bond yields falling, commodities looking up and a chance for other currencies to gain on the US dollar at last. But will it last? That’s a question put to NAB’s Ray Attrill on this morning’s podcast. China announced some easing of COVID restrictions, Russia has backed out of Kherson and markets were still rejoicing with the fall in one month’s CPI read in the US. None of those translate to a fast track to a world that’s COVID free, with peace in Ukraine and price pressures alleviated. Could markets retrace their steps a little today after the euphoria at the end of the week, or will a positive meeting between President Xi and Biden later today add to the jubilation?
Friday 11th November 2022
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US core inflation dropped to 6.3% in October, below expectations and down from 6.6% in September. NAB’s David de Garis joins Phil to talk through the market reaction, which has seen stocks soar, bond yields fall and the US dollar taking a big hit. Does this mean inflation has peaked? Dallas Fed’s Lorie Logan called it a ‘welcome relief’ but the message from other speakers overnight is that there’s still a lot of work to be done. In Europe the central bank seems to be upping its hawkish rhetoric, whilst the UK is still stuck with the uncertainty of a shrinking economy and a budget next week that will be more painful than restorative.
Thursday 10th November 2022
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It’s inflation day. The CPI print is out from the US late tonight Australia time. On today’s podcast NAB’s David de Garis talks about the impact if the number is a little higher than expected. The Fed’s John Williams said overnight that the news for the US is “mostly good”, suggesting longer-run inflation expectations have remained remarkably stable. No doubt his goal was to prevent an overreaction to the numbers tonight, which will be followed by a slew of other Fed speakers in the hours that follow. There’s also a discussion about China’s producer prices on the podcast. They’re falling. Could we see China started to export deflation again? Not if they keep locking cities down.
Wednesday 9th November
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US equity markets have switched from being upbeat about the prospect of an end to China’s zero COVID to being upbeat about the outcome from today’s mid-term elections. NAB’s Ray Attrill also talks about the differences between Australian consumer and business sentiment and why the business outlook always seems a little rosier. He also discusses how one central banker at least reckons a recession will increase inflation, whilst there’s some hope that falling producer prices from China today might dampen inflation expectations a little, as more cheaper goods are shipped around the world. And Donald Trump has announced he will be announcing something important. Any idea what that might be?
Tuesday 8th November 2022
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We didn’t see the expected turnaround in markets on Monday. Yesterday on the Morning Call we talked about how Chinese officials had denounced speculation that they were heading away from the Zero COVID road soon, so we expected a reversal to some of the optimism in markets at the end of last week. On Monday though, as NAB’s Taylor Nugent discusses, US equities continued to rise, with the Wall Street Journal reporting again that a turnaround in China’s policy could still be on the cards. Perhaps. Well, the Chinese trade numbers yesterday were a clear demonstration of the damage being done to the economy. Today eyes will be on the US mid-term elections and, if there’s strong support for the Republicans, whether one Mr Donald John Trump will stand for the Presidency. In the more immediate future, markets are preparing for the US inflation numbers later in the week.
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Monday 7th November 2022
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It seems likely we’ll see a reversal to some of the positive sentiment on Friday that saw equities and commodity prices rise, driven by the renewed hope that China was moving towards an end to their zero COVID approach. The official word over the weekend was that that was not the case. NAB’s Skye Masters says there was also a positive response to non-farm payrolls in the US on Friday, with a rising unemployment rate suggesting the labour market was easing and there would be less pressure on the Fed, supporting the case for a 50pc rise at the next FOMC meeting. But in Canada the labour market is as tight as ever, it seems, evidenced by rising employment numbers on Friday.
Friday 4th November 2022
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It could be the worst of times, or something even worse than that. The Bank of England painted two possible scenarios overnight, after raising rates by the expected 75 basis points. In scenario one, the bulk of their work is done and rates don’t move much higher. In scenario two, rates rise to 5.25% and the country faces a two-year recession. Talk about hedging your bets. NAB’s Ken Crompton says it shows the difficulties faced in the UK and Europe, in comparison with the US, where the Fed is fighting continued high consumption levels - evidenced by high imports in the Balance of Trade overnight – and resilience in the employment market. On that point, tonight’s non-farm payrolls will be eagerly watched. We also look at what to expect in today’s Statement of Monetary Policy from the RBA.
Thursday 3rd November 2022
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Who’d have thought that a fourth 75 basis point hike by the Fed would see equity markets rally and bond yields down? As NAB’s Gavin Friend explains, the bounce didn’t last long, and it was driven by the term ‘cumulative tightening’, which markets took to mean the FOMC committee believed they could slow down while they assess the aggregate impact of the hikes so far. But in the press conference that followed Jerome Powell made it clear any slow down wouldn’t imply the terminal rate will be any lower, in fact it is likely to be higher than they’d been thinking in previous meetings. Where does the Bank of England go today? The expectation is a 75 basis point hike there too, but in very different economic circumstances. If they do go lighter touch they’ll be keen to emphasise this is not a dovish pivot, simply taking stock of where they are now.
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Wednesday 2nd November 2022
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The RBA has taken a slow and steady approach to interest rate hikes, so we can expect many more to come. Sally Auld says Governor Lowe said last night that the risks are more two-sided than they were a few months ago, and the bank needs to factor in the risk of the lag. It’s a very different approach being taken by the Fed, with a strong expectation that they will announce a 75bp hike tomorrow morning, reinforced by data showing a rise in job openings in the US. The optimism in markets yesterday afternoon that perhaps China was heading out of its zero COVID approach have been reversed, with newspaper reports suggested the opposite is the case and we can expect more lockdowns and the like.
Tuesday 1st November 2022
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Today is the day of the race that stops the nation, but before the champagne flows there’s an RBA meeting to get through. NAB’s Tapas Strickland says the odds are on a 25bp hike today, but the board will be considering last week’s inflation surprise and yesterday’s retail numbers. So there’s an outside chance they will go higher. The FOMC meets later this week, and tonight’s JOLTs job openings numbers will be given some consideration. It’s a while till the next ECB meeting, but an inflation shock justifies last week’s 75 basis point hike and could justify a third such rise next time. And a soggy track – good news for a British horse this afternoon?
Monday 31st October 2022
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US equity markets rose sharply on Friday, even though there’s little evidence that inflation is easing or that the Fed will slow down their pace of hikes, despite all the pivot-talk of the last week. This morning NAB’s Rodrigo Catril is asked whether they are too optimistic, given the data and geopolitics we are experiencing right now. Could the fear of persistent inflation but the frighteners on them this Halloween? The US employment cost index might have moved down slightly, but the rate of wage growth is still way higher than the Fed would like to see. In Europe equities were still rising on Friday even as inflation numbers for Germany, France and Italy were way-higher than expected. With the BoE, RBA and Fed all meeting this week will reality come back to bite? Will the word ‘Pivot’ be consigned to history, at least for a week or two?
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Friday 28th October 2022
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The ECB raised rates by 75 basis points as expected, but NAB’s Rodrigo Catril says a widespread expectation that central banks will ‘pivot’, and switch away from a path of higher rate rises. We don’ have long to wait to find out with the BoE, RBA and Fed all meeting next week. But is all this pivot talk misplaced? If it’s because of softening data, the Fed has made it clear that inflation will be tackled at whatever cost. For that reason, the employment cost index will be a key number to look out for from the US today. It’s a different story for the ECB, which faces bigger recessionary fears and a mixed inflationary picture across the Euro area. Meanwhile, expect little from the Bank of Japan today, but they will have to make moves to tackle rising inflation at some point.
Thursday 27th October 2022
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The Bank of Canada lifted rates by 50 basis points this morning, against expectations of a 75 bp hike. David de Garis says there were cries of ‘Pivot’ amongst the traders at NAB in London, but how far will it stretch. Does it follow that the Fed will follow in Canada’s footsteps? It’s unlikely the ECB will, when they meet later today. Or the RBA when they meet next week, given the stronger than anticipated inflation numbers yesterday. And a sign that the confidence crisis in the UK is over, the new PM announced a delay to the issuance of their new budget without the pound tanking and a massive spike in Gilt yields. Besides the ECB, all eyes today will be on US GDP.
Wednesday 26th October 2022
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Equity markets and bonds have both rallied overnight, pushing yields lower again. NAB’s Skye Masters says investors are still hoping that the Fed will slow down the path of rate hikes, although there’s no data top suggest why they should and some commentators suggesting that rates might go up above 5 percent early next year. Italy’s new PM is opposed to hikes and an end to QE, warning of the impacts it’ll have on high debt economies, like Italy, for example. That’s unlikely to stop the ECB lifting rates by 75 basis points, which is what the Bank of Canada is expected to do tonight. We also take a look at yesterday’s budget and ask will it help combat inflation, or is the expectation that the RBA will do all the heavy lifting?
Tuesday 25th October 2022
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It's been a very mixed session depending on vaired geographic circumstances, says NAB’s Taylor Nugent. US equities continue to rally on anticipation of positive earnings results and the hope that the Fed will slow down its pace of hikes. Europe has seen modest gains as gas prices fall, offsetting a slightly worse than expected set of PMIs. The UK has seen gilts back in fashion as Rishi Sunak is announced as the new Prime Minister, generally seen as a relatively safe pair of hands. But China has seen the offshore Yuan fall sharply and equities also taking a dive, despite relatively strong economic data, including a better-than-expected GDP read. The concern is the direction President Xi will take as he surrounds himself with allies and prepares for more controls and lockdowns. Tonight we’ll find out what’s in the Australian budget, at least those bits that haven’t already been leaked to the press.
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Monday 24th October 2022
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The US finished the week with equities rising and the dollar falling, with the Fed’s Mary Daly hinting that the path of hikes might slow for fear of an ‘unforced downturn’. NAB’s Ray Attrill notes that the Wall Street Journal’s Nick Timiraos suggesting the Fed might well be signalling a stepping down of rate increases, and that Timiraos rarely gets it wrong. It’s fun and game is the UK today as they fast track the selection process for the next Prime Minister, although since we recorded the podcast it seems an almost certainty that Rishi Sunak will be the UK's next prime MInister, staving off the turmoil that could have ensued from a Boris Johnson win. Plus, lots of PMIs today, and China’s GDP and other data, pushed back from the People’s Congress last week.
Friday 21st October 2022
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The UK is on the lookout for another Prime Minister after Liz Truss announced her resignation overnight. Her replacement will be found by Friday next week, at the latest, but NAB’s Gavin Friend says there could be a new PM in place as soon as Monday. There wasn’t a massive market reaction, with the good news offset by the uncertainty of who will replace her. Boris perhaps? Yes, really. Meanwhile Aussie jobs numbers show the labour market remains tight, as did US weekly jobless claims. In short, another day with no signs of inflation easing.
Thursday 20th October 2022
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It’s a very mixed day, but generally the reverse of yesterday. The US dollar has gained strength, bond yields have pushed higher and equities have fallen, despite some strong corporate earnings. NAB’s Taylor Nugent says we are back to worrying about inflation and central bank’s pursuing elevated interest rate paths. US 10 year yields reached a 14 year high overnight, as the Fed’s Neel Kashkari declared he had not seen any signs yet that inflation had peaked. Higher than expected inflation numbers in the UK and Canada have added to the mood, although gilt yields have fallen as markets assume a more balanced approach by the government, although looking at the political shenanigans overnight the environment is far from stable. And Russia is stepping up action against Ukraine, adding to global uncertainty. Hence, the volatility.
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Wednesday 19th October 2022
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Equity markets have managed to climb again in the US, supported by earnings results, although NAB’s Ray Attrill describes it as a bear rally. There is still plenty of uncertainty around, evidenced by moves in bonds, in all directions. The BoE drove some of the movement when they announced they would resume bond purchases next month, on schedule, despite the diversion last week. New Zealand’s inflation numbers yesterday surprised on the upside, which begs the question, will we see the same with CPI for the UK and Canada today?
Tuesday 18th October 2022
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The UK government decided it couldn’t wait till the end of the month to reverse almost all of their unfunded tax cuts, so they did it yesterday, much to everyone’s surprise. Markets have taken it well, with big falls in bond yields and a rise in Sterling, but as JBWere’s Sally Auld points out, there is still a big budget gap to bridge. The impact has helped buoy US equity markets though – perhaps looking for a buy-the-dip excuse. Today look out for NZ CPI and the minutes of the last RBA meeting, when they surprised with a less than expected 25bp rate hike.
Monday 17th October 2022
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US Treasury yields rose higher still on Friday as markets absorbed Thursday’s inflation print and the expectation of faster hikes and a higher terminal rate from the Fed. Despite the hikes so far, there’s few signs of a slowdown, with NAB’s Rodrigo Catril pointing to Friday’s retail numbers which showed yet more resilience in spending from US consumers. We look at how this is all playing into the weakness of the Australian dollar. And then there’s the UK! Will they have a change of Prime Minister, will a complete reversal in policies be enough to stop the BoE picking up its pace of increase, and if it is, what does that mean for the pound. Plus, the China People’s Congress, the fall in oil prices and much more besides. It’s a busy start to the week.
Friday 14th October 2022
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It’s been a stormy night, with violent swings in bond yields and US equities. As NAB’s Skye Masters explains, shares plummeting as the higher than expected CPI read but then staged a massive rebound later I the session, fishing markedly higher towards the close. Bond markets responded more predictably, pricing in a more aggressive path of rate hikes from the Fed – maybe 150bp before Christmas. Meanwhile, massive swings on UK bonds with reports that the Truss government might be ready to stage another u-turn on their unfunded tax cuts, although the Chancellor Kwasi Kwarteng has denied this. Today, US retail numbers will have less influence than the CPI, but a strong read will indicate a more resilient economy which would suggest rates will stay higher for longer.
Thursday 13th October 2022
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The BoE has been buying up more bonds to protect pension funds from the volatility of an economy still struggling with the budget presented by the Truss government. But when Andrew Bailey says the help stops on Friday does he really mean it, or will they be back buying bonds next week? Meanwhile the latest GDP numbers show the UK could well be in a recession, or at least the economy is looking very off colour. Meanwhile, the latest FOMC minutes show the US central bank is determined to continue to tackle inflation, and rate rises won’t stop until the labour market starts to rescind. The number that will drive markets today – US CPI. Whether its higher or lower than expected, we can still expect a reaction.
Tuesday 12th October 2022
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The Bank of England has been buying up more government bonds as it fights uncertainty in UK markets. NAB’s Ken Crompton says it’s no surprise that they have had to target 30 year inflation-linked bonds, as they constitute a large proportion of the stock held by the pension funds the bank is trying to protect. But, with devastating opinion polls and a rebuff of their budget plans by the IMF, expect more UK uncertainty in the weeks ahead. Meanwhile, in Australia the gap between consumer and business expectations has widened further, we look at why that is.
Tuesday 11th October 2022
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The latest title from to the IMF’s World Economic Outlook is ‘Gloomy and More Uncertain’. That certainly reflects the mood this morning, with risk driven by an escalating war in Ukraine, question marks over whether the UK Chancellor’s budget will pass muster with the markets, and the China slowdown, now added to by President Biden cracking down on the export of advanced semiconductors. NAB’s Rodrigo Catril says the timing of the US Presidents restriction is impeccable, just ahead of the Party Congress and the expected announcement of President Xi winning another term in office. Is that why the Aussie dollar is so weak today, falling more than any other major currency? And will we see a continued division between negative consumer sentiment in Australia, offset by more a positive business sector?
Monday 10th October 2022
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There was a strong market reaction to non-farm payrolls on Friday, which suggested the US labour market remains tight, with the unemployment rate falling. NAB’s Tapas Strickland says it was another of those ‘good news is bad news’ moments, likely to keep the Fed on its hawkish path for some time yet. That could be reinforced if CPI data this week remains strong. The question is, how will any central bank know when it has overshot its target? There could be some caution today as the world waits for Putin’s response to the Crime bridge explosion.
Friday 7th October 2022
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Markets are still nervous. This morning NAB’s Gavin Friend says hopes of a pivot from the Fed have more or less disappeared, following on from the softer manufacturing numbers earlier in the week. The Fed’s Neal Kashkari said we are quite a way away from a pause in their path of rate hikes. A lot rests on today’s non-farm payrolls, with the markets ready to pounce on anything that could suggest a slow down from the Fed. Today’s episode, out a little earlier than normal, comes from the Australian Embassy in Paris, where NAB has been talking to investors about opportunities in Aussie infrastructure and energy projects. Gillian Bird, the Australian Ambassador to France, joins us on the podcast.
Thursday 6th October 2022
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Yesterday’s vain hope of a pivot by the Fed, to slow down rate rises after the weaker job openings numbers, were destroyed today by a stronger than expected non-manufacturing ISM read. Not only was the main number higher than anticipated, at 56.7, new orders were strong too. It was another of those good news is bad news moments, because its unlikely the Fed will consider any slow down in their path of rate hikes when the economy is showing strong growth against a tight labour market. On that, the ADP employment numbers reported wages growing at 7.6 percent in September. This could be an unfortunate precursor to the non-farm payrolls numbers on Friday. The day’s other big news is the OPEC+ decision to cut oil by two million barrels a day – a move which could add to inflation pressures.
Wednesday 5th October 2022
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There’s plenty of talk of a Fed pivot according to JBWere’s Sally Auld, but is it an overreaction? The drivers have been the smaller than expected rise by the RBA yesterday and one million less jobs being advertised in the US. Bond yields have fallen and the equity markets are lapping it up. So, today, will the RBNZ follow in the RBA’s footsteps? Markets are expecting a 50 basis point rise in New Zealand, but that’s what they said about Australia.
Tuesday 4th October 2022
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There’s been a swift change of direction in markets, with bond yields falling and big rises in equities in the US and Europe. NAB’s Tapas Strickland says there are several reasons for this reversal in fortune. Part of it is a partial u-turn by the UK chancellor over unfunded tax cuts, suggesting the new government is not as cavalier as some had feared. Second, the US ISM numbers came in weaker than expected, showing a fall in demand, rising inventories and a drop in manufacturing prices. Locally, the RBA is expected to lift rates by 50bp today, and tonight the US job openings numbers will be viewed to see if there is any easing in the labour market.
Monday 3rd October 2022
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The lasting effect from the UK’s mini-budget kerfuffle has not been the weakness in the pound – that’s bounced back for now – but the rise in bond yields. They are, of course, rising everywhere as central banks find it increasingly hard to fight inflation. The pound might feel some pressure today, though, as S&P put the UK’s credit rating on a “negative outlook”. NAB’s Taylor Nugent says it doesn’t mean a downgrade is going to happen, but it adds to the uncertainty the UK is facing right now. Meanwhile, inflation remains strong, with the Euro area reporting 10% and the US Core PCE read on Friday also on the rise. Oil prices are likely to rise as well as OPEC+ meets this week, with a large cut in production likely. Locally, the RBA meets tomorrow. We look at what to expect.
Friday 30th September 2022
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Things are calmer in the UK because the Prime Minister has agreed to get the numbers to support last week’s budget. Whilst that’s helped the pound a little, yields continue to rise. NAB’s Tapas Strickland says the volatility is far from over in the UK. Elsewhere there’s rising concern over inflation, which is showing little signs of easing, with central banks (the Fed and ECB in particular) continuing their hawkish tilt. That’s hit US stocks hard today. Also on today’s podcast a look at yesterday’s monthly CPI umbers for Australia and a look ahead to European inflation data today.
Thursday 29th September 2022
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It’s been quite a session in the UK, with the IMF reprimanding the government over it’s budget, and the Bank of England suspending its quantitative tightening, instead switching to buying longer end bonds in a move to protect pension funds. What’s all this doing to the UK’s credibility? NAB’s David de Garis talks through the events from London. In the US equities have bounced back, even though central banks show no sign of stepping back on their hawkish stance. The war in Ukraine is showing signs of escalation, with Russia now accused of sabotaging gas pipelines in the Baltic and the EU promising more sanctions this Friday. But Australia, for now, is avoiding the worst of the declines, with retail sales holding up, at least in terms of money spent. Today inflation and jobs vacancies for Australia will be keenly watched.
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Wednesday 28th September 2022
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A rising US dollar, yields pushing higher, equities being sold off, central bankers talking up rates – that’s been business as usual lately. NAB’s Skye Masters says resilience in economic data, particularly for the US, isn’t making the job any easier for central banks, who expect rates to be higher for longer than markets envisage. In the UK the terminal rate for the Bank of England has risen markedly, of course, with Huw Pill, the chief economist, warning that the response to the government’s budget will require a significant monetary policy response, but not till November. Presumably that means they continue with their quantitative tightening.
Tuesday 27th September 2022
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The pound fell to an all-time low overnight before picking up a little, but still well down on the day as markets react badly to the new UK Chancellor’s mini-budget last week. NAB’s Taylor Nugent talks through the response, which is being driven largely by uncertainty. Gilt yields have pushed up markedly and the unease has spread to other markets, with bond yields also rising sharply in the US. There has been some expectation that the Bank of England will call an emergency meeting, whilst the Chancellor has said he will provide a fully costed proposal in two months’ time. Will markets settle down without reassurance that the government has its finances under control? Meanwhile, data releases globally were largely softer, including sizeable downgrades to growth forecasts in the latest OECD economic outlook. On the speakers circuit later on, Huw Pill, the Bank of England’s chief economist – perhaps not the easiest gig this time round.
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Monday 26th September 2022
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The UK budget that wasn’t a real budget, turned out to be more far reaching than most budgets and certainly had far more market impact. On today’s podcast Phil asks NAB’s Ray Attrill whether the sharp fall in the pound will be retraced this week, particularly as the UK’s government debt is still far less than many other European nations. Italy’s election results will be released shortly, but the lurch to the right has already been well signalled. On the data front, PMIs on Friday showed further weakness in Europe and the UK, with some gains in the US, but the picture is not pretty anywhere. Today data includes Germany’s IFO and the OECD’s interim economic outlook. More importantly, there are a few inflation indicators later in the week for the US, the Eurozone, China and Australia.
Friday 23rd September 2022
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Bond yields continued to rise in the US one day on rom the FOMC meeting. NAB’s Ken Crompton says normally you’d expect to see a bit of a rebound, so this is a sign that the market has accepted that the Fed are determined to keep going, evidenced by the elevated dot plots yesterday. Meanwhile the Bank of England lifted rates 50bp – it probably would have been higher if the UK government hadn’t stepped in with a cap on energy prices, although their mini budget today will include tax cuts that could go against the bank’s objectives. The Bank of Japan didn’t move at all and a very dovish speech by Gov Kuroda sent the Yen spiralling lower, forcing the Ministry of Finance to intervene. Lots of PMIs today to provide evidence of which economies are softening and which, like the US perhaps, are holding up.
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Thursday 22nd September 2022
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No surprise, the Fed has lifted rates by 75 basis points. NAB’s Gav Friend says the response in the bond markets was a reaction to the dot plots, which suggest rates will be at 4.4% by the end of the year, 4.6% next year and 3.8% in mid-2024. They all represent a considerable increase in the numbers given back in June. The Bank of England meets later and, although markets are expecting a 75-basis point hike there too, its unlikely to happen as inflation could well be tamed by a high level of government support for fuel costs. In other news, Putin has called up 300 thousand reserves and threatened the use of all resources, even nuclear, if the west attacks territories deemed by referendums to be part of Russia. No bluff, he said. We look at what impact this will have on market sentiment.
Wednesday 21st September 2022
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Bond yields have pushed higher in the US and the UK ahead of the Fed and the Bank of England meetings tomorrow. NAB’s Taylor Nugent says the expectation is still for a 75 bp hike, although that was the assumption for the Riksbank too, but they lifted rates by 100 yesterday. But as Taylor points out, they are starting from a lower base. But are there signs that inflation is easing. Oil is down, China is reopening, Hong Kong has eased restrictions and Taiwan is busy responding to demands for new iPhones. Is life starting to get back to normal and could easing of supply pressures bring prices down? Or simply create yet more demand? Ukraine presents further risk today, with Russia planning sham referendums in captured territories, which has the potential to escalate the war.
Tuesday 20th September 2022
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It was a quiet session overnight with the UK on holiday and a fair bit of attention on a funeral service in London. Nonetheless bond yields continued to push higher. JBWere’s Sally Auld says markets have priced in rate rises this week of 80 basis points in both the UK and US, meaning there’s some chance the hike will be more than 75. ‘Keeping at it’ was the title of Paul Volcker’s book and that seems to be the Fed’s philosophy right now – and for other central banks, Japan and China excluded. Canada's inflation numbers today will give us a good indication of whether going hard and going early helps contain inflation any quicker.
Monday 19th September 2022
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It’s a confusing week ahead of central bank meetings and public holidays. The Queen’s funeral will attract most attention today, but not on the markets that could see a quiet start to a busy week. NAB’s Ray Attrill says it’ll add to the volatility this week, driven by uncertainty and liquidity. Whilst most expect a 75 basis point rise from the Fed this week, there’s still a chance they will lift by 100. The UK faces a decision by the Bank of England and a mini budget from Kwasi Kwarteng, the new Chancellor, that could add to big increases in bond issuance. Plus, a meeting of the UN General Assembly which could (perhaps) see Putin lose more allies.
Friday 16th September 2022
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Front end bond yields pushed higher in the US, as shares fell sharply and oil prices fell. The inversion in the yield curve continues to point to a recession with investors clearly expecting a higher terminal rate by the Fed. NAB’s Gavin Friend says markets are still reeling from the higher than expected inflation read this week, and much now rests on what Jerome Powell says next week. The picture is muddy, with today’s data releases fairly mixed. US retail sales were up, but the Philly Fed manufacturing index fell, with a big decrease in new orders. We try and make sense of it all in today’s podcast, along with analysis of yesterday’s Australian employment numbers and words on the meeting between Presidents Putin and Xi in Uzbekistan yesterday.
Thursday 15th September 2022
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Yesterday, markets responded sharply to the higher-than-expected inflation read from the US. You might have expected a bit of a correction today as markets take stock of the news, but that didn’t really happen. As NAB’s David de Garis points out, there is still an expectation of sharp moves by the Fed, with the possibility of a 100bp rise still on the table. UK inflation fell back into single figures, but only because petrol prices have fallen. Today Australian employment numbers and US retail sales are the figures to look out for.
Wednesday 14th September 2022
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Markets were caught off guard by the higher-than-expected inflation rad fom the US. The fall in energy prices has been offset by a broad-based rise across all other sectors. US equities fell heavily, bond yields rose and the US dollar gained significant ground. NAB’s Ray Attrill says the results have raised the spectre of a possible 100bp rise by the Fed and a higher terminal rate. The UK gets their inflation numbers later, after falling unemployment numbers and rising wages yesterday. So, what about Australia, where the NAB Business Survey showed improvements in business conditions and sentiment – but what did it tell us about inflation expectations?
Tuesday 13th September 2022
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Risk sentiment is improving, with shares up in the US and Europe and the US dollar losing ground to the Euro. Why? It’s a question Phil Dobbie puts to NAB’s Tapas Strickland in today’s Morning Call. The EU has drafted an energy plan that includes a windfall tax on fossil fuel providers, but the data over the last 24 hours shouldn’t imbue confidence. UK GDP growth was below expectations, and the IFO has substantially downgraded their forecasts for Germany. The big event today is the CPI figure for the US tonight, although its unlikely to change the expectations for a 75bp hike from the Fed at their next meeting.
Monday 12th September 2022
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Curiously, US shares pushed higher towards the end of last week, even though there is no sign of the central bank slowing down its path of rate rises. Quite the reverse in fact. NAB’s Rodrigo Catril says short-selling has been a driving force behind this and we can expect volatility in equity markets for some time. Meanwhile, front end bond yields are rising as Fed speakers find new ways to signal continued tightening, with no let-up until the job is done. We might hear the same from the Bank of England, except they’ve pushed back their next meeting to next week in respect to the death of Queen Elizabeth II, but it could work out as much better timing for them as well. The EU are struggling to find an answer to energy prices, but have agreed that something needs to be done, hopefully before the cold weather sets in.
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Friday 9th September 2022
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Even though a big hike from the Fed is widely anticipated, bond yields continue to move up as Jerome Powell and other speakers talk it up. The moves were even bigger in Europe where an expected 75 basis point hike saw a sharp rise up in 2 year Bund yields. NAB’s David de Garis says markets expect that, at some point soon, central banks will start pulling back and they are looking for that inflection point. Today there was no sign of that happening anytime soon on either side of the Atlantic. But the RBA’s Jerome Powell was sounding far more dovish. The new UK PM outlined her plans to subsidise energy, which will involve a massive amount of government spending. Sadly, the news was overshadowed by the passing of Her Royal Highness. Irrespective of your views on the monarchy, most people acknowledge Elizabeth II was a warmly regarded, hard working lady who will be sadly missed.
Thursday 8th September 2022
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There were big market moves yesterday and overnight, with sharp drops in oil prices, bond yields falling, a turnaround in US equities and the US dollar gaining some ground, with the Yen falling to its lowest level in 24 years. NAB’s Skye Masters says there wasn’t much data to influence the markets, but there was a lot of Fed commentary that is suggesting that perhaps the pace of interest rate moves might begin to slow down. Falling oil prices and government subsidies on gas prices will also be seen as helping to tame inflation.
Wednesday 7th September 2022
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There was a strong response to the US Services ISM overnight, which came in stronger than expected. NAB’s Rodrigo Catril says they have raised expectations for a 75bp rate hike at the next FOMC meeting, pushing bond yields higher overnight. In the UK Liz Truss is officially Prime Minister and is expected to freeze energy bills with what could amount to a £1,500 subsidy per household. So that could help reduce inflation, but higher government spending could have the opposite effect, particularly in combination with planned tax cuts. There’s also discussion about the RBA decision, Australia’s widening current account surplus, China’s trade data and the Bank of Canada meeting tonight. A busy one.
Tuesday 6th September 2022
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It’s RBA day today. NAB’s Ivan Colhoun talks through what to expect, whilst Ray Attrill looks at the worsening situation in the UK and Europe. Gas prices have risen after the closure of the Nordstream pipeline, and oil prices are also on the rise after OPEC+ agreed to production cuts from next month. We’ve also seen a revision in PMIs in Europe, with the UK services PMI moving into contractionary territory. Signs of resilience are quickly disappearing. It’s a different story for the US, though, where ISM numbers are expecting to stay above 50, adding to the pressure the US dollar will place on other major currencies.
Monday 5th September 2022
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There was a short-lived burst of positivity on Friday, when USD payrolls numbers delivered a Goldilocks result, with jobs rising, but wage rises easing and more people piling into the jobs markets. The good news was offset by news that Russia will not be reopening the Nordstream gas pipeline, adding to the pressure on Europe to navigate its way through winter. NAB’s Tapas Strickland talks through the market impact on today’s podcast, as well as the problems in China, where 65 million people are currently in lockdown in 33 cities. The ECB, RBA and Bank of Canada all meet this week, and the UK gets a new Prime Minister later today.
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Friday 2nd September 2022
We know the world is in an awkward place, but we keep getting positive data reads, like a strong manufacturing ISM from the US, retail sales picking up in Germany, UK house prices still strong – all the things central banks don’t really want to hear right now. So what happens if non-farms payrolls in the US tonight shows a labour market that isn’t showing any signs of weakening? NAB’s Ken Crompton reckons a soft read will cause more of a fall in bond yields than the response to a stronger set of numbers. It’ll be an asymmetric response, he says.
Thursday 1st September 2022
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Euro area inflation is the highest since the creation of the Euro and NAB’s David de Garis says markets are no pricing in a greater than 50 percent change that the ECB will lift rates by 75 basis points next week. That’s helped support the Euro today, whilst the pound falls further, to levels we saw in early 1985, when mullets were fashionable. Still are for some, of course. Australia’s construction sector has taken a battering, driven by weather and higher supply costs, but private sector credit growth remains strong. China’s PMIs show an economy that is taking a long time to recover – in part because of COVID, but hot weather has also had an impact. Friday’s jobs numbers will focus attention now, but the new ADP report has shown jobs growth for larger businesses and a fall in small business employment.
Wednesday 31st August 2022
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The US jobs market grew last month, whilst consumer sentiment improved. It’s not what the Fed wants to hear. Do these positive numbers mean that the US can survive a soft-landing? No, says JBWere’s Sally Auld, it just piles the pressure on the Fed to be more aggressive on rate rises. The consumer sentiment probably reflects little more than a fall in petrol prices. We know Europe is set for a hard landing, even though gas prices have fallen and Germany’s reserves are up to 80 percent. But German inflation was higher than expected overnight, which suggests the European numbers will also be higher tomorrow, putting pressure on the ECB to move faster.
Tuesday 30th August 2022
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Bond yields in Australia rose sharply yesterday. NAB’s Rodrigo Catril says it was part of the global response to Jerome Powell’s short hawkish speech in Jackson Hole on Friday, but it was also because of the much higher than expected July retail numbers for Australia, which might suggest the RBA will have to push harder to knock inflation down to size. There’s also discussion about how quickly the market in the US is expecting to see rates rise, and how quickly they expect inflation to fall. Also, the latest on the European energy crisis, why oil has pushed higher today and a look ahead to European inflation umbers and US jobs data.
Monday 29th August 2022
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We knew Jerome Powell would be giving a hawkish speech at Jackson Hole, so why were equity investors so surprised when he did just that? Clearly, they didn’t get the memo, says NAB’s Ray Attrill, referring to a huge sell off in US shares on Friday, mirrored by a big fall in the Aussie dollar. So how will the Aussie shape up now, if we see Europe and the US heading into recession, That’s more likely in Europe, where gas prices continue to rise and deliveries from Russia stop totally middle of the week, with a question mark on when – and if – they will start again. Meanwhile, Britain’s energy prices continue to rise to unprecedented levels. Where does it all end. And happy birthday to us; the Morning Call is six years old today.
Friday 26th August 2022
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There’s unlikely to be any surprises when Jerome Powell steps up to the podium at the Jackson Hole Symposium tonight (Australian time). It’s well signalled that he will be uber-hawkish, and with the Fed’s credibility on the line, best not to go too-soft when inflation is spiking. That said, NAB’s Taylor Nugent says there has been some pull back in bond yields ahead of the main act, whilst equities have pushed higher overnight. Minutes from the ECB have largely been overtaken by events. It was noted that a “recession would not necessarily diminish upside inflation risks, especially if it was related to a gas cut-off”, but the question remains, what can monetary policy do about it? And US GDP has been revised up, still in negative territory but gross domestic income perhaps provides a more realistic – and positive – picture of the health of the US economy.
Thursday 25th August 2022
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Ukraine has just celebrated Independence Day and it’s becoming clearer how much the UK and Europe is paying the price. NAB’s Gavin Friend paints a pessimistic picture about the outlook for that part of the world, as gas prices push ever higher. He says the Fed can raise rates to moderate demand in the US, but in Europe rate hikes will do nothing to mitigate rapidly rising energy prices. Joe Stiglitz has been saying overnight that interest rate hikes will do other than, he reckons, make inflation worse. Yet UK two-year yields shot higher overnight on expectations that the Bank of England will push ahead with a faster path of rate increases.
Wednesday 24th August 2022
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It’s that time of the month when PMI reads give us a global snapshot of how everyone is doling relative to each other. NAB’s Ray Attrill says the US provided the biggest surprise with a sharp fall in the services number, moving further into contraction territory, with a read of 44.1 – a 27 month low. That’s somewhat worse than services numbers in Europe, and well below the UK, which continues to surprise, with a Services PMI read of 52.5 (actually growing). The bad news from the US was compounded by a fall in the Richmond Fed manufacturing index (also moving into contraction) and a further slowdown in new home prices. But Europe’s future continues to be dominated with higher fuel costs, which show no signs of settling down.
Tuesday 23rd August 2022
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The US dollar has risen close to a multi-decade, against a falling Euro and pound, as the energy outlook in that part of the world worsens and gas prices continue to skyrocket. NAB’s Tapas Strickland says this has added to the resolve of central banks to tackle inflation with faster rises in interest rates. There is a plethora of PMI reports today. The question is, if they show any weakening in the performance of economies, will that be enough to moderate the hawkishness that’s prevalent amongst most central banks right now?
Monday 22nd August 2022
Markets seem to have got used to the idea that central banks will be more aggressive with cash rate hikes, ahead of the Jackson Hole symposium at the end of the week. Part of the reason for that is because, what’s been done so far is clearly not enough. UK retails sales increased in July despite all the talk about the dire state of the economy. The Canadians are also out shopping. We also saw a big increase in purchase prices in Germany, in fact the largest monthly rise since 1949. All of this adds to the expectations that the meeting in Wyoming will see an increasingly hawkish stance from all gathered there.
Friday 19th August 2022
Bond markets have been fairly lacklustre today. NAB’s Ken Crompton says there is still uncertainty over the less-hawkish FOMC minutes this week, which is why central bank speakers are out in force pushing the party-line for higher rates faster. There’s still a difference between the markets and the Fed on how quickly those rates will come down. Meanwhile, there’s still plenty of resilience in the US economy, with jobs not really coming down. As we saw yesterday, it’s the same story in Australia. The Euro saw a sharp fall today, as gas prices shot up to a record high. Canadian and UK retail numbers are out later – will they be a other sign of resilience in the face of adversity?
Thursday 18th August 2022
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Inflation clearly isn’t easing yet. The UK hit 10.1 percent in numbers released yesterday. NAB’s David de Garis says the sticker-shock of double-digit inflation set the cautious mood off early. But if hiking by central banks is designed to slow consumption it is taking its time about it. US retail sales were up 10.3 percent (YoY) in July. Can an aggressive path of hikes slow demand enough to stop inflation in its tracks? Will the RBNZ be the first to demonstrate success? And will the RBA need to pick up the pace, with some worrying signs in the wages data yesterday, even though the headline number seemed quite tame.
Wednesday 17th August 2022
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Central banks continue to keep a close eye on wages data. The UK has just reported a drop in wages growth, alongside a fall in new jobs. We’ll see Australia’s wage growth numbers later today, which NAB’s Rodrigo Catril says shouldn’t be a big rise this quarter, but expect more in Q3 and Q4. Also today, the state of US retail, Canada’s rising inflation (despite all the front-loading of interest rates) and what to expect from the RBNZ. A busy day.
Tuesday 16th August 2022
The Aussie dollar has retreated from the gains at the end of last week, after a slowdown in China’s retail sales, industrial output and fixed asset investment. All grew well below expectations, as COVID continues to influence behaviour and, clearly, buying habits. We’ve also seen a big drop in oil overnight. NAB’s Ray Attrill says the fall is a combination of the weaker China data and signs that an Iran nuclear deal could be getting closer, which would see more oil pumped into the global marketplace. In the US equities continue to rise, even though the housing market is struggling, and the Empire State Manufacturing Index showed a massive (unbelievable) fall. The RBA minutes will be scoured today for any signs of the direction the bank will take now it is not, in their words, on a “pre-set path”.
Monday 15th August 2022
There was a lot more positive sentiment around on Friday, because there are more signs that perhaps inflation is peaking. NAB’s Tapas Strickland says strong corporate earnings have helped, and a belief that the Fed will not be moving much further on rate hikes – even though many Fed speakers are keen to argue otherwise. It’s a different story amongst bond markets, were the 2-10 years spread remains firmly in negative territory, suggesting a recession or at least much slower activity for the remainder of the year. The RBNZ meets this week – Phil asks Tapas is they are being viewed as a test case for central banks, given that interest rates are likely to hit 3% this week, amid signs that the economy is slowing.
Friday 12th August 2022
Markets are still behaving as though inflation will not reach the heights predicted by the Fed, and that the path of hikes will be downgraded. Softer PPIs in the US added to this sentiment. But NAB’s David de Garis says energy prices are the big concern. Brent is back over $100 a barrel, with concerns that European demand to substitute gas will push prices higher and add to inflationary pressures. But will inflation create a recession? GDP numbers in the UK today are expected to show a decline, yet unemployment remains persistently low, retail numbers are doing well and Dave says the streets of London are filled with people spending money. It doesn’t feel like a recession, whatever the numbers show.
Thursday 11th August 2022
US inflation numbers were lower than expected, giving markets a major boost if confidence. Shares rose sharply, thew VUIX index fell to the lowest in quite a while, the USA dollar weakened, and the Aussie dollar was given a major boost. But will the enthusiasm last? As NAB’s Tapas Strickland explains, the falls were largely related to lower energy prices and the low-side core surprise was a payback for the high-side reading in June. In fact, the core reading is still rising and the Fed has made it clear they still have more work to do. So, can we expect markets to retrace their steps a little over the next day or so?
Wednesday 10th August 2022
The long-awaited US CPI numbers are out today. NAB’s Rodrigo Catril most attention will be paid to the core reading, which excludes energy and food, the two factors which the Fed can have less influence over. If the core reading rises it shows the Fed has more work to do and that will only exacerbate recession fears. On that, we’ve seen the 2-10 yield spread falling ever lower to levels normally only ever seen ahead of recessions. China’s CPI and PPI reads will also be of interest today. There’s also discussion on today’s podcast on the NAB Business Survey yesterday – how can business indicators be so strong, whilst consumer sentiment is falling?
Wednesday 9th August 2022
Markets are a bit in limbo today. We’ve seen bond yields reversing some of their initial response to non-farm payrolls, with the US dollar temporarily switching direction, and the Aussie and Kiwi dollars gaining strength. But for how long? NAB’s Skye Masters says what happens next will depend on US CPI numbers tomorrow. There was a glint of hope that the worst is over with slight decline in inflation expectations in the US and New Zealand. Certainly the NAB business survey will be scanned eagerly today for price movement.
Monday 8th August 2022
The US non-farm payrolls numbers on Friday were certainly a surprise to many, with 528k new jobs created in July, twice the market expectation. Wages also rose further. Phil talks to NAB’s Ray Attrill about the swift market response, with many assuming the Fed will go for another big hike at their next meeting. US consumer credit numbers on Friday are also a forewarning of a difficulty period ahead for struggling housheolds. Meanwhile, Joe Biden’s Climate bill has just been passed by the senate – what impact will another splurge of government spending have on the Fed’s endeavours to bring down inflation. Speaking of which, US CPI is the number to look out for this week.
Friday 5th August 2022
Markets continue to be pulled in two directions. Is inflation peaking with the hope of a soft landing? Or is there more to come, forcing central banks to lift rates high enough to spark a recession. At least the uK seems to have a clearer picture, but its not a good one. As NAB’s Gavin Friend discusses today, the Bank of England has lifted rates by 50 basis points, lifted their inflation forecasts and warned of five consecutive quarters of economic contraction. So, why is it so much worse in the UK than Europe? And could a change in Prime Minister change the outlook? He also talks to Phil about yesterday’s Australian trade data and looks ahead to tonight’s non-farm payrolls in the US.
Thursday 4th August 2022
Nancy Pelosi has moved on from Taiwan and taken the cautious sentiment with her. Instead, very positive ISM services numbers in the US, and James Bullard talking about how the Fed will deliver ‘credible disinflation’, have seen the US dollar strengthen, helped shares bounce back and driven front end bond yields down. Today Phil talks to NAB’s Ray Attrill about what Bullard had to say, what to expect from the Bank of England today and whether Australia’s trade balance will actually increase, rather than the consensus view of a slight fall.
Wednesday 3rd August 2022
There has been some market caution this morning as Nancy Pelosi arrives in Taiwan, much to the disgust of China. Her rhetoric has been confrontational too, so what is the purpose of this visit? Fed speakers have been keen to shift US market sentiment away from the notion that there will be an easing in the path of rate hikes, with Mary Daly saying they are “nowhere near almost done”. NAB’s Tapas Strickland says there’s been a sharp rise in 2 year yields since, fully erasing the fall seen after the last FOMC meeting. The RBA raised rates as expected but is being cagey about where to next. On today’s podcast we look at the likely path to the end of the year, but is the market overly optimistic about how quickly rates will come back down?
Tuesday 2nd August 2022
There were further signs of a looming recession, with the US manufacturing ISM weakening, the Caixin Manufacturing PMI also lower and retail sales in Germany falling the most in 50 years. Oil is also falling, and the 2-10 yield spread in the US is close to being the most inverted it’s been since the year 2000. You’d think although these recession signs at a time when central banks are still pursuing aggressive hikes would be enough to upset the markets, but NAB’s Rodrigo Catril says they clearly haven’t got the message yet, with equities showing only minor falls today. The only positive news of the day was that the first shipment of grain has left from Odessa, but it’s anyone’s guess how long that will last. The RBA meets today, a 50-basis point rise is expected, and an increase in the bank’s inflation forecast this week.
Monday 1st August 2022
For those hoping that inflation was peaking (anywhere), then Friday didn’t bring good news. PCE numbers in the US are rising, Europe’s CPI is climbing higher, whilst manufacturing from China has slowed. Clearly, we’re not out of the woods yet, with former US treasury secretary Larry Summers saying on Friday that the Fed hasn’t reached a neutral rate yet, and the fact that Jerome Powell has said they have is just “wishful thinking”. So, what does this all mean for the RBA tomorrow. NAB’s Taylor Nugent says the expectation is there will be a 50 basis point rate hike, but Philip Lowe has spoken about a narrow path “clouded in uncertainty” – is there an outside chance he will see the need to move even faster as global inflation rates show few signs of easing?
Friday 29th July 2022
US GDP fell by 0.9 percent in Q2. On top of the 1.6 percent fall in Q1 that meets the technical definition of a recession. But Jerome Powell and Janet Yellen are keen to point out the downturn is not sufficiently broad based to be called a recession. Nonetheless it does signify a further weakening in the economy, which investors seem to be taking as a sign that the Fed won’t need to be as aggressive to counter inflation. NAB’s Gavin Friend says that although the market may be trying to lead the Fed in that direction, that’s not how Jerome Powell sees it and we can expect to see further significant hikes. Perhaps the same could be say for the RBA, with Australian retail sales continuing to rise and Treasurer Chalmers yesterday predicting inflation will peak at 7,75 percent, well above the RBA’s 7 percent forecast.
Thursday 28th July 2022
The FOMC has met, they’ve pushed rates up 75 basis points and, whilst Jerome Powell said there would be no forward guidance, he has hinted at another big rise next time. Of course, it all depends on the data. Phil Dobbie talks to NAB’s David de Garis about the take-outs from the press conference, which injected some animal spirits into the share market. They also look at yesterday’s Australian inflation numbers, and whether they have cemented in a 50-basis point rate rise by the RBA, or could it be more? Plus the Meta earnings release, which brought mixed news after the US market close.
Wednesday 27th July 2022
There gave been sizeable falls in US equities, mainly stemming from a cut to Walmart’s profit estimates. NAB’s Tapas Strickland explains how the rising price of food is leaving less money for people to spend on discretionary items, with more price increases to come. Meanwhile, Europe is hoping to cut gas consumption as Russia halves the supply of gas down the Nordstream pipeline. The EU has agreed a voluntary arrangement, but will be enough to build reserves for winter? Australia’s inflation numbers are out today – what will they be, and could they force the RBA to be more aggressive next week? The IMF has downgraded its global growth forecasts, noting an increasingly gloomy and uncertain outlook. Least but not least, the FOMC announces its rate decision just before tomorrow’s podcast. Tune in then for the full rundown, as it happens.
Tuesday 26th July 2022
From Wednesday one of two operating turbines on the Nordstream pipeline will be switched off, effectively halving the existing supply, taking gas provision to Europe down to 20 percent of full capacity. There’s no clear evidence that Europe has a coordinated plan to deal with reduced supplies, as EU member nations argue over the equality of calls for reduced consumption. NAB’s Ray Attrill says the threat of the full blown weaponization of gas supplies later in the year is still very much a live issue. Meanwhile, markets are treading water ahead of the FOMC meeting middle of the week, the US GDP read after that and Aussie inflation numbers tomorrow. There’s also a slew of major earnings results over the next few days.
Monday 25th July 2022
PMI numbers were much weaker than expected on Friday, particularly for US services, which fell quickly into a contractionary read of 47.1. The composite read for Europe also fell below 50. Will this mean central banks ease off the rate-hike pedal a little? The opposite is expected in Australia. Rodrigo Catril explains how NAB believes the lower-than-expected unemployment rate last week cannot be ignored, and it’s likely the RBA will move faster over the next couple of meetings. Vladimir Putin continues to hold a strong grip on energy and food supplies, offering a re-opened gas pipeline with constrained supply, and reopened grain delivery routes, offset by attacks on their principal port of departure. It’s a busy week ahead, including the Fed meeting, and more inflation numbers.
Friday 22nd July 2022
As we predicted the ECB lifted interest rates by 50 basis points yesterday, up to zero percent. NAB’s Ken Crompton says this was more than markets had expected and explains there was a short-lived reaction on the bond markets. There was also disappointment in the central bank’s anti-fragmentation tool, which now has a name and a new acronym! Right now it’s light on detail and will countries like Italy be able to meet the criteria being set for its use, even though, with rising spreads with German bunds, they are the ones who really need it. In the US weaker jobs claims gave job that the labour market might be easing. Coupled with weaker than expected manufacturing data, there’s always the hope that the Fed won’t need to be so aggressive. PMI data today will give a further indication of how services and manufacturing are travelling, in the US, UK and Europe.
Thursday 21st July 2022
There’s some confidence in the markets this morning, despite what seems to be a compendium of bad news for Europe. NAB’s Gavin Friend says gas prices have fallen because Vladimir Putin has indicated that they will meet the reopening deadline for the Nordstream pipeline, but it’ll be at only 20 percent of its capacity. As discussed on today’s podcast, that might be enough to meet short term demand, but won’t allow Europe to build up stocks for winter. The ECB meets today and will outline plans for its anti-fragmentation tool. If markets aren’t impressed, it could bolster Italian bond yields, which have already pushed higher on growing uncertainty over Draghi’s tenure in the Italian parliament. We also look at what Philip Lowe said yesterday, ahead of August’s RBA meeting.
Wednesday 20th July 2022
Markets are preparing for a big rate rise by the ECB tomorrow. NAB’s Rodrigo Catril says they are hiking when the expectation is that the Nordstream pipeline won’t fully reopen for some time, if at all. “No energy means no growth”, he says, with the likelihood that Europe is heading for a major recession. Is the central bank prepared for that? Politically, can Europe cope with it all? Also today, we look at what the Bank of England’s Andrew Bailey had to say about UK rate expectations, ahead of inflation numbers later today. Plus, is the RBA preparing the market for a 75bps hike? And those flicking the off switch on Netflix - not as bad as expected.
Tuesday 19th July 2022
The resumption in gas supplies to Europe could well be delayed, but perhaps Russia has a legitimate reason. A bigger move this morning has been the rise in the price of oil which NAB’s Ray Attrill will in part be down to Saudi Arabia’s refusal to increase supplies. Equities have fallen slightly, in part because of reports that Apple are downgrading their hiring and growth plans. US housing continues to be under pressure, with more data today. We also hear from the RBA’s Michelle Bullock today, who might give away some indication of rate expectation, perhaps.
Monday 18th July 2022
US equities rallied on Friday as data releases showed some resilience in the economy, but is it enough to stave off recession? Probably not, says NAB’s Tapas Strickland on today’s podcast, but it will be enough to put to bed any ideas of a 100 basis point rate rise by the Fed this month. Also today, China’s fall in GDP was worse than expected, with continuing lockdowns making the official forecast for the year completely out of reach. The focus this week will be on Europe: what if the Nordstream pipeline doesn’t reopen? And, with so much uncertainty, NAB is predicting the US dollar will remain stronger for longer, which is likely to keep the Aussie dollar below 70 US cents for some time to come. Hear more about that in today’s podcast too.
Friday 15th July 2022
In a week of surprises (US CPI and labour market data, Canada’s interest rate rise, China’s lockdowns and the US$-Euro parity), yesterday saw a sharp fall in Australia’s unemployment rate. ‘It was our turn to surprise’, says NAB’s Taylor Nugent on this morning’s podcast. Unemployment has now fallen to a level below what the RBA was forecasting for next year, so does this mean we should expect a much larger hike at the start of next month? The big news this morning is the attempted resignation of Italian Prime Minister Mario Draghi, adding to the turmoil in Europe and adding to the US dollar strength. Next week is shaping up to be a turbulent week for the ECB, particularly if Vladimir Putin doesn’t turn on gas supplies as scheduled. Rising US PPI numbers added to the inflation story overnight. Today, US retail sales numbers are out, and the University of Michigan inflation expectations survey, which last month convinced the Fed to move rates higher.
Thursday 14th July 2022
US inflation has picked up more than expected, rising 9.1% in the year to June. The Fed’s Raphael Bostic said later that “everything was in play” when it came to a July rate rise. NAB’s David de Garis says, it doesn’t take a genius to figure out what he meant. The Bank of Canada (BoC) had just raised rates by 100 basis points, more than had been expected, so had that paved the way for the Fed? It certainly makes the RBNZ’s 50 basis point hike seem a little constrained. The UK GDP growth was, unusually, helped by trips to the doctor, rather than to restaurants. Locally, Australian labour market data will be studied closely. Can the jobs market tighten any more and add to the pressure for faster hikes from the RBA?
Wednesday 13th July 2022
There’s no let-up when it comes to the downward expectations around the health of the global economy. US bond yields inverted further, suggesting a heightening of recession expectations. Oil prices fell sharply lower, suggesting demand is expected to fall further. US small business owners who expect conditions to improve in the next six months fell to minus 54%, the lowest in half a century. The confidence in the German ZEW survey hit a 10-year low yesterday. The NAB business survey also showed business optimism falling sharply. And NAB’s Gavin Friend reckons the prospect of an energy crisis in Europe is the real danger that is not yet fully reflected in market pricing. What will turn all this around? Central banks think a race to higher rates will fix the problem, with the Bank of Canada and RBNZ trying to outdo each other today on who can rate the fastest. So, imagine the reaction if US CPI numbers come out higher than expected today.
Tuesday 12th July 2022
There’s a more cautious tone in the markets today, with US equities falling, bond prices rising, and the US dollar continuing on the up and up. Sentiment hasn’t been helped today by more lockdowns in China as COVID cases flare up. Ironically, Yuan loans have increased a fair bit. NAB’s Tapas Strickland says this suggests, perhaps, that the economy will pick up once COVID cases have settled down. Meanwhile the Euro is very close to parity with the rising US dollar, as concerns grow about continuity of energy supplies. Already parts of Germany are starting to ration energy use.
Monday 11th July 2022
It is a bit weird that positive US jobs data would be seen as heightening the expectations of a recession, but that seems to be the case. As NAB’s Ray Attrill explains on today’s podcast, the strength in the non-farm payrolls numbers of Friday did nothing to ease expectations that the Fed will continue with a rapid pace of rate hikes, and that could easily lead to a recession in the US. In Europe ECB speakers, like Robert Holtzman, are pushing for larger rate hikes even though rising energy prices (and shortages) are a very real prospect, with the next meeting this week. Meanwhile, recession prospects and a strengthening US dollar are playing havoc in emerging markets, as evidenced by the situation in Sri Lanka right now.
Friday 8th July 2022
There have been slightly less recession concerns in the US overnight, with equities and commodity prices pushing higher and 10 year Treasury yields pushing back over 3%. Jobs have been front and centre, with weekly jobless claims not moving far, and non-farm payrolls adding more data to the picture later tonight. It’s been a torrid day in UK politics, with Boris Johnson resigning but not leaving Downing Street until a replacement is found. NAB’s Gavin Friend talks through the impact it’ll have on the UK economy. Whilst China is contemplating a massive spending spree for local governments to build infrastructure and get the economy back on track.
Thursday 7th July 2022
The FOMC minutes are out, pointing to significant risk if inflation isn’t nipped in the bud. Markets are taking this as a sign that the Fed will lift rates more quickly, starting with a 50-75 basis point hike at the next meeting. This has added to concerns about the Fed inducing a recession, yet equity markets continue to climb. Phil asks NAB’s Ray Attrill whether the minutes are a little out of date, given the ISM read shows a fall in employment. We’ll get a clear indication of the jobless rate with initial claims for the US tonight. And Australia’s trade balance is the major release locally.
Wednesday 6th July 2022
The Euro is getting closer to parity with the US dollar. In today’s podcast NAB’s Skye Masters points out that the Markets team had forecast parity by the end of the year, but it looks like it wil happen much sooner than that. The big moves overnight, including a sizable fall in oil and copper, show recession fears are front and centre, even though there’s been very little data, and what there has been has not been particularly bad news. Skye says days like today, where there are some contradictory shifts, demonstrate the importance of looking at the trends and focusing on the bigger picture. Tomorrow could easily see a reversal of the moves we’ve seen today. The US share market had a wide trading range today, showing just how much uncertainty there is in the direction of travel right now.
Tuesday 5th July 2022
The RBA meets today and the NAB expectation is that they will lift interest rates by 50 basis points. Phil asks NAB’s Tapas Strickland whether, by seeing inflation rising slower than many other parts f the world, whether we’ll see a lower peak and hence, less work needed by the RBA. There seem to be lots of hope lately that inflation might be showing signs of peaking, but the war rages on and oil and food supplies are still heavily constrained. The most telling reality check is that Germany trade has fallen heavily into deficit, for the first time since 1991 (and even then, only relatively briefly). It could be worse still if Russia restrains supply even further.
Monday 4th July 2022
Recessions fears continue to rise, pushing bond yields lower. As NAB’s Rodrigo Catril explains, the ISM manufacturing report in the US on Friday added to the fears, showing a contraction in new orders. It’s no longer an issue of supply constraints, demand is also softening. Yet inflation continues to rise. In Europe it grew from 8.1% year on year in May, to 8.6% in June. A big fall in copper prices also suggests an expected fall in demand. All this uncertainty is knocking the Aussie dollar down more than most currencies. This environment provides the ammunition for the RBA to make a large hike (50 basis points) tomorrow. Later in the week we’ll see if the tight labour market in the US is easing any, with the release of the monthly non-farm payrolls data. Prepare for a bumpy week again.
Friday 1st July 2022
Yields are lower in the US and Europe as recession fears grow, prompted by weaker than expected personal spending in the US, with a very strong chance of a negative Q2 GDP, which would mean the US economy was in recession. Whilst you might hope less consumption would mean falling inflation, NAB’s Tapas Strickland days there’s little sign of it yet. It wasn’t just the US receiving bad news. There was a flurry of negative data for Europe, even before the EDB lifts rates, and a particularly bad activity outlook report from New Zealand. So, if the US, Europe, UK and New Zealand all go into recession, does that mean Australia will follow?
Thursday 30th June 2022
Markets are confused as to where the global economy is heading. If investors were looking to the ECB Forum in Sintra for clarification, they will have been disappointed, with Jerome Powell confessing that recent experience has shown ‘how little we understand inflation’. NAB’s Gavin Friend says it doesn’t inspire you with confidence, when central banks are feeling their way. Meanwhile, all we can do is look for signs of softening economies, in the hope that falling demand will match up with lower supplies. On that basis a downward revision in US GDP could be seen as good news and Australian retail sales holding up the opposite side of the coin. There is a plethora of data today to add to the confusion, including the core PCE deflator, that the Fed has traditionally turned to as its measure of inflation.
Wednesday 29th June 2022
US equities switched direction overnight. NAB’s Taylor Nugent says it was a swift response to a weaker than expected consumer sentiment read in the US, with a particularly sharp fall in the expectations component. European yields are markedly higher today as Christine Lagarde spoke up the task at hand for the ECB, even though she continues to outline a hike of just 25 basis points in July. Today, Australian retail sales numbers are out, NATO continues to meet and the ECB forum in Sintra finally gets down to some meaty discussion.
Tuesday 28th June 2022
The volatility of the past few months means there is likely to be a greater need for rebalancing at the end of the quarter this time, says NAB’s Rodrigo Catril. Hence, we have seen a mixed picture overnight, with equities down, yields rising, the Aussie dollar suffering another fall and oil and iron ore rising in price, but each for differing reasons. Yet the overarching picture is one of uncertainty. Nobody is sure that central banks can combat inflation without instigating a recession, and nobody has a clear picture about how the Ukraine war will end. Once again, we try and map out a picture in the face of markets, geopolitics and data releases.
Monday 27th June 2022
These are strange times. Market sentiment improved at the end of last week because of weaker consumer sentiment and a downward revision in consumer inflation expectations. The hope is this means that central banks will need to do less to curb inflation, which is reducing recession fears. But as NAB’s Ray Attrill says, that could all change tomorrow. Or today. The war in Ukraine is escalating and the G7 resolve to do more against Russia is increasing. Also today, what the RBA’s Philip Lowe said in Zurich last week, and the fate of the Aussie dollar?
Friday 24th June 2022
There have been big movements in bond yields overnight. NAB’s Ken Crompton says there’s been a reaction to weak PMI data from Europe and the US. There were promising signs, though, particularly in Europe were rising inventory numbers suggest demand is softening and prices are weakening, which could lessen the need for aggressive hikes by the ECB. Nothing, it seems, will stop the Fed though, with Jerome Powell renewing his unconditional commitment to reducing inflation.
Thursday 23rd June 2022
You take whatever you want from a senate hearing, so there have been mixed reviews of Jerome Powell’s performance in front of the Senate Banking Committee. Some picked up on his claim that the US economy was in a strong position, whilst others focused on his warning that a recession was a ‘possibility’. Phil asks NAB’s Gavin Friend if that’s why we’re seeing sentiment split, from positive moves in US equities for most of the session, to a less positive outlook amongst bond markets and commodity traders, with the Aussie dollar bearing the brunt of it. They also discuss UK and Canadian CPI, and look ahead to the barrage of PMIs today.
Wednesday 22nd June 2022
We’ve just had the longest night of the year in Australia but the markets are focused on the light at the end of the tunnel! There is a lot of positive sentiment today, with NAB’s Taylor Nugent point to strong growth in US and European shares across almost all sectors. So, does this mean there’s an acceptance, once again, that inflation can be tamed without a recession, or perhaps there’s a belief that a mild one would be acceptable. Certainly the RBA’s Governor Lowe is seeing the good times returning before too long, even as he talks up the need for more rate rises. He outlined three reasons we’ll see inflation fall next year. Listen in to find out more.
Tuesday 21st June 2022
RBA Governor Philip Lowe is talking at an American Chamber of Commerce event this morning in Sydney. Phil asks NAB’s Ray Attrill whether he could signal that interest rates could push higher than 2.5 percent, even though he said that was a possible level to reach on the 7.30 Report only last week. Certainly central banks seem to be drifting to more aggressive hikes, with one voting member at the Bank of England concerned that if they fail to follow the path of the Fed that could devalue the pound and add to the inflation woes. Today, with the US having spent Monday on their Junteenth holiday, markets are relying on central bank speak for direction, and there’s a lot of it over the next 24 hours.
Monday 20th June 2022
It’s almost like there’s a race to turn up the rhetoric between central bank speakers, signalling to markets that rates will keep going up and the increments might be quite large. Klaus Knott from the ECB, for example, is talking about a possible series of 50 basis point hikes, which is a long way from the gradualism we’ve been hearing about for most of this year. This morning NAB’s Rodrigo Catril also talks about the fate of the Aussie dollar, which has been impacted by falling commodity prices which itself, is driven by recession concerns. It’s a quiet start to the week, with bond and equity markets closed in the US for Juneteenth.
Friday 17th June 2022
The positive reaction to yesterday’s FOMC market was short lived, with a much softer US dollar this morning and big falls in equity markets. NAB’s David de Garis says some of the uncertainty comes from a surprise decision by the Swiss National Bank to lift interest rates for the first time in 17 years – and not by a little bit, but by 50 basis points. It’s unsettling for those who assumed they’d wait for the ECB before reacting. By comparison, the Bank of England went for a 25 basis point rise, exactly as expected, but suggesting they will act forcefully, in necessary. Just not yet. Data overnight was largely second tier, but none of it was particularly encouraging. We also take a quick look at yesterday’s Australian employment numbers too.
Thursday 16th June 2022
The FOMC announced a 75-basis point rise in interest rates in the US, with rates rising to 3.4 percent by the end of the year. Sat the press conference that followed Jerome Powell spelt out that the next rise would be 50 or 75 basis points at the next meeting. They continue to argue that all of this can be achieved with a soft landing, but as NAB’s Ray Attrill suggests, when has a central bank ever confessed to contributing to a recession. There was also an emergency meeting of the ECB yesterday, as they try to tackle fragmentation in the European union occurring from rising rates. Later on the Bank of England, expected to lift rates by 25 basis points. Also today, Aussie employment numbers and New Zealand GDP.
Wednesday 15th June 2022
The FOMC meeting tomorrow morning (Australian time) has been the focus of intense speculation this week, with the surprise inflation numbers last week suggesting a more aggressive stance by the Fed. Some commentators are even pointing to a 100-basis point rise. NAB’s Rodrigo Catril says the dot plots from this meeting – showing the Fed’s own expectations of the path of rises – will be more significant than the rate decision itself. Meanwhile, Japan and China are struggling to constrain yields and the BoE faces an easier job as the UK economy slows itself down, without too much central bank intervention.
Tuesday 14th June 2022
There have been massive moves in financial markets since the release of the US inflation data on Friday. The US dollar is around the highest in decades, bond yields have shot up, in many cases to the highest in more than a decade, and the S&P500 has fallen to its lowest level in 15 months. NAB’s Tapas Strickland says the concern is we are seeing inflation expectations de-anchoring. In other words, is panic creeping to the markets? The concerns are heightened by the meetings of the Fed, the Bank of England and the Bank of Japan this week. The UK might not see big moves by the central bank, but only because the economy is already slowing and, after today’s GDP numbers, could well be the first into a recession.
Friday 10th June 2022
The ECB indicated overnight that they will lift rates at their July meeting, and if there’s no sign of a fall in inflation then a bigger hike might be necessary in September. This is the most hawkish the ECB has sounded, but Phil Dobbie asks NAB’s Gavin Friend if it is enough? The prospect of more rate rises has accentuated concerns about the impact of southern European economies and Christine Lagarde’s proposals on how to deal with the problem failed to satisfy markets, with Italian and Greek bonds falling markedly again. Today’s CPI number for the US will be watched keenly. Has inflation peaked?
Thursday 9th June 2022
There’s not much optimism in the air this morning. The OECD almost doubled their inflation expectations and slashed their growth forecasts, with the UK chosen for a particularly pessimistic outlook. NAB has revised its own forecasts for RBA rate hikes, outlined in today’s podcast. Oil prices have shot higher, with NAB’s Rodrigo Catril saying low inventories and the China reopening story means we haven’t reached the peak yet. The ECB meets later on. We know what to expect, although this is an environment where people change their minds at short notice.
Wednesday 8th June 2022
It was only a month ago that RBA governor Lowe was suggesting a 25 basis point hike was business as usual, with the bank wanting to signal that things would return to normal with a standard adjustment in interest rates. As NAB’s Ray Attrill points out, it was only a few months ago that the RBA was suggesting rates weren’t going up until 2024. Things changed sharply yesterday. This morning we look at the market reaction, from bond yields and equities, to the cross-rate with the New Zealand dollar. There’s also discussion on the ECB, with the potential for bond purchases in southern European nations who will be hit hardest from rate hikes.
Tuesday 7th June 2022
There’s been lots of action on the markets overnight, with rates pushing higher and, for most of the session, equities on the rise too. NAB’s Tapas Strickland says reopening news from China has helped push equities higher, but the prospect of rate hikes has seen that optimism diminish as the session neared the close. In currencies, the pound was the best performer in the G10, rising on the news of a leadership challenge for UK Prime Minister Boris Johnson. He won the challenge and the pound started drifting down again, but there’s no guarantee he’ll stay in his job for long. The RBA is the main focus today, with NAB expecting a 25 basis point rise. There’s less urgency and, with more meetings, greater flexibility than with other central banks.
Monday 6th June 2022
It might be a quiet start to a busy week, with the RBA and ECB meeting, and the US releases its CPI numbers at the end of the week. NAB’s Skye Masters says there’s divided opinion on how far the RBA will push tomorrow – anywhere from 25 to 50 basis points. We know the ECB is moving slower, but we can expect they’ll give further signals about when rates will rise and by how much. It all depends on the inflation outlook, of course, with CPI for the US out on Friday. Meanwhile, markets have been looking for any evidence that price rises might have peaked, but with the uncertainty over oil, the war and China’s lockdowns, it’s a bold call to say we are there yet.
Friday 3rdJune 2022
Today saw another session demonstrating the violent swings across all asset classes. Equities, that were well down yesterday, are well up this morning, despite an earnings downgrade from Microsoft. A chunk of the optimism comes from news that OPEC+ will increase oil production, even though oil prices themselves rose today. NAB’s Ken Crompton says we haven’t seen the same response in bond markets because of the likelihood that the Fed will keep rising, even beyond September, Lael Brainard said as much overnight. Tonight US non-farm payrolls will be watched keenly for signs of a softening job market or a reduction in wages.
Thursday 2nd June 2022
If investors were looking for signs of weakness in the US economy, in the hope that it might moderate the expectations for a rapid path of rate rises from the Fed, they didn’t get it, says NAB’s Rodrigo Catril. Instead, the ISM manufacturing PMI for May came in higher than expected, job openings remained high and job quits haven’t really come down much. Nothing there to suggest the Fed needs to tread a more careful path, so bond yields have risen sharply and equities have fallen further. It’s a different picture in Australia, where a stronger GDP read is being taken as a sign that we might weather the storm better than most.
Wednesday 1st June 2022
The EU has agreed to an immediate ban on oil exported by sea from Russia, with a further ban on EU and UK insurance of Russian vessels exporting oil elsewhere. On today’s podcast NAB’s Taylor Nugent discusses the tightening of restrictions and the impact on commodity prices and Europe’s rising inflation numbers – which exceeded expectations overnight. Meanwhile, a meeting between Biden and Powell today, representing two supposedly independent entities, demonstrates the dichotomy between controlling inflation and avoiding economic hardship. Today’s Australian GDP numbers will demonstrate how we have it better than most with 0.7% growth expected QoQ – although that figure would have been higher without a higher negative trade balance.
Tuesday 31st May 2022
There isn’t much in the way of good news today, but that doesn’t seem to matter as far as equity markets are concerned. German inflation was a big upside surprise and other numbers out of Europe suggested things are perhaps worse than imagined. Oil is rising sharply and could well surpass the previous peak. The war in Ukraine continues unabated with Russia making further inroads in the east of the country. China is easing lockdowns, but for how long? Yet European shares rose the Futures suggest the US will open higher on Tuesday too. NAB’s David de Garis talks about markets are looking on the bright side of the downside.
Monday 30th May 2022
Markets seem to be optimistic that the inflation wave can be ridden without us all crashing down on a rocky outcrop somewhere. So, are they right? NAB’s Ray Attrill joins Phil Dobbie this morning to discover the positive mood in the markets – particularly equities – driven by an absence of bad data and a hope perhaps that inflation will be tamed before central banks have to go the full way on interest rate rises. To what extent is demand holding up because people can dip into the extraordinary level of extra savings accumulated since the start of the pandemic. The non-farm payrolls data at the end of the week will be of interest, particularly in relation to wages. Locally, GDP numbers are out middle of the week. There are only three days this week when the US and UK markets are open, with month-end in-between. It could be a choppy week.
Friday 27th May 2022
US equities rose sharply again today as more retailers gave positive outlooks, despite the earlier surprise form Walmart and Target. The optimism wasn’t impacted by another set of weaker data from the US. That presumably means there’s potential for damage if today’s consumption numbers surprise on the downside, or the PCI-deflator shows higher than expected inflation levels. As NAB’s Gavin Friend points out, the bond markets have not reacted the same way, positioned as they are for a series of rate hikes from the Fed and the question mark over a recession. The UK Chancellor Rishi Sunak tried to head off recession with the announcement of a large round of fiscal stimulus, funded by a one-off windfall tax on energy companies. But is it enough? And what happens next year?
Thursday 26th May 2022
The increasing belief amongst central bankers – particularly in New Zealand and the US – is that faster rate hikes will have a more marked impact on fighting inflation, giving more flexibility on how to handle the issue later in the year. NAB’s Rodrigo Catril isn’t sure that a couple more 50 basis point hikes from the FOMC will be enough. Supply chain issues remain for goods, and consumers need to be torn away from their rising consumption of services. Today, Australia’s Q1 Capex numbers are worth looking out for. Also today, if the world seems a worrying place right now (particularly if you’ve been listening to George Soros), calm yourself down with a picture of a fluffy cat. It worked for our host.
Wednesday 25th May 2022
Yesterday’s upbeat sentiment was very short-lived, with a sharp fall in equities and bond yields today. A statement from Snap! about a worsening environment hitting revenue projections sent shares down across the board, but particularly advertising reliant tech stocks. That wasn’t the only bad news of the day. As NAB’s Tapas Strickland outlines in today’s podcast, there’s been a plunge in new home sales in the US, and a sharp fall in service PMIs in the UK. On the back of all of this, markets are expecting central banks to move a little slower on rate hikes, with the Fed’s Raphael Bostic warning policy makers to ‘proceed carefully’. We also look at the RBNZ decision today and Australia’s construction numbers this morning.
Tuesday 24th May 2022
A bounce back in equities and a better-than-expected IFO read from Germany. For today at least we’re seeing the return of some risk sentiment, as money piles into equities and bonds are sold off, pushing yields higher. NAB’s Taylor Nugent says there wasn’t anything obvious to prompt this risk turnaround, except perhaps some positive words from Joe Biden about the potential easing of tariffs with China. That might paint a happier long-term picture, but supplies from China remain an issue, with Beijing seeing an increase in COVID cases. Oil continues to be pulled in all directions, even as it becomes clear that Russian oil sanctions are having little effect. It’s PMI day today – perhaps we’ll see some upside surprises to add to the upbeat sentiment.
Monday 23rd May 2022
Will a new government have any market impact? NAB’s Skye Masters has been looking at how markets behaved, relatively speaking, in the first few months of a new government. Irrespective of history ,the reality is, of course, that global concerns are far greater this time round, with markets pulled between inflation concerns and recession fears. The Fed’s James Bullard doesn’t think a recession is the on the cards for the US and thinks inflation can be beaten by next year if they push rates fast enough this year. The UK demonstrated that, despite price pressures and very low consumer sentiment, people are still shopping. It shows the importance of data right now, as we all try to grapple with the direction of economies the world over.
Friday 20th May 2022
There was no bounce in equities today after the big falls we saw yesterday. NAB’s Taylor Nugent says its growing concerns about the US growth outlook, driven by earnings results and no uptick in economic data. Cisco has been the latest to downgrade their forecasts, blaming supply chains from the war and China’s lockdowns. But equity markets can normally see through short-term impacts, but not right now. Is the concern of over-reach by central banks part of the concern? And what does yesterday’s Australian employment data mean for inflation and the response from the RBA? There’s also a look at the minutes form the latest ECB meeting which ,again, highlighted the divide within the board about the need to act on inflation versus the impact on economic growth. Very much the question of the day.
Thursday 19th May 2022
We’ve seen big falls in US shares as major retailers issue profit warnings, based on inflation and supply chain worries. Investors responded quickly. Had they forgotten that inflation was a thing? It was a timely reminder, says NAB’s Ray Attrill, that headline inflation hits consumer spending, so consumer staples and discretionaries will feel the pinch. The UK’s CPI hit 9 percent, but was in line with expectations. Canada’s inflation number was higher than anticipated, however. Australia’s wage growth remains relatively subdued, but the RBA’s focus will be on today’s labour market data.
Wednesday 18th May 2022
Equity markets have rallied today, buoyed by positive retail numbers for the US. But NAB’s Rodrigo Catril says the sentiment really improved in APAC yesterday on news that Shanghai will reopen after three days of zero COVID infections. Markets turned when the Fed’s Jerome Powell spoke about pushing beyond neutral to curb inflation, but shares rebounded soon after. Britain’s job numbers would look fantastic at any other time but now – instead, lower unemployment and rising vacancies spells out further inflation risks which will encourage the BoE to move faster, perhaps. Even the cautious ECB has one member talking about a 50-basis point rate hike. Today Australia’s wage price index will be watched keenly because it could be influential in the RBA’s next move up in rates.
Tuesday 17th May 2022
There’s been a fair bit of volatility in equity and bond markets overnight. Stocks are generally down after swings back and forth through the session. NAB’s Ken Crompton says there’s a continuing tension between the Fed talking up rate rises and whether that will prompt a recession. The data flow hasn’t offered anything encouraging. China’s retail sales were well down the NY State Manufacturing Index was pulled down by a fall in new orders, and the European Commission, understandably, lowered their growth forecasts and upped their inflation expectations. Meanwhile oil pushed higher and wheat prices ha e been hit by an export ban from India. Today US retail sales will show whether inflation is hitting demand yet and Christine Lagarde will have a chance to talk-up a July rate hike in Europe. Plus the minutes of the last RBA meeting.
Monday 16th May 2022
There was a slight reversal in sentiment on Friday, with the US dollar losing ground, equities climbing and bond yields rising. NAB’s Tapas Strickland says news of the easing of lockdowns in Shanghai this week might have provided an excuse for this switch around, but news over the weekend could make this change in direction very short lived, with China relinquishing its staging of the 2023 Asia Cup (soccer). In Europe, Sweden and Finland have both announced they intend to join NATO. If that wasn’t enough to upset Putin, Ukraine won the Eurovision Song Contest. Today, eye swill be on China’s fixed asset investments, industrial production numbers and retail sales, and on the continuing debate about whether the Fed (or any central bank) can deliver a soft landing from the inflation battle without forcing a recession.
Friday 13th May 2022
US equities continue to take a hit as inflation concerns continue and two of the biggest contributors – the war and China lockdowns – show no signs of abating. The war won’t go away, with Sweden and Norway now pushing for fast-tracked NATO membership. Reports suggest Beijing is now significantly in lockdown, which could further damage the Chinese economy and foreign trade. Here we are, says NAB’s David de Garis, wondering how low shares will go before we see anything like the Greenspan put come into play! A bigger worry for the UK is the cost of living, with March GDP numbers showing the economy retracted, and it will almost certainly be worse in April. Also today, we compare and contrast the direction of house prices in the UK and New Zealand.
Thursday 12th May 2022
US inflation numbers didn’t fall as much as hoped, in fact the core number is up, making the job for the Fed that little but harder. There’s been a sharp response on the share markets, particularly for tech stocks, but less of a reaction in the bond markets. On today’s podcast NAB’s Skye Masters says there’s been a flattening of the yield curve, suggesting that the expectation is that the Fed won’t need to push further in its terminal rate. Meanwhile, Christine Lagarde has finally joined the ECB’s July rate-hike brigade, and the pound has taken a hit as Britain threatens to unilaterally pull out of a key component of the Brexit agreement with the EU, threatening a trade war.
Wednesday 11th May 2022
For a while today US shares were pushing higher, with tech stocks leading the way. Then as market close neared, prices started to fall and gains were effectively halved. NAB’s Rodrigo Catril says he is sceptical about hopes of a rebound, because the headwinds remain, particularly continued lockdowns in China, which will have a lag impact on the rest of the economy. How much of that lag will be reflected in US CPI later today? Meanwhile, the NAB business survey shows Australia is faring rather better than most of the world, right now.
Tuesday 10th May 2022
Markets are clearly concerned that there will be no soft-landing. There’s the big fear that rate rises won’t cut demand enough to compensate for inflation driven by supply chain disruption. The result, we’re seeing inflation expectations remaining high, stocks taking big hits and the US dollar possibly the only safe haven there is. So, what will turn this situation around? NAB’s Taylor Nugent says there has been no major data releases or news items to drive sentiment today, but risk-off uncertainty prevails. We have to wait for signs that inflation is starting to unwind. It might be way too soon, but signs of an easing of inflation in tomorrow’s US CPI would be very welcome.
Monday 9th May 2022
Equity markets continued their falls on Friday, driven by concerns that the FOMC will let the economy slip into recession if it’s needed to keep inflation under control, just as the BoE warned last week. NAB’s Tapas Strickland says some Fed speakers have suggested a faster rate of tightening will be needed if supply chain difficulties aren’t corrected in a hurry. Given the China and Ukraine situations, that seems unlikely. Inflation concerns are rising everywhere. Even the ECB is expected to hike rates soon, and though the RBA’s path is somewhat slower than most there are concerns that they too might be underestimating the hit inflation could make and will need to correct quickly. All in all, a lot of investors will be looking eagerly for any signs that supply chain problems are improving.
Friday 6th May 2022
Yesterday, as Jerome Powell gave the post-FOMC press conference, the US dollar strengthened, equities shot up and front-end bond yields fell sharply. Today, there’s been a swift reverse. The dollar is the highest in years, 10-year Treasuries are well over 3% and the share market has seen one of the biggest turnarounds ever. Does this suggest markets have a growing fear of a hard landing from the hawkish Fed rate path? NAB’s Gavin Friend says it is a challenging pathway for the Fed, but inflation will come down, hopefully, before causing too much turmoil in the economy. The risk to the economy was outlined by the Bank of England Governor Bailey, as they raised interest rates 25 basis points. Their forecasts make grim reading. And the Aussie dollar took a hit as risk sentiment soured. There will be a lot of interest in the projections in today’s Statement of Monetary Policy.
Thursday 5th May 2022
The FOMC announced a 50 basis point rate rise for the US. As NAB’s Skye Masters notes in today’s podcast, the market response was fairly muted until Jerome Powell gave his press conference shortly afterwards. One comment, that they were not contemplating a 75-basis point rise, sent bond yields diving lower and equities shooting higher. Skye says markets had priced well ahead for a hawkish Fed, now they are taking some of that pricing back. But uncertainty hasn’t fallen away, with or inflation signs in New Zealand’s employment data, in Australian retail numbers and with another day of rising oil prices. We can expect a less hawkish Bank of England later, but it’s still likely they will raise rates even with the cost-of-living crisis being faced in the UK.
Wednesday 4th May 2022
On today’s podcast NAB’s Ivan Colhoun talks through the RBA’s higher-than-expected rate hike yesterday. Taylor Nugent adds that it was clearly more than expected, given the rise in front-end bond yields after the meeting, buoyed on by more hawkish rhetoric from the RBA’s Governor Lowe after the meeting. Next it’s the FOMC, early tomorrow morning, with a 50 basis point rise still anticipated. The JOLTs numbers indicated the labour market is still very tight and the challenge will be to restrain wage inflation. Job numbers and wages data tonight and Friday might add fuel to the fire. This morning, lots of focus on wage inflation in New Zealand, with employment data out and a press conference from the RBNZ.
Tuesday 3rd May 2022
US 10-year Treasury yields snuck over three percent overnight, albeit briefly. But NAB’s Ray Attrill says this could be the psychological baseline that sees rates grow higher. The latest ISM showed a slowing growth in US manufacturing, the result of lockdowns in China, but the Fed is still expected to push ahead with a significant rise later this week. Before that, the RBA meets today and the expectation is that they’ll raise rates by 15 basis points, but some see an argument to push them up to 0.5%. Also, today, a flash crash in Swedish equities.
Monday 2nd May 2022
Last week finished with stocks well down in the US, particularly amongst high-growth tech-stocks. The reason, growing inflation concerns. NAB’s Rodrigo Catril says a 50-basis point hike from the Fed is very likely later this week, with growing market expectations that it could be followed by a 75-basis point rise next month. Meanwhile, there were further signs of growing inflation at the end last week that inflation, including a big rise in core inflation for Europe, rising producer prices in Australia and higher than expected wage growth in the US.
Friday 29th April 2022
The US delivered a sharp fall in GDP in the first quarter. It wasn’t expected and could naturally spark fears that recession could be coming to the US sooner rather than later. But NAB’s Tapas Strickland says ‘beneath the hood’ the numbers showed that the US economy was still performing relatively well, with the numbers dragged down by a larger negative trade balance and lower inventories. As a result, equities continued to push higher, along with the US dollar. Inflation fears are rising in Europe though, with a higher-than-expected CPI read for Germany. These concerns pushed front-end yields higher and forced the Riksbank to unexpectedly lift their rates.
Thursday 28th April 2022
Australian inflation rose more than expected yesterday. NAB’s Ivan Colhoun said it didn’t come as a complete surprise. NAB’s Business Survey has been showing rising input costs, and its likely inflation will rise till further in the next quarter. All that points to a high likelihood that the RBA will lift interest rates next week. Elsewhere, markets have had a temporary does of optimism, although NAB’s Rodrigo Catril says a resolution has to be found for Europe’s energy problems. There just aren’t enough global supplies to completely cut out Russia. US GDP and German CPI are two significant data releases today, along with the business activity outlook for New Zealand.
Wednesday 27th April 2022
Big market moves today, with US shares plummeting, bond yields also falling, and commodity prices rising sharply. European gas prices shot up on the news that Russia intends to turn off gas supplies to Poland and Bulgaria almost immediately, for not paying in Roubles. Whilst Europe debates whether they should ban buying Russian gas, perhaps the decision will be made for them. NAB’s Ray Attrill says recession fears on a global scale are also impacting sentiment, particularly as the war in Ukraine is clearly with us for some time, and China’s lockdown fears. Today, Australia’s CPI will be the numbers to watch. Could they rise enough to drive the RBA to a rise as soon as next week?
Tuesday 26th April 2022
There’s been a strong risk-off sentiment to the start of the week. NAB’s Taylor Nugent says equity investors belatedly “got the memo” on the Fed’s front-end loading for rate rises. Fears of more lockdowns in China, including Beijing, have added to the uncertainty, even though the fatality rates are low in comparison to many opened-up western nations. It seems China’s zero-COVID focus and the ongoing impacts of the Ukraine war are two issues that won’t slip away anytime soon. US GDP and Australian CPI will be two of the main focuses data-wise this week.
Friday 22nd April 2022
Markets are a little easier to understand today. Bond yields are back on the rise, given inflation expectations and more hawkish rhetoric from central banks. That’s hit equities. NAB’s Ken Crompton agrees that it’s a more text-book response to what we have been seeing, with equities and yields rising in tandem. There have been particularly strong moves for front end yields of European bonds, with some members giving a more hawkish timetable for rate rises. Today PMIs will be closely scrutinised to get a flavour of growth and conditions across Europe, the UK and USA.
Thursday 21st April 2022
Bond yields have fallen sharply overnight, but that doesn’t mean inflation expectations are going away, or does it? NAB’s Taylor Nugent says the Fed’s Beige Book, out overnight, highlights some examples of how inflation might be nearing its peak, but there are plenty to suggest otherwise. For example, Canada’s CPI and German PPIs, two sets of numbers showing prices are still rising, at quite a rate. NZ CPI numbers are out soon. Also today, a short-term reprieve for the Yen, whilst the Yuan falls to a six-month low. The Zero COVID approach had an impact on Japan’s export numbers, and will add to global inflation worries. And what about their attitude towards Russia? If you want a healthy dose of geopolitics, the French Presidential debate is also on today, ahead of the weekend election, and it’s close.
Wednesday 20th April 2022
It’s not something that will continue for long, but US bind yields have risen sharply today, and so have equities. Which one will give in first? Equities have risen because of strong earnings results but, as NAB’s Ray Attrill observes in today’s podcast, there’s still a long way to go. Bond yields are rising as Fed speakers up the ante on the path of interest rates, with one even raising the prospect of a 75-basis point rise at the next meeting. Meanwhile, oil is down sharply today, with the IMF downgrading global growth forecasts, except in Australia. There’s also discussion on the RBA minutes and the fall in the Japanese Yen.
Tuesday 19th April 2022
There’s a fundamental difference in the approach of the ECB and the Fed, as NAB’s Tapas Strickland explains on today’s podcast. Whereas the Fed is focused on inflation, the ECB is also concerning itself with growth. Could we see rising prices curtail that growth faster than anticipated? What about rising rates. The IMF has warned that rising rates will drive deleveraging that will have a marked impact on GDP growth. We also look at lockdowns in China and whether the rising bond yields in the US will offset any positive news to come from earnings results this week.
Thursday 14th April 2022
Despite 50 basis point hikes by the Bank of Canada and the RBNZ over the last 24 hours, bond yields haven’t moved a great deal. NAB’s Gavin Friend says the market has taken a bit of a breather, which has offered a reprieve for stocks, with the NASDAQ climbing 2 percent at close. The path is certain for Canada and New Zealand, but it’s a less clear direction for the ECB, which meets tonight, with no moves expected as Europe struggles with rising energy prices and the impact of Russian sanctions. Similarly, the UK has just reported the highest CPI read in 30 years and it will only get worse, but the cost-of-living squeeze is making it hard for the Bank of England to look at big moves in a hurry. Today’s employment numbers for Australia will be keenly watched by the RBA, who will be looking at prospects for wage rises driven by an even tighter labour market.
Wednesday 13th April 2022
US inflation rose as expected, but there’s still been a reaction in the bond markets. NAB’s Taylor Nugent says investors latched onto the core CPI read coming in slightly softer than expected or feared. The subtly of the change wasn’t picked up by equity markets which fell, pushed lower by rising oil prices and the realisation that inflation is still here and could get worse. The NAB Business Survey yesterday demonstrated how Australia isn’t exempt, as Ivan Colhoun explains on today’; s podcast. Later on, two central banks who might well lift rates by 50 basis points – the RBNZ and the Bank of Canada.
Tuesday 12th April 2022
US bond yields continue to career higher. ‘IT was another blistering night’ says NAB’s Tapas Strickland, with 10-year Treasury yields reaching a three-year high. With no new news, he says, it’s a continued reaction to the hawkish Fed agenda. But could it all backfire? The Fed has never had successive 50 basis point rises. There are still concerns that they could spark a recession if they move too quickly, particularly as supply chain difficulties won’t be resolved by monetary policy. And the rising COIVD cases in China suggest there will be more supply constraints to come. With inflation front and centre of everyone’s attention right now, US CPI figures are obviously the numbers to watch for.
Monday 11th April 2022
Although there’s clearly volatility in markets, NAB’s Ray Attrill says the common thread is that yields are still rising. Even if the inversion in the curve has dissipated, the fact remains 10-year yields are at multi-year highs as inflation fears grow and central banks respond. Food prices have risen almost 13 percent in one month, even worse if you cook with vegetable oil. This might be reflected in China’s CPI numbers today, and for the US mid-week. The war will have a strong influence on this, and there are no signs it will dissipate anytime soon. Meanwhile several central banks meet this week, including the ECB. Markets are priced for a 50-basis point rate hike by the Bank of Canada.
Friday 8th April 2022
As bond yields continue to rise, particularly in the US, it seems there’s not much impact from all the hike talk on consumer spending just yet. Consumer credit numbers in the US shot up in February, much of it revolving credit. Will that just add to the Fed’s concerns and the accelerated rate of hikes, which has seen bond yields push ever higher. Ken Crompton says NAB’s forecast is for 10 yields to reach 3 percent by the end of the year, but there is still considerable room for movement. Yesterday’s Australian balance of trade numbers were a surprise, with much higher imports pushing February’s surplus down by $4.5 billion from the month before. Whilst the ECB minutes overnight reflect a more hawkish approach, but a bank still heavily divided on the road to take.
Thursday 7th April 2022
Bond markets have reacted sharply and briefly to the FOMC minutes this morning, which suggested the Fed might start slashing its balance sheet sooner rather than later. This added to the sentiment expressed by Lael Brainard earlier in the week, which saw the yield curve steepening a little. Phil Dobbie asks NAB’s Gavin Friend what these moves are telling us, and why the impact has cut short the strengthening of the Aussie dollar. Maybe strong trade numbers today will turn it around again. There’s also discussion about German factory orders and tonight’s ECB minutes.
Wednesday 6th April 2022
The RBA has lost its patience and wants to move fast, but how fast and how far? On today’s podcast NAB’s Ivan Colhoun says it’s unlikely we’ll reach the 3% terminal rate that markets are anticipating, or at least with the expected rapidity. Taylor Nugent – new to the Morning Call – looks at the market response to words from the Fed’s Lael Brainard overnight, who talked about balance sheet reduction, possibly as soon as next month, at a faster pace than before. The Fed minutes today might add more substance to interest rate expectations, whilst two members of the RBA front a senate hearing today, where questions will not doubt be asked about the sudden pivot in policy signalling.
Tuesday 5th April 2022
The hope of peace in Ukraine is slipping away as more evidence of war crimes emerges, suggesting diplomacy could take some time. The Euro fell as expectations rose for more sanctions against Russia, which also pushed oil higher. NAB’s Tapas Strickland says negotiations are continuing though and we shouldn’t underestimate the chance for some sort of truce to be found. Meanwhile, inflation remains a global concern, particularly in the US. The inverted yield curve is also a cause for consternation. Tapas suggests the FOMC should have moved sooner on rates and speculates that the RBA will be watching and learning. Will the word ‘patience’ disappear from today’s RBA statement?
Monday 4th April 2022
Non-farm payrolls gave the hawks at the Fed the ammunition they wanted, and bond yields have responded. NAB’s Rodrigo Catril says the data on Friday has cemented in the expectation of a 50bp rate hike at their next meeting. The ECB is still reticent to talk about bringing their schedule forward, even though Friday’s Eurozone inflation numbers were a lot higher than expectations. Today we get to hear how the BoE’s Andrew Bailey expects to balance rising inflation against an economy that has already slowed (possibly to zero). And what of the RBA? Will tomorrow bring a signalling of a faster path to a rate hike? Also today, has oil fallen too far? The situation in Ukraine looks like it won’t end soon, yet oil is less than 10% higher than before the invasion.
Friday 1st April 2022
There’s a hefty emphasis on oil and gas this morning. Putin is demanding payment in Roubles from today, but there seems to be some caveats and so the impact isn’t as pronounced as you might expect. More significantly, President Biden has announced a six-month commitment to a daily draw down from the US strategic oil reserves. Will it be enough to make a difference? NAB’s Ken Crompton says the markets seem to think so, with a significant fall in the WTI price this morning. Also today, we look at China’s PMIs, which are firmly in contraction territory as they pursue their zero-COVID policy. And tonight, non-farm payrolls, where the focus might be more on wage inflation than the jobs numbers themselves.
Thursday 31st March 2022
There was hope in market pricing earlier in the week that some sort of resolution over Ukraine could be sought soon. But those hopes faded when Russia started bombing regions it had indicated it would pull back from. Today, oil prices are back up and US equities have been hit hard. It’s not all down to Ukraine though. Inflation rates in Germany and Spain are through the roof. As NAB’s David de Garis points out, they have risen more in a month than Australia has seen in a year. That presents a special challenge for the ECB, who have to control inflation in an environment where consumers will be facing a cost-of-living squeeze.
Wednesday 30th March 2022
Markets have responded perhaps a little too favourably to peace negotiations between Russia and Ukraine in Turkey overnight. There wasn’t a concrete outcome, yet the Euro is riding high, stocks have risen sharply and bund yields are up. NAB’s Ray Attrill says even if some sort of resolution is found soon, sanctions will remain for some time to come. Meanwhile, front end yields continue to rise in the US as more Fed speakers talk-up the prospect of a 50 basis point hike at the next FOMC meeting. We saw a brief 5-10 year yield inversion, but blink and you missed it. Also today, NAB’s Ivan Colhoun talks through Josh Frydenberg’s pre-election budget.
Tuesday 29th March 2022
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There’s continued volatility in US bond markets, with significant flattening of the yield curves. Is this flagging a future recession? NAB’s Rodrigo Catril says the direction of travel is looking that way, although it’s too early to tell. But the rise in 2-year yields shows that markets are expecting a more aggressive stance by the Fed, whereas in the UK yields are falling after the Bank of England’s Andrew Bailey indicated a less aggressive stance on rates given the cost of living squeeze the country is facing. Also today, how the Bank of Japan is tackling rising bond yields, the reasons behind today’s sharp fall in oil, what will Australia’s retail numbers show today, and what to expect from today’s budget (beyond what has already been made known).
Monday 28th March 2022
The sell-off of bonds continues, with a further spike in yields at the end of last week. NAB’s Tapas Strickland says it’s because there is heightened expectations that the Fed will lift rates even faster than previously thought, possibly even four 50 basis point rises this year. Yet the share market – in the US and Europe – continues to rise. We look at why in this morning’s podcast, plus Shanghai in lockdown, how the Yen has lost its safe haven status and the ongoing impact of the war in Ukraine.
Friday 25th March 2022
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It's a very mixed and confusing day today. “It’s rare that you see equities and bond yields rise at the same time”, says NAB’s David de Garis, but maybe markets have optimism that the Fed’s aggressive stance will put the inflation genie back in its bottle. Or investors are a little unsure where to park money right now. Or, perhaps, investors see anything in the US to be safer than Europe, where inflation will be driven higher through fuel shortages. Meanwhile, PMIs are a little softer but still in growth territory, most notably for services in UK and the USA, a reflection of a braver stance on post-COVID re-openings. The major currency move has been a fall in the Yen, reflecting the widening gap between yields between Japan and the US. In amongst all the confusion, the Aussie dollar is holding its own.
Thursday 24th March 2022
Bond yields have come back a fair bit today. NAB’s Gavin Friend says it’s just a recalibration after the massive hikes we’ve seen over recent days. The tone from the FOMC certainly hasn’t changed. Meanwhile oil prices have risen sharply, in part because President Putin has threatened that Europe should pay for gas in Rubles, rather than dollars or Euros. If it’s an attempt to get the West to roll back on sanctions he might be disappointed, with Biden meeting with the EC, NATO and G7 over the next day or two, where the one question on everyone’s mind will be, “what do we do next?” And for an early sign of the impact of the war on Europe, the UK and USA, flash PMIs are out later on.
Wednesday 23rd March 2022
Just three weeks into March and US two-year bond yields are up 74 basis points, says NAB’s Tapas Strickland, on today’s Morning Call. Will the Fed be happy to see the market responding in this way, particularly as there’s less growth later in the yield curve? Does that suggest there are some concerns about whether Fed can keep inflation in check, without causing a recession. What does history tell us about the chances of that happening? Meanwhile the Yen is a casualty from all this bond action, with their central bank a long way off any sort of tightening. And the rise in oil prices has stalled today, we look at the reason. Today, UK’s CPI is the main set of numbers. Inflation and more of it.
Tuesday 22nd March 2022
Bond yields have moved sharply higher as markets expect the Fed to move faster on rate rises and, potentially, drawdowns on the balance sheet. After Jerome Powell spoke overnight, NAB’s Ray Attrill says there’s now a much stronger expectation that April’s meeting will see a 50 basis point rate hike and, perhaps, the same again at the next meeting. Could the ECB also be stepping up its plan of action? Christine Lagarde talks later today. Inflation worries won’t be helped by the rise in oil prices, with no obvious short-term solution. An increase in production from Saudi Arabia seems unlikely because they are upset about the US withdrawal of arms sales over the war in Yemen. The Ukraine crisis looks set to continue, and any step up in action by Russia could increase the extent of sanctions including the possibility of an oil ban by the EU.
Monday 21st March 2022
Nobody really knows how the war in Ukraine will play out, but we kick off the week with reports from Turkey that an understanding between Ukraine and Russia might be closer. There’s even speculation that the two leaders will meet face to face – obviously at opposite ends of a very long table. On today’s Morning Call Phil Dobbie talks to NAB’s Ray Attrill about the market optimism right now, with equity markets rising despite the prospect of many rate hikes this year. Supply chain disruption looks set to be with us for longer, with more lockdowns in China over the weekend. But it's the words from Fed speakers that will be the focus of attention at the start of the week – will they support the hawkish stance of the FOMC last week or try to rein back a bit?
Friday 18th March 2022
After a very hawkish Fed yesterday, the Bank of England has presented a much more guarded approach for the rest of the year, whilst delivering the third interest rate in a row. NAB’s Gavin Friend talks about why the central bank has a reluctance to signal too much right now. Meanwhile, are markets concerned that the Fed is moving too fast? There’s discussion about Aussie unemployment numbers too and what the strong numbers mean for the RBA. The Bank of Japan is the next central bank, but inflation driven by a tight labour market is much less of a concern for them. Oil prices are rising as hopes of a rapid end to the war dissipate but there are still irons in the fire, including talks between President Xi and President Biden.
Thursday 17th March 2022
The Fed has met, they’ve lifted rates in the US, and given a hawkish outlook for rate increases this year and next, with a terminal rate of 2.8 percent by the end of next year. The statement and subsequent press conference left some questions unanswered. NAB’s David de Garis points out how they plan to get inflation under control without unemployment rising, even by the end of 2024. Markets reacted swiftly to the announcement, with sharp rises in front end yields. The Bank of England meets later today, and inflation numbers overnight highlight the size of the task ahead for the Bank of Canada. And oil prices are falling as hope remains that a solution can be found to the war in Ukraine.
Wednesday 16th March 2022
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Chinese equities have been hit hard again today, despite data showing very strong retail sales, industrial production and fixed asset investment. NAB’s Ray Attrill says it’s a mix of increasing COVID cases, causing more lockdowns, and China’s position over the Ukraine war. They want to keep the peace with Russia without attracting sanctions from the west. Is it a sign of the shifting balance of influence that China is negotiating with Saudi Arabia to buy oil in Yuan? Besides the war and COVID, inflation is still a major concern, with the FOMC meeting in less than 24 hours. 25 basis points is more or less locked in, but it’s the rate of future rises and the associated commentary that will attract attention in these uncertain times.
Tuesday 15th March 2022
China and the US have been meeting, with the hope that talks can resolve the war in Ukraine. But China is showing little sign of offering total support for the west. NAB’s Tapas Strickland wonders whether they’ll need to, with talks between Russia and Ukraine at least offering the opportunity “for an off-ramp” from the conflict. Oil prices have fallen today, mainly because of further lockdowns in China as the country continues to pursue a zero-COVID strategy. That’ll add to supply chain problems, which will further add to inflation pressures. No surprise then that bond yields have risen sharply ahead of the FOMC later this week.
Monday 14th March 2022
Fighting got very close to the Polish border over the weekend, with Russian attacks on a training base. NAB’s Rodrigo Catril says it’s hard to see the volatility across all asset classes calming down as the uncertainty in Ukraine remains. Although talks are ongoing there has been little grounds for hope so far. This makes it all very tricky for the FOMC, whose members will be submitting their dot point predictions for future rate rises, in an environment where inflation is rising and consumer confidence is falling.
Friday 11th March 2022
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The war isn’t going to end anytime soon. That was clear with the high-level peace talks on Turkey breaking down after just 90 minutes, acting as nothing more than a conduit for untruths. That’s partly why we’ve seen a shift back in sentiment. The risk-on mood yesterday was a one-off. On the podcast today NAB’s David de Garis talks through the other big turnaround – the attitude of the ECB, who have speeded up their tapering schedule and the opened the door to earlier rate hikes. As a result, there have been sharp moves in peripheral European bonds, such as Italy, Greece and Portugal.
Thursday 10th March 2021
Looking at the markets this morning you might be mistaken for thinking Vladmir Putin had resigned, but sadly not. The war is still on, and just as messy as ever, but equities have risen, oil is down and bond yields are rising. NAB’s Gavin Friend talks us through this broad reversal in risk sentiment, which he says is being driven by a number of factors, but nothing concrete. There’s also discussion about the ECB meeting today, and the EU’ s plans to issue bonds to reduce dependency on Russian resources. Plus, did Philip Lowe’s speech yesterday indicate a rate rise from the RBA this year was more likely, or less? And US inflation numbers tonight.
Wednesday 9th March 2022
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Markets have been encouraged by a possible solution to the Ukraine crisis. The Kremlin had suggested a raft of measures, including a ban on NATO membership. Today, Ukraine’s President Zelenskyy suggested NATO wasn’t a priority. NAB’s Rodrigo Catril says the hope that a peaceful solution might be possible saw a strong risk-on mood hitting markets – although the Aussie dollar is down. Commodities continue to rise, of course. And the EU is meeting this week to discuss the issuance of bonds to cover spending on arms and to end a reliance on Russian energy. Also on today’s podcast, NAB’s Ivan Colhoun talks through yesterday’s NAB Business Survey.
Tuesday 8th March 2022
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Day 12 of the war in the Ukraine brought more violence and uncertainty. Russia’s offer of a temporary ceasefire so residents could escape was given short shrift when it was clear the escape route was to Russia or Belarus. It was a strong risk-off session across all asset classes, with Brent getting over $139 for the first time since 2007. The Aussie dollar has lost a lot of ground, with NAB’s Ray Attrill saying the US dollar is now the pre-eminent safe-haven currency. Even the Yen has failed to perform its traditional safe-haven role, demonstrating how far and wide the impact of the oil price shock is having on global markets, with no signs of a way out anytime soon.
Monday 7th March 2022
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For a while over the weekend it seemed like Vladimir Putin was suggesting the west had already declared war with it imposition of sanctions, but, in context, he was really saying it was like a declaration of war, but a no fly zone would be a declaration of war. Whilst that’s a relief, we can all do without that sort of escalation, the uncertainty of the future outcome remains and we can expect more volatility this week as the fighting continues. Today Tapas Strickland talks about the impact of rising commodity prices and the response from central banks, including the ECB that meets this week. Australia meanwhile, seems to be enjoying the benefits of distance from the trouble in eastern Europe, with the Aussie dollar almost 5 percent up on the Euro over the last week. How long will this last?
Friday4th March 2022
The Aussie dollar was one of the winners today, even as the US dollar lurches to highs not seen since the early days of pandemic. It’s been driven by demand for coal and iron ore, as almost all commodities respond to the shock of supply cuts from Russia and Ukraine. Jerome Powell was back on Capitol Hill today, again reiterating the need to control rising inflation. Jobs continue to be part of the problem (with the ISM read overnight showing a fall in services employment) along with rising commodity prices. NAB’s Gavin Friend points to studies from the NY Fed, one noting that the global supply chain pressure index eased in February , a sign, he says, that global supply chains will repair. The question is, how quickly? The ISM numbers overnight didn’t show any improvement.
Thursday 3rd March 2022
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It almost seemed like business as usual for markets overnight. Equities rebounded strongly and demand dipped for bonds, pushing yields higher. As NAB’s David de Garis remarks, it all seems a little topsy-turvey. Investing in shares doesn’t seem a logical choice as the Fed chairman indicated that the path of rate rises in the US will continue unabated, just as the Bank of Canada lifted its rates for the first time since the pandemic. But away from equities, there are still clear signs of disruption from Ukraine, with oil prices continuing to increase, coal rising higher and wheat prices soaring.
Wednesday 2nd March 2022
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'What a night for market moves', says NAB’s Tapas Strickland, on today’s Morning Call. With no sign of an easing of the conflict in Eastern Europe, risk sentiment has risen sharply in the last 24 hours, with bond yields way down, oil peaking higher, the US dollar gaining strength and huge volatility on equity markets. Oil prices are rising even without export bans because trade houses are reluctant to touch Russian cargo. Today we look at how the uncertainty will translate to central banks. NAB’s Ivan Colhoun says the RBA continues to be patient, given that inflation is not as strong as elsewhere. Like all other central banks they will be factoring in the uncertainty from the war. The Bank of Canada might moderate their plans tonight on that basis, and Jerome Powell will be asked for his approach when he fronts up to the House Committee in the US later today.
Tuesday 1st March 2022
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The sanctions against Russia are taking their toll on Russia, with moderate contagion to the rest of the world, but its early days. NAB’s Rodrigo Catril says the reaction in markets highlights how much more Europe is exposed, with increasing demand for US dollars. On today’s podcast there’s discussion about the impact on markets, who is exposed to risk, whether prices reflect an event which could rapidly escalate, the role China will play and the fate of the Aussie dollar in the midst of all this.
Monday 28th February 2022
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There will be a shift back from the optimism of Friday, when markets were responding to the weaker-than expected sanctions being imposed on Russia. That’ll change today as access to the Swift system is denied to most Russian banks. NAB’s Ray Attrill says this, and the limitations on Russia’s central bank to make use of its foreign reserves, will have a profound effect on their economy. In today’s podcast he talks through the flow-on effects for other economies, including Australia and emerging markets. Can we expect a stronger US dollar for longer? And how will it impact the roadmap for central banks? And should we be seriously contemplating the risk of stagflation in the global economy?
Friday 25th February 2022
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The Russian President surprised many with his broader attack on Ukraine yesterday. The UK Prime Minister called it Putin’s ‘squalid venture’, before announcing further sanctions, repeated by Joe Biden, including freezing more bank assets, stopping Russian trades in pounds and dollars, and ending a dependency on Russian oil and gas. The aim is to squeeze Russia out of the global economy, but that’s a long-term game in what could be a very short war. Today NAB’s Gavin Friend talks through the market impact, the influence of China, the inflation concerns and the likely response by central banks.
Thursday 24th February 2022
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The Hitchhikers Guide to the Galaxy has the words ‘Don’t Panic’ emblazoned on the front. NAB’s David de Garis is more familiar with the words of Lance Corporal Jones, who frequently offered the same advice. It seems markets have taken that advice for now, perhaps because there’s been no significant deterioration in the Ukraine crisis. Still, oil prices are up, and equities are down, but the focus has, by and large, switched back to concerns about inflation. The RBNZ only lifted rates 25 basis points, but they have raised the terminal rate and expectations for a faster track this year. Australia's slower wage inflation came in as expected, supporting the RBA’s more patient approach, whilst more ECB members are getting nervous about inflation growth in Europe. Rising prices are hitting consumer confidence there.
Wednesday 23rd February 2022
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The news over Ukraine overnight is confirmation from Putin that he supports separatists who want to take control over the wider Donbass region, which could see Russia invading further into Ukrainian territory. The market response so far has been fairly measured, but an escalation could see the West move beyond the current sanctions. One of those sanctions is shelving approval for the Nord stream 2 pipeline, which arguably hurts western Europe more than anyone.
NAB’s Ray Attrill says the geopolitical uncertainty could dissuade the RBNZ from contemplating a half percent rate hike today. Australia’s wages data is out later today. Whatever the final number it will be well below the rises seen elsewhere, perhaps justifying the RBA’s more patient stance.
Tuesday 22nd February 2022
Will Putin’s declared support for separatists in the Donbass region be the false flag event the West has been concerned about? Does that mean an invasion is imminent? Market reaction hasn’t been strong so far, except for a rise in oil prices, but maybe that’ll change as the US returns from the President’s Day holiday. NAB’s Tapas Strickland says the actions overnight has certainly reversed the optimism yesterday, when a diplomatic solution looked more hopeful. Meanwhile, PMIs in Europe were really strong, which will add to the inflation pressures and could lead to a more hawkish ECB. US PMIs are out later on, and we’ll Christopher Kent from the RBA later today. What’s he going to say about QE and interest rates?
Monday 21st February 2022
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There’s more uncertainty in the markets as tensions mount still further over Ukraine. Words from Biden and Johnson won’t help for the start of this week, alongside news that Russian troops on military exercises in Belarus are not going home anytime soon. NAB’s Rodrigo Catril says conflicts often have a short-lived impact on markets, but wonders whether this will be different, given the scale of it and the inflationary impacts it would have on Europe. Meanwhile, words from the Fed’s John Williams over the weekend have reduced the likelihood of a 50 basis point rate hike in the US next month. And for those looking of hard numbers there’s a plethora of PMIs, except the US, where it's President’s Day today. Plus why NZ bonds could be in demand.
Friday 18th February 2022
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There are mixed signals in the markets today. Equities have taken a hit from continued uncertainty over Ukraine, but oil prices are down, perhaps because negotiators are close to agreeing a deal over Iranian oil. NAB’s David de Garis says many traders will also be assessing their positions ahead of a long weekend in the US. Yesterday’s FOMC meeting seems to have shortened the odds for a half percent rate hike from the Fed, although there’s been a lot of strong US data since that meeting. Words from the ECB’s Philip Lane have reinforced the idea that the bank is rethinking its position on holding off on rate rises. Today’s main stats are the retail numbers for the UK, which are unlikely to bounce back as quickly as we saw in the US yesterday.
Thursday 17th February 2022
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There are no signs of inflation abating just yet, or of Vladimir Putin pulling his troops from the Ukraine border. That means there’s more caution in the markets. On today’s Morning Call NAB’s David de Garis talks through the likely market response if Russia does invade and Biden responds with sanctions. Meanwhile, inflation is creating enough of a concern for everyone, with CPI up in the UK, South Africa and Canada, with rising US retail sales adding to the pressure in the US. In Europe a couple of ECB members are starting to get nervous about house prices. Only in China do they seem to have inflation under control, and the potential for more easing by the central bank. Whilst in Australia the Labour Market data will be the main focus this morning.
Wednesday 16th February 2022
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There’s a bit more positivity in the markets today, certainly since yesterday morning, because Russia hasn’t invaded Ukraine, and talks continue. But NAB’s Rodrigo Catril says there is still plenty to be cautious about. NATO can’t confirm Russian troops have moved from the border, as Putin had claimed, and the central issue of Ukraine’s right to NATO membership remains unresolved. Still, markets have taken it as good news, offsetting any inflation concerns that should have arisen from US PPI numbers yesterday. UK jobs numbers also showed wage pressures and today, loads more, inflation and producer prices for many parts of the world. We also get to see the RBA’s Debelle and Bullock in front of the senate tonight.
Tuesday 15th February 2022
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The rhetoric is still that Russia is on the brink of war with Ukraine, although, as NAB’s Ray Attrill points out, markets took some comfort from a television event that saw Putin saying he supported continued diplomat efforts with the west, but have since repsnded to military movements that suggest something is about to happen. For a while, the talk of more talks allowed a little more focus to return to central banks, with the Fed’s James Bullard again calling for a front loading of hikes because the policy is out of sync with the economy. Today, with inflation still on the rise just about everywhere, including New Zealand, US producer prices will be watched keenly later today, along with UK wages.
Monday 14th February 2022
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There was a swift response on Friday to speculation that Putin would launch an attack on Ukraine as soon as this week. The US dollar gained ground at the expense of the Euro, whilst bond yields, which had risen on the upside inflation surprise on Thursday, came falling down again. NAB’s Tapas Strickland says more negative new over Ukraine will add to the strength of the US dollar, but similarly, markets could slowly reverse their positions if weeks go by without any resolution. Meanwhile, second guessing the actions of central banks remains a focus on markets, with Aussie bond yields shooting up on Friday as Philip Lowe suggested a rate rise this year was “consistent with their central scenario”.
Friday 11th February 2022
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Markets reacted swiftly to a higher-than-expected rise in the US CPI. NAB’s Gavin Friend says its unlikely that the Fed will raise rates by half a percent in March, even though many now expect it and the Fed’s Bullard has said he isn’t opposed to the idea. Gavin’s point, if they were to do that, why haven’t they stopped QE dead in its tracks? Today’s podcast looks at the market reaction in the US and yield movements in Europe. There’s been more discussion about Ukraine, but one British former diplomat has described the whole thing as a Russian fishing trip. And new Yuan loans have seen a heap of extra money piled into the Chinese economy.
Thursday 10th February 2022
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Bond yields have fallen back a bit a little ahead of US CPI numbers later on today. Phil Dobbie asks NAB’s David de Garis what he will be looking for in the data, to give a clearer picture of where inflation is heading. In particular, are we seeing signs that supply chain difficulties are easing? Central bank speakers are out in force, but its pretty clear now that few have a clear picture about the path beyond the next hike. Equities are up for a second day, driven by positive earnings, but with uncertainty over forward guidance they too will be susceptible to a move in tonight’s CPI.
Wednesday 9th February 2022
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In the absence of any big statistical releases markets are treading water ahead of US CPI numbers later in the week. US 10-year Treasury yields hit a two-year high for a short while, whilst equities have been choppy in face of all the uncertainty. How much will the Fed lift rates in March? What will be the end rate? NAB’s Ray Attrill says focus is now also shifting to the actions of the ECB. Even though Christine Lagarde is still talking about a gradual shift in policy, other ECB members are not so sure and European bond yields have been rising accordingly. Much of the focus today will continue to be on inflation prospects, in the NAB Business Survey and in the NFIB small business survey.
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In the absence of any big statistical releases markets are treading water ahead of US CPI numbers later in the week. US 10-year Treasury yields hit a two-year high for a short while, whilst equities have been choppy in face of all the uncertainty. How much will the Fed lift rates in March? What will be the end rate? NAB’s Ray Attrill says focus is now also shifting to the actions of the ECB. Even though Christine Lagarde is still talking about a gradual shift in policy, other ECB members are not so sure and European bond yields have been rising accordingly. Much of the focus today will continue to be on inflation prospects, in the NAB Business Survey and in the NFIB small business survey.
Monday 7th February 2021
Friday’s non-farm payrolls data showed how more people returned to work in the US whilst Omicron saw the highest wave of COVID-19 infections across the country. Over the border Canada saw a fall in jobs in the face of continuing lockdowns. Phil Dobbie asks NAB’s Rodrigo Catril whether this means US jobs will bounce back further next month, and what does this mean for inflation, with the US data showing another increase in hourly wages. China is back at work today, with the possibility that they will add to the rising cost of oil as they seek to replenish dwindling reserves.
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Friday 4th February 2022
The Bank of England is certainly all out to stop any risk of wages pushing inflation out of control. The decision was one vote away from a half percent rate rise, with NAB’s Gavin Friend saying the bank is trying to send a firm signal, even though the eventual number of rises this year might fall below current market expectations. The rise comes at a time of strong headwinds for UK households and the broader economy. Meanwhile, a strong reaction on bond markets to the ECB meeting. The announcement itself wasn’t a surprise, but some ground was given during the press conference suggesting the ECB might move faster than they have been letting on. Tonight, of course, non-farm payrolls. Before that, the RBA Statement of Monetary Policy.
Thursday 2rd February 2022
You could say its the best of times and the worst of times, with a rampant jobs recovery tempered by high inflation. Certainly, two central banks have a different perspective on the underlying economic strength. As NAB’s David de Garis discusses on today’s podcast, the Bank of England are expected to raise rates today, whilst the ECB will continue to sit on its hands with Christine Lagarde, only yesterday, continuing to argue that inflation is temporary. Meanwhile, yesterday the RBA’s Philip Lowe finally admitted that a rate rise this year was plausible. Overnight we saw staggering earnings results from Google and disappointing jobs data in the US. Omicron almost certainly contributed to both of those outcomes.
Wednesday 2nd February 2022
The RBA is still reticent to signal a rate rise this year, even as they lift their inflation forecasts. NAB’s Ivan Colhoun says a lot rests on what Governor Lowe has to say today. The ECB is also playing it cool, but with 2-year German Bund yields climbing higher than the loan rate its clear the markets don’t agree with them either. NAB’s Rodrigo Catril talks through the latest data from Europe and the US, and reasons why equities are so much calmer and why the Aussie dollar has bounced back today.
Tuesday 1st February 2022
It seems more likely than not that the RBA will announce an end to QEW today. NAB’s Tapas Strickland says core timed mean inflation is running two years ahead of the RBA’s forecasts which suggests a rate rise this year is also likely. The front end of the yield yield curve rose a little in the US after Raphael Bostic argued for a 50 basis point rate rise in March, although he retreated a little form those remarks today. Inflation is rising in Europe, with figures out just in time for the ECB this week, and the BoE will almost certainly raise rates too. So is inflation the only driver now? What if the rates push major economies into a downturn?
Monday 31st January 2021
Whilst it was quite a night for Rafael Nadal, Friday had a less positive ending for the Aussie dollar, falling below 70 US cents to its lowest level since mid-2020, despite rising commodity prices. NAB’s Ray Attrill says the sharp fall could be the result of portfolio rebalancing by Aussie investors, which means it could stay low today but recover after month-end. We’ll see. Meanwhile equities bounced back in the US on Friday but markets are still choppy. Wages grew slightly less than expected in the US in Q4 and consumption has slowed, which makes the path for interest hikes a little murkier. All eyes will be on the RBA tomorrow, with markets still expecting rate rises this year. Will the RBA join the group-think? And China takes a holiday this week, we look at the impact that could have on the Aussie dollar, as we welcome in the Year of the Tiger.
Friday 28th January 2022
There has been quite a turnaround after the sharp falls in share prices and the rise in bond yields that we saw kicking off during the Jerome Powell press conference after the FOMC yesterday. Today, bond yields have been falling and shares attempted a climb back. So, given the Fed delivered exactly what was expected, why the strong market reaction. NAB’s Gavin Friend says markets were surprised by the hawkishness of the conference, but have perhaps since evaluated the vagueness of what was said. There was no timeline or detail on the number of rate hikes, for example. Today’s GDP numbers for Europe will provide evidence of the sharp contrast with the US, but that is expected to narrow as the year progresses.
Thursday 27th January 2022
The FOMC has met and reaffirmed that rates will rise from March. NAB’s David de Garis says it was exactly what the markets were expecting, although the response has been a rise in yields and a fall in equities. Jerome Powell was more reticent to talk about the speed of tightening beyond the next meeting, given the uncertainties that remain. The Bank of Canada will also hike rates soon. Also on today’s podcast, what does the US widening trade deficit mean for their GDP numbers out later today, how will The RBNZ react to today’s inflation numbers, and Brent oil hits $90. Where to from here?
Tuesday 25th January 2022
Markets have been gearing up for the FOMC meeting this week, but for a while at least tensions over Ukraine seem to have driven a strong risk-off push, with significant falls in share prices, a fall in bond yields and, to an extent, the US dollar seen as a safe-haven. But as the session progressed there was some re-evaluation of the risk, with shares and bond yields regaining some of the lost ground. As to the Fed, NAB’s Ray Attrill says the rising inflation is a major political headache for the Biden administration, so he’ll be eager to see the FDOMC do what it has to do to keep price sunder control. The question is, what will it do to the growth of the economy in the process?
Monday 24th January 2022
On today's podcast: Curiously bond yields retreated at the end of last week even though the assumption remains that the Fed will signal a March hike. NAB’s Tapas Strickland says the fall in yields is a response to the sharp sell-off in equities at the end of the week which is, itself, a response to the rising interest rate environment. Locally, the CPI numbers for Australia tomorrow will put the RBA’s timeline for rate rises into sharp focus. Global PMIs today might have less influence given they are influenced by transitory factors, such as lockdowns, and the focus on the Fed.
Friday 21st January 2022
Australia’s job numbers were well above expectations yesterday. NAB’s Ivan Colhoun talks about what this means for the RBA, who are still at odds with the market on their timetable for rate hikes. NAB’s David de Garis in London talks about the move up in equities and bond prices this session, suggesting it is likely to be nothing more than a bounce. The expectation is still that the Fed will end QE and move to rate hikes swiftly this year. It’s a less definitive picture in Europe, with the ECB minutes highlighting the divided opinions of the board. UK and Canadian retail numbers are out later today.
Thursday 20th January 2021
The sell-off of US bonds has halted, temporarily, but it continues in Europe, particularly in the UK where high inflation numbers will heighten the Bank of England’s resolve to raise rates next month. Canada also reported a higher-than-expected level of CPI, increasing the expectation for a rate rise there next week. In Germany, 10-year bund yields moved into positive territory for the first time since 2019. As NAB’s Gavin Friend says, it’s not just a US dynamic, as central banks attempt to grapple with inflation. But what of Australia? Labour numbers today are expected to show the unemployment rate fall to 4.2%. Given many parts of the world are seeing wage-push inflation, could we see prices rise faster than anticipated?
Wednesday 19th January 2021
US bond yields are now at their highest levels for two years, with equities now joining the sell-off, particularly for tech stocks on expectations of rising bank rates. NAB’s Rodrigo Catril says markets oil is also rising sharply on the expected rise in demand in a post-COVID area, or at least a time when we learn to live with the virus. The UK has shown how that can be done, with better-than-expected employment numbers, despite the rising number of cases in late 2021. So, how prepared is Australia to live with COVID? Today’s monthly consumer confidence numbers will give us an indication.
Tuesday 18th January 2022
Bond yields continue to rise as expectations heighten for faster central bank tightening. As NAB’s Tapas Strickland discusses on today’s Morning Call, the exception is the People’s Bank of China, which lowered rates yesterday on concerns about the spread of Omicron. President Xi has asked other central banks to sit tight, but that seems unlikely. Even the RBA is likely to bring forward its end to QE to next month. Whilst China faces more lockdowns, the rest of the world seems to be opening up The UK seems likely to end its Plan-B restrictions as soon as next week. The Empire Fed Manufacturing survey will be worth looking out for today, particularly after a sharp fall in the ISM Manufacturing Prices Paid Index. Could the supply chain disruption be easing – and maybe inflation was transitory after all? Perhaps.
Monday 17th January 2022
The Fed kicks of its schedule of FOMC meetings next week. We know tackling inflation will be front and centre, but as NAB’s Ray Attrill points out, rate hikes are not the only tool they will be using. The minutes from the last meeting also suggest reducing their balance sheet will be part of the plan. Meanwhile, we’ve seen a significant sell-off in bonds, as investors expect a strong economic recovery this year, as Omicron’s impact wanes. Except in China, of course, which continues to pursue a zero-COVID policy, meaning supply chain disruption could remain, adding to inflation. China’s Q4 GDP is the data to look out for today.
Wednesday 22nd December 2021
There was a lot more positive sentiment in the markets overnight. NAB’s Rodrigo Catril says it’s all down to Omicron news, with infection rates falling in South Africa and hopes that a pill can stave off the worst for people who catch it. If the news remains as positive as all that, how will markets fare in 2022? How quickly will China bounce back, given their zero-COVID policy will still force shutdowns? What will happen to inflation is consumer demand improves but supply chain bottlenecks remain? What actions will central banks take and will any step too far when it comes to balance sheet reductions? And what will happen with the Great Resignation, if there continue to be many more jobs than people to fill them? One thing we can be certain of, even if COVID dies down next year, uncertainty remains.
Tuesday 21st December 2021
Energy markets are dominating market moves in the run up to Christmas. Oil prices have fallen significantly on fears that travel demand will fall as Omicron gains strength, whilst gas prices in Europe continue to rise on supply constraints from Russia. Equiites have also been hit hard by the virus uncertainty, on thinner holiday trading. NAB’s Ray Attrill says US numbers are just a couple of weeks behind the UK. And geopolitics is also at play, particularly in Chile and Turkey. Even in the UK Boris Johnson can’t be assured he won’t make it through Christmas without a roasting from his backbenchers.
Monday 20th December 2021
Markets are very cautious ahead of the Christmas break, with concerns about the impact of the Omicron strain. The Netherlands has gone into another lockdown and restrictions are being introduced in many other parts of Europe. But that’s not stopping a more hawkish attitude from the FOMC. NAB’s Tapas Strickland says a March hike in the US is a real possibility, with Fed Governor Waller flagging concerns about an “alarmingly high” inflation rate. More discontinuity in supply chains from Omicron could add to inflation concerns, of course. Today, we also discuss rate hikes whilst winding down balance sheets. Could central banks go too far too quickly?
Friday 17th December 2021
A rate rise by the Bank of England has surprised many, particularly in an environment of record COVID infections, and a hospitality industry calling for government support as pre-Christmas demand collapses. NAB’s Gavin Friend says it had been clear since August that they wanted to lift rates, the only reason for the delay was a question mark over whether employment numbers would fall after furlough ended, which it didn’t. The ECB gave clearer indications of how they would manage their asset purchase post March. The RBA’s Philip Lowe remains cautionary despite an outstanding set of employment numbers for Australia yesterday. In data releases, PMIs showed a significant fall in services for Europe that is not being seen in the US. A pick-up in housing starts I the US could be taken as a sign that supply chain concerns are easing.
Thursday 16th December 2021
The Fed, not surprisingly, are tapering faster as the race is on to lift rates next year. NAB’s David de Garis says the QE ending by March clears the decks, with a revised inflation forecast speeding up the expectations of rises. Markets were expecting a hawkish tilt, so they haven’t been surprised. The Bank of England decision is less easy to read later on, with Britain’s high inflation number overnight offset by the highest number of daily COVID infections since the pandemic began. The ECB follows shortly after that, in a busy day which also sees PMIs across the globe and Aussie employment numbers.
Wednesday 15th December 2021
Markets are still pulled in two directions. First there’s the continued uncertainty of the new COVID variant, which might be mild (or not), but is spreading like wildfire in the UK right now and the race is on to have booster jabs across the globe. Then there’s the inflation question and how quickly central banks will respond to it. A sharp increase in producer prices in the US has added to the ammunition for the Fed to move faster, with the next FOMC meeting tomorrow. It is assumed QE will end in March, the question is how many dot points for rate rises are expected next year. Whilst the Fed might predict two, markets are pricing for three. NAB’s Rodrigo Catril says if the FOMC suggests three, the markets might move their expectations to four. It seems whatever the Fed chooses, markets expect more!
Tuesday 14th December 2021
There’s a little more caution this morning, with equities down, driven by banks, travel and energy, with stay at home stocks doing better. But NAB’s Tapas Strickland points out, the fall in the S&P is on the back of the 67th record high of 2021 on Friday night. He says we shouldn’t expect too many significant moves ahead of the FOMC, ECB and Bank of England later in the week, and little significant news expected before then. Turkey’s central bank has already met, responding to sky high inflation by lowering interest rates. An interesting approach. Whilst rising Omicron cases are adding to the cautious tone. Numbers in the UK have risen sharply again, with the first recorded fatality.
Monday 13th December 2021
Markets were trading last week on the basis that the Omicron variant was not as lethal as the Delta strain, even though infections were spreading rapidly. NAB’s Ray Attrill says that’s been the view with central banks too, who are more concerned about inflation than and further impacts from COVID. That said, rising cases in the UK will almost certainly stop the Bank of England from raising rates this week, whilst the FOMC is expected to shorten its taper timeline, finishing in March. It’s a busy week for central banks and more data on Omicron will influence the direction too. Starting with a press conference from the UK’s Prime Minister (for now) shortly after the release of this podcast.
Friday 10th December 2021
Things were definitely a bit quieter overnight, with markets stepping back a little as they wait to figure out just what impact Omicron is having, and which way inflation is heading. We get the latest indication on the latter with US CPI number out tonight, but NAB’s Ray Attrill says China’s consistently high producer prices don’t bode well. Also today, how China is trying to stop the appreciation in the Yuan and what to expect from the UK’s GDP number tonight.
Thursday 9th December 2021
Even though equity markets have slowed, bond markets are still reflecting positive sentiment around coping with the Omicron strain. NAB’s Gavin Friend says Pfizer has confirmed views that three jabs will guard against serious illness from the new variant, and yet just now the British Prime Minister, where almost a third of the population have had three jabs, has introduced tougher measures to control the spread, including mask wearing at almost all indoor venues, working from home and vaccine passports for larger venues. The Bank of Canada has delayed acting on rising inflation and it seems likely that all central banks will sit on their hands this side of Christmas until more is known about the impacts of Omicron. Yesterday the RBA’s Philip Lowe said he didn’t expect the new strain to delay the recovery, but what makes him think Australia is so unique?
Wednesday 8th December 2021
There’s a lot of positive sentiment around this morning. Equities are rising sharply in the US and Europe, oil is up and bond yields are rising. NAB’s Gavin Friend says it’s been driven by the efficacy numbers of a GlaxoSmithKline vaccine, and circumstantial evidence that the Omicron strain might not be that bad for those who have been jabbed. Data wise there were fairly in strong industrial production numbers in Germany, with Chinese imports picking up and the final GDP numbers showing a rise in European consumer spending. In other news, Janet Yellen has been channelling her inner Donald Trump when it comes to tariffs and tensions brew over Ukraine. And NAB’s Ivan Colhoun deciphers yesterday’s RBA meeting.
Tuesday 7th December 2021
US equites are roaring back, so is oil, with bond yields rising again. This newfound optimism has been driven by policy easing measures from China’s central bank, and less concern about the impact of the Omicron strain. It’s still too early to draw definitive conclusions on the virus, says NAB’s Rodrigo Catril, with reports from South Africa that there is a concerning rise in younger patients. Tougher measures on mandatory vaccines for workers could also ignite more protests that could have the opposite impact on take-ups, which could slow economies, particularly in Europe. Not much is expected from the RBA today, but the build-up of positive data is likely to force a policy change in February. Meanwhile, the jury is still out on the Bank of England next week, but market expectations around a rate rise are falling.
Monday 6th December 2021
Markets were far more cautious on Friday. In part there are still concerns about the new Omicron strain, although circumstantial evidence so far is pointing to it being a milder variant. NAB’s Tapas Strickland says tech stocks were hit the hardest, because there’s growing acceptance that the Fed will push ahead with faster tapering, irrespective of tailwinds. Payrolls numbers were weaker than anticipated, but not enough to stop them, it seems. That raises the question, will central banks push ahead with tightening measures before economies have recovered to the detriment of the longer term outlook?
Friday 3rd December 2021
Markets have displayed much mor epositive sentiment in the last 24 hours, but its not lasting. Gains in US equities have fallen away a little, and oil prices have risen sharply and fallen back again. NAB’s Tapas Strickland says Omicron news is mixed – it’s certainly spreading quickly but symptoms of those who are vaccinated appear to be mild. US Treasury yields have flattened further as more Fed officials pile on with calls for faster tapering. Oil prices fell sharply mid-session on the news that OPEC would lift supplies next month, but rose again on the news that they would pull back if demand falls because of Omicron. In short, another day of uncertainty all round.
Thursday 2nd December 2021
Markets were choppy again overnight, but there is renewed hope with circumstantial evidence that the Omicron variant might be less severe. A WHO press conference suggested that existing vaccines will be enough to prevent many extreme cases, but we’ll still have to wait for the final verdict. NAB’s David de Garis says that was enough for the focus to shift a little to positive data reads out of the US, including a 534k rise in the ADP payrolls number an ISM manufacturing at 61.1 for November. Australia’s better than expected Q3 GDP number has done little to help the Aussie dollar – Dave suggests it has followed the fortunes of the S&P500. Today, the focus will stay with news around the virus and its impact on lockdowns and other contingency measures.
Wednesday 1st December 2021
You might have expected that Jerome Powell would use the uncertainty of the new COVID strain to downplay the need to adjust the speed of tapering by the Federal Reserve, but instead, addressing the Congress, he talked up the need for faster tapering, to be discussed at the next FOMC meeting. So, what’s brought about this character transformation? NAB’s David de Garis says he is clearly now far more worried about inflation. The ECB, meanwhile, is happy to keep using the transitory word and believes inflation has just about peaked. Meanwhile, China’s PMIs and prices paid gave a glint of hope that supply chain issues might be easing, albeit very slowly. But progress could be destroyed by the impact of measures to constrain the new variant. The future is as clear as mud and markets today reflect that uncertainty.
Tuesday 30th November 2021
On today’s Morning Call NAB’s Ray Attrill reminds us that the CSIRO’s Dr Rob Grenfell predicted, back in the middle of the year, that about now we would see a variant of COVID spreading from India or Africa. He now says the situation in South Africa is not a good comparator for Australia, and we should watch how it develops in Europe over the next couple of weeks. In the meantime, markets are playing a waiting game. There was a mild bounce back in equities, bond yields and the US dollar, but volatility will remain, driven by the news cycle. The other unknown is the impact this will have on the speed of a global recovery, with border shutdowns and the like, and the subsequent impact on inflation. Lots of questions for Jerome Powell and Janet Yellen then, in front of a senate hearing today. China’s PMIs will be the numbers to watch today.
Monday 29th November 2021
There was a very strong market response to the news of the Omicron virus strain on Friday. Equities were hit hard, currencies ran for the shelter of safe havens and there was a sharp fall in bond yields. How much of this was a knee-jerk reaction amongst the thin trading on the day after Thanksgiving. NAB’s Rodrigo Catril says we can expect Asian markets to follow the US today, before markets settle down, but we can expect volatility for some time as we wait for news that helps assess the risk posed by this new strain. So, what does this mean for central bank tightening? Where will the Aussie dollar head through this turbulent time? What impact will it have on oil and inflation?
Friday 26th November 2021
As America gobbles up Turkeys NAB’s Gavi Friend talks through the latest positioning on tightening by central banks. The FOMC minutes suggested a more hawkish approach, and the latest data would suggest that view has been reinforced, but there’s still a disconnect between what the markets expect and the messaging from the Fed. The Riksbank has started to talk about rate rises, but not before 2024. The Bank of England looked certainly to raise rates last month, but it didn’t happen and a rise in December is now looking less certainly. The ECB are continuing down a dovish path, reinforced by their latest minutes overnight. Meanwhile, the RBA is holding firm, even though the bounce back in jobs yesterday (with retail sales data today) suggests a recovery that most nations would be envious off.
Thursday 25th November 2021
There were many more positive signs for the US economy overnight, with initial jobless claims at an all-time low. The US dollar remains in favour, with the DXY index reaching a 16-month high. On today’s podcast NAB’s Tapas Strickland says rising inflation concerns are turning even the most dovish FOMC members, with Mary Daly the latest calling for a faster taper to make room for rate rises. Former US Treasury Secretary Larry Summer spoke again about his concerns about the Fed’s delay, worried that they won’t be able to find “a soft landing”. Meanwhile, the Kiwi dollar has been hit hard by the quarter percent rate rise by the RBNZ. Why was there such a sharp response? Plus, the latest on oil, with prices down today, but we can expect more volatility as OPEC takes on their customers. How dare they dip into reserves!
Wednesday 24th November 2021
There was a surprise for those expecting the PMI numbers on Tuesday to confirm the widening gap between US and European economic performance. Let’s be honest, the NAB Morning Call team were amongst those who weren’t expecting to see the narrowing of the divide, with Europe doing somewhat better than expected, and the US a little worse than forecast. But NAB’s David de Garis says the US bond yields are still up, the market still wants to hold US dollars in anticipation of a quickening of the taper and earlier rate rises. The RBNZ rate decision today will be watched closely – there’s still an outside chance the rise will be as much as half a percent. And Joe Biden’s attempts to bring down the cost of oil seems to have gone awry. Confirmation of a plan to dig into reserves, not just in the US, has seen oil prices shoot skywards.
Tuesday 23rd November 2021
The US dollar and bond yields rose on the news that Jerome Powell is to keep the top job at the Fed for another term, with Lael Brainard as deputy. Even though both are doves, NAB’s Ray Attrill says the market still has two or three rate rises priced in for next year. The Aussie dollar has avoided collateral damage from the raising US dollar, helped by the news of border reopenings, that will help foreign workers to return. Today is PMI day, which is expected to give a further clear delineation between the strength of thew US economy versus the woes faced in Europe. The Euro is expected to continue to bear the brunt of any rises in the dollar.
Monday 22nd November 2021
The divide between the US and Europe became more pronounced at the end of last week, as NAB’s Rodrigo Catril explains 0n today’s Morning Call. On the one side of the Atlantic there are increasing infections, more lockdowns and, in Austria, mandatory vaccines, with a central bank pushing the line that tightening will only damage the recovery. On the other side, central bankers are talking up the need for faster tapering, presumably so they can move to raise rates sooner. But hardly anyone is moving as fast as New Zealand, with the RBNZ certain to lift rates this week, but by how much?
Friday 19th November 2021
US equities have bounced back a little today, but, as NAB’s Gavi Friend describes, it’s been a session without significant event risk or data flow. Equities and bond yields have been stable compared to recent volatility, with the tech sector contributing to equity rises, including news of Apple’s self-drive car. Some companies are also reporting easing of supply chain difficulties. Those issues have certainly been holding back the speed of recovery, evidenced again by higher prices in the Philly Fed’s manufacturing index and a slowdown in the reduction of weekly jobless claims. If supply chains recover and jobs growth picks up, will inflation subside. That continues to be the view of the ECB, with Philip Lane reiterating it again overnight. Europe meanwhile has other issues to contend with – energy supplies, rising COVID cases and a likely trade dispute with the UK.
Thursday 18th November 2021
Australian wage growth is in line with expectations, but where to from here? Phil Dobbie asks NAB’s Ivan Colhoun if there’s a chance we’ll see wages escalate in the next few months? The UK’s inflation numbers surprised everyone overnight, reaching 4.2 percent year on year. Does this concrete in a BoE rate rise, or could they do what they did last time and do nothing? David de Garis gives his thoughts. Canada’s inflation is also increasing, but no more than anticipated. US housing starts are down, but there are clear signs they’ll soon pick up. Join us for a Morning Call triple header!
Wednesday 17th November 2021
It’s been a positive session overnight, with US retail sales rising and US jobs bouncing back. NAB’s Tapas Strickland says it’s difficult to tell how much of the 1.7% month on month increase in sales is a result of rising prices and how much is more goods sold, but it shows consumers are prepared to spend even with supply constraints and inflation concerns. The UK jobs numbers are particulartly good because they have grown despite the end of a job furlough scheme with 1.1 million people on it. Mostly retained their jobs and there were many extra jobs besides. Is this the ammunition the Bank of England needs for a rate rise next month? Meanwhile Governor Lowe continues to be cautious about rate hikes for Australia, reiterating nothing is likely to happen until 2024, even though the market has priced in 2022.
Tuesday 16th November 2021
The Euro has lost ground this morning, with concerns over COVID, following lockdowns in Holland and Austria, and rising cases in Germany. There remains a very different attitude between the ECB and the Fed, with Christine Lagarde reiterating that in Europe they are in no rush to tighten policy. China’s activity data provided hope that the country’s economy was stabilising. In the US there will be a lot of focus to see whether tonight’s retail numbers are strong, or will they have been pulled down with falling consumer sentiment? The UK’s employment numbers will be watched keenly by the Bank of England, but NAB’s Rodrigo Catril says it’s too soon to provide the full picture needed to determine rate rises. And President Xi and President Biden meet (virtually) shortly – the start of better relations, perhaps?
Friday 15th November 2021
Hot on the heels of the surprising increase in inflation in the US earlier last week, Friday saw an unexpected fall in consumer sentiment. The Michigan survey hit an 11-year low. NAB’s Ray Attrill says previous low readings had been associated with rising COVID cases, but now, as the US seems to be faring somewhat better than Europe, the concern is all about rising prices. It’s a significant issue for the Fed and the US government, with wages rising significantly below the headline inflation rate. To counter being worse off, over 4 million Americans quit their job in one month. In Europe COVID itself remains a concern with restrictions re-imposed in Holland and Austria. Could other countries follow as winter draws near? Today, activity data from China will be keenly watched, and later in the week the wage price index will highlight whether Australia too could become subject to wage-push inflation.
Friday 12th November 2021
Markets have been a little more positive over the last 24 hours, with the NASDAQ back on the rise, although a rising US dollar continues to hurt the S&P, and the Aussie dollar has taken another hit. Part of the fall in the Aussie can be attributed to the weaker than expected jobs numbers yesterday, but NAB’s David de Garis says when you unpack the numbers there was plenty of ground for optimism. He says one interesting factor has been the gross rise in jobs in NSW – many people were switching jobs as the lockdown eased. Australia could be witnessing the start of the great resignation seen in other developed countries. The UK’s recovery slowed, with GDP lower than expected, but that’s been offset by falling COVID cases and high uptakes of the third jab. So, what does that all mean for the expectation of rate rises form the Bank of England?
Thursday 11th November 2021
The inflation numbers from the US have been eye popping. That’s the description by the Fed’s Mary Daly as US CPI hits 6.2%, a 30 year high. NAB’s Gavin Friend points out that there are still four million people in the US who lost their jobs through COVID who aren’t back in the workforce, and the Fed will continue to use that reasoning for not lifting rates. But markets are likely to revert to their expectations that the bank will be forced to move sooner than it intends. Australia’s labour market data today, for October, will still be held back by lockdowns and the UK’s GDP read for Q3 will provide a useful barometer on an economy whose return is slower than anticipated, and will have taken a knock with increased fuel costs.
Wednesday 10th November 2021
There’s been a move away from risk assets. It could just be equity markets running out of steam after a particularly strong rally, but a Financial Stability Report from the fed warning of “perilous lunges for risky assets” probably didn’t help. NAB’s Ray Attrill says it’s hard to join all the dots right now about why the mood has shifted, but inflation continues to be a concern. It was reflected in the NFIB small business report, along with difficulties in obtaining staff. There’s optimism in Australia though, evidenced by the NAB Business Survey yesterday. Today, US CPI will be the focus, along with producer prices from China. Two key numbers for inflation watchers.
Tuesday 9th November 2021
You’d think markets would be bathed in positivity, particularly in the US, with a string of good news, including infrastructure spending, the COVID pill and the reopening of a lot of international travel. There’s evidence of tiredness in the equity market says NAB’s Rodrigo Catril in today’s podcast, but we’ve been here before and then it takes off again. Bond yields meanwhile are still adjusting to a world in which central banks are not quite so quick to raise rates, whilst coping with a high inflation outlook. On top of all that, Europe has to contend with higher gas prices, rising again, and the danger of a trade war over Brexit. Locally, the NAB business survey is out early this morning (7.30am).
Monday 8th November 2021
You might expect a little more optimism in the markets given Friday’s strong non-farm payrolls data in the US, Pfizer’s news about a pill for COVID sufferers, the passing of Biden’s $1.2 billion infrastructure bill and rising consumer credit in the US. Equity markets are riding high on future hopes, but NAB’s Tapas Strickland says bond markets continue to unwind from expectations on the timing of rate hikes by central banks, in particular the surprise move by the Bank of England last week not to move. Today we also look at Friday’s RBA Statement of Monetary Policy, and look ahead to US CPI and Australian labour market data this week.
Friday 5th November 2021
There has been a sharp response in bond yields and currency markets to the Bank of England’s decision not to lift interest rates. Furthermore, Andrew Bailey is suggesting he doesn’t know where everyone got the idea that they would. NAB’s Gavin Friend says the response has been very marked. The fall in yields is pushing riskier assets, hence new highs for the S&P and NASDAQ. Yields could claw back a little as markets assess the possibility of a December hike. Meanwhile, the focus is on tonight’s non-farm payrolls in the US, with indications that it could be a strong number.
Thursday 4th November 2021
There weren’t any surprises in from the FOMC this morning. The Fed will cut asset purchases by $15 billion this month, with a further $15 billion in December, and an expectation that it will continue until the middle of next year. But Jerome Powell was again quick to point out that the tapering does not imply “any direct signal on interest rate policy”. Phil Dobbie talks to NAB’s David de Garis about the meeting, and looks at the latest US data that shows further signs of recovery. Tonight all eyes are on the Bank of England, where we can expect a small move up in interest rates. They’ve practically said as much.
Wednesday 3rd November 2021
Central banks are still grappling with what to do about inflation. The RBA is reluctant to talk about interest rate hikes anytime soon, because they don’t think inflation will be a big problem. The Fed and the Bank of England take a different view, but how hawkish will they be. Today on the Morning Call NAB’s Tapas Strickland looks back at yesterday’s RBA meeting and looks ahead to the FOMC tomorrow morning, whilst discussing the various attitudes to the dimensions of inflation. Concerns over supply chain disruptions, of won’t be helped by the rise of COVID lockdowns in China , with the Commerce department there asking local authorities to stock up for winter.
Tuesday 2nd November 2021
For once we are going into an RBA meeting unsure of what the outcome will be. NAB’s Ray Attrill says we have as much chance of predicting a winner in the Cup today as we do forecasting what direction the central bank will take. Meanwhile bond yields in Europe are being driven by the next central bank meeting – will the ECB abandon its PEPP program? Plus, more evidence of the great China slowdown.
Monday 1st November 2021
There were more big moves in Australian bond yields on Friday as the RBA failed to buy up the April 2024 bonds that were the focus of its yield curve control (YCC) policy. So does that mean YCC is dead? NAB’s Rodrigo Catril says, yes it is. It has become dysfunctional, given the force we have seen from markets pushing front end yields higher around the globe. It should make for an interesting RBA meeting tomorrow, with more to come from the Bank of England the Fed. All are expected to confirm a policy shift. Meanwhile, evidence of inflationary pressures continue to mount, whilst China’s manufacturing is in contraction. Listen in as Rodrigo explains the rapidly evolving picture, for bonds, economic growth, jobs and inflation.
Friday 29th October 2021
Three year bond yields rose well above the RBA’s target of 0.1 percent yesterday, but the central bank didn’t buy any up as part of its yield control. That pushed yields even higher. So will they react today? NAB’s David de Garis doesn’t think the bank will ditch yield control, but it’ll make next week’s policy meeting that much more interesting. Christine Lagarde said there was a lot of soul searching at yesterday’s ECB meeting, where the discussion was all about "inflation, inflation, inflation". In the end they reaffirmed that inflation was a transitory issue and there was no need for the bank to react. Yet Germany and Spain reported the highest inflation rates in decades. Are they doing the right thing? Meanwhile, equites are existing in a different world, rising still higher on the back of strong earnings results. And Facebook is changing its name. Listen in for more details.
Thursday 28th October 2021
There have been sharp movements in bond yields, with front end yields rising and falls at the back end. NAB’s Gavin Friend says it reflects expectations that rising inflation will force central banks to raise rates sooner. We saw a higher-than-expected rise in Australian inflation yesterday and 2 year yields rose sharply overnight. Guy Debelle is in front of senate estimates this morning – will he still be arguing the transitory line? Bonds were also impacted by the Bank of Canada, who were more hawkish than expected, and by Rishi Sunak’s UK budget, which included forecasts suggesting a £50 billion drop in debt issuance next year. Tonight, the ECB meets and Q3 US GDP numbers are released.
Wednesday 27th October 2021
Former US Treasury Secretary Larry Summers took to Twitter yesterday to challenge Janet Yellen over inflation policy, suggesting the risk of losing control of it is higher than at any time in his career. Today, NAB’s Rodrigo Catril talks more about the rising inflation sentiment, with inflation expectations in the US now at a 13 year high. The expectation of a rate hike is being brought forward around the world, but the RBA (and NAB) are not expecting that to happen in Australia. Will this morning’s CPI numbers change that view?
Tuesday 26th October 2021
The markets continue to be dominated by rising inflation concerns, including the price of oil. WTI got over $85 today, but has fallen back since. NAB’s Tapas Strickland tells how Saudi Prince Abdulaziz bin Salman has said it’s too early to up production whilst uncertainty prevails. There was an example of that uncertainty as another Chinese province went into lockdown. But equity markets aren’t concerned about such things. The S&P500 hit a new high as share rose on the back of strong earnings and higher commodity prices. And Joe Biden could be a step closer to having a scaled back version of his infrastructure package see the light of day. Listen in to find out why.
Monday 25th October 2021
Comments from Jerome Powell added to the volatility in bond markets on Friday. The chair of the Fed reinforced that it was time to taper, but suggested rate rises would have to wait, with more than five million people who were working before the pandemic still unemployed. The labour market needs time to heal, he said. NAB’s Ray Attrill says it shows that he is less inclined to respond to inflation worries until bond purchases are unwound, unlike the Bank of England. Ray also points out how the PMI data for Europe, the UK and US was generally strong, suggesting that stagflation looks like likely. It’s a busy week ahead with the ECB and Bank of Canada meeting, Q3 CPI for Australia and lots of earnings announcements, including Facebook after Monday’s close in the US.
A sharp fall in commodity prices hasn’t dampening inflation expectations, and with it the assumption that central banks will bring interest rates forward. NAB’s David de Garis says it’s been a day when bond markets in particular have particularly been bitten the inflation bug, with pricing suggesting inflation will average three percent over the next five years, even higher in the UK. Two surveys highlighted that supply chain difficulties continue, the Philly Fed’s Business Outlook, and the CBI Optimism Index. The CBI survey showed that two thirds of UK businesses were complaining of supply shortages, the last time it was that high was in January 1975. Oh dear.
Thursday 21st October 2021
Equities are rising to new highs as risk sentiment improves on the back of strong earnings results in the US, even though inflation remains an ever-present concern. NAB’s David de Garis says the Fed’s Beige Book, out this morning, highlights how many companies are convinced they can pass on their increased costs, with consumers paying through increased wages. If that’s the case has Jerome Powell been right all along, that inflation is transitory? It remains the subject of intense debate. The head of the Bundesbank has announced his resignation, citing personal reasons, but could it also be his objection to ECB’s delay in tackling inflation? And could the Bank of England’s plans by stymied as COVID infection rates start to rise again, quite significantly.
Wednesday 20th October 2021
US equities have had a strong session, although Procter and Gamble weas one of the first major household companies to highlight margin squeeze from supply chain difficulties. Netflix earnings are expected to be strong thanks in part to the success Squid Game. Meanwhile the tentacles of inflation continue to worry policy makers almost the world over – the RBA being one of the few exceptions. The UK CPI numbers are out tonight, but already it seems like a rate rise is (squid) inked in. Phil Dobbie asks NAB’s Ray Attrill whether the Bank of England could regret lifting rates, and whether the lack of movement in longer-dated bond yields suggests investors are thinking the same thing.
Tuesday 19th October 2021
Bond yields are higher globally as inflation concerns mount. New Zealand’s CPI read (2.2% QoQ) sent 10 year yields up 16 basis points, spilling over to Australia. But NAB’s Rodrigo Catril says the inflationary pressures haven’t yet arrived in Australia which means the RBA will lag other central banks when it comes to rate hikes. Meanwhile, China is showing signs of a significant slowdown in output, with GDP growing just 0.2 percent in the last quarter, and with supply chain disruption, COVID lockdowns and energy shortages unlikely to improve that number could go lower. US data also disappointed. Phil Dobbie asks whether these are the signs of emerging stagflation? Or will corporate earnings give the markets some momentum and show there is growth, even with rising prices?
Monday 18th October 2021
Equity markets were buoyed by strong US earnings results and stronger than expected retail sales numbers, but there are many reasons to suggest this confidence might be short-lived, according to NAB’s Tapas Strickland. Corporate earnings have been focused on the finance sector, so results from other sectors will give an indication of the inflation impacts on margins and growth potential. Chinese activity data today and the ongoing Evergrande saga could impact global growth hopes. Then there’s inflation, which continues to grow, with the Fed expected to bring forward its first rate hike and the Bank of England Governor reiterating the need for a rate rise in the UK this year. Paying more for a mortgage is unlikely to boost consumer confidence which is already flagging.
Friday 15th October 2021
Markets have taken a more positive outlook overnight, with sharp rises in equities in the US and Europe. NAB’s Gavin Friend says it’s been helped by falling bond yields, showing that there’s less immediate concern about rising inflation. That doesn’t mean the problem has gone away, but company earning results in the US have been positive, and there will be some solace in the fact that the growth in producer prices (PPI) seem to have stalled, albeit at very high levels. On today’s podcast we look at inflation in China (where PPI growth persists), the commodity and supply chain sagas, US jobless claims and yesterday’s employment data from Australia. Today US retail numbers are the data to watch for.
Thursday 14th October 2021
US CPI numbers were a little higher than anticipated. NAB’s David de Garis says we did see some support for bond yields, but markets slipped back when it was realised the core inflation number was pretty line-ball with expectations. As we’re seeing around the world, prices are being influenced by fuel, supply chains and wages. This morning’s FOMC minutes contained nothing in the way of surprises – it simply cemented-in the belief that the Fed will start tapering this year through to mid- 2022, but the timing of a rate rise seems less certain. UK GDP was also close to expectations, although manufacturing and construction were well down thanks to the ‘pingdemic’. We also look at China’s trade data on the podcast today and discuss Australia’s employment numbers out this morning.
Wednesday 13th October 2021
The IMF released revised forecasts overnight, together with a warning that central banks need to tighten their monetary policy if inflation persists. Inflation concerns are certainly growing, backed with evidence in numerous surveys. 30% of small business owners in the US said they expect to lift wages, according to the latest NFIB survey. The latest jobs data for the US and UK shows how tight the labour market is, adding to fears of an inflation spiral. NAB’s Ray Attrill talks through the numbers and the central bank responses, as well as looking ahead to today’s trade data from China and tonight’s CPI numbers from the US.
Tuesday 12th October 2021
Fuel prices are rising, with the gas crisis now pushing up oil and coal prices. On today’s podcast NAB’s Tapas Strickland says central banks are now worried about inflation getting “permanently embedded” (Andrew Bailey’s words) and are becoming more hawkish in their outlook. The latest is the Bank of England, where markets are already pricing in a 50 percent chance of a small increase as soon as next month. Bond yields continue to rise on this new attitude by central banks. Also today, does Australia need to reopen its borders to get the economy back on track? Can we fully recover without the return of a migrant workforce?
Monday 11th October 2021
Non-farm payrolls numbers from the US on Friday were less than expected, but NAB’s Rodrigo Catril says the numbers weren’t as bad as they seem, because they included an upward revision in the month before. The expectation is that the Fed will push ahead with tapering of bond purchases later in the year, with bond yields rising around the world, to multi-year highs in some cases. Inflation remains a concern, because of supply chain disruption, rising fuel prices and wages. That might be good news for the Aussie dollar iron ore rose 6 percent on Friday – but N AB has downgraded forecasts given the expected strength in the US dollar during this climate of uncertainty. Listen in to find out more.
Friday 8th October 2021
Two cans are being kicked. The US debt ceiling can is being kicked into December, but the issues remain. The gas can has been kicked along by a promise of more fuel from Russia, but isn’t Europe’s dependency on Russia part of the problem? Meanwhile, the Bank of England’s new chief economist is warning of inflation for longer. Is he positioning for a rate rise? NAB’s David de Garis talks through the overnight market news, as well as looking ahead to the Financial Stability Review from the RBA today, and tonight’s non-farm payrolls numbers in the US. There are plenty of reasons why this should be a strong set of numbers.
Thursday 7th October 2021
The fuel crisis in Europe and the UK is impacting global markets, with shares taking a hit. There’s been no rush to bonds given the impending inflation concerns, worsened by fuel prices, and most currencies are losing against the US dollar, which is possibly the only safe-haven left right now. It’s been a rollercoaster day, says NAB’s Gavin Friend, with energy prices in the driving seat and upending all markets. The problem is, there doesn’t seem to be a short-term resolution. Listen in to find out why. Plus, strong jobs numbers in the USD. Does this foreshadow a strong non-farms payroll number for the US on Friday? And a vote on the US debt ceiling possible in the next few hours.
Wednesday 6th October 2021
The currency markets suggest there’s a risk on mood this morning, with the US dollar gaining on the Japanese Yen and Swiss Franc. Strong non-manufacturing ISM numbers in the US have helped with that. But oil prices continue to rise too, adding to inflation concerns. Yet tech stocks have risen as well. NAB’s Rodrigo Catril joins Phil Dobbie to help explain market positions this morning, on the day that the RBNZ is expected to lift interest rates, despite expectations that the country will face many more COVID cases as the policy switches to one of living with the virus. US jobs will be the focus for the second half of the week, starting with ADP employment numbers tonight.
Tuesday 5th October 2021
Oil prices rose quickly this morning after OPEC+ announced they would stick with their earlier plans of rising production in November by 400 thousand barrels a day. At one stage Brent and WTI were both up more than 3 percent. NAB’s Ray Attrill says it was a surprising response, because there wasn’t a particular expectation that they would rise production. Nonetheless it has added to inflation concerns, and raised more talk about stagflation – will the price increases dampen demand and slow the jobs recovery? It’s a dilemma for central banks and governments. So far though, inflation isn’t having a big reaction on production. The manufacturing ISM in the US was strong n Friday, so was consumer spending. Markets will be watching the data today to see whether demand from the services sector is continuing to push ahead.
Friday 1st October 2021
There’s a fair bit to chew on today, with commodity currencies helped by word from China that they must secure enough energy for winter, whatever the cost. The US has managed to agree an interim budget for now, but the debt ceiling remains an issue and will remain so until the very last minute. Jerome Powell pontificated in his congressional hearing about what to do if high inflation persists, but NAB’s Gavin Friend says nothing that was said deflects from the expectation that rate rises in the US are still a long way away. The US dollar has stalled its steady growth for now, in part because of the rise in commodity currencies, but will it resume its steady path? Maybe Europe will come to the fore. After all, they don’t have to debate spending packages, they already have one.
Thursday 30th September 2021
Markets are much calmer this morning. Equities have managed to climb a little, with the biggest moves in currencies and commodities. NAB’s David de Garis says there’s debate about whether we’re heading to reflation, deflation or stagflation, or all of the above. The Aussie dollar lost more ground, but the pound is taking more of a hammering as fuel shortages will almost certainly be hitting the growth outlook there. Over the Atlantic the debt ceiling is looming, but the short-term issue is passing some sort of budget today, so the government can carry on spending tomorrow.
Wednesday 29th September 2021
It seems like it was a fairly heated Senate Banking Committee meeting in the US overnight. Flags were raised about whether Jerome Powell will win another term as Governor of the Fed, given the background of yesterday’s resignations and with one Democrat Senator overnight calling him ‘dangerous’. The US debt ceiling is also causing concern, with it being used as a bargaining chip for the moderation of Biden’s spending plans. NAB’s Tapas Strickland says we have been here before so the market is not overly concerned about the lack of progress, just yet. We also discuss how the Fed are likely to push ahead with tapering even if employment doesn’t pick up, how China’s growth this year is likely to be hit by rolling power outages, signs that Australia will bounce back quickly out of lockdown and the future for Evergrande.
Tuesday 28th September 2021
It seems markets are still trading on the hawkishness of central banks, particularly the Fed, where we’re seeing bond yields significantly higher and tech stocks weakening. Commodity prices are also pushing higher globally, with Brent Crude now close to $80 a barrel. NAB’s Gavin Friend in London says these extra costs, plus supply constraints make it highly unlikely that the Bank of England will lift interest rates next year, no matter what Governor Andrew Bailey suggests.
Monday 27th September 2021
Last week was a very volatile week, driven by the uncertainty over Evergrande, the unexpected hawkishness of central banks, continued concerns over supply chains and the emerging fuel crisis in the UK and Europe. This week you can add the USD debt ceiling to the list of concerns. NAB’s Ray Attrill says without a stop gap funding resolution we could be going into the weekend with government shutdowns. Also today we look at the German election over the weekend, which could see the government split three ways. And will the Aussie dollar gain ground as “freedom day” in NSW approaches?
Friday 24th September 2021
There’s been a big shift to risk-on overnight, with equities rising and bonds falling, pushing yields much higher in the US and across Europe. But why? The risk of Evergrande remains and with the Fed eyeing jobs data, a rise in weekly jobless claims was hardly a good sign this morning. NAB’s Gavin Friend says part of it is a reaction to the clearer roadmap for the Fed, assuming the next payrolls numbers are strong. Markets were also responding to the Bank of England, who expect inflation in the UK to reach 4 percent this year and that could strengthen the case for “modest tightening of monetary policy”. But if prices are rising because of supply constraints, does a rate hike really make sense?
Thursday 23rd September 2021
As expected, the Fed didn’t give a specific date for the start of tapering, but suggested it should all be done by the middle of next year. NAB’s David de Garis says the bank has also moved forward its expectations for rate rises, with the board split on a rise as soon as next year. The Norges Bank is well ahead of them tonight, likely to be the first G20 central bank to lift rates since the pandemic started. The Bank of England meets today too, and inflation concerns will be front and centre, particularly with the crisis in fuel prices. Meanwhile markets were buoyed by the news that Evergrande will pay bondholders, so that can has been kicked down the road for now. Oil has risen as inventors in the US fell faster than expected. And lots of PMI reads today.
Wednesday 22nd September 2021
Markets are still concerned over the Evergrande debacle, although equities and currencies and bonds have all calmed down a little overnight. China has been on holiday so far this week, so today could provide news on the government’s response before the develop defaults on its bond interest payments. There will be strong interest I the Fed tomorrow morning, of course, but it seems unlikely that they will announce tapering of their asset purchases just yet. NAB’s David de Garis says they will prefer to see another standout jobs report. Also today, can we expect more moves in oil, with the EIA stockpile report tonight. And the OECD has revised growth forecasts down and inflation expectations up.
Tuesday 21st September 2021
Markets have been running for cover overnight over fears that a default by Evergrande could spread beyond the Chinese property sector to the rest of the world. NAB’s Ray Attrill talks through the response, which has seen equities ditched in favour of bonds, and the money markets running to the Yen and Swiss Franc. But it’s the pound that has fared the worst overnight as their energy crisis continues, which has its own multi-industry contagion. By the time you listen in RBNZ Assistant governor Christian Hawkesby will have given a speech that could impact markets locally, particularly if he gives hints on the size of the expected rate rise. And the Canadian election results will start coming in later today, but there’s every chance it’ll be down to the wire and we won’t know for sure till later in the week.
Monday 20th September 2021
There’s more caution in the markets as we kick off a week doinated by central banks – the US Fed, BoE, BoJ, Swiss National Bank, Riksbank, Norgesbank all meeting, but NAB’s Tapas Strickland says it’s the US Fed that has markets on a bit of a holding pattern. There will be particular interest in the mapping of dot points this week. On the podcast there’s discussion about the flattening US yield curve, reasons for the weak retail numbers in the UK, Europe’s gas crisis, and the impact of a potential default by Evergrande in China this week.
Friday 17th September 2021
There was a lot of movement overnight, with US equities falling, then regaining some of the losses in late trade. Most currencies fell against a rising US dollar, but even some of those were pared back as the session progressed. The fall in equities happened despite a rise in US retail numbers, when sales were expected to fall. NAB’s Gavin Friend says markets clearly didn’t know which way to take it. There have, of course, been other surprises in the last 24 hours. Australian employment numbers fell more sharply than anticipated and NZ GDP was stronger than expected, both supporting the relative stance of their respective central banks. There are lots of swings and roundabouts on the road to recovery it seems, creating a lot of investor confusion. Today was one of those days.
Thursday 16th September 2021
There’s a little more optimism in the markets this morning, particularly in US equities. NAB’s Tapas Strickland says there’s no overarching good news, suggesting there’s a strong element of ‘buying the dip’. Which could mean it’s all reversed tomorrow! In fact, the news out of China was largely negative, with industrial production, fixed asset investment and retail sales all below expectations. The huge debts of the Evergrande Group are also likely to see authorities tightening financial controls on the construction industry. Inflation was more than expected in the UK and Canada, and will, in both cases, add fuel to the argument that their central banks will raise interest rates at least once next year. Locally, Australia’s employment data will be the numbers to watch, although they are a little out of date. US retail sales will also be one to watch.
Wednesday 15th September 2021
Inflation in the US has slowed. Is this a win for those arguing it is all transitory? Phil Dobbie asks NAB’s Rodrigo Catril what this means for the Fed and expectations of tapering. Market moves aren’t just a reaction to the US CPI, there’s also a risk-off mood driven by increasing cases of COVID in China which could cause further supply disruption. The Aussie dollar is still weak after Philip Lowe’s dovish speech at lunchtime yesterday. UK jobs numbers were strong but there are still a million job openings to be filled, by who? And today we’re expecting to see weaker activity numbers from China.
Tuesday 14th September 2021
Markets are a little mixed ahead of today’s US CPI numbers. But, just how important are these numbers when the Fed is far more focused on returning the country to full employment. NAB’s Tapas Strickland says supply-led inflation is allowing the Fed to be more accommodative for longer. Oil prices hit a six week high overnight, based on supply constraints and OPEC’s expectations for increased demand. Besides US inflation numbers, the focus later will be on UK jobs numbers and, at lunchtime, a speech by the RBA’s Philip Lowe.
Monday 13th September 2021
Talks between Biden and Xi on Friday added to market concerns. NAB’s Rodrigo Catril says it was the realisation of how long it would take to resolve issues, if ever. A US investigation into Chinese state subsidies also added to the malaise. On top of that, inflation (driven by supply constraints) and the speed of economy recovery remain two other major concerns. On the price side, US PMIs were higher than expected on Friday, whilst UK GDP growth was slower than expected in July. Rodrigo says there are so many factors making the data very noisy. But if the caution is lifting the US dollar at the expense of the Aussie, is there anything that will change that in the near term?
Friday 10th September 2021
As NAB’s Gavin Friend vehemently predicted on yesterday’s Morning Call, the ECB has announced that they will cut back purchases under their Pandemic Emergency Programme. It reflects the optimism in Europe, which is not currently matched in the US, where equities are down on the realisation that the recovery is taking time, largely driven by supply constraints that could be with us for a lot longer. There was positive news on jobs, with the weekly initial jobless claims at their lowest level since the pandemic began. US PPI, Canadian unemployment rate, UK monthly GDP and NZ credit card spending are the numbers to look for today.
Thursday 9th September 2021
As expected, there were no moves from the Bank of Canada overnight, but NAB’s Gavin Friend says the same will not be true for the ECB tonight. They will cut back on bond buying, he says. In fact, it’s taken longer than expected. Currency markets have been fairly quiet, with most moves happening in equities, which have adopted a more cautious air. The Fed’s Beige Book reflected some of this caution, with many consumers wary of eating out or going on holiday for fear of catching the Delta variant. There’s a rising delta between jobs advertised and employment, with the JOLTs figures showing 10.9 million openings in the US. Boris Johnson pushed ahead with his bold move of lifting taxes in the last few hours, running the risk of slowing a recovering economy. Today, Aussie weekly payrolls, China’s CPI and a speech from the RBA’S Guy Debelle.
Wednesday 8th September 2021
The RBA is pushing ahead with its tapering of bond purchases, just as predicted on The Morning Call, but the bank is doing it in a very dovish fashion. There won’t be any further cuts in the quantity until February next year. Does that suggest the RBA is seeing a slower recovery? NAB’s Rodrigo Catril reads between the lines in the RBA statement yesterday, and looks at why the US markets are showing so much caution on the return from the Labor Day holiday. Plus, China’s surprise trade numbers and a look ahead to the Bank of Canada tonight.
Tuesday 7th September 2021
The RBA meets today and the big question is, will they push on with their tapering schedule, reducing weekly purchases from $5b per week to $4b. NAB’s Ray Attrill says that they will, but there are concerns about the optics of making a move when the economy is in lockdown. The same question applies to the ECB later this week. Central banks have a direction they want to take, but the timing is being determined by the rise in COVID cases. On that, a rate hike by the RBNZ is looking even more likely, as the country starts to ease restrictions as cases are contained. Equities in Europe were up today, and will likely rise in the US as they return from the Labor Day holiday. That too is likely to be a response to the Fed delaying tapering, topping up the punchbowl for a while longer.
Monday 6th September 2021
Non-farm payrolls grew well below market expectations I the US on Friday, and are certainly not the substantial progress the Fed has been looming for. Today on The Morning Call NAB’s Tapas Strickland looks at the market response to the payrolls numbers, and other signs that the global recovery might be slowing. Is it just a transitory phase? With that in mind, what will the RBA do about tapering its bond buying, and will the ECB still ease off its purchase under its PEPP? Both meet this week, and the Fed’s Beige Book is out midweek to, to help provide some colour on the state of the US economy right now.
Friday 3rd September 2021
There seems to be a lot resting on tonight’s non-farm payrolls numbers from the US. Phil Dobbie asks NAB’s Gavin Friend what the reaction will be if the numbers come in softer or stronger than anticipated? The weekly jobless claims overnight were encouraging, showing the lowest number of new claims since the pandemic began. Whilst equities and bonds have been relatively subdued in the wait, there’s even more movement in currencies, with the Aussie dollar managing to climb back over 74 US cents.
Thursday 2nd September 2021
The ADP employment numbers in the US normally play second fiddle to the non-farm payrolls, but they are out a day earlier, and overnight they only came half way to meeting expectations. NAB’s Gavin Friend says they rarely show any correlation with Friday’s numbers, but they do reflect concerns about growth inhibited by supply chain disruption. The ISM numbers also reported a reduction in employment. On today’s podcast we also look at yesterday’s GDP numbers for Australia, which were a big surprise, but less relevant with most of the population now in lockdown with no clear end date in sight.
Wednesday 1st September 2021
Markets have lost their optimism overnight. China’s PMIs came in softer than expected and Canada’s GDP, expected to grow, actually fell. Add falling consumer confidence in the US and there;s plenty of numbers for those looking at the glass half full. Inflation reared its ugly head again too, with Europe’s CPI read much more than anticipated, which could present a headache for the ECB, who had signalled that their emergency bond buying would continue through to next year. Ina amongst all of this, the Aussie and Kiwi dollars rose. NAB’s Ray Attrill says it’s telling as to how much pessimism and bad news was already priced into both these currencies.
Tuesday 31st August 2021
It’s been a quiet session overnight and NAB’s Tapas Strickland says its likely to be a quiet week in the run up to non-farm payrolls on Friday, which will give us all a clearer understanding on the speed of the US jobs recovery. The continued high COVID case numbers, a drop in air travel and the threat of an EU ban on non-essential travel from the US haven’t dented market enthusiasm, with the S&P reaching yet another record high. Locally today more GDP partials, which should give us enough data to determine whether tomorrows Q2 GDP number will be negative or positive. China’s PMI numbers will be watched keenly, whilst Chinese authorities will be keeping an eye on computer gamers!
Monday 30th August 2021
The Fed chair Jerome Powell didn’t indicate any timing for tapering, as we predicted several times last week on The Morning Call. Yet the markets still reacted. Phil Dobbie asks NAB’s Rodrigo Catril what was said that was interpreted as a more dovish stance than expected. Can the markets maintain their optimistic outlook with a more cautious Fed, and with some data suggesting growth might be slowing. With NSW recording its highest infection rate so far yesterday, and Victoria staying in lockdown beyond Thursday, can the Australian dollar hold the gains it made late last week?
Friday 27th August 2021
Market sentiment has been hit by the explosions in Kabul this morning, but NAB’s David de Garis says the response has been fairly limited. It certainly hasn’t knocked currencies and equities out of their trading ranges. No, the real focus today will be on what Jerome Powell says at tonight’s virtual Jackson Hole Symposium. Even though more hawkish members of the Fed are pushing for tapering sooner rather than later, it’s still likely that Powell will retain a wait and see approach. There’s still too much uncertainty to assume jobs will keep bouncing back at the rate we saw in the last non-farm payrolls. The next report is only a week away. Whilst the NSW Premier talks about easing restrictions, the national cabinet meets today to nut out a COVID strategy.
Thursday 26th August 2021
Market optimism continued overnight, with US equities again hitting new highs and commodities climbing sharply too. That's helped the Aussie dollar again today. NAB’s Rodrigo Catril says the sentiment is being driven by infection rates starting to subside in the US. Phil Dobbie asks how fragile this optimism could be, if number were to rise again. The ECB’s Philip Lane painted a positive picture, suggesting the Delta variant won’t impact the European recovery story because fatalities and serious illness have been contained by the vaccine. He also indicated, whether through PEPP or another vehicle, they’ll be providing favourable financing conditions through to next March, at least. It’s very different to the direction being taken by the Fed, but more on that in tomorrow’s podcast.
Wednesday 25th August 2021
The tide of optimism seems to have set in, with another day of rising commodity prices and a strengthening Aussie dollar. Rising iron ore prices and zero new cases in China have also helped the Aussie, as the country gets to grips with life with COVID after lockdown. NAB’s Tapas Strickland says politicians are becoming more explicit about living with the virus, with Gladys Berejiklian expected to announce on Thursday some easing measures for those vaccinated. In New Zealand a rate hike in October is very likely, with the RBNZ signalling that the delay was to do with the timing of the lockdown and little more. Australian construction work data for Q2 is out today – if the number undershoots expectations, it could be enough to push Q2 GDP into negative territory.
Tuesday 24th August 2021
There’s been a swift turn in market sentiment, with US equities pushing new highs and oil bouncing back sharply. NAB’s Rodrigo Catril says there are early signs that the rise in COVID cases in the US might have peaked, whilst the official approval of the Pfizer and BioNTech vaccines might encourage more people to come forward for the jab. PMIs told a less positive story, with services growth slowing in the US and, for now, Europe seemingly showing more growth. Amongst all the commotion, bond markets remaining quiet, waiting for any hint of policy direction from Jerome Powell at this Friday’s virtual Jackson Hole symposium.
Monday 23rd August 2021
Equities recovered in the US at the end of last week as markets responded to comments from Robert Kaplan, President of the Dallas Fed. NAB’s Ray Attrill says the FOMC member has changed his hawkish stance, now admitting the Delta variant was dampening demand and that could slow the speed of tapering by the central bank. In Asia it’s a different story, with equities hit by further evidence of increased regulation, mixed with the slowdowns associated with a zero COVID approach that is hitting supply and production. Locally, of course, rising infection numbers and extended lockdowns will continue to hurt the Aussie economy. Today PMIs for the Eurozone, the UK and Australia will give an indication of the relative rate of recovery around the world, although possibly, a little out of date given how quickly the global situation is changing.
Friday 20th August 2021
There are more concerns over the global growth story, with commodity prices falling and the Aussie dollar one of the hardest hit currencies this morning. NAB’s David de Garis says China’s growth is one of the biggest concerns. Phil Dobbie asks whether expectations were set too high. COVID case rises continue to play on uncertainty, with another report showing how the efficacy of vaccines can quickly deteriorate, hence the need for booster shots. Debates over the time of the Fed’s tapering continues, but it’s unlikely we’ll hear more at Jackson Hole next week. Aussie employment numbers yesterday might have surprised on the upside, but it wasn’t as strong as the headline would suggest and, in any case, it won’t last with lockdowns continuing. Once again, COIVD cases for NSW, Victoria and NZ will be the most important numbers of the day today.
Thursday 19th August 2021
The RBNZ didn’t push interest rates up yesterday, in light of the national lockdown. NAB’s David de Garis says the decision has been pushed back to October, all being well. It all depends on COVID numbers of course. Australia’s jobs numbers today are less relevant than usual given that they only covered the start of the NSW lockdown – the real numbers of concern will be infection rates. The FOMC minutes highlighted the divide that exists in the Fed on the speed of tapering, with Bullard suggesting tapering should be pushed back to next year, but finished in time for a rate hike later in the year. All this is putting markets on hold, with shares taking a knock and bond yield hardly moving.
Wednesday 18th August 2021
With New Zealand in lockdown will the RBNZ still push ahead with its expected rate rise today? NAB’s Rodrigo Catril says central banks take a mid-term view, and the inflation and housing pressures remain, so it’s likely they will stick with the plan, but by no means certain. US markets took a confidence hit as retail sales and the NAHB housing index both came in much lower than expected. There was further evidence of rising costs, which were also reflected in the UK’s employment numbers yesterday. Today UK inflation data is out, plus Australia’s wage price index, and the FOMC minutes. And that RBNZ decision.
Tuesday 17th August 2021
Markets remain unsure as to the speed of the global recovery, but there’s mounting evidence that the full extent of the rebound will be delayed. That’s obviously the case in Australia, but the US we reported on Friday’s falling consumer sentiment, overnight the Empire State manufacturing index underwhelmed. This will increase the focus on US retail sales today. Overnight, though, the response has been to data from China, where retail sales, industrial production and fixed asset investment – were all weaker than anticipated, with the unemployment rate ticking up a little too. NAB’s Ray Attrill talks through NAB’s revised forecast for China’s growth. Locally the RBA minutes are out today, but they are somewhat out of date, given the change in circumstances.
Monday 16th August 2021
The US dollar lost a lot of ground on Friday, with Treasury yields falling, both on the back of a much weaker than expected consumer confidence report in the US. NAB’s Tapas Strickland says this is the lowest read since the pandemic began. So, will treasury yields bounce back? Supply concerns have been exacerbated by the temporary closure of one of the world’s busiest container ports, after just one COVID case. Could a zero-COVID policy from China lead to much more disruption in coming months? Locally lockdowns look set to continue for longer, but the expectation is that the economy will bounce back quickly afterwards, provided we don’t see a significant rise in unemployment. Activity numbers from China today will give an indication of the extent of the slowdown in the recovery of the global economy.
Friday 13th August 2021
There was very little movement in the markets overnight, with thing trading during the northern summer, compounded by any significant news. Bond yields have edged higher, with another successful auction, whilst equities have ground higher, with new highs for the S&P. NAB’s Gavin Friend says we’re at the point of the month when things quieten down. Even news of more regulation from China did little to impact markets. UK GDP was strong and US jobless claims fell, but these, and other data points overnight, came as no surprise to anyone. So a quiet day. Enjoy it while it lasts.
Thursday 12th August 2021
US CPI eased in July. NAB’s David de Garis says it was helped by less pressure on used car prices and airline fares, whilst food prices remain elevated. It means the Fed can focus on reaching their employment target, whatever that target is. In a speech overnight Raphael Bostic suggested it wasn’t just about hitting full employment, it was also about fixing the inequality brought about by the pandemic. Meanwhile, the market is sold on the idea of tapering starting sometime in the next few months. At home, consumer confidence fell, but optimism is greater amongst those who have had the jab. UK GDP numbers are out today and will be better than last time, simply because it covers a period when lockdowns eased.
Wednesday 11th August 2021
Markets are a little more optimistic today, but there seems little rhyme nor reason. NAB’s Ray Attrill says oil has bounced back, seemingly ignoring yesterdays concerns about slowing demand from China in light of COVID cases and lockdowns, even though the situation is only getting worse. The NAB Business Survey demonstrates the extent of the situation in Australia. Could a protracted lockdown see the RBA reverse its decision to introduce tapering next month? Generally, markets are looking for direction. Even the passing of Biden’s Infrastructure Bill through the senate has seen very little response. Will the US CPI numbers today provide some direction?
Tuesday 10th August 2021
The UN chief has called the latest IPCC report on climate change “a code red for humanity”. The shorter timeframes for rising temperatures has not had any market influence. NAB’s Tapas Strickland says, instead, the focus has been split between how quickly the Fed will introduce tapering, and concerns over whether the recovery will slow, with rising cases and more lockdowns. Oil has fallen further as flight numbers fall and the anticipation of less travel for the remainder of the year increases. Today the NAB Business Survey will reflect the lockdowns in Sydney and beyond, which Tapas points out, are likely to extend beyond the assumptions in the RBA’s latest forecasts.
Monday 9th August 2021
There was a strong market reaction to Friday’s non-farm payrolls in the US, which NAB’s Rodrigo Catril says was at the top end of a broad range of expectations. The question is, does this represent the substantial progress that the FOMC is looking for before tapering bond purchases. It depends on which Fed member you are listening to. We’ve seen the response to the jobs numbers in equity markets, bond yields and the strengthening of the US dollar. That’s contributed to a weaker Aussie and Kiwi dollar, which could take another hit from weaker trade data from China over the weekend. So, will the Aussie recover? Protracted lockdowns will have an impact, with NAB at odds with the RBA on near term growth. How quick the recovery, obviously depends on vaccine rates.
Friday 6th August 2021
I amongst the mixed data from the US – including signs that the job recovery is slowing - and the varied opinions of central bankers, take a look at what’s happening in Germany. Factory orders came bouncing back in June and Google mobility data is showing most people are heading back to work. NAB’s Gavin Friend says this adds to the strong GDP numbers last week. The extent to which these surpassed US growths hasn’t been given enough consideration, he says. Also today, the Bank of England ups its inflation forecast to 4% by the end of the year and all eyes will be on the non-farms payrolls data tonight – with a wide range of predictions, so take your pick!
Thursday 5th August 2021
The New Zealand unemployment rate has fallen sharply, adding more to the expectation that the RBNZ will lift interest rates next month. NAB’s David de Garis says the markets have now priced it in at more than 100 percent. US jobs, however, are taking longer to recover. The ADP employment report saw far fewer new jobs than expected. Although all eyes are on the more credible non-farm payrolls number on Friday, the ADP report did knock the S&P off its record high. Today, the Bank of England meets, although we can’t expect them to be signalling anything of significance.
Wednesday 4th August 2021
Central banks seem to be taking a very optimistic view of the rate of recovery right now. The RBA has decided it will push ahead with its tapering of asset purchases, despite the protracted Sydney lockdown. The RBNZ’s Governor Orr has as good as said that the central bank will lift interest rates next month. The direction taken by the US Fed will be dependent on jobs numbers, making the non-farm payrolls data all that more important at the end of the week. Meanwhile US equities have bounced back as investors take stock of strong corporate earnings. NAB’s Tapas Strickland says 88% of S&P 500 companies have reported a positive earnings surprise for Q2. Of concern, though, are rising infection rates in China. Mass cancellation of flights has been influential in the fall in oil prices again overnight.
Tuesday 3rd August 2021
There was a sharp drop in Treasury yields soon after the release of the ISM Manufacturing numbers from the US. The expectation was that they would rise slightly, but they actually fell. Although still in expansionary territory NAB’s Rodrigo Catril says it adds to the narrative that the speed of recovery is slowing. It was compounded further with weaker Caixin PMI manufacturing numbers from China. At home the RBA is fully expected to reverse its plans to start tapering its bond purchases from September, as NSW focuses more on increasing the vaccine rate as the only way out of lockdown.
Monday 2nd August 2021
Iron ore prices fell below U$200 on Friday as China indicated that they would be cutting demand. It hit the Aussie dollar on Friday, which was already suffering as virus cases mounted in several parts of the country and no immediate escape plan for the Sydney lockdown. Today, Phil Dobbie asks NAB’s Ray Attrill whether the Aussie dollar could fall to 73 cents again this week, or lower, and whether that’s such a problem, given it has spent much of the last few years below that level. Also today, how Friday’s data showed that Europe is gaining momentum over the US on the recovery race. And mixed messaging from the Fed, but tapering is not likely to start anytime soon.
Friday 30th July 2021
Markets have had a chance to absorb the dovish sentiment from the Fed yesterday and take stock of mixed data overnight. On the surface US GDP numbers looked weaker than anticipated, but a chunk of that was influenced by lower inventory and trade numbers. NAB’s Gavin Friend explains how consumption and investment was actually much higher than anticipated. He says we can expect a strong GDP read for the Euro are later today, where vaccine levels are picking up. Markets have also been soothed from conciliatory messages from China regarding overseas investors. The Aussie dollar showed slower growth on the back of a weaker US dollar, as the question remains, how long will the Sydney lockdown really last?
Thursday 29th July 2021
There was a tame response to the FOMC statement this morning, but a more marked reaction during the press conference that followed. NAB’s David de Garis says the turning point was Powell’s remark that there was some ground to cover when it came to reaching full employment. Also on today’s podcast, discussion on yesterday’s Aussie CPI numbers, and how the widening trade deficit has seen a downgrade to US GDP expectations later today. And the US infrastructure bill might finally be voted on, but we’ll explain why markets are unlikely to be too interested.
Wednesday 28th July 2021
Whilst US equities edged to all-time highs, the real yields on US Treasuries sank to new lows. NAB’s Rodrigo Catril talks about how expectations for tapering by the Fed could be pushed back, as the recovery slows. The take-up of vaccines in the US isn’t helping, with the seven-day average of daily jabs now at the lowest level since early January. In the UK infection rates are falling – but still very high – but hospitalisations are increasing. Whilst in the Sydney region lockdowns are likely to last longer, with almost 400k people claiming disaster payments, according to today’s AFR. So, plenty of reason for caution, and the waiting game is on for the response from the Fed later this week.
Tuesday 27th July 2021
Whilst US equities edged to all-time highs, the real yields on US Treasuries sank to new lows. NAB’s Rodrigo Catril talks about how expectations for tapering by the Fed could be pushed back, as the recovery slows. The take-up of vaccines in the US isn’t helping, with the seven-day average of daily jabs now at the lowest level since early January. In the UK infection rates are falling – but still very high – but hospitalisations are increasing. Whilst in the Sydney region lockdowns are likely to last longer, with almost 400k people claiming disaster payments, according to today’s AFR. So, plenty of reason for caution, and the waiting game is on for the response from the Fed later this week.
Monday 26th July 2021
Last week markets were pulled between concerns over the rise of the Delta variant and the encouragement of strong corporate earnings data. This week could go either way, with significant earnings to come, and mixed opinions on the direction the virus will take. In today’s podcast NAB’s Tapas Strickland looks at the latest vaccine efficacy numbers and the influence on the Aussie dollar. Which was one of the biggest losers last week. We also look at the PMIs from Friday shows, which suggest Europe might have the edge on the US for growth. And the American economy has something else to contend with, slower population growth.
Friday 23rd July 2021
Equities have been helped by earnings results and a little less COVID concern. On the macro front US jobless claims rose unexpectedly, but NAB’s Gavin Friend says a lot of it will be to do with seasonal adjustments related to the annual auto-tooling shutdowns. The ECB held its first meeting since it’s new straight 2 percent target, but little will change in the short term. The UK economy could be hit by track and trace ‘pings’ that are spreading like wildfire. Aussie payrolls numbers yesterday reflected the current shutdowns, which are likely to go on for much longer. Over the water New Zealand has its first day without QE – we look at the market response.
Thursday 22nd July 2021
The rebound from the COVID concerns at the start of the week is now complete, with bond yields rebounding further overnight, equities bouncing higher and commodities on the rise. NAB’s David de Garis talks about how businesses are seeing the recovery happen, even where he is in London. Globally, it seems the expectation is that COIVD won’t hinder a global recovery, particularly as vaccine numbers rise. So what does that mean for the ECB today, particularly if growth is expected to rise and their outlook remains dovish? And Brexit is back, struggling over the NI border issue that was never resolved, perhaps because there isn’t an answer.
Wednesday 21st July 2021
Curiously, much of the negative market reaction at the start of the week has seen a reversal in the last 24 hours, even though the reasons for the concern remain. The Delta variant continues to spread, vaccination rates have slowed, and case numbers are rising. Phil Dobbie asks NAB’s Ray Attrill if he can explain the switch in direction, with the response far stronger for equities than it is for bond traders. They also discuss the next moves for the RBA, with more lockdowns across Australia, and what to expect from the ECB tomorrow. Plus, Aussie retail sales numbers are out today. However poor they are for June, we know July will be worse.
Tuesday 20th July 2021
There’s not been a lot of economic data around, but markets have dipped sharply on the back of rising COVID cases. NABs Tapas Strickland says its being driven by the preponderance of the Delta variant. Oil is also down, in part because of the OPEC deal discussed yesterday, but also expectations of a slower global economic recovery and less international travel. Further tensions with China are adding to the uncertainty, with the US now implicating Chinese nations in the hacking of Microsoft servers earlier in the year. This will add to the tensions between Australia and China. A quiet day today, with the RBA minutes from a meeting that won’t have reflected the growing global concerns, which could delay the bank’s decision of when to taper asset purchases.
Monday 19th July 2021
OPEC reached a deal of sorts over the weekend which will see supplies increase incrementally over the next few months. NAB’s Rodrigo Catril said markets had been expecting a deal of this magnitude, so it has done little (so far) to oil prices. Meanwhile, COVID caution continues to rein over the markets, with a stronger US dollar and a weaker Aussie. US retail numbers were strong on Friday, but we discuss Google data which suggests store visits are plateauing below pre-COVID levels in most parts of the world. New Zealand’s strong inflation numbers at the end of last week cemented the likelihood of action by the RBNZ, and this week will be the ECB’s first change to issue guidance reflecting its new strategy.
Friday 16th July 2021
Markets returned to a more cautious outlook overnight, with US equities losing ground and bond yields falling. As NAB’s David de Garis explains, its difficult to find any particular reason for the change in sentiment, other than a return to concerns over COVID and the speed of economic recovery. There wasn’t anything in day two of Jerome Powell’s testimonies to cause concern and US data overnight was largely positive. The Aussie dollar felt the impact of the mood of the day, even though there was a very strong set of employment numbers yesterday. The UK’s employment numbers told a different story. And data from China suggest the slowdown is not as bad as feared, but likely to be enough to spark more stimulus from the PBoC. Today, the NZ CPI read will be the focus of attention.
Thursday 15th July 2021
There’s a world of difference in the approaches being taken by central banks in response to the COVID recovery. NAB’s Gavin Friend talks through some of them, starting with the RBNZ announcing bond buying will end next week, leaving the door open for rate rises as soon as August. The Bank of Canada is also tapering its asset purchases. Yet, as inflation rises, the Fed’s Jerome Powell has been reiterating to Congress that tapering will not start anytime soon. The UK also saw inflation rise yesterday, but the BoE is not in any hurry to change direction, neither is the RBA. Who’s got the right idea? Today we will see jobs numbers for Australia and the UK, plus the weekly unemployment claims for the US, and a heap of data from China, including Q2 GDP.
Wednesday 14th July 2021
US inflation has surprised again. It was expected to ease back after the 5% jump last month, but this time its higher still. Phil Dobbie asks NAB’s Tapas Strickland whether this will be enough for the Fed to be forced into tapering sooner than intended, or is it still transitory? As luck would have it, Jerome Powell is talking to Congress later today, so maybe we’ll get an inkling of a change in timelines. Also today, decisions from RBNZ and the Bank of Canada, two central banks in more of a hurry than most. Plus, China’s trade numbers, the NAB business survey and the Bank of England’s stability review.
Tuesday 13th July 2021
US stocks hit new highs as Q2 earnings season kicks off. NAB’s said it also reflects a recovery from Asia emanating from China’s easing of reserve requirements. China will be a focus today, too, with the release of trade data. US CPI is also out today. Could a combination of weaker earnings reports, a fall in trade to and from China and/or a higher-than-expected CPI dampen the mood? The other significant news overnight has been Christine Lagarde’s Bloomberg interview were she spoke about PEPP continuing in some form from 2022. Will we see central banks taking a more dovish stance as COVID numbers continue to raise concern?
Monday 12th July 2021
For most of last week markets grew increasingly cautious about the spread of the Delta variant and fears of further lockdowns in major economies, Australia included. On Friday, though, that all changed, with bond yields rising, equities breaking new highs, the US dollar back on the rise, but the Aussie also doing well along with other commodity currencies. This morning, NAB’s Ray Attrill looks for reasons behind the shift in sentiment, including better credit numbers from China and a more extensive and sharper than expected cut in the reserve requirement ratio for Chinese banks. So, has the mood shifted? It’s a busy week ahead, including US CPI numbers, which markets have been particularly sensitive too recently. Who’s to say caution doesn’t swiftly return on the back of more virus news.
Friday 9th July 2021
Is it below 2 percent or at 2 percent? The ECB has made subtle changes to its inflation target, but has flatly rejected the Fed approach of average inflation targeting. NAB’s David de Garis explains what’s changed in the ECB’s approach. Plus words from Philip Lowe yesterday about the RBA’s reluctance to shift policy until unemployment is (much) lower. Plus, oil up as US supplies fall, and the reflation trade takes a breather as COVID concerns rise. Listen in for the detail.
Thursday 8th July 2021
The FOMC minutes were released this morning, but a more significant central bank release could be out later in the day. Christine Lagarde is said to be released the outcome of the ECB’s extensive strategy review. NAB’s Gavin Friend talks to Phil Dobbie about what’s likely to be in it and how much of it could be market changing. The Fed minutes meanwhile, had little impact on the markets, which continue to exercise caution as further data suggests a slowdown in the speed of the global economic recovery.
Wednesday 7th July 2021
Bond yields have fallen markedly as markets adopt a more cautious air. NAB’s Rodrigo Catril says it’s being driven by a number of factors, including weaker than expected ISM services numbers from the US and factory orders from Germany. The main concern in the ISM was the employment data which dropped below 50, reinforcing the belief that there is a constraint in the availability of labour. A more controlling influence from China, the growth of a more virulent COIVD strain and the uncertainty over an OPEC deal have all added to the caution. So will a strong JOLTs number and the minutes of the last FOMC meeting do anything for turn the sentiment around today? There’s also discussion on yesterday’s RBA meeting, which left the door open to earlier rate rises and tapering of QE, driven by data not dates.
Tuesday 6th July 2021
Boris Johnson has told the UK public that they are just two weeks away from removing their masks, getting back to work and forgetting about social distancing. Within reason. Is this why the pound had such a strong day today, on what’s been a quiet session with the US holiday. Today, we know something will change with the RBA. That’s why Philip Lowe has scheduled a press conference this afternoon. But what exactly will be decided? NAB’s Ray Attrill talks through the possibilities. More importantly, what will cause the market to react? And oil rises sharply as OPEC+ talks fall apart.
Monday 5th July 2021
Not too strong not too light, that seems to be the view of the non-farm payrolls in the US on Friday. It wasn’t strong enough to signal change in the Fed’s direction says NAB’s Tapas Strickland. At the current pace, he said, it would take eight months to get back to the pre-pandemic level for payrolls. There’s also discussion about changes expected from the RBA tomorrow. It’s been well signalled that there will be policy changes. Tapas says, given the improvements in the Australian economy, the need to run QE at $100 billion every six months is not there anymore.
Friday 2nd July 2021
Markets have been treading water all week waiting for the non-farm payrolls data, particularly in bond yields which hardly moved at all in the last 2 4hours. NAB’s Gavin Friend says there’s been a lot of data for markets to chew over too, some of it below expectations, some of it over. Markets are clearly looking for direction and hoping that payrolls will provide it. In the podcast we also look at yesterday’s manufacturing, trade, dwellings and job vacancy numbers from Australia – all good, although the Aussie dollar was one of the weaker currencies overnight. Why?
Thursday 1st July 2021
As we’ve mentioned before, central bank speakers are having little influence on the markets since the sharp response to the last FOMC meeting. As David de Garis says on today’s podcast, investors should wait for the evidence, with the non-farm payrolls on Friday the next significant cab off the rank. The ADP numbers overnight were down on April, and could be revised down further, as is often the case. There’s also discussion about weakness in the Aussie dollar, despite the iron ore price, Andy Haldane’s parting words from the Bank of England and uncertainty over China’s growth.
Wednesday 30th June 2021
Markets have largely moved sideways, pulled between rising confidence numbers in the US and Europe, and concerns about rising cases of the Delta strain. As NAB’s Rodrigo Catril explains, the Conference Board’s labour market differential index, which looks at the ratio between those who see jobs as being plentiful and this finding them hard to get, came in at the highest level since 2000. Also today, discussion on Christine Lagarde’s green plans for Europe, the direction of the Chinese economy and house price concerns. Today, Australian Private Sector Credit will be of interest along with the ADP jobs numbers for the US.
Tuesday 29th June 2021
A little more cautiousness has crept back into the markets says NAB’s Tapas Strickland, although it might be as much to do with the prelude to the non-farm payrolls numbers at the end of the week as it is to do with rising infection rates as lockdowns. On today’s podcast we look at vaccine numbers and what needs to happen to see economies can on full footing. Plus, Tapas’ taker on yesterday’s Intergenerational Report for Australia. Germany’s CPI numbers will be watched closely today, as do all inflation numbers lately.
Monday 28th June 2021
With Sydney suddenly flung into lockdown, Phil Dobbie asks NAB’s Ray Attrill what the market reaction will be today. One immediate repercussion will be we won’t hear anything from the RBA ahead of next week’s meeting. Markets also open today with the weekend news that Joe Biden has backtracked on his latest stimulus bill. It’s not such a done-deal after all. There’s also discussion about the path the markets take having retraced their response to the FOMC meeting the week before last, particularly when there remain so many known unknowns.
Friday 25th June 2021
Joe Biden has struck a deal to push ahead with his infrastructure plan – a much reduced version. That’s helped US equities today. Ahead of that, it was a mixed day on the markets says NAB’s Gavin Friend, as Fed speakers gave mixed views on the duration of inflation and the Fed’s likely response. Data was also mixed, with weekly jobless claims not falling as much as hoped and durable goods orders a little weaker than expected. The Bank of England, who might have been a little more hawkish, actually took a very dovish stance. The data form Europe was largely positive and today the US personal income and spending will be of interest, along with the core PCE deflator, but, there again, we already know prices are rising.
Thursday 24th April 2021
The crawl back from last week’s FOMC surprise is more or less complete. As NAB’s David de Garis points out, Treasury yields are back to where they were just before the Fed met. Equities are back to on the rise and commodities and being driven higher by demand and supply constraints. The reflation trade is back. On today’s podcast we go through the plethora of PMIs from Europe and the US, with more data from Europe today. The Bank of England meets later. The heavily-vaccinated UK population seem to be adapting to life with the virus. Could that influence the outlook for the Bank of England later on?
Wednesday 23rd June 2021
Jerome Powell has been giving is testimony on Capitol Hill and he, like all the Fed speakers over the last 24 hours, has been trying his hardest to calm the markets and reassure them that inflation won’t last, so the Fed won’t be tapering soon or bringing forward rate increases. It seems to be working, with another day of a weakening US dollar and rising equities. This week tentatively suggests that the global reflation trade is not dead, says NAB’s Ray Attrill on today’s podcast. Plus, loads of PMIs today, for Australia, Europe and the US, we look at the winners and losers. And the first words from the RBA since those strong jobs growth numbers last week.
Tuesday 22nd June 2021
Well, we did say it was a rather extreme reaction to the FOMC meeting last week. NAB’s Tapas Strickland says the market moves overnight suggest the response was overdone, as markets partially unwound, with the US dollar falling, the yield curve steepening again, US equities up and the Aussie dollar on the rebound. So, what’s driven this rethink and will it last? Will Jerome Powell have an influence on it all when he speaks in front of a US government committee later? On today’s podcast we also examine yesterday’s Australian retail numbers, dissect what Christine Lagarde had to say from the AECB, and look ahead to what’s on today.
Monday 21st June 2021
The US dollar continued to rise at the end of last week., hitting a two-month high, after the surprisingly bullish outlook from the Fed, but is the Aussie dollar paying too high a price? NAB’s Rodrigo Catril says the Aussie is in the middle of the storm, with the unwinding of the reflation trade pushing US equities and commodities lower. The Aussie dollar broke through a few technical levels at the end of the week, will it pick back up? Today we discuss movements in currencies and bond yields at the end of the week and what the week has in store for us.
Friday 18th June 2021
The US dollar continued to rise yesterday, after the hawkish comments from the Fed. As David de Grais discusses on today's podcast, it’s impetus was enough to squash any positive currency response to Australia’s employment numbers and New Zealand’s GDP read yesterday, both of which were way higher than anticipated. And yet Philip Lowe continued to set the expectation that Australian rates wouldn’t rise until 2024. The road to recovery isn’t straight forward though, with US unemployment claims rising last week and Britain’s infection rate rising sharply, despite the vaccines. UK retail sales will garner a bit of attention today.
Thursday 17th June 2021
At the FOMC meeting this morning the Fed upped their growth and inflation forecasts, twit the dot plots pointing to rate rises as soon as 2023. It’s a much more hawkish meeting than had been anticipated although, NAB’s Gavin Friend wonders whether enough has changed in the Fed’s forecasts to warrant such a shift. UK CPI is another indicator that exceeded expectations. We’re getting that a lot lately. Today’s Australian employment data is also discussed in today’s podcast, along with Philip Lowe’s speech in Toowoomba later on.
Wednesday 16th June 2021
The FOMC meeting is just a day away are markets are being cautious, with little movements in bonds or equities. A weaker than expected set of retail sales numbers has added to the uncertainty. But is there any uncertainty around what the FOMC will say. NAB’s Tapas Strickland says under the hood the retail numbers had some positives, including more evidence of the rotation from goods to services. We also look at the rising price of oil, and the fall in other commodities. Coming up, other than the FOMC meeting, we’ll see China’s retail sales numbers, CPI for the UK and Canada and New Zealand’s balance of payments and current account.
Tuesday 15th June 2021
Oil has hit a two-year high. This morning NAB’s Ray Attrill explains why oil prices could continue to rise. Are we heading for $100 oil? Also, why bond yields are rising again ahead of an FOMC meeting this week where little is expected to happen. And troubling times for Boris Johnson, fighting the EU over the NI protocol, pacifying the US President and announcing a 4 week delay to next week’s planned lifting of all COVID restrictions. On today’s podcast we also look ahead to the RBA minutes, US retail sales and UK employment numbers.
Friday 11th June 2021
US CPI was a higher than expected, but the Market seems to have taken it largely in its stride, although it’s helped push equities higher today. NAB’s David de Garis said the market will be more interested in what the Fed might say next week, after a couple of disappointing payrolls numbers. Meanwhile, the ECB, upped their forecasts but didn’t talk of tapering, except to say they weren’t going to rush into it. And world leaders are in Cornwall to talk about the global approach out of the pandemic, including a belt and road initiative to rival Chinas.
Thursday 10th June 2021
Bond yields have fallen further overnight, in some cases to levels not seen for several months. NAB’s Tapas Strickland says it could be market positioning, although it could also be related to growing acceptance that any inflation that occurs is transitory. That’s not how the Bank of England’s Andy Haldane sees it though, and China’s PPI numbers shows supply costs are rising. Yet the RBA’s Christophe Kent sees any significant rise in inflation, temporary or otherwise, as being some way off for Australia. This mix of views on where inflation is heading globally will be fuelled further by the latest US CPI number out later today. Plus, what to expect from the ECB.
Wednesday 9th June 2021
Inflation fears have eased further, says NAB’s Gavin Friend, with bond yields pushing lower and market volatility easing. That’s despite the JOLTs (job openings) numbers in the US which were high enough for everyone to have a job, but its clear to attract workers companies will have to lift their wages. That was evidenced in the NFIB small business survey overnight too. Meanwhile, in the UK the focus is on rising house prices – BoE chief economist Andy Haldane described the market as “on fire” – and the worsening dispute with the EU on the Northern Ireland border. The Europeans are worried that British sausages could find their way onto the continent, stopping them could also mean the Northern Irish could be sausage-free. This is a story that won’t go away. It’s a slow burner, with lots of sizzle to follow (sorry).
Tuesday 8th June 2021
If the non-farm payrolls gave the markets a Goldilocks moment on Friday – with jobs numbers that weren’t too hot or too cold – then maybe markets are already starting to question whether it was exactly what was needed. As NAB’s Ray Attrill points out, US CPI numbers later in the week, and the expectations of them, could tip the balance a little. But, could the speed of recovery also be a concern? The US is showing growth, and it’s likely the JOLTs numbers today will show there are lots of job openings, but will they be filled? And why are China’s exports down? Could it be to do with supply constraints, or could it be lack of demand, particularly when much of Asia is facing increasing lockdowns and restrictions.
Monday 7th June 2021
Not too good, not too bad, that seems to have been the market response to the non-farm payrolls numbers out of the US on Friday. NAB’s Rodrigo Catril says it reinforced the view that the labour market was recovering in the US, but not so fast that it would prompt tapering discussions. The result has been a sharp fall in Treasury yields and a pick-up in risk assets. It’s a different story in Canada, but as discussed in today’s podcast, it’s all a question of timing and lockdowns. The G7’s agreement in principle to a 15% minimum corporate tax was another highlight at the end of last week, but there’s still a long way to go.
Friday 4th June 2021
On today’s podcast NAB’s Gavin Friend talks through a session that has been in two parts. First off there was the response to a series of strong numbers from the US, including a standout set of employment numbers from the ADP. This positive news added to speculation that the Fed would taper soon rather than later, with the Fed’s Robert Kaplan suggesting they might need to take their foot off the pedal sooner. Stocks regained some of their losses when reports emerged that Joe Biden might compromise on the size of his increase to corporate tax. Tonight the focus will be on the non-farm payrolls numbers out of the US. If they are strong then pressure will mount for a swifter move from the Fed. Or at least that’s what the markets will expect.
Thursday 3rd June 2021
If there’s one takeout from the Fed’s Beige Book overnight, aside from the continued improvement in the US recovery, it was the rising concern about input costs. Even though it’s seems to be accepted wisdom that price pressures from supply chain disruption will be transitory, there’s the question about how that disruption will impact the jobs recovery. NAB’s David de Garis says that makes this week’s non-farm payrolls on Friday particularly important, which explains why markets are lacklustre today, across almost all asset classes. Only oil is showing any significant move forward. Listen in for a description of how markets are travelling, just don’t expect any big numbers. Not today.
Wednesday 2nd June 2021
The RBA didn’t steer from its earlier stance that it was too soon to be looking at any changes in policy right now. Those who were expecting a more hawkish attitude will have been disappointed. The real surprise yesterday was the strength of the GDP partials in Australia, in particular a record current account surplus. NAB’s Rodrigo Catril says that will translate to a higher GDP number today. Elsewhere, Europe posted final PMIs for May, which have been revised upwards, and the US reported a high ISM manufacturing read. Hardly surprising then, that oil is on the rise, with Brent hitting pre-pandemic levels. But with India still in trouble, Iran ready to up their production, and uncertainty over lockdowns the world over, isn’t $71 oil a little premature?
Tuesday 1st June 2021
Markets have been understandably quiet with the US and UK on holiday. China delivered its PMIs, with the manufacturing read a little below expectations, and non-manufacturing a little higher than expected. NABs Tapas Strickland says the new orders component of manufacturing suggests demand might be starting to level off. The rising Yuan is clearly a concern for the PBoC who announced measures to tackle it, whilst Chinese authorities are now permitted families to have three children. Whilst Monday was quiet, there’s a plethora of data today, including pre-GDP partials for Australia, the Eurozone’s CPI, Canada’s GDP, US ISM, and China’s Caixin PMIs. Plus, of course, the RBA. No big announcements are expected but what will be the tone they adopt?
Monday 31st May 2021
It was an early start to month-end on Friday, with the US and UK off on holiday today. NAB’s Ray Attrill says there were a lot of intra-day currency moves late in the day on Friday, some of which will be down to asset managers managing their hedge ratios. There was little movement in other asset classes, even with a higher-than-expected inflation read, mainly because it wasn’t the same scale as the CPI shock earlier in the month. It might be a quiet start to the week, but it’s a busy week, including the RBA tomorrow and non-farm payrolls in the US on Friday.
Friday 28th May 2021
Three central bankers argued for a more rapid tightening of monetary policy overnight. The Bank of England’s Gertjan Vlieghe argued a scenario where rates in the UK could rise as early as Q2 next year, although NAB’s David de Garis says markets might have overreacted to what was a far more nuanced argument. The pound is the big winner in the major currencies overnight. The ECB’s Jens Weidman expressed concerns about monetary policy being pushed too far to tackle income distribution, whilst the Fed’s Robert Kaplan wrote an article outlining how the US labour market might be tighter than many have thought, with people stepping out of the workforce for early retirement, for example. Tonight, the Biden administration releases its budget papers, with forecasts, and the long awaiting PCE deflator – although with so much uncertainty around the transitory nature of inflation, or otherwise, there’s a question mark on just how valuable this read will be.
Thursday 27th May 2021
The RBNZ surprised many yesterday by indicating that there could be an interest rate rise as soon as next year, which bolstered the Kiwi dollar and it hasn’t really come back down to earth. They are a little more guided in Europe, though, where the ECB mentions at every turn that tapering won’rt happen soon, let alone a rate rise. This morning Phil Dobbie asks NAB’s Rodrigo Catril whether two central banks can really pursue such different paths when the push comes to shove, particular as the RBA and RBNZ tend to be aligned?
Wednesday 26th May 2021
Okay, we know The US dollar has fallen again, with rises in the Euro, and a shift up in the Yuan, but will it stick? NAB’s Ray Attrill says there have been conflicting reports from China as to whether the country would benefit from a stronger currency, or not, but the belief is it will continue to rise which could add more strength to the Aussie dollar over time. In the US house sales were well down, but it seems to be a factor of supply shortages mixed with rising construction costs weakening demand. It’s being seen as another temporary inflation measure, with further falls ion bond yields overnight suggesting the transitory inflation story is even more widely accepted. Today the RBNZ policy statement – can they remain so dovish in light of the local data?
Tuesday 25th May 2021
Equities are back on the rise and bond yields are falling, slightly, as investors seem to have accepted the line of most central banks that inflation is only transitory. The Bank of England’s Chief Economist is one of the few dissenters, but as NAB’s Gavi Friend points out, he has always been hawkish, and he is about to walk out the door anyway. Nonetheless, the inflation debate continues and attitudes could quickly switch. Meanwhile, the Aussie dollar hasn’t gained as much as the NZ dollar from the weakening US dollar, in part because of more noises for China on the need to control speculation in commodities. Today Aussie merchandise trade figures, plus the weekly payrolls report, and the German IFO report.
Monday 24th May 2021
There was a strong set of numbers at the end of the week; PMI reads were generally good, UK retail bounced back and vaccines, we’re told, will do a good job against the current mutations of COVID-19. But the Euro lost ground on Friday as Cristine Lagarde refused to commit to any schedule for talking tapering, whilst support for tapering sooner rather than later is gathering some momentum in the US. Inflation continues to be a hot topic, with more evidence of rising costs in the PMIs. NAB’s Tapa Strickland says the survey highlights how many companies are expecting to pass the costs on. What will rising prices and a string economic recovery do for Biden’s hopes for a massive infrastructure spending program?
Friday 21st May 2021
Equities bounced back in the US and Europe as markets re-evaluated the comments about the timing of tapering in this week's FOMC minutes. The US dollar is also lower, along with bond yields. NAB’s Gavin Friend points out that this is the third turnaround Thursday in a row. Will it become habit forming? On today’s podcast more discussion about differing attitudes to inflation, plus a look at yesterday’s job numbers in Australia and a look ahead to today’s flash PMI numbers for many parts of the world.
Thursday 20th May 2021
The FOMC minutes gave away more than expected, with the Fed suggesting it might be appropriate at some point to discuss a plan to adjust the pace of asset purchases, if the economic recovery continues. Lots of caveats there, but markets responding pushing 10 year Treasury yields up 5 basis points quickly afterwards. NAB’s David de Garis says the mere mention of tapering was enough to evoke a response, with inflation also back in full focus. Also today, Bitcoin lost almost a third of its value, before making most of it back again, after China announced a ban on financial institutions facilitating any transactions into or out of the currency. There’s also discussion on today’s Aussie employment numbers – NAB is more bullish than consensus on this, expecting the unemployment rate today.
Wednesday 19th May 2021
It’s been a mixed session for US equities overnight, whilst bonds headed sideways. The main move has been the further decline in the US dollar, falling below 90 on the DXY index for the first time since January and not far from the lows of 2018. NAB’s Gavin Friend says the move down is being driven by the reopening in Europe ,without the US labour market volatility, plus the fall in real yields. Also on today’s podcast, discussion on yesterday’s RBA minutes, tomorrow’s FOMC minutes and whether a US-Iran nuclear will add a sizeable chunk of extra oil on the global markets.
Tuesday 18th May 2021
US shares fell sharply today as investors once again weighed up inflation concerns. The only new data to support rising prices was the Empire State Manufacturing Index, which showed an all-time high for prices paid and future prices. NAB’s Tapas Strickland says it’s the tech sector that has been hit the hardest, perhaps because of overvaluation concerns and the fear of a Fed that has to raise rates aggressively if it’s behind the curve on inflation. Also on today’s podcast discussion of the RBA minutes later today, China’s retail numbers yesterday and the UK’s employment data later on today.
Monday 17th May 2021
Share markets are riding high again in the US despite a triple whammy of disappointing reports. First, retail sales ex-auto fell 0.8 percent in April, secondly consumer sentiment fell from 88.3 to 82.8, and finally inflation expectations have risen to the highest level in a decade. NAB’s Rodrigo Catril says investors are buying the Fed’s line that the recovery will see fluidity in numbers and rises in inflation are transitory. But we should also be looking at vaccination numbers, lockdowns and COVID infection rates to understand which economies will bounce back the fastest.
Friday 14th May 2021
USA equities came bouncing back today after yesterday’s sharp response to the higher than anticipated CPI numbers. Topday, investors clearly decided to look beyond any temporary price rises and look to the great re-opening story. The news that there were less than expected jobless claims last week will have helped to drive the expectation that the worst is over and the US economy is reopening. That was reflected in the rise of cyclical stocks in particular and further evidence was provided in the New York Fed’s Weekly Economic Index. Today, eyes will be on the US retail numbers for April and the Michigan Uni Consumer Sentiment Index.
Thursday 13th May 2021
US CPI numbers came in on the high side today, and markets have reacted swiftly, with equities falling sharply and the bond sell-off pushing Treasury yields up, although not quite as high as late March when inflation fears were at fever pitch. Phil Dobbie asks NAB’s David de Garis whether the market is over-reacting. After all, it’s one month, it includes the base effect of last year’s lockdowns and the core number is not too far from the Fed’s target range. It could easily settle down in a month or two. The UK could be next to see this supply driven inflation ramp up, with the GDP numbers showing a significant rise in March, even before lockdown was fully eased. There’s only one focus for the markets right now and nobody is exactly sure how it will play out.
Wednesday 12th May 2021
Equities have taken a tumble again in the US, with the falls broader than just tech stocks. Europe too has seen sharp falls. This risk off mood is being driven by increasing inflation concerns, as evidence mounts that supply restraints are pushing up producer prices, which will eventually be passed on to the consumer. NAB’s Gavin Friend says vertigo is another factor, shares have risen so much this year that investors are worried. There’s also discussion on the Australian budget, China’s rising PPI numbers and why the rise in European bond yields this morning?
Tuesday 11th May 2021
Inflation expectations continues to influence markets, with NAB’s Rodrigo Catril explaining why it has such a marked impact on tech stocks. Inflation in supply chains is a theme around the world, and tonight’s PPI numbers from China are expected to give another clear indication. The pound has had a string session as Britain prepares for more lockdown easing – and Boris Johnson promising the return of hugging – from next Monday. Locally, the focus will be the Federal Budget, and the implications for the RBA of a smaller deficit and less bond issuance.
Monday 10th May 2021
US non-farm payrolls markedly undershot market expectations on Friday, with just 266 thousand new payrolls, versus the expectation of close to one million. NAB’s Tapas Strickland says some argue that the $300 a week jobless supplement is delaying the return to work. Nonetheless, investors took it as a sign that government stimulus would continue and that the Fed’s program would continue on schedule, with no moves until a string of months with strong recovery in jobs numbers. In Australia all eyes will be on the revised government deficit in the Federal Budget tomorrow. Can the RBA continue with the current scale of bond buying if the government is issuing less of them?
Friday 7th May 2021
The Bank of England has upped its forecasts for the growth of the UK economy this year – from 5 percent a few months ago, up to 7.25 percent. The recovery is booming, it seems, but let’s not get carried away, said BoE Governor Andrew Bailey. NAB’s David de Garis looks at the implications of the new forecast on their policy decisions moving forward. The RBA has also been in the spotlight, with Guy Debelle talking in Perth last night and suggesting that inflation forecasts were of less interest to the bank than the inflation that was actually being experienced. Tonight non-farms payrolls will be the focus in the US, where the economy is also bouncing back and jobs will be part of it, but just how quickly?
Thursday 6th May 2021
The Fed’s board continues to talk down the prospect of tapering, pushing the argument that price rises will be transitory. There was more evidence of prices being hit by supply chain issues in the services ISM numbers in the US this morning. It might be a different story in the UK. NAB’s Gavin Friend says its line ball as to whether the Bank of England will highlight the prospect of tapering this year. Guy Debelle might add some thoughts on the timeline for the RBA’s bond buying when he talks in Perth this afternoon. The UK also goes to the polls today, with the question of whether an increase in the SNP vote could force the case for another Scottish independence referendum.
Wednesday 5th May 2021
Janet Yellen surprised the markets this morning suggesting that it might be necessary to raise interest rates to stop the economy from overheating. A call to be made by the Federal reserve, not the Treasury Secretary. Initial market reaction was paired back as the reading of the intent and timing of the comments was watered down. Meanwhile, shares fell in the UK and Europe, although big -tech fared worse than cyclicals. The RBA has upped their growth forecasts for Australia, and cut their unemployment rate expectations, whilst the RBNZ’s Financial Stability Report will be looked at with keen interest to see the influence of a housing market running hot.
Tuesday 4th May 2021
Demand is outstripping supply on both sides of the Atlantic. That fact shone through in today’s US manufacturing ISM, which, whilst still well over 509, at 60.7 it is quite a bit down on March, with a rising number of backorders and increasing material costs. It’s a similar story in Europe, where manufacturing PMIs for April have been revised down a little. NAB’s Rodrigo Catril says there is little doubt that inflation is coming, the question is, for how long and how deep? The RBA meets today, their statement will foreshadow the forecasts in Friday’s Statement on Monetary Policy.
Monday 3rd May 2021
What data there was on Friday was largely good news, apart from the horrific turn of events in India. In the US, though, reads on consumer sentiment and Chicago’s PMI came out stronger than expected. Yet markets turned a little sour at the end of the week, with equities sharply down, and commodity prices falling. NAB’s Tapas Strickland says month-end positioning will be partially to blame, along with concerns about market valuations. Another positive indicator for the US was a 21 percent surge in personal income in the US. Will this flow through to stellar GDP growth in Q2, and if so, what does this do t the prospects for Biden’s next stimulus package or for the Fed’s resistance to tapering?
Friday 30th April 2021
It’s been a choppy session for US stocks, even though the news on the economy was largely positive and earnings results have been strong. Still, equities generally pushed higher, with the S&P500 getting over the 42,000 level. Commodities have also been rising sharply, with copper breaking $10,000 momentarily. NAB’s David de Garis talks about how supply chain issues are pushing prices higher, particularly the supply of chips which is slowing car production in the US AND Japan. Commodities generally are impacting the prices paid for producers the world over. The big questions is, how long will this go on for?
Thursday 29th April 2021
Excuse the American pluralisation, but “long ways to go” is the Fed’s Jerome Powell’s take on the path to recovery for the American economy, and the reason that rates won’t be lifting anytime soon, and the easing of bond purchases are, supposedly, also some way off. There were small movements in the market, says NAB’s Ray Attrill, mostly from the press conference rather than the FOMC statement. Also today, why housing subsidies partially account for Australia’s lower than anticipated CPI numbers yesterday. Plus, the problem with the US’s rising trade deficit, and how we can expect Australia’s terms of trade to rise even more later today. And the first look at earnings results for Apple and Facebook. Spoiler alert, both very strong.
Wednesday 28th April 2021
Markets are treading water ahead of the FDOMC meeting tomorrow morning, but there’s been a sudden rise in bond yields in the US which, NBA’s Rodrigo Catril, suggests inflation is still a concern, as optimism around a vaccine driven recovery escalates. But inflation is less of a concern in Australia - we get the CPI numbers today, Rodrigo tells us what to expect. There’s also discussion around what the Fed will say tomorrow morning, and why share prices aren’t always responding to earnings results which are generally beating expectations. Tesla, Microsoft and Alhabet are the latest to outperform. Has the market reached a peak for now?
Tuesday 27th April 2021
Equities are on the rise again as risk sentiment rises following largely positive data, including the PMIs talked about in yesterday’s Morning Call. Data over the last 24 hour shas been a little more subdued, with Germany’s IFO survey pulled down by lower expectations, and the US durable goods orders softer after the cancellation of Boeing aircraft orders. Nonetheless, the mood is generally positive, says NAB’s Gavin Friend, with Europe now getting into gear on vaccination rollouts and most S&P companies I the US have beaten their earnings estimate and copper – which is tied to the global reflation trade – is now at a decade high. The stars are aligned, for now, but the situation in developing nations – and in particularly in India – are a stark reminder that the problem won’t go away until the disease is tackled everywhere.
Monday 26th April 2021
Markets were on a positive frame of mind at the end of the week, with a strong set of PMIs in the US and Europe, which helped push equities still higher in America. But how much is too much? Phil Dobbie asks NAB’s Tapas Strickland whether some of this is being driven by a fear of missing out. Meanwhile, with all the positive news, how long can the Fed continue to argue the need for such high levels of bond purchases and years of low interest rates? Will there be any hint that a change in direction is even being considered, when the Fed meet this week?
Friday 23rd April 2021
Shares in the US have fallen this morning on news of a sizeable hike in capital gains for wealthy Americans. Although not officially released, NAB’s Gavin Friend explains how the rumour was enough to send shares falling, after a fairly positive start to the session. The ECB was asked whether they would follow Canada’s lead in tapering bond purchases sooner, but there won’t be anyu change until the June 10th meeting. Then the ECB might change its approach, depending on progress on containing the virus. Todays, it’s a day for PMIs, with the flash numbers for April for the Eurozone, Germany, the UK and the US.
Thursday 22nd April 2021
The Canadian dollar has been boosted by the Bank of Canada markedly increasing their growth forecasts for this year, bringing forward the expected date of rate rises and introducing tapering from next week. NAB’s David de Garis says markets were expecting a tapering announcement, but were taken by surprise by the size of the growth revision, with the country in the midst of the third wave of the pandemic. On the podcast today we also look at New Zealand’s CPI read and what it can tell us about Australia’s inflation numbers next week, plus we look ahead to the ECB meeting tonight. And yesterday’s Australian retail numbers was largely a rebound in growth for WA and Victoria, but it seems cafes and restaurants may have led the charge. Is Australia heading for an avocado on toast led recovery?
Wednesday 21st April 2021
There’s a cautious mood in the markets right now, with US stocks down, with smaller caps hit particularly hard. NAB’s Ray Attrill discusses whether this is all down to a revaluation of the speed of the economic recovery. Could the tightening of credit be responsible for this? It’s hard for businesses to recover without borrowing. There’s also discussion of yesterday’s RBA minutes and the expectations for Australia’s retail numbers out this morning.
Tuesday 20th April 2021
US equities dipped a little overnight, pulling back from record highs. NAB’s Tapas Strickland says there does seem to be a habit for a selloff whenever equities climb above the S&P500 200-day moving average. Will it all bounce back? Well, the vaccine news remains positive, with big reductions on cases in countries where vaccines have been rolled out extensively. That’s why we’re seeing strength in the Euro and Sterling today. But what about the Aussie dollar? Is it losing its momentum? It’s another quiet day ahead, with the RBA minutes not expected to reveal much, and earnings results for United airlines and IBM. Plus Apple are announcing something new.
Monday 19th April 2021
There’s still plenty of positive sentiment around as the US, UK and Europe continue to vaccinate at pace. Europe has picked up pace and now jabbed 20 percent of its adult population. The Fed’s Christopher Waller said the economy is “set to rip”, with 6.5 percent growth this year. Yet, despite all the positive news, we have been seeing a decline in bond yields. In today’s Morning Call NAB’s Rodrigo Catril suggests it might be because concerns over inflation have been overdone and the market is coming round to the message that the Fed is trying to deliver that any rises will be transitory. Bitcoin dropped 15 percent in value on Friday, with unsubstantiated reports that the US might be clamping down on money laundering. Today is fairly quiet for data releases, with US earnings reports the only numbers of any consequence.
Friday 16th April 2021
The news was largely positive overnight. Retail sales in the US were better than expected, initial jobless claims were down, the Philly Fed and Empire Manufacturing Surveys were strong – yet bond yields fell sharply in the US, spreading across much of Europe. It’s not the response you’d expect. NAB’s Ray Attrill says bond analysts had been expecting a period of consolidation, but perhaps not quite so much in one day, particularly surrounded by such positive economic data. The Aussie dollar has been one beneficiary of the positive sentiment surrounding that data, and there could be more to come if the numbers out of China are strong, including Q1 GDP, March Industrial Production, Retail Sales and Fixed Asset Investment, all out later on today.
Thursday 15th April 2021
Equities came back off the highs we saw on Tuesday/Wednesday, but their decline didn’t reflect the sentiment in the market. In fact, a four percent rise in oil has been a better indicator, along with the strength of the Aussie dollar. NAB’s David de Garis says we have sen a rotation out of the tech stocks, but the banks have generally been doing well, helped by better than expected earnings results. Our local currency has been bolstered by yesterday’s consumer confidence read, with high hopes for today’s employment data for Australia. Today there will be a lot of attention paid to US retail sales – will they add to the positive vibes?
Wednesday 14th April 2021
It’s been a session with mixed messages. Inflation is showing up in data, including higher than expected CPI in the US yesterday. We’re seeing it in input prices in the NAB Business Survey too, Of course central banks continue to say that any rise will be transitory, but are the markets convinced? Meanwhile, the global recovery that will give rise to that inflation could be temporarily stalled as the Johnson and Johnson vaccine deployment has been halted in the US and in Europe, where it was is expected to inoculate a quarter of all adults. Phil Dobbie talks to NAB’s Rodrigo Catril about the day’s market action.
Tuesday 13th April 2021
It’s been a fairly quiet session overnight, with bond auctions garnering a little less interest than last time, and more to come today. We also get CPI numbers for the US today. NAB’s Ray Attrill says the market is well prepared for a big jump in the yearly reading, but a significant upside surprise could raise questions about how transitory the rises are. Fed’s Bullard spoke about the potential to look at tapering of asset purchases when the US vaccine rate reaches 75% of the population. That’s assuming having the jab results in lower infection rates – Brazil is struggling to contain an outbreak after rolling out a vaccine with a low efficacy rate. NAB’s Business Survey is out today as well.
Monday 12th April 2021
Equities in the US finished Friday on new highs, ahead of corporate earning this week and despite a rise in bond yields. NAB’s Tapas Strickland says a lot of the optimism is being driven by vaccine optimism, as President Biden once again brings the dates of his vaccine targets forward. The spectre of rising inflation continues to hang over markets, particularly as PPI prices rose last week. But Jerome Powell sued his 60 minutes appearance on US TV to again make the point that any rise in inflation would be transitory. Nonetheless, a poll of economists are expecting a rate rise at least a year ahead of the Fed’s schedule. Aussie jobs data will be a focus this week, along with China’s aggregate financing data.
Friday 9th April 2021
Australia has become the latest nation to express concern about the use of the Astra Zeneca vaccines on young people, except here young is anyone under 50. N AB’s Tapas Strickland says it’s unlikely to slow down the speed of the vaccine rollout, but it could have consequences in Europe. Jerome Powell offered little new when he spoke on an IMF panel overnight, talking down the prospect of sustainable inflation. But the ANZ business survey for New Zealand showed rising inflation expectations. Phil Dobbie asks, what does the RBNZ do if inflation is maintained above its target rate, whilst the rest of the world doesn’t? And CPI numbers of China will be worth looking out for later today.
Thursday 8th April 2021
It’s been one of the quietest sessions for some time. The FOMC said nothing that surprised markets, and Janet Yellen detailing how they would pay for the $2.25 trillion infrastructure package was met with a similar muted response. NAB’s Gavin Friend suggests the markets are considering a bit of rebalancing, particularly when it comes to Europe. Even if they are slower to recover the difference between the US and Europe will only be a few months. The destination is the same. The pound struggled today as an announcement was made about limiting use of the Astra Zeneca vaccine for the under thirties. Generally, though, the word ‘lacklustre’ sums up market action overnight. Sadly, the only currency to see significant losses was the Aussie dollar.
Wednesday 7th April 2021
There were no significant market moves overnight. The US dollar has fallen a little further, bond yields are down and equities have cooled somewhat. NAB’s David de Garis says, maybe markets are taking Jerome Powell’s words to heart that it’s a long road ahead and the Fed is going to stay the course. That’s certainly the line echoed by the RBA yesterday even though, like the US, the news is largely positive. Vaccination rates continue to be a determinant of economic recovery, with Canada’s President Trudeau announcing a third wave on his home soil, where the number of people having the jab remains very low. FOMC minutes are out tomorrow; we’ll talk about those, hot off the press, tomorrow morning.
Tuesday 6th April 2021
US equities have been boosted by a string of positive data. The ISM manufacturing read at the end of last week bounced back sharply, and the services number reached a new record high this morning. Plus, non-farm payrolls on Friday also punched the lights out. NAB’s Ray Attrill says even though shares responded, Treasury yields are actually lower than they were before this swathe of positive numbers and the US dollar has fallen, indicating it is responding negatively to risk sentiment at the moment. Today the RBA meets, job vacancy numbers are out for Australia and the Caixin Services PMI is out in China.
Thursday 1st April 2021
Joe Biden and Treasury Secretary Yellen are about to give the details of their long-awaited infrastructure spending plan, but NAB’s Tapas Strickland tells Phil Dobbie that most of the detail has already been released. And the response to the markets has clearly been favourable, with share prices reaching new highs overnight. Bond yields have also been rising. They also discuss Australia’s residential building approvals, US jobs data and China’s rising PMIs. Tapas explains how a slower recovery in Europe could actual be good for the Chinese economy.
Wednesday 31st March 2021
US 10 year Treasury yields hit a 14 month high overnight, as the US dollar rose higher. Phil Dobbie asks NAB’s Ray Attrill how much of today’s movement can be attributed to end of month and end of quarter rebalancing? And how much of a reaction can we expect after Joe Biden announces his infrastructure plan later tonight – which could cost anything from US$2.2 to 4 trillion. There are plenty of moving parts to influence markets, from the total size of the package to how it will be funded – government debt or taxation. There could also be a response to jobs numbers from the US today and on Friday. The Fed’s Raphael Bostic has predicted a million jobs a month over summer, if that happens sooner it could put pressure on bond yields over the long weekend.
Tuesday 30th March 2021
NAB’s Gavin Friend says, early in the session the fire-sale of $20 billion of stocks held by Archegos Capital was all everyone was talking about. But, as it became clear there was little further contagion, attention shifted to the floating of the Ever Given and the easing of lockdowns. The focus now, he says, is on price pressures, starting today as German reports preliminary inflation numbers for March. There will be a lot of attention focused on Joe Biden’s infrastructure proposal, with reports that the total spend could be as much as $4 trillion. Weekly Australian payrolls numbers are out today, but Thursday’s job vacancies data will garner much more interest.
Monday 29th March 2021
There was quite a bit of optimism in the air on Friday as we career towards the end of the month and the end of the quarter this week. NAB’s David de Garis says this could account for some of the volatility we saw at the end of the week, with Goldman Sachs selling off $10.5 billion in stocks. Nonetheless, shares were up after a late in the session rally, which carried through to Asia. So, could there be more volatility in this shortened week? There will be a lot of attention on jobs numbers (in Australia and the US), whilst the blockage in the Suez will cause supply concerns. An attempt late Sunday to float the stranded vessel failed and now it seems the only way forward is to start removing containers, which will take time.
Friday 26th March 2021
It’s been another mixed session. NAB’s Gavin Friend says, on the one side there’s the tantalising prospect of an economic reopening in the northern hemisphere that is almost touchable, but there’s also the issues around vaccine production and, in Europe, concerns about how many people are prepared to take it. Equity markets are subdued, with another move away from tech stocks. Interest in the 7 year bond auction in the US was better than last time, but still cautious. Whilst most Fed speakers reiterate that, even though economic growth might be higher than expected by the year end, interest rates won’t budge till 2024, although Bostick predicts a much shorter timescale. Jo Biden, meanwhile, has doubled his forecast for the number of jabs in American arms in his first 100 days in office. And oil prices rose again as the Suez Canal remains closed, possibly for days, maybe even weeks.
Thursday 25th March 2021
There’s a realisation emerging, says NAB’s Gavin Friend, that even though countries are pressing ahead with vaccine role outs, the speed of recovery might be slower than envisaged. The political wrangles over vaccines supplies from the EU have added to this feeling, with a risk-off mood returning slowly to markets. Oil rose sharply as an oversized ship has blocked the Suez Canal – expectations that it might quickly be moved have gone because, well, it’s still there. There’s a lot of bonds being auctioned in the US in the next 24 hours to keep a watchful eye on, and Joe Biden gives his first press conference, focusing on geopolitics and the Build Back Better infrastructure plans.
Wednesday 24th March 2021
Market sentiment has switched in the last 24 hours, with concerns that the economic recovery from COVID-19 might be slower than anticipated. The airline industry will feel some of the hurt, with European summer holidays likely to be off the agenda for most Brits. Janet Yellen and Jerome Powell were also guarded in their comments about the pace of recovery in the US, when they spoke to the House Financial Services Committee. The New Zealand dollar was the currency hit the hardest. NAB’s David de Garis says much of the fall is to do with government measures to try and restrict house price inflation, moving demand from investors to home buyers. Watch the PMIs tonight for signs of a widening gap between the European and UK economies, as Britain takes the jab many times faster than their cousins over the channel.
Tuesday 23rd March 2021
There were big rises in US shares overnight, with the NASDAQ rising 1.7% in this session, helped by a moderate fall in Treasury yields. NAB’s Tapas Strickland says news of a higher than expected infrastructure spending plan also helped boost equities. Reports suggest as much as $3 trillion will be spent, a mere $1 trillion more than had been anticipated. Trials of the Astra Zeneca vaccine in the US also came up with very positive results, which could lead to approval, with the bonus of perhaps encouraging more Europeans to take the vaccine. The slow rollout is adding to the number of new cases in Europe and in parts of the US, which could slow the speed of economic recovery.
Monday 22nd March 2021
The Fed will push on with ending its lower capital requirements held against Treasurys, sticking with a schedule that will see the so-called supplementary-leverage ratio (SLR) ending on 31st March. Although not unexpected, NAB’S Rodrigo Catril says it risks weakening the appetite for bonds at a time when there is a much higher issuance doing down the pipeline. He explains why markets calmed down a little later I the Friday session. Today we can expect some response to President Erdogan’s decision to sack Turkey’s central bank governor for having the temerity to raise interest rates. Otherwise, it could be a fairly quiet start to the week.
Friday 19th March 2021
There was more reaction to the FOMC meeting today, with bond yields rising sharply. Oil has also risen a lot as tensions mount between the US and Russia. Biden referring to Putin as a “killer” doesn’t seem to have gone down too well, and now with the threat of sanctions from the US there are fears Russia will up oil production in response to impact the US shale oil industry. The Bank of England followed the same script as the FOMC overnight, expecting a faster recovery but, just like the Fed, they are going to let the economy run hot before they contemplate a rate rise. As NAB’s David de Garis points out, the UK would relish the idea of the economy running hot anytime soon. In Australia labour market data was a big upside surprise, with unemployment down to levels not forecast to be reached for a year. Perhaps today’s retail numbers will also be welcome news.
Thursday March 18th 2021
The Fed has upped its growth expectations for the US economy, driven by the fiscal support and the vaccine rollout. But Fed Chair Powell says they are still expecting to keep interest rates low through to 2023, and they are not even talking about starting to talk of tapering of their QE activity anytime soon. He also said inflation was expected to pick up in the shorter term, but this would be transitory. Phil Dobbie asks NAB’s Gavin Friend whether the markets are convinced on this. Plus, what to except from NZ GDP this morning, and Australia’s labour market data from the ABS today.
Wednesday 17th March 2021
There wasn’t much movement in shares, bond yields or currencies overnight, despite weaker retail numbers out of the US. It’s a different story for Australia with strong jobs data yesterday ahead of the official ABS Labour market data later in the week. NAB’s David de Garis says the RBA has suggested that many big companies have already made their adjustments on employment levels ahead of the end of JobKeeper, so there is a reduced risk of any sort of shock as the scheme closes.
Tuesday 16th March 2021
The fear of blood clots from injections means use of the Astra Zeneca vaccine has been suspended in an increasing number of European countries, slowing down the rollout, whilst the UK pushes ahead, reaching almost 40 percent of the population so far. This issue of lagging behind is not just impacting the economy, but is also playing into the strength of the Euro, says NAB’s Rodrigo Catril. Generally though it’s been a quiet session, with minimal movement sin bond yields, shares and currencies, ahead of the FOMC meeting later in the week.
Monday 15th March 2021
Bonds yields rose sharply again on Friday, with 10 year Treasuries reaching their highest level since February last year. NAB’s Tapas Strickland says the inflation break-even component actually fell slightly, as the Michigan Consumer Sentiment survey showed inflation expectations had fallen slightly. Meanwhile the cyclical rotation theme continues as the vaccination rollout accelerates in the US and UK. It’s a different story in Europe, of course, with Italy returning to lockdown today as infection numbers rise sharply, with Germany heading in the same direction. The FOMC will be the main focus this week, along with Aussie retail sales and employment numbers.
Friday 12th March 2021
Asset markets continue to be drawn by bond markets, says NAB’s David de Garis, on today’s podcast. With stimulus coming down the line, and jobs data showing further signs of recovery, you might have expected increased inflation concerns, but yesterday’s CPI figures seem to have calmed those concerns for now. But the ECB is still kicking into action, promising a faster bond buying spree under its pandemic emergency purchase programme, with Christine Lagarde concerned about the rate of recovery. Europe, of course, continues to suffer from a slow vaccine rollout – reaching 10% of the population in France so far, compare to 36 percent in the UK. Britain’s trade numbers will be interesting today, not because of COVID, but to se the impacts of Brexit on trade with Germany and the rest of Europe.
Thursday 11th March 2021
The US 10 years notes auction this morning was a little softer than anticipated, but saw yields higher than last time. But NAB’s Gavin Friend says the story of the day was really the softer US inflation numbers, which saw yields pull back and helped stocks rise, with more rotation away from tech stocks. Meanwhile Philip Lowe from the RBA has been pushing back on market pricing, suggesting rates won’t rise until 2024, saying they would need to see wage gains sustainably above three percent. Whilst the RBA concerns are growing pains, the ECB has a different issue, says Gavin, because of their delayed response to the vaccine.
Wednesday 10th March 2021
Shares have reverted to a focus on tech in the US with a sharp rise in tech stocks. In fact, almost everything is a reversal on yesterday, with the US dollar weakening, the Aussie dollar strengthening, and bond yields falling. Chinese shares have stopped their decent, perhaps the alleged injection of cash from the government worked, for now. The expectation that the global recovery will be strong was reinforced by revised OECD forecasts and a record high for business confidence in yesterday’s NAB Business Survey. The inflation fixation right now means all eyes will be on the US and China CPI numbers tonight, as well as listening in to see what the RBA’s Philip Lowe has say on rising bond yields.
Tuesday 9th March 2021
Us Treasury yields pushed steadily higher overnight, reaching 1.6 percent for 10 year Treasuries. These higher rates have loosened the appetite for tech stocks in the US and Europe, with the NASDAQ falling further. NAB’s Rodrigo Catril says the speed of the rise in bond yields has taken markets by surprise, and a period of consolidation seems reasonable, particularly as the injection of the $1.9 trillion stimulus, which has prompted the rise, has been expected for some time. The Aussie dollar has been impacted, along with EM currencies. The Bank of England’s Andrew Bailey is perhaps the first central bank governor to highlight that an inflation fuelled rate rise is as much a risk as having to lower rates if the recovery is slower than anticipated. Talk about an each way bet!
Monday 8th March 2021
The US senate has passed the $1.9 trillion stimulus package, so it will almost certainly become law this week. Phil Dobbie asks NAB’s Ray Attrill whether this will add to inflation concerns, particularly as oil is also racing ahead thanks to the OPEC+ decision last week to hold off on easing supply cuts. China’s trade figures over the weekend are another sign that the global economy is quickly getting back up to speed, as where US jobs numbers on Friday, although Janet Yellen has been quick to point out you shouldn’t jump to conclusions over the lower unemployment rate.
Friday 5th March 2021
Bond yields are on the rise, in the US and in Australia – for very similiar reasons. Jerome Powell failed to reassure markets that the Fed had a plan to cope with rising yields. As NAB’s David de Garis explains, the Fed governor was saying the Fed had the tools to use if conditionals materially changed, just as conditions were materially changing! In Australia markets were clearly hoping for more bond buying from the RBA, so when they went returned to their previous buying level, markets were disappointed and bond yields rose again. All of this, of course, driven by inflation fears, for which a spike in oil prices hasn’t helped help. The timing couldn’t have been worse from OPEC+, who failed to agree on easing production cuts. Tonight we get non-farm payrolls numbers in the US and China’s National People’s Congress is on over the weekend. There’s a bit going on.
Thursday 4th March 2021
Bond yield have been rising sharply overnight. This time it’s being driven not just by optimism about the speed of the global recovery, but also by the likelihood that the UK government will be issuing around £50b higher than the market expected. Chancellor Rishi Sunak has extended the furlough program through to September, along with other assistance measures. This latest jump in yields couldn’t be timelier with Jerome Powell speaking later today, no doubt reiterating the point that the Fed sees no reason to be concerned about inflation. US jobless claims will also be of interest later on – they were down last week, but the ADP employment numbers told a different story last night, with fewer jobs around.
Wednesday 3rd March 2021
All eyes will be on Australia’s GDP read this morning, which NAB’s Ray Attrill says is expected to be close to 3% growth QoQ, driven by consumer spending. The warnings yesterday from China’s banking regulator, Mr Guo Shuqing, that the US and Europe face bubbles from excessive leverage haven’t had any lasting impact. The RBA continued to provide guidance that rate rises weren’t likely until 2024 and made it clear that the $4 billion purchases announced on Monday were simply a bring forward, so we can assume they will be compensated by lesser purchases to keep the schedule on-track. Tonight the US ADP employment numbers will be a focal point ahead of non-farm payrolls at the end of the week.
Tuesday 2nd March 2021
The RBA might have left itself with very little to say today, having upped their bond buying in response to the sharp rise in yields last week. With bond yields still significantly higher than they were at the beginning of the year Phil Dobbie asks NAB’s Tapas Strickland what else the RBA can do as the Aussie economy finds itself in a better position than most developed nations. The return to normal overnight, with equities back on the rise, has been partially fuelled by stronger than anticipated ISM manufacturing numbers for the US. In fact, most data lately has been on the upside. The Euro is one of the weaker currencies today, perhaps because of an expectation that the ECB too will increase their bond-buying.
Monday 1st March 2021
Friday saw a reversal in the bond sell-offs earlier in the week, seeing 10 year yields in the US falling back top 1.4%. Phil Dobbie asks NAB’s Rodrigo Catril whether the RBA can ignore this volatility this morning, particularly as they were arguably slow to respond last week, eventually buying up $7 billion of bonds. What impact will Biden’s $1.9 trillion stimulus package have, even if it does get whittled down by $400 million or so this week? And there’s rising concerns about inflation, particularly in Europe. If we are to keep volatility under control we really need to see data which shows a gradual economic improvement, without upside surprises.
Friday 26th February 2021
Despite the increasing dovishness of central bankers the markets have been selling government bonds like they are going out of fashion. That’s resulting in huge increases in bond yields in around the world, but particularly in the US and Australia. It’s the pace of the move in yields that’s grabbing attention, says NAB’s Gavin Friend in London. Some are also expecting inflation sooner rather than later, evidenced by a rise in yields on shorter term US treasury notes. Spending data tonight could add fuel to this burst of optimism if it suggests there’s more pent-up demand in the US economy.
Thursday 25th February 2021
As the reflation trade continues to push bond prices lower and commodities higher, central bankers are fighting amongst themselves as to who can sound the most dovish. That’s helping push equities a little higher this morning. The Fed’s Jerome Powell and BoE’s Andrew Bailey were both in front of parliamentary committees overnight, each suggesting rates would stay low and any rising inflation was transitory for now. NAB’s David de Garis says the RBNZ was toeing the same party line, suggesting the outlook remains highly uncertain. Today the weekly claims numbers for the US will highlight the strength (or otherwise) of the jobs recovery. By the way, for those who think this is ridiculous title for an episode, doves do fight each other, sometimes to the death, but normally when they are trying to impress hens, not water down inflationary fears.
Wednesday 24th February 2021
Many believe the RBA didn’t go far enough on Monday, buying up a $1 billion of bond purchases in the face of sharply rising bond yields. NAB’s Tapas Strickland points to speculation in the AFR today that the RBA will come out swinging today and tomorrow, buying up more state and federal government debt to make up for the shortfall. Elsewhere, US equities are generally down, driven largely by tech stocks and other rotational shares. They did get a bounce, however, when Jerome Powell gave his testimony to the senate, reiterating that the Fed was still a long way from its targets. It was a similar party line from the Bank of Canada overnight. Today, the RBNZ is the next central bank of the marks, and they’ll be treading a careful line, trying not to inflate the Kiwi dollar, but with the global reflation trade there’s not much they can do to stop it.
Tuesday 23rd February 2021
Australian 10 year bond yields have nudged 1.65 percent for the first time since May 2019. NAB’s Rodrigo Catril says the market was clearly disappointed by the RBA’s resolve to deal with the sharp rise in yields. Meanwhile, US Treasury yields have also been on a roller coaster. It’s been the same situation in Europe, although the yields have dropped back now. The COVID bounce back story continues to push commodities higher too, which is why we’re seeing the Aussie dollar edging even closer to the 80 US cent mark. The pound has also had a strong session, in part perhaps because of Boris Johnson’s lockdown escape route, although his chosen path is very slow and cautious.
Monday 22nd February 2021
There was a big rise in the Aussie dollar and the pound on Friday, both reaching multi-year highs. NAB’s Ray Attrill says rising commodity prices are the single biggest influence on the Australian dollar and the prediction that it could reach 80 US cents by midways through the year could be realised before the end of the first quarter. The pound meanwhile is going strong on an expedited vaccine rollout program, which offset the poor retail sales numbers last week. In the US yields rose sharply. Inflation continues to be a concern, although the technical indicators are that this concern is easing.
Friday 19th February 2021
There have been big falls in US equities overnight after higher than anticipation jobless claims, showing its not a smooth recovery for the US. Bond yields on both sides of the Atlantic suggest there are inflation concerns but, as NAB’s David de Garis suggests, it’s difficult to draw definitive conclusions when most inflation signs have been in the goods sector where there have been significant supply disruptions. Markets seem most enthused about the UK right now, where 16.5 million people have been jabbed and Boris Johnson will be announcing his escape plan from lockdown on Monday.
Thursday 18th February 2021 There was a strong bounce back in US retail sales in January, helped by the arrival of $600 into most people’s bank accounts. NAB’s Gavin Friend says this is a clear sign of the positive impact of the government’s fiscal stimulus, something that won’t be lost in the negotiations for the next round of support measures. Inflation continues to be a debating point in the US, but the UK’s CPI data today shows it’s far from being an issue there just yet. The Bank of England continues to talk up the UK recovery, helped by the high level of personal savings. We also look at the latest FOMC minutes, out only moments ago. And at home, we can expect a strong increase in jobs, helping Australia claw back the losses made last year. Tonight it’s US jobs numbers and housing starts.
Wednesday 17th February 2021
Equities were mixed in the US overnight, but the S&P did manage to claw out a new record high, whilst the NASDAQ fell. The biggest movements, though, have been in treasury yields, particularly in the longer end of the curve. Phil Dobbie asks NAB’s Rodrigo Catril where the money is going, if it is leaving government bonds and not piling into equity markets. The new high for Bitcoin might be part of the answer, as the ECB’s Gabriel Makhlouf likening it to Tulip speculation in Holland 300 years ago. US retail sales and the FOMC minutes are two highlights over the next 24 hours, along with the UK’s inflation numbers.
Tuesday 16th February 2021
America has been off work for Presidents Day, but that hasn’t stopped markets optimistically looking to a world where COVID-19 isn’t centre stage. The reflation trade continues unabated. Overnight we saw the US dollar drift lower, the Aussie climbing and the pound showing strength as the vaccine rollout continues at pace. NAB’s Ray Attrill says the weakness in the Yen was also the result of good news, a higher than anticipated Q4 GDP result for Japan. One downside is the continued rise in oil, which has been accentuated by increased demand from blisteringly cold weather in Texas. Today, Australia’s weekly wages and payrolls data will be the most anticipated numbers locally.
Monday 15th February 2021
There’s absolutely no surprise that Donald Trump has been acquitted in Washington, which means he could stand for office again. It also means a number of Republicans felt their voters are still aligned to the former President, so will that make life harder for Joe Biden to drive the agenda? That’s a question Phil Dobbie puts to NAB’s Tapas Strickland this morning. Plus, a rise in equities and bond yields, driven by strong earnings and stimulus hopes, mixed with inflation concerns. Which will retreat first? It’s gong to be a quiet day today in international markets with the US on holiday, along with China and Hong Kong.
Friday 12th February 2021
It’s been a relatively quiet 24 hours with only slight market moves, with traders absorbing the dovish outlook presented by Jerome Powell at the Economics Club this time yesterday/. NAB’s Gavin Friend says the Euro has held its own despite EU forecasts which have downgraded growth to 3.8 percent, from 4.2 percent. They expect the UK to do somewhat worse, not just because of the virus but also Brexit. Remember that. US China relations won’t immediately return to pre-Trump levels, with Jo Biden hooking up on the phone to President Xi, making it clear that human rights remains a concern and tariffs would remain in place.
Thursday 11th February 2021
Markets have been fairly subdued on the back of soft inflation numbers in the US, and as investors hold off for any revelations from Jerome Powell as he addresses the Economic Club of New York. As it turned out he echoed the words of the Riksbank Governor – central banks, it seems., are in no rush to pull back on purchases or raise interest rates until full employment has returned. They’ll even let the economy run hot for a while to ensure lower paid jobs also return. But, as NAB’s David de Garis explains, inflation seems a way off yet, with soft numbers from the US and China. But metal prices are indicating an expectation that demand will pick up soon, however, with oil adding to its post-pandemic high.
Wednesday 10th February 2021
The Euro gained on two fronts overnight. First, Super Mario Draghi looks set to run the Italian government, and is likely to announce his cabinet today. Secondly, we’ve seen a sharp rise in credit growth in China. NAB’s Ray Attrill says this extra juice to the Chinese economy has helped the Euro, simply because Germany will benefit from export demand fuelled by credit. Meanwhile, inflation numbers are out for the US later today. Phil Dobbie asks whether a higher number could add to the concerns that the stimulus package, it the lands when the economy is recovering, jobs are returning and savings are being spent, could overheat the economy. A nice problem to have, perhaps.
Tuesday 9th February 2021
Janet Yellen shrugged off concerns about the Biden stimulus package unleashing inflation on the US economy. As NAB’s Tapas Strickland discusses on today’s podcast, it continues to be the stumbling block for the deal and inflation talk has influenced markets for another day. As an interesting aside, Elon Musk has announced Tela will buy $1.5 billion in Bitcoin, and will accept Bitcoin payments for cars in the future. Vaccines continue to be rolled out at speed in the US and the UK, and there is positive evidence from Israel that its working, although doubts remain about the efficacy of the Astra Zeneca vaccine against the South African strain. And WA is the envy of the world, heading to an election next month with a budget surplus!
Monday 8th February 2021
Friday’s non-farm payrolls numbers in the US surprised on the downside. NAB’s Rodrigo Catril says a big downward revision to the December numbers also disappointed. The good news is that this softer set of numbers adds impetus to Joe Biden’s drive to push through his $1.9 trillion stimulus package. One sticking point is concerns, even from some Democrats, about whether this extra money injected into the economy will be inflationary. The steepening yield curve is pointing to heightened inflation expectations. In other news over the weekend Mario Draghi has managed to secure support in Italy, whilst news is mixed about the efficacy of some vaccines to the newer strains of the virus. Plus, a look at the data highlights to look out for this week.
Friday 5th February 2021
Today’s moves reinforce the emerging story of two destinies. The UK and the US are well ahead of Europe on vaccine rollouts, and that seems to be the major focus of markets right now. The pound was also helped by a very hawkish stance taken by the Bank of England governor, who is expecting a strong recovery in the second half of the year driven by record savings. NAB’s Gavin Friend says this is all a change in the base case from the beginning of the year when it was assumed the US would be at the back of the recovery queue. Locally there will be a lot of interest in RBA Governor Philip Lowe’s parliamentary testimony, particularly as the AFR today leads on speculation of a raging bull in stocks and housing driven by the expectation of continuing low interest rates.
Thursday 4th February 2021
New Zealand’s labour force data yesterday showed a strong fall in unemployment, possibly down to NAIRU levels. Phil Dobbie asks NAB’s Ray Attrill whether this means inflation could soon emerge and does this mean the RBNZ is the first central bank to seriously think about a post-pandemic rate rise? It’s a very different story in Australia, with Philip Lowe yesterday reinforcing the dovish tone set by the RBA on Tuesday. Strong US data and reflation expectations have pushed oil to the highest level since the pandemic began, even as US reserves fell less than expected. And Mario Draghi is back on the scene. He has accepted an invitation to form government in Italy and there’s been a sharp reaction in local equities and bonds.
Wednesday 3rd February 2021
All eyes and ears will be on Philip Lowe’s speech today, following the very dovish outlook from the RBA yesterday. Despite our expectation on yesterday’s podcast that they would taper their QE program, NAB’s Rodrigo Catril explains how they are extended it by another $100 billion, even though the economy is doing well and the fiscal position is improving. It was a big surprise, he says. In other news, the markets have returned to whatever is normal these days, as the influence of Redditt day traders subsides, for now. There are lots of services PMI numbers today which will give a good indication of how Europe, China, the UK and USA are travelling.
Tuesday 2nd February 2021
In normal times an episode like the Reddit induced short squeeze would eventually see markets return to normal. Normal today, of course, is a market driven by COVID-19 news, whether it’s the valuation of stay-at-home stocks like Amazon and Apple (both due to report tomorrow), or the latest vaccine rollout news. NAB’s David de Garis says the market is also getting more interested in the inflation story, after a big rise in the prices paid element of the US ISM manufacturing numbers. Today, the RBA meets. The question is, what will they do about QE – will they extend it, and if so, by how much?
Monday 1st February 2021
Equities were hit hard on Friday as the Reddit warriors made their mark. NAB’s Tapas Strickland says the regulators response is to side with the retail investors, eager to investigate trading freezes by brokerages, like the Robin Hood app. Normally you might have expected Friday to see some positive sentiment in markets, with a strong batch of US data. Two new vaccines have come o the scene too, as the spat between Europe and the UK dies down a little over the distribution of Astra Zeneca doses. Today Scott Morrison will address the Press Club, when he will talk of more fiscal discipline, arguing the government can’t write a blank cheque forever.
Friday 29th January 2021
US equities have bounced back after a day influenced by speculative trading on retail platforms, like Robin Hood, with investors spurred on by chatter on Reddit. The app has stopped trading on eight of the stocks today, with prices readjusting themselves. Phil Dobie asks NAB’s David de Garis whether the new administration in the US could see this as an opportunity for more regulation of the finance sector. This Main Street versus Wall Street battle was certainly more entertaining than the Fed yesterday, with the press conference adding little to what was discussed on yesterday’s podcast. In other news US Q4 GDP figures show the rate of recovery has slowed, whilst NAB consumer spending analysis for last week shows consumption is bouncing back quickly, although it obviously isn’t hitting all sectors.
Thursday 28th January 2021
The markets have so far been unmoved by the DOFMC announcement, perhaps because it said so little. No move in rates or QE and a reliance on vaccine news before taking further steps, but NAB’s Rodrigo Catril suggests the Fed will be on standby to do more if necessary. There has been a bevy of bad news from Europe, with German consumer confidence well down, rising concerns about the impact of a lower US dollar, slow vaccine deployment and now, a feud with the manufacturer over delivery timelines. One ECB member also suggested that the market was underestimating the potential for the bank to lower rates further.
Wednesday 27th January 2021
The IMF has upped their forecasts for global growth but, as NAB’s Tapas Strickland suggests on this morning’s podcast, markets don’t tend to pay a lot of attention to these numbers. There’s been more interest in the prospect of a stock bubble in China and the question of whether the PBoC will respond. Not too much is expected from the FOMC meeting today, but there is news that the ECB is to take the Euro exchange rate more seriously. They don’t want to see the US dollar keep falling. NAB is expecting inflation to be a little higher than consensus today – we explain why. We also look ahead to the NAB business survey and the US earnings season. And why one stock has been elevated by a woollen helmet for Elon Musk’s dog.
Monday 25th January 2021
Markets turned sharply to a risk-off mood at the end of last week, on the realisation that vaccine roll outs will take longer than hoped whilst infections are growing. NAB’s Ray Attrill says there were too many bad news stories on Friday to offset the optimism of those looking forward to the sunny uplands of a post-COVID world. There was also mixed news with PMI reads at the end of the week; Europe fared relatively well, the US saw improvements, but the UK was nothing short of a disaster. That’s on top of the news from the UK PM that the new strain is not only more infectious it’s more deadly, with fears that the other new strain (from South Africa) might also be more resistant to vaccines. Ass we said, many bad news stories.
Friday 22nd January 2021
The ECB changed nothing overnight, with President Lagarde saying risks remained on the downside. NAB’s Gavin Friend says German bond yields rose as she suggested the full extent of the €1.85 trillion Pandemic bond purchase might not be required, although she also said it might, or there might even be a requirement for more. There’s also discussion on the impact of Joe Biden’s first day in office, and Janet Yellen’s words on China and currency manipulation. Australia jobs numbers didn’t disappoint, and today is PMI day, for the UK, Europe and the US.
Thursday 21st January 2021
Former President Donald Trump often remarked about how his administration saw record highs in US equities. If the President has any control over that, Joe Biden can make the same claim, with new highs on the NASDAQ and S&P500 right from his first moment in office. Today we look at the risk-on mood of inauguration day and ask will it last. Could a bad set of weekly employment numbers later on dampen the mood? Plus, rising infection numbers in China, largely ignored by the markets so far. Phil Dobbie also asks NAB’s Tapas Strickland what we can expect from employment numbers in Australia today.
Wednesday 20th January 2021
It’s Inauguration Day, or it will be when Wednesday eventually ticks round in the US. Lady Gaga will sing the National Anthem before Biden moves into the Oval Office and works his way through his executive orders. Ahead of that, we’ve heard from Janet Yellen, the nominee to be Treasury Secretary who said the administration needs to act big to help those struggling through the COVID crisis. Phil Dobbie talks to NAB’s Ray Attrill about the market reaction to her words. They also look at bank earnings and rising confidence in Germany, as well as looking ahead to the UK’s CPI figures later, plus the Bank of Canada meeting tonight.
Tuesday 19th January 2021
Markets are looking through the prospect on any unrest on inauguration day, but the more immediate question is what with the President do today? Reuters is reporting he is withdrawing licences from any companies working with Huawei, is anything else in the offing? NAB’s Tapas Strickland says it doesn’t really matter too much what the President does, because it can always be undone in the days that follow. The bigger question is what will Biden’s attitude be to China? There’s also discussion on today’s podcast about yesterday’s GDP numbers for China, expectations for the ECB meeting this week and political unrest in Italy.
Monday 18th January 2021
Markets responded at the end of the week to Joe Biden’s proposals for stimulating the US economy. As NAB’s Rodrigo Catril points out in today’s Morning Call, markets questioned the President-Elect’s ability to implement his pandemic relief spending plan while Biden also noted everyone will have to pay their fair share. Soft US data and US banks underperformance didn’t help sentiment either. A safe-haven bid lifted the USD and weighed on longer dated UST yields. Otherwise, the continuance of disturbing infection rates for COVID-19 quell optimism everywhere, with the UK stepping up it’s measures on inbound travellers. There’s also discussion about Australia’s housing market – could prices really rise by 30 percent in the next few years?
Friday 15th January 2021
Bond yields were already on the rise before Fed chairman Jerome Powell talked down the likelihood of any easing in bond purchases this year. NAB’s Gavin Friend says he indicated the Fed would look through any short-term rise in inflation as a reason to make changes. This has added to a positive market sentiment today, despite a disastrous rise in US jobless claims, up from 784k to 965k in one week. There’s also discussion today on the ECB minutes, German GDP, NAB’s payments data and an exodus from the UK. Today, all eyes will be on what Joe Biden has to say. It’s a busy first week back!
Thursday 14th January 2021
An ensuing impeachment of the US President continues to be of little concern to the markets, with more focus on the words coming from central bankers. NAB’s Tapas Strickland talks about the continued fall in bond yields, as Fed speakers downplay the prospect of tapering of bond purchases later this year, aided by subdued US inflation numbers. All eyes will be on Joe Bidens stimulus plans and how much extra money he plans to pump into the economy. Meanwhile, Aussie job numbers have gone through the roof and Italy's government is on the verge of collapse.
Wednesday 13th January 2020
With yields rising there’s been a question mark over whether the appetite for treasury bonds is falling, ahead of trillions expected in new government debt. On today’s podcast NAB’s Rodrigo Catril says the issuance of Treasuries this morning indicates the opposite may be true, with yields falling – the first decline since the beginning of the year. There’s also discussion on the easing of loans in China, the latest tit for tat measures between China and Australia, and what to expect from US inflation numbers tonight.
Tuesday 12th January 2020
Bond yields continue to rise In the US as markets prepare for an expected multi-trillion dollar stimulus package from the President-elect. We’ve seen bond yields hit new highs, as equities start to fall. Phil Dobbie asks NAB’s Gavin Friend whether political uncertainty is behind any of these moves, including a fall in equities, admittedly from record highs on Friday. Meanwhile, Aussie retail sales looked strong yesterday, although the US dollar-strength saw the Aussie dollar lose ground. Could tensions with China also be playing into that weakness? Maybe the issue will go away when Donald Trump leaves the White House.
Monday 11th January 2021
The Morning Call is back, and the new year has kicked off in a very different place. The blue-wave wasn’t written in stone, but with control of the Senate the Democrats should find it easier to roll out more substantial stimulus measures, so does that mean the US economy will recover faster? Phil Dobbie talks to NAB’s Ray Attrill about the response in the bond markets, with Treasury yields rising markedly. But is there a risk that the expectation of a US recovery is overblown – after all COVID numbers continue to rise and there’s still a gargantuan task in rolling out vaccines. Given all that’s been going on, how have NAB’s forecasts changed over the last few weeks?
Tuesday 22nd December 2020
You might have expected a positive market response as the US politicians reach agreement on a fiscal stimulus bill, particularly as Europe became the latest region to approve a vaccine. NAB’s Ray Attrill talks through how sentiment has rapidly switched direction. Investors have tended to look through short term concerns for the optimistic longer-term outlook, when COVID-19 is but a distant memory. But the rise in numbers in the UK and fears of the new strain that spreads faster has led to a sudden realisation that the short-term downside might last longer than expected. Then there’s Brexit – check back next week on that one.
Monday 21st December 2020
There’s a strong expectation that the US fiscal stimulus deal will be resolved in the next few hours. NAB’s Rodrigo Catril says the news will be good for risk assets helping equities recover and reflected in emerging market currencies. It’s a different story in the UK, of course, where the new strain of COVIDS-19 has seen London, large parts of southeast England and Wales moved into lockdown, and many European countries stopping flights from the UK. That’s being compounded with the lack of movement on a post-Brexit deal, but could the turn-for-the-worse on COVID force the UK and EU to reach a deal quickly, to cope with the other matter at hand?
Friday 18th December 2020
The post-Brexit trade deal and the US fiscal stimulus deal have been pushed back time and time again, but we really are at the point of no return. NAB’s Gavin Friend says there will be a deal in both instances, and the markets are priced accordingly. The US fiscal stimulus deal might mean politicians meet over the weekend, whilst UK MPs, already on their Christmas break, could be pulled back after their roast turkeys to sign off on their deal. Central banks have been squeezing in their final meetings of the year – the Bank of England unsurprisingly pessimistic, but the Swiss National Bank and the Norges Bank, both more upbeat. There’s also discussion on yesterday’s unemployment numbers for Australia, and the mid-year budget update yesterday.
Thursday 17th December 2020
The US dollar slid overnight as US retail sales figures for November were released. The numbers “were grim” says NAB’s Gavin Friend on today’s Morning Call podcast. Sentiment turned more positive as the session progressed, with rising hopes that a fiscal stimulus deal is imminent. There’s also hope that a UK-EU trade arrangement is getting close, with Ursula von der Leyen saying there is a path to a deal. The FOMC met and announced no changes to interest rates or bond buying. Their forecasts see this year a little less bleak for GDP, and a big stronger than previously forecast for 2022. The Bank of England is also expected to sit on its hands tonight too. The US weekly job numbers are also worth watching – new jobless claims have been rising recently.
Wednesday 16th December 2020
Equities have climbed higher in the US and in Europe on the hopes that two deals will be struck this week. NAB’s Rodrigo Catril talks about the market response to a tweet from the BBC’s Nicholas Watt, suggesting there was a buzz around Brexit talks and a resolution could be close. There’s also renewed hope that the text for a fiscal stimulus deal will be agreed in the US. We might hear progress on both of those in the next few hours … or maybe not! Aside from all that, tomorrow morning’s question will be, what next from the FOMC? There’s some discussion on that in today’s podcast.
Tuesday 15th December 2020
The markets lost some of their mojo today. They kicked off well as the US starts its vaccination program, but the UK health secretary upset the apple cart by announcing that the rise in infections in and around London has been attributed to a new, faster-spreading variation of the virus. As NAB’s Ray Attrill point out, there is no suggestion that vaccines won’t be responsive to the new strain, but it could mean we see more lockdowns and restrictions – as evidenced by Germany, London and, potentially, New York. There’s hope a fiscal stimulus deal will be reached in the US this week, with the wording for a potential bill to be released in the next few hours. China’s activity numbers will be the main data point today. Oh, and Brexit talks continue.
Monday 14th December 2020
The inoculation program in the US has ambitious targets. NAB’s Tapas Strickland says the aim is to have given the jab to 75% of the population by June. Even so, markets were a little subdued on Friday, as infection numbers continued to rise in the US and across Europe. Germany has announced its most pronounced lockdown so far, starting Wednesday. Meanwhile, Brexit hopes linger on, with Sunday’s deadline pushed back and negotiations continuing. That’s helped cable this morning, even though Boris Johnson has reiterated no-deal remains the most likely outcome. There’s also discussion on today’s podcast about the US stimulus, the FOMC meeting this week, Australia’s MYEFO and the rising price of iron ore.
Friday 11th December 2020
Even though a hard deadline has been set for Sunday for the UK-EU trade deal, there’s no guarantee it will all end there. NAB’s Gavin Friend says a no-deal could weaken the pound and soften the Aussie dollars chances of maintaining its position over 75 US cents. The ECB has announced more bond buying, whilst the EU has managed to broker a deal to pass its budget, including the Recovery Fund, using the age-old EU technique of kicking the can down the road. The US is also obfuscating on the fiscal stimulus package as virus numbers continue to rise.
Thursday 10th December 2020
As we recorded this morning’s podcast Ursula von der Leyen and Boris Johnson were meeting over dinner to discuss the progress of the UK-EU trade deal. NAB’s Rodrigo Catril predicts there will be no definitive outcome tonight, but it remains unlikely that the UK will accept what the Europeans are putting on the table. The EU will also have difficulties tomorrow as it tries to pass its budget and the Recovery Fund. More significant for us is the outcome of the ECB meeting. Rodrigo says any indication for how long the central bank continues its bond buying program will have repercussions for the RBA. US equities saw sharp falls today as infection rates rise and the passage of a stimulus deal this year seems to be slipping away.
Wednesday 9th December 2020
The UK has started injecting people with the COVID vaccine. If only they could inject compromise in the UK and EU negotiators who remain a long way from reaching a deal. The chances are slim according to Michel Barnier, as Boris Johnston travels to meet Ursula von der Leyen Wednesday night (Thursday morning AEDST). No deal, plus the potential blocking of the EU budget by Poland and Hungary could make for a very disappointing EU summit at the end of the week. Meanwhile,. There’s no progress on a fiscal stimulus package in the US, but as NAB’s Tapas Strickland points out, even if there is a smaller than anticipated deal, it’ll be the bridge to a larger deal after Joe Biden takes office. On today’s podcast there’s also discussion on yesterday’s NAB business survey and today’s China GDP ands PPI figures.
Tuesday 8th December 2020
The UK-EU trade deal really is going right down to the wire – and the wire itself keeps getting pushed back. On today’s Morning Call NAB’s Rodrigo Catril says the decision to hold a face to face meeting between Boris Johnson and Ursula von der Leyen means the decision will be reached in coming days, not in the next few hours. We might see a version of the $908b fiscal stimulus package in the US in a short while, though, although even here differences remain. Locally, yesterday’s downgrading of NSW and Victoria’s credit rating will push up borrowing costs, but the states will emerge from COVID-19 better placed than most parts of the world. Today’s NAB Business Survey will show how much confidence there is in the economy right now.
Monday 7th December 2020
US equities reached new highs again on Friday even though the jobs numbers were lower than anticipated. NAB’s Ray Attrill says the logic is that the disappointing numbers heighten the prospect of an agreement being reached on a fiscal stimulus deal. But its not there yet. It’s the same with a UK-EU trade deal. After cancelling talks on Friday they were back at it on Sunday, but Ray reckons the chance of a deal being struck is now 60 percent at best. Expect a lot of European market action late ri the week, with the EU summit, plus an ECB meeting where they are likely to up their bond-buying program. Today China’s trade numbers are the most significant data releases.
Friday 4th December 2020
OPEC+ has struck a deal to slowly increase oil production from next month, rather than letting the production cuts fall off a cliff. NAB’s Tapas Strickland says they will also monitor progress and make adjustments accordingly. That’s helped the oil price this morning, but the two other deals on the table remain in limbo. Talks over the post Brexit EU-UK trade deal remain in gridlock. The pound has remained resiliently strong, although it’s lost a little ground as doubt creeps in over last minute talks. The US fiscal stimulus deal seems to be edging slowly forward, although the size of it might be reduced in the rush for a compromise. Meanwhile equity markets have hit new highs as investors see through the rise in US infections, hospitalisations and fatalities, and ignore weaker ISM numbers. Perhaps tonight’s non-farm payrolls are a less important too. It’s less about the “now” and more about the “what next”.
Thursday 3rd December 2020
The UK is the first country to approve the Pfizer BioNtech vaccine and will start jabbing people with it next week. That’s kept Brexit off the front pages in the UK, even though the pound has taken a sharp hit as talks don’t seem to have progressed much at all. NAB’s Ray Attrill talks about Australia’s GDP numbers which technically mean we are out of recession, but unemployment and annual GDP suggest otherwise. He also talks about Philip Lowe’s comments about following the world on future QE decisions, softer jobs numbers in the US and what to look out for today, including the Caixin Services PMI.
Wednesday 2nd December 2020
There’s a positive vibe about this morning, pushing equities higher and Treasury yields have seen a sharp rise too. NAB’s Tapas Strickland says it's down to a number of factors – stronger than expected Caixin PMI numbers from China, fast-tracking of vaccines, news that US stimulus talks are back on the table and reports that UK-EU trade negotiations have entered the tunnel. The only downside today has been a delay in reaching an agreement by OPEC – they'll try again on Thursday. Today we see the numbers for Australia’s Q3 GDP, which is expected to bounce back sharply. The RBA didn’t have much to say yesterday, avoiding any signals around whether it will extend, stop or reduce its QE program.
Monday 30th November 2020
The pound has already recovered the losses it made on Friday, when Brexit rhetoric was ramped up on both sides of the English Channel. Over the weekend, though, reports suggest talks have been far more productive, tackling the last sticking point of fishing rights, and there’s a real possibility that a deal could be reached in the early part of this week. NAB’s Rodrigo Catril says the deal could include a new transition period, just for fish! Meanwhile, relations between Australia and China remain tense, even if it is having little influence on currencies or equities just yet. Today’s China PMI numbers will confirm how well the country is doing, compared to the rest of the world right now. But it’s been an incredibly strong month for global equities, spurred on by vaccine news, even though US infection rates continue to rise.
Friday 27th November 2020
There are some questions over the numbers provided in phase three of the Astra Zeneca vaccine trial. NAB’s David de Garis says the concern is over the age of participations in the subset who achieved the highest level of efficiency. The makers claim a rerun of trials won’t slow progress, although some believe it could delay entry into the US. The ECB’s Philip Lane expressed concern about tightened of credit standards which could impede the European recovery. Meanwhile, lockdowns are being extended in parts of Europe. And on a quiet day in the markets, the pound is lower, with another day passing without any Brexit progress.
Thursday 26th November 2020
It’s Thanksgiving today in the US and markets have been cautious ahead of the holidays. Vaccine hopes have been pushed aside after Wednesday’s post first-wave high for COVID fatalities in the US. There was also a string of disappointing data, including a rise in unemployment claims for the second week in a row. NAB’s Ray Attrill gives us his reaction to the FOMC meetings, hot off the press. Plus, the UK's Rishi Sunak paints a glum picture for the UK economy, but manages to avoid mentioning Brexit. A quiet data for global data, but at home private capex number, with a wide variety of opinions on what they’ll actually come out at. And what’s going on with the Kiwi dollar?
Wednesday 25th November 2020
President Trump made an appearance before cameras today to boast about the rise in equities, with the Dow breaking 3,0000 for the first time. NAB’s Rodrigo Catril tells Phil Dobbie it’s in part down to the relief that the Biden administration has now been given access to the handover process for the White House. It’s mixed with continued optimism around vaccines, which is seeing stocks that have suffered, like airlines, starting to bounce back. Oil is also back to pre-pandemic prices. The news that Janet Yellen is likely to be Treasury Secretary has also has a positive impact, whilst in New Zealand the request from the Finance Minister for the RBNZ to consider control house prices as part of its remit has seen sharp moves in bonds and the NZ dollar. Meanwhile, COVID numbers in the US continue to cause concern, even though it seems to have slipped the concern of investors right now.
Tuesday 24th November 2020
Astra Zeneca announced the results of their trials, with efficacy up to 90 percent with a drug that is cheaper to produce and easier to distribute. Yet the markets were cautious in their response, although equities are on the rise and tech stocks are taking a back seat. NAB’s David de Garis talks through the response, with the US dollar also spurred on by better than expected Markit PMI numbers for the US. Donald Trump is still in the White House and trying to build a western alliance to play it tough against China, although the response has been somewhat muted. The pound has strengthened on Brexit hopes even though there’s been no specific news. And it’s the Victoria budget today, with a focus on infrastructure spending.
Monday 23rd November 2020
NAB has revised its forecasts for growth in the Australia economy. NAB’s Tapas Strickland talks us through it, plus Josh Fryenberg’s plans to boost invest from larger corporations. Meanwhile, markets continue to respond to COVID-19 infection rates, punishing equities in the US, with growth switching to Europe. There’s been a spat between the US Treasury and the Fed with Steve Mnuchin wanting to see the Fed return unused funds from emergency lending programs. And stand by for a Brexit deal – something has to happen this week, surely.
Friday 20th November 2020
Schools out for winter in New York as COVID cases in the US continue to rise, with the country passing a quarter of a million deaths from the virus. Phil Dobbie talks to NAB’s Gavin Friend about how the markets are more focused on the short-term economic hit than the longer-term vaccine fuelled positive outlook The short-term hit was demonstrated, however, by a sharp increase in unemployment claims in the US. The reverse was the case in Australia yesterday, but worsening relations with China add another dimension to local markets. And Brexit talks have been delayed by a senior negotiator on the EU side contracting COVID-19, but Gavin reckons we can still expect positive news next week and the pound is behaving as though that is the case.
Thursday 19th November 2020
Markets continue to be torn between the good news and the bad news. On the positive side, Pfizer is set to apply for emergency authorisation for its COVID-19 vaccine. NAB’s David de Garis says you’d have expected the news to have created more of a risk-on mood but, on the negative side, infection rates continue to rise. The spike in South Australia, with the six day statewide lockdown, has shown Australia is not immune. Beyond the virus, there’s hope that a UK-EU trade agreement will be announced next week, and the world is preparing for a different political outlook as the Biden administration gets set to move into the White House.
Wednesday 18th November 2020
There was no new vaccine news overnight and the markets seemed a little disappointed by that, with equities down and a move to government bonds. But NAB’s Tapas Strickland says this respite could be short lived, with the results of the Oxford vaccine trials imminent. Meanwhile, there seems to be less of a temptation to take an overly negative view despite the rising COVID-19 cases and sluggish retail sales in the US. The pound has been helped by positive talks around Brexit, although it’s unlikely any deal will be reached this week. And central banks are suggesting that financial regulators are stopping investors dipping into their savings.
Tuesday 17th November 2020
Markets have been lifted higher on further vaccine news, with Moderna saying their trials have shown 94.5 percent effectiveness. NAB’s Rodrigo Catril says markets are pricing in the positive news that we could have vaccines distributed early next year, whilst ignoring the bad news of rising infection rates, particularly in the US. There’s also discussion on today’s podcasts about comments from the RBA’s Philip Lowe yesterday, with a focus on the labour market and the need to contain the strength of the Aussie dollar. Plus, the latest on Europe’s recovery plans and Japan’s trade numbers and US retail numbers due out later today.
Monday 16th November 2020
Last week was a volatile one, but markets enthusiasm stemming from the hope of a vaccine led the charge, with some shifting of focus on equity markets. That said, infection numbers continue to rise, particularly in the US, where the President has flatly stated there will be no lockdowns so long as he’s in charge. NAB’s Ray Attrill says the push-pull effect of vaccine news versus COVID data will drive the markets again this week, with the added diversion of Brexit. There’s an EU Summit this week and Boris Johnson’s chief advisor Dominic Cummings left No. 10 on Friday, which some are reading as a sign that the UK will take a more conciliatory approach and a deal could be forthcoming. Perhaps.
Friday 13th November 2020
This week’s earlier optimism over a possible vaccine for COVID-19 has disappeared completely, with equities falling and bond prices rising. NAB’s Gavin Friend says rising COVID numbers in the UK and Europe have provided a dose of reality, with almost 33.5k cases in the UK on Thursday, despite a national lockdown. Numbers are also rising sharply in the US with the possibility that schools will close again in New York. The pound has taken the hardest hit today. Phil Dobbie asks Gavin how much of that is to do with a lack of progress on Brexit?
Thursday 12th November 2020
Even though the markets continue to respond positively to the hope of a vaccine, central bankers seem to be taking a more cautious tone. NAB’s David de Garis said the tone set by the ECB’s Christine Lagarde was one of concern, at their central banker’s conference. The RBNZ also continued to present a dovish outlook – despite New Zealand’s low infection rates – but the expectation of negative interest rates has diminished significantly. There’s push and pull factors at play – on one side the vaccine hopes, on the other, what’ll happen in the meantime, with the virus still raging. The UK reached the sombre milestone of 50,000 fatalities today.
Wednesday 11th November 2020
Those vaccine hopes continue today, even though there were warnings from Fed officials that the economy still faced ongoing impacts from COVID-19, with structural differences highlighting the need for the fiscal stimulus that now seems unlikely to happen this year. NAB’s Rodrigo Catril says there’s also some caution over the vaccine news, and a response to antitrust action against Amazon ramping up in Europe. On today’s podcast there’s also discussion on yesterday’s NAB Business Survey, which showed business confidence picking up, and today’s RBNZ meeting – will they be less dovish that many had anticipated?
Tuesday 10th November 2020
The markets have scarcely had time to respond to the news that Joe Biden is the next President of the United States than we’re it with the (potentially bigger) news that Pfizer have successfully completed stage three of their COVID-19 vaccine trials, with an astonishing 90% success rate. NAB’s Ray Attrill talks through the market’s response, which includes rising equities in the US and Europe, higher bond yields, a bounce in oil prices. Phil Dobbie asks whether this will alter the approach taken by the Fed and other central banks, starting with the RBNZ tomorrow.
Monday 9th November 2020
There’s still a chance that in January the Democrats will take control of the Senate. Until then, President Trump is still in charge and the US faces rising COVID cases without a fiscal stimulus. Larry Kudlow suggested that Friday’s non-farm payrolls were so strong there isn’t a need for support but NAB’s Tapas Strickland says high-frequency data suggests the job recovery is slowing. Similarly, China reported a big increase in exports, but can that last if demand for goods is subdued by the continued strength of the pandemic. It’s a quiet week this week, except for the President’s legal challenges on the election result, but markets are not likely to respond to the sideshow. Similarly, there’s no market reaction to Brexit talks, even though the clock is ticking louder now.
Friday 6th November 2020
Depending on which news source you choose, Biden has either 253 or 264 electoral college votes. We’re likely to find out today, but Donald Trump’s legal challenges could delay the confirmation of the result. Markets have adopted a risk-on stance, with the hope that there will be fiscal stimulus to counter the impacts of COVID, but other progressive policies, including tax rises, would be challenged in the Senate. Elsewhere, the Bank of England coordinated the injection of extra funds into the UK economy, with extra bond buying coinciding with the extension of the furloughed workers’ scheme. In Europe there’s hope that the EU can progress with the implementation of the Recovery Fund. NAB’s David de Garis says it highlights the need for the same fiscal and monetary coordination in the US, as COVID cases rise and the jobs recovery stalls. Today though, the Fed, offered nothing new.
Thursday 5th November 2020
US equities have climbed as the US goes through Wednesday without a clear winner in the election. It seems likely Biden will win, with five key states still undecided and millions of votes still to be counted. The Senate looks less clear and NAB’s Gavin Friend suggests this explains the behaviour of the bond markets, without the fear of unbridled fiscal spending. Conversely, of course, a delayed election result also delays the passage of any further fiscal stimulus package. Will that influence the Fed’s decision on Thursday – one of two central banks making announcements (the other is the Bank of England). Important those these meetings are, all eyes will remain on the vote counts, and whether President Trump is serious in his proclamation to challenge the result (if he loses).
Wednesday 4th November 2020
The RBA announced cuts to interest rates and a step up in bond buying yesterday. NAB’s Tapas Strickland says, as other banks follow, there won’t be any influence in the strength of the Aussie dollar. Americans are voting right now, with record numbers of postal and early votes, which could delay the outcome, or speed it up. Although there’s a clear expectation than Biden will win, and the Democrats regain control of the Senate, nobody is entirely sure what will happen over the next 24 hours. Meanwhile the expected mega-listing of the Ant Group has been delayed and Brexit talks have left both sides exhausted. Aside from the US election, payrolls for Australia will be the numbers to watch today.
Tuesday 3rd November 2020
Markets flipped from Friday’s share and bond sell-off, with more optimism a day or two out from what is expected to be a Biden victory. NAB’s Ray Attrill also points to very strong manufacturing numbers published for the US, which will have been an encouraging sign for investors too. Ahead of the US election though, there’s a Melbourne Cup to be won, and a decision to be made by the RBA, which will include rate cuts and more bond buying. Phil Dobbie asks Ray why the RBA needs to be taking such a strong stance when Australia is faring better than most places when it comes to tackling the pandemic.
Monday 2nd November 2020
After the markets finished with a strong equities and bond sell-off on Friday, expect a busy week, with the RBA, the Fed and Bank of England all meeting, with the difficult job of determining how to see the economy through rising infection numbers. Then there’s the non-trivial matter of the US election tomorrow. Will we hear the results by Wednesday? NAB’s Rodrigo Catril says there’s a very strong chance that we won’t. The big question for the RBA tomorrow, will be whether they announce an increase to QE at the longer end of the curve.
Friday 30th October 2020
Markets turned around again, with equities rising sharply. How much of it is the anticipation of Q3 tech company earnings results after the US close, how much of it is the strong bounce back in US GDP and how much is the anticipation of a clear outcome in next week’s US election? Phil Dobbie asks NAB’s Gavin Friend how he reads the market right now, and what are his thoughts on the ECB meeting which did little, but promised a lot more next time. Meanwhile virus numbers rise, there are more restraints on the economy in France and Germany – and could the UK be forced to go further next week too? Next week will be quite a week.
Thursday 29th October 2020
US equities have been hit hard today, the third day of losses, with the US dollar rising. NAB’s David de Garis said the markets hit the decks running as they opened in Europe, running away from risk. There’s growing concerns about the rising COVID infection rates, and, more significantly, rises in death rates in Europe and the US. Macron could be about to announce a significant lockdown of the French economy soon. Meanwhile, although Biden is still expected to win the US election next week, there are growing concerns about how clear the win will be, and whether President Trump will contest the result. If central banks have run as far as they can, the only injection for COVID-hit economies will come from fiscal measures. That was the gist of the message from the Bank of Canada, and is likely to be echoed by the ECB today. This morning the NAB business survey will give an invaluable read on expectations for Q3, whilst the US GDP numbers later on will show the extent of the country’s bounce back.
Wednesday 28th October 2020
There’s a risk that next week’s US election is more contestable than we might have considered a week ago. NAB’s Tapas Strickland says late surge polling could fall in the President’s favour. A poll in the US has also demonstrated just how many American’s would take to the streets if their preferred candidate didn’t win. Through rising COVID numbers into the mix, and it’s not surprising that the markets continue to struggle to find certainty right now. On the data front, US durable goods orders looked strong, as did industrial profits in China. And newspapers are reporting that Australia is heading out of recession on the back of the RBA’s Guy Debelle’s comments to Senate Estimates yesterday, but in reality his comments were more guarded than that.
Tuesday 27th October 2020
Markets are displaying classic risk-off moves today – with equities down, bond prices up and the US dollar the safe haven currency of choice. The reasons are clear – COVID cases continue to rise, a US stimulus won’t happen in a hurry and although the expectation of a Biden victory is clear there’s still the uncertainty of an election in a week’s time. NAB’s Rodrigo Catril talks through the moves, with the bad news overshadowing the good news – like Melbourne’s economy reopening tomorrow, and Astra Zeneca’s latest vaccine trial news.
Monday 26th October 2020
Last week finished with US stocks down, the US dollar down and the price of bonds down. Normally, if the sentiment is risk off and equities are down, you’d see the US dollar rise. The fact that didn’t happen demonstrates the US dollar is in a down trend, says NAB’s Ray Attrill on today’s Morning Call. Short term we can expect markets to continue to be influenced by election polls, Brexit hopes and COVID-19 statistics. The idea of a stimulus deal in the US remains a tiny glimmer of hope, but Nancy Pelosi might be the only person left hoping.
Friday 23rd October 2020
In a few hours Joe Biden and Donald Trump go head to head in the last election debate. NAB's Gavin Friend says equities have picked up some momentum later in the session, possibly not because of lingering hopes of a pre-election stimulus deal, but more on a Biden victory that could secure a more sizeable deal than would ever be agreeable to fiscally conservative Republicans. The UK has added more support payments for workers as COVID cases continue to rise, there and across Europe. A newspaper report claims Michel Barnier sees fish as the only sticking point for Brexit, which suggests a deal is closer than ever. And PMIs for Europe, the UK and the US will give an indication on to what extent the service sector has stalled in its recovery.
Monday 22nd October 2020
Talks are back on. Safter setting a deadline of Tuesday, Nancy Pelosi is continuing talks with the Republicans with a view to getting a stimulus package agreed for the US by the weekend. And after giving each other the cold shoulder for the first half of the week, the UK and EU are back to talking about a Brexit deal, meeting every day now until the issue is resolved. “This is the final run in”, says NAB’s David de Garis on today’s Morning Call podcast. If successful it could boost the pound, but the risk goes both ways. Meanwhile rising COVID numbers continue to cause concern and oil prices have taken a hit after a surprise rise in gasoline inventories in the US.
Wednesday 21st October 2020
Equities are higher in the US again today. NAB’s Tapas Strickland says it is largely on the back of continued hope that a stimulus deal will be struck. If not now, perhaps after the election with the possibility that the Democrats also win control of the senate. There’s also optimism around a vaccine and US housing data bounced back, showing more underlying strength in the US economy. Tapas is asked why US equites continue to significantly outperform those in Europe, Australia and other parts of the world. There’s also talk about the RBA minutes and yesterday’s Australian jobs data, plus the high demand for the ERU’s first ’social bonds’.
Tuesday 20th October 2020
Markets are waiting to see the outcome of two on again off again decisions, both with sizeable economic consequences. Boris Johnson declared that Brexit talks were over, but NAB’s Ray Attrill says the markets clearly don’t believe him, with the pound one of the strongest currencies today. Stateside, equities are subdued as the deadline for a pre-election stimulus deal draws closer. Meanwhile the Aussie, which should be benefiting from a falling US dollar and a stronger Yuan, refuses to budge as markets come to terms with the next moves from the RBA.
Monday 19th October 2020
After a fairly volatile week markets were calmer on Friday on the back of positive retail numbers from the US. NAB’s Rodrigo Catril says Republicans could use it as an excuse not to support further stimulus measures. There was little market reaction to Boris Johnson’s threats to walk away from Brexit negotiations, perhaps because ‘walking away’ has been shown to mean ‘keep talking’. Jacinda Ardern’s election victory is unlikely to see a market response because it too was entirely expected. Today’s GDP numbers from China will show how their economic recovery continues, whilst any volatility this week is likely to be driven by rising COVID-19 numbers, news of related government restrictions, Brexit talks and the US election circus.
Friday 16th October 2020
There’s a strong risk off mood in the air, which has pushed the US dollar higher and hit stocks. Phil Dobbie asks NAB’s Gavin Friend whether markets are now accepting that COVID-19 cases are rising and that will stall attempts at an economic recovery. It certainly seems to be the case in Europe, with more stringent controls being introduced in Paris and London and cases rising in Germany too. Weekly jobless numbers pointed to a further slowdown in the US. At home, a very dovish Philip Lowe signalled where the RBA is heading in November – lower rates and more bond buying seems likely. NZ goes to the polls at the weekend, but it’s unlikely Jacinda Ardern has called the removalists.
Thursday 15th October 2020
Philip Lowe, the Governor of the RBA, is talking this morning. NAB’s David de Garis tells us what to expect in terms of signalling for future stimulus measures. Stimulus is off the cards for now in the US, but listening to President Trump speaking at the Economic Society of new York you’d have to wonder why they need it. They’ve had the smallest economic contraction and fastest recovery of any major western nation, he said. He left out China, of course, because their economy really has had a V-shaped recovery, demonstrated further by increased loans reported yesterday and, hence, a larger money supply, that should boost their GDP further. In Europe, rising infection rates and lockdown fears continue to cause uncertainty, whilst Brexit talks will continue beyond the EU meeting this week. The pound continues to be highly volatile to it all, choosing today to rise in the side of optimism.
Wednesday 14th October 2020
The Aussie dollar has taken a hit twice in the last twenty-four hours. NAB’s Rodrigo Catril says the first hit came on reports that China was to stop importing Australian coal, a significant worsening of trade relations. The second hit came as the US dollar rose and equities fell as the last vestiges of hope for a stimulus deal seemed to disappear. There’s also caution around earnings results, with banks so far producing good results but not much optimism looking ahead. The pound has had a worse night though, as Brexit talks continue to produce no results, unemployment numbers were worse than expected, COVID cases have risen further and the opposition leader is calling for another full national lockdown.
Tuesday 13th October 2020
The US senate is seemingly preoccupied with pushing through Amy Coney Barrett as Supreme Court nominee, casting aside any bandwidth for fiscal stimulus talks. Yet US equities have bounced higher today. NAB’s Ray Attrill says there’s no clear logic for enthusiasm amongst share investors, except for the hopes that a Biden win will see more fiscal stimulus; but it would also mean more regulation for tech companies, and they’ve been leading the charge overnight. Equally as curious, the pound has risen despite rising COVID cases, more lockdown measures and no Brexit progress. It’s perhaps easier to explain the fall in the Aussie and NZ dollars, pulled down with the PBoC’s measures to reduce the value of the Renminbi.
Monday 12th October 2020
The US dollar hit a two and a half year low on Friday, whilst the Chinese Yuan showed big gains. NAB’s Tapas Strickland said the dollar fell on expectations of a Biden victory, which could see increase government spending to tackle the economic impacts of COVIDS-19. The Yuan gained ground as the Caixin Services PMI came in strong. This week was to be the week when a Brexit deal would finally be agreed, but why rush into these things? Talks are likely to continue into November. This week Australian investors will be looking to RBA’s Philip Lowe’s speech on Thursday for suggestions about the easing policy that is likely to be introduced in the November meeting.
Friday 9th October 2020
Donald Trump continues to talk about a stimulus deal, even though he said it had been shelved. But NAB’s David de Garis reckons its highly unlikely anything will be done before the election, an election with Joe Biden stands an increasing chance of winning. The minutes of the September ECB meeting showed concern over the EUR exchange rate, which could present “a risk to both growth and inflation”. Today’s GDP numbers for the UK are likely to show some growth in August as the hospitality industry kicked back into gear, but pubs and restaurants are facing more closures now as infection numbers rise. And the NZ dollar has been losing ground as the RBNZ Assistant Governor raised expectations for negative interest rates next year.
Thursday 8th October 2020
There’s been a market rebound on the hope that some sort of stimulus deal in the US is still possible before the election, but will it really happen? Phil Dobbie asks NAB’s Tapas Strickland whether the rising likelihood of a Biden victory is also an influence. The FOMC minutes haven’t shifted markets much this morning, so was there anything surprising in there? There’s also discussion in today’s podcast on last night’s Australian Federal Budget. There’s plenty of stimulus, but has the government got it right on growth forecasts?
Wednesday 7th October 2020
There’s been a strong reaction in the equity and currency markets to Donald Trump’s sudden decision to stop talks about a fiscal stimulus, even though he tweeted about the need for it whilst in hospital over the weekend. NAB’s Rodrigo Catril wonders whether he’s serious, or is it a last minute bargaining tactic? It comes after the Fed’s Jerome Powell warned that too little fiscal support would lead America to a weak recovery. All this at a time when Biden seems to be pulling away in the polls. Meanwhile, the RBA and Australia government are more in-tune on the need for stimulus to create and retain jobs, whilst the ECB is sounding more dovish. And Brexit talks – the reports are mixed. Deadlines are getting pushed back.
Tuesday 6th October 2020
As the President prepares to leave for the White House there’s still hope that a deal will be reached to pass version 2 of the Heroes Act, adding more stimulus to the US economy. Phil Dobbie asks NAB’s Gavin Friend if that’s what’s driving the risk-on mood today, or is it the news that the President will be out of hospital soon? Gavin suggests the rising gap in the polls will also be driving the mood, removing the uncertainty perhaps of a drawn out election process. The President told people not to be afraid of COVID in a recent tweet, which could mould his campaign message from now on. The non-manufacturing ISM read has added to the plethora of strong(ish) data from the US. It’s a busy day for Australia today, with the RBA meeting and the Federal Budget tonight.
Monday 5th October 2020
Friday was certainly a gamechanger. The US President went into hospital without a clear picture of his condition. Now, it seems he could be returning to the White House as soon as today. So, do the markets take back some of their risk concerns, and focus on the positives of the situation? That’s a question Phil Dobbie puts to Ray Attrill in today’s Morning Call podcast. One positive could be that Republicans are more prepared to reach a deal on a stimulus package. Friday’s non-farm payrolls in the US on Friday were largely ignored by the markets, but showed a slowing in jobs recovery. The pound strengthened on Friday on hopes that talks over Brexit will step up, but there’s still a lot of ground to be covered in a very short period of time. And locally, we’re one day away from the next RBA meeting and the budget, but markets are more likely to be eyeing Washington than hanging out for words from Josh Frydenberg.
Friday 2nd October 2020
Equities in the US rose overnight despite a stalemate on the fiscal stimulus package. Optimists insist there is some hope that a deal will be reached but, as NAB’s David de Garis puts it, the whole thing is being held back by philosophical differences. The pound has had a choppy day today, with little progress on the Brexit talks. The EC has started legal proceedings against the UK with regard to their Internal Markets Bill, giving the UK Prime Minister a month to respond. By then you’d hope a trade deal will be reached, but there’s no guarantee the two parties will go into tunnel talks. Non-farm payrolls from the US will be the major bit of new data tonight, the weekly jobs numbers released last night showed the claw back in employment is slowing and many US companies have announced major layoffs this week.
Thursday 1st October 2020
No sell off in equities after that yelling match that was apparently a presidential election debate. In fact, equities have been helped by some strong data from the US and continued hope on a stimulus deal, although enthusiasm for that waned somewhat later in the session. Elsewhere, the Bank of England’s Andy Haldane criticised the Chicken Licken mentality. NAB’s Gavin Friend says it’s a curious comment given the sharp rise in COVID-19 cases in the UK. The pound has gained more as the UK potentially gave some ground in the Brexit negotiations, and the Aussie dollar boosted by rising commodity prices and strong PMI numbers from China. The US manufacturing ISM and weekly jobless claims will be numbers to look out for tonight.
Wednesday 30th September 2020
Despite a big jump in confidence in the Conference Board numbers for the US, there’s not much optimism in the markets today. NAB’s David de Garis says, as the virus refuses to settle down, the lack of a fiscal stimulus deal – the so-called Heroes Act – will be playing on markets (hence the title of today’s podcast, a homage to the 1970’s punk band The Stranglers). There’s also the pre-debate nerves, with Trump and Biden battling it out in the next few hours. Oil has taken a hit today, again because of COVID concerns and the realisation that demand will be slow to pick up. Today, China’s PMI numbers and RBA credit numbers will be of interest to Aussie investors.
Tuesday 29th September 2020
US and European equities rose sharply, with rising confidence seeing a fall in the US dollar and a rise in the Aussie. The reports that the US President has paid very little in tax might provide some fodder for Joe Biden in the TV debate and NAB’s Tapas Strickland says it could influence undecided voters. Whichever way you look at it, it’s going to be a messy election. Meanwhile, the pound has gained in hopes of a Brexit deal, which has offset any concerns about further lockdowns in the UK. The gains in the Aussie dollar will be partially influenced by an expectation that the RBA won’t cut rates next week, waiting instead till November.
Monday 28th September 2020
COVID19 cases continue to rise in Europe, with numbers in the UK and France now well above the first wave. Yet, whilst there’s very little in the way of new data to influence the markets this week, there’s plenty of non-COVID politics; the President’s nomination of Amy Comey Barrett for the Supreme Court, the first Presidential election debate mid-week, and the start of another round of Brexit talks, with hopes increasing that a deal will be struck. NAB’s Ray Attrill talks through a week which will be less about economic data and more about geopolitics – and virus numbers of course.
Friday 25th September 2020
Equities were rising again in the US overnight on the hopes that a stimulus deal would be struck between the GOP and Democrats, but as optimism turned to reality, prices fell, the US dollar regained some of its strength and bond yields weakened. NAB’s Gavin Friend says it demonstrates how markets are clinging to any good news in amongst what’s a pretty bleak picture right now. The pound gained a little ground as the Chancellor Rishi Sunak unveiled the follow-up to the furlough scheme, but its clear many workers will not be covered and unemployment will rise. Have we reached the end of the road for sizeable bailouts from governments?
Thursday 24th September 2020
NAB had forecast that the Aussie dollar would reach 74 US cents by the end of the year. It did earlier this month but, as global risk sentiment rises, it is rapidly losing ground. On his first day back from holidays, NAB’s Ray Attrill is asked whether he still thinks the Aussie will regain strength, given the hit it has been taking this week? How much of it is down to the easing expectations for the RBA? The risk-off mood is being driven by rising virus concerns and louder voices from the Fed on the need for a fiscal stimulus which looks less likely by the day. To add to global concerns, flash PMI numbers for Europe show a service sector in contraction, putting the kibosh on rapid recovery hopes.
Wednesday 23rd September 2020
In the US Jerome Powell spelt out very clearly in his testimony before Congress that more fiscal stimulus was needed and had been assumed by many board members in their policy predictions. Meanwhile, in Australia Guy Debelle has hinted that more monetary easing might be round the corner. Tapas Strickland says NAB has revised its rates forecast and explains some of the reasoning behind it. It’s been a bad day for the pound, as infections rise further and more restrictions are imposed on the public. A swag of PMIs are out today for Europe and the US, which will give a clearer idea of how each economy is traversing the economic impacts of the pandemic.
Tuesday 22nd September 2020
Concerns over the impact if a second wave in the US and Europe seem to be gathering momentum, driving investors to government bonds and safe-haven currencies. NAB’s Gavin Friend says banking stocks have added to the slide today following an investigation into how some big banks failed to stop money laundering up to three years ago. The US election is adding to uncertainty. But it’s the rising virus numbers that are the real concern and what else, if anything, central banks can do about it. All eyes will be on Jerome Powell’s testimony on the Fed and on Guy Debelle’s speech today, to see the direction the RBA is planning to head.
Monday 21st September 2020
As COVID-19 cases rise in many parts of the world, and more restrictive measures likely in the UK and Europe, there’s the question of what more central banks can do to help stabilise the global economy? NAB’s Rodrigo Catril says this should be an interesting week in that respect, with central bank speakers out in force, including Jerome Powell facing a two-day grilling by the Senate and the Congress in the US. Meanwhile, uncertainty is hurting the share markets, which took a tumble on Friday. The pound could be a casualty this week with Boris Johnson set to announce more restrictions for the UK public on Tuesday, whilst, conversely, Victoria’s infection rates are falling and NZ is likely to ease measures from tonight.
Friday 18th September 2020
It’s been a topsy turvy session overnight, that’s seen equities slide even though a day ago the FOMC was signalling years of near zero interest rates. NAB’s Gavin Friend says by extending the expected period of low rates investors dwelled more on the negative impacts of the virus. There was some optimism that a deal would be struck to provide more fiscal stimulus in the US, but despite the President’s calls for Republicans to be prepared to spend more, a deal still seems unlikely. In the UK the pound also twisted and turned, driven up by optimism over a Brexit deal from Ursula von der Leyen and driven down by talks of negative interest rates from the Bank of England.
Thursday 17th September 2020
US interest rates will be lower for longer – that’s the takeout from today’s FOMC meeting. So, what are the implications of three, perhaps four years, of near zero rates? A question put to NAB’s Rodrigo Catril in today’s Morning Call podcast. How concerned should we be about deflation, with figures in the UK today showing a 0.4 percent fall in August? There’s also discussion on today’s labour market data for Australia, GDP numbers for Q2 for New Zealand and what to expect from the Bank of Japan and the Bank of England later on.
Wednesday 16th September 2020
Equities are on the rise again in the US. NAB’s Gavin Friend says it has been driven by a flurry of M&A activity, alongside vaccine hopes and reasonable activity numbers from China, which showed retail sales turning positive for the first time this year. Compared to that, US data was decidedly mixed, with the pace of recovery seeming to slow. The FOMC meeting tomorrow morning will present a dovish view, says Gavin, with the possibility of downgrading some of their economic forecasts. On the podcast there’s also discussion on yesterday’s RBA minutes and why the latest UK employment numbers should be taken with a pinch of salt.
Tuesday 15th September 2020
Shares climbed in the US today on the hope that Pfizer will have a vaccine ready by the end of the year. It’s a promise made by their CEO at the weekend and touted by the US President. The US dollar fell, with the NZ dollar the main beneficiary. NAB’s Rodrigo Catril says speculation is mounting that the RBA will buy more government bonds to bring interest rates down, which accounts for a why there’s been less interest in the Aussie dollar. Plus, more volatility for the pound, and activity numbers from China today will help determine whether consumer confidence has come back yet.
Monday 14th September 2020
It’s just over six months since the COVID-19 pandemic was declared and we’re all still unsure about how it will all end. NAB’s Tapas Strickland said we can expect some optimism today as the Oxford University-Astra Zeneca trials resume, and that could help the Aussie dollar gain some ground? But could it also hit tech stocks, who have been enjoying their moment in the sun as home workers have been more reliant on technology. The tech bubble will be tested this week with a significant number of IPOs in the US. On today’s podcast there’s also discussion on the latest inflation numbers in the US ahead of this week’s FOMC meeting, the UK’s delayed recovery, China’s credit growth and Japan’s new Prime Minister. Plus a look ahead to the RBA meeting tomorrow.
Friday 11th September 2020
The pound lost further ground today as the EU objected to a new government bill that would unilaterally overturn the Withdrawal Agreement. NAB’s Gavin Friend says observers have been aghast at the actions of the UK government and that’s being felt in the pound. But has the weakened pound held back the Euro? The ECB’s Christine Lagarde signalled that the ECB was watching the rising exchange rate, but it was not a target for the central bank. Does that give the currency permission to rise higher? Meanwhile, uncertainty remains in US equities, falling markedly today, with the US dollar holding its own, most likely because of the Sterling effect. Weekly jobs numbers in the US also disappointed a little.
Thursday 10th September 2020
There’s been a rebound in risk sentiment which NAB’s Tapas Strickland has been driven by a buy-the-dip mentality, with opinions still divided as to whether tech stocks remain over-valued. Meanwhile the US dollar has fallen again, boosting the Aussie dollar and the Euro. The rising value of the Euro of late will be of particular concern to the ECB which meets later – higher priced exports could hinder Europe’s recovery. The pound meanwhile is finding it hard to keep up as Brexit uncertainty remains and concerns over rising COVID infections, with new restrictions imposed in the UK today. All that said, the data over the last 24 hours has shown largely positive signs of recovery.
Wednesday 9th September 2020
US equities have had a third session with substantial falls. NAB’s Gavin Friend says the damage is largely confined to the tech sector but there is evidence that it could be broadening to a fuller risk-off mood. The reasons for the uncertainty are clear, beyond irrational exuberance, we have increasing rhetoric from Donald Trump over China, expanding on his earlier decoupling comments; Boris Johnson is turning up the heat on Brexit negotiations, threatening to change the withdrawal agreement, even if it means breaching international law; and COVID-19 cases continue to rise.
Tuesday 8th September 2020
A drop in the pound was the only significant market move today, driven by threats from Boris Johnson to walk away in mid-October if he doesn’t get the Brexit deal he wants. Normally such remarks are taken as brinkmanship as negotiations near the finish line, but today there was a market reaction – perhaps because there’s little else to go on. Data from Australia today will give a clear indication of the impact of the Melbourne lockdown on other states – the NAB Business Survey for August and the weekly payrolls numbers. NAB’s Tapas Strickland also talks through a Bloomberg survey showing the expectation for further rate cuts and increased bond buying from the RBA.
Monday 7th September 2020
US jobs data on Friday helped the equities market to regain a little composure as it fell for the second day. It also saw Treasury yields rise sharply, steepening the curve. NAB’s Rodrigo Catril proffers his opinion on how much of this is a short-term response and how much the start of a longer-term shift. The Fed’s Jerome Powell said on Friday that the recovery ”will get harder from here”. There’s also the discussion on the impact on the Australian economy of the extension to the Melbourne lock-down announced yesterday.
Friday 4th September 2020
There have been massive falls in US equities, particularly tech stocks. NAB’s David de Garis says thin trading in summer can always create sharper moves, but there’s little doubt a correction was overdue and tech stocks have borne the brunt of it. There’s been no encouraging news to divert attention – the Services ISM number came in lower than expected, with the employment component still in contraction. The weekly jobless claims numbers remain persistently high, with non-farm payrolls providing more detail tonight. And the Fed’s Charles Evans has suggested it’ll take more than two years to see a full recovery. The biggest victim of this negative mood – other than retail investors feeling the equity hit – is the Australian dollar.
Thursday 3rd September 2020
The US dollar managed a slight recovery in the overnight session, which has also seen continued growth in US equities, echoed across the Atlantic. On today’s podcast Phil Dobbie asks NAB’s Ray Attrill why the positive sentiment when the data we’re seeing isn’t so positive? ADP employment numbers were softer than expected and the Fed’s Beige Book suggested the recovery in the US is slowing. They also discuss yesterday’s GDP numbers for Australia and the whole gamut of services PMI numbers out later today.
Wednesday 2nd September 2020
Deflation in Europe comes as no surprise, just as the shift in the Fed’s monetary policy seems likeold news, but NAB’s Gavin Friend explains how the markets are still adjusting to it. Data releases have largely been positive, with a higher than expected increase in the USA ISM, and the Caixin PMI for China is at its highest level since 2011. So, what can we expect from Australia’s GDP numbers for Q2? Will they signal that the RBA, and the government, needs to do more to help the economy recover?
Tuesday 1st September 2020
The Australian and NZ dollars reached two-year highs in the overnight session, with the US dollar declining further. Phil Dobbie asks NAB’s Rodrigo Catril whether the trend will continue, wand whether we could see the Aussie reach 80 US cents late next year. There’s also discussion on Warren Buffet’s investments in Japan, Richard Clarida’s explanation on the Fed’s policy change and how the rate of US COVID-19 fatalities seems to be reacting sluggishly to the fall in cases. Plus, what to expect from the RBA today and the US ISM manufacturing number tomorrow morning.
Monday 31st August 2020
NAB’s Ray Attrill says the US dollar bore the brunt of Friday’s reflective thinking on Jerome Powell’s Jackson Hole speech. He says, if the market believes the Fed will run inflation up to 3%, then real US interest rates would be lower and higher inflation should force the currency down over time, hence the response. But isn’t this somewhat hypothetical when inflation has struggled to get anywhere near 3 percent? There’s also discussion about US confidence data, China’s ISM numbers today and the impact of Shinzo Abe’s resignation announcement.
Friday 28th August 2020
Jerome Powell used his virtual address to the Jackson Hole Symposium to announcer the Fed’s strategy of targeting an ‘average’ 2% inflation rate, a subtle change that is likely to keep interest rates lower for longer. NAB’s David de Garis says that lower rates will help to propel investment once confidence returns, but it’ll take a while to eat into the current spare capacity. Meanwhile another million people signed for unemployment benefit in the US, business confidence seems to be picking up in Europe and the ABS provided confirmation that private capex in Australia was way down in Q2. Of course, the Q3 numbers will be a lot more interesting.
Thursday 27th August 2020
There’s continued optimism in the markets, with equities reaching new highs again, helped on by better than expected durable goods orders in the US, and despite rising US-China tensions and the potential impact of Hurricane Laura. NAB’s Rodrigo Catril also discusses the continued interest in Australian bonds and the impact on GDP of yesterday’s construction numbers and today’s private capex read. Plus, what will be said at the virtual Jackson Hole, which kicks off today.
Wednesday 26th August 2020
The US dollar is down again this morning, with equities up and touching new highs again. More significantly, we’ve seen sizeable increase in government bond yields in the US and Europe. NASB’s David de Garis talks through the factors at play, including hope that the US China trade relationship will continue as planned in the phase one deal, and concerns that a bigger supply of bonds in the pipeline could be inflationary. Meanwhile the IFO numbers from Germany gave ground for some optimism, despite rising COVID-19 cases in the country. Yet consumer confidence in the US has fallen, even as home sales increase 13%, to levels not seen since the subprime crisis. Good news or bad?
Tuesday 25th August 2020
US equities reached new highs again, with big gains also in Europe. NAB’s Rodrigo Catril says investors are back to reacting to the vaccine hopes, with President Trump announcing he will fast track roll-outs in the US – faster than a ‘traditional’ administration. Meanwhile, NZ’s retail numbers yesterday fell significantly during Q2 as expected – so will they pay the price for a protracted lockdown? And will German IFO numbers today confirm that the European economy is recovering at a slower rate than the US? Plus, Australia’s payroll data today will show the early impacts of the Victorian lockdown.
Monday 24th August 2020
Europe’s PMI’s disappointed markets on Friday, whereas the US numbers were better than expected, helping to lift equities to new highs (again). The UK provided mixed news, with string PMIs offset by a week of Brexit negotiations that led nowhere. Donald Trump is pushing out all the stops on a virus and cure for COVID-19, with announcements expected today on one, if not both. NAB’s Ray Attrill talks through all of this, and reports that the take-out from the National Cabinet Meeting on Friday was that States and Territories should do more to fund Australia’s recovery. In the week ahead, the meeting of central bankers at Jackson Hole should provide a steady stream of news and views.
Friday 21st August 2020
US equities continue to rise, even though the jobless claims numbers rose last week. Phil Dobbie asks NAB’s Gavin Friend, at what point will they appear to be overvalued? There’s also discussion on bond movements, the continued fall in the Kiwi dollar, even against a weaker US dollar today, and the rise in the pound. There’s lots of PMIs released today – services and manufacturing for the UK, Germany, the Eurozone and the US – what will they tell us about the shape of the global recovery?
Thursday 20th August 2020
There’s no doubt about it, there was disappointment from investors after the minutes of the recent FOMC meeting were released. There was hope that there would be some indication of how the committee would be arriving at a forward guidance for Fed strategy, but nothing. As NAB’s David de Garis says, Jerome Powell had suggested that their strategic review – that was interrupted by the COVID-19 outbreak - was well advanced and details would be released soon. Clearly not this soon, and equities fell back a little on the lack of new news. There’s a clearer picture on the direction of the RBNZ, with an expectation that interest rates will be in negative territory next year. There’s discussion of that on today’s podcast, plus the China-Australia fracas and US unemployment and stimulus (or lack of).
Wednesday 19th August 2020
US stocks continue to rise to record highs, helped today by strong housing starts and building permits. Phil Dobbie asks NAB’s Tapas Strickland whether there’s too much optimism about the rate of recovery and that’s showing in overvalued assets, including stocks and gold. Maybe the FOMC minutes will bring us down to earth tomorrow morning, although the news that Nancy Pelosi has indicated she’ll agree to go halfway on a fiscal stimulus deal might add to market enthusiasm.
Tuesday 18th August 2020
The US dollar continues to fall, pushing the Aussie dollar higher this morning. The dovish tone set by the RBNZ – plus a delayed election – means the NZ dollar hasn’t seen the same level of growth. In fact, NAB’s Ray Attrill points out in today’s Morning Call, the Aussie-NZ dollar cross is at a two year high. That’s not all, US equities are hitting new levels too, even though the idea of any sort of fiscal deal seems to have fallen off the table and growth slowed markedly in the latest NY Empire Manufacturing Index.
Monday 17th August 2020
Lockdowns have been extended in Victoria and Auckland, even as COVID-19 cases ease. But, NAB’s Rodrigo Catril, says hotspots around the world are becoming a bigger concern, hence the continued uncertainty in markets – although equities continue to perform close to record highs. With so much focus on the virus it’s not surprising that US China trade talks have been called off for the foreseeable future, with little market impact on the news. More interesting, perhaps, will be the Democrat Convention that kicks off today. What impact will their policies have? Can anything stop the slide in the US dollar right now?
Friday 14th August 2020
Jobs data is confusing right now. How much is it influenced by government stimulus activity? Well, not much in the US right now because an agreement still hasn’t been reached, but weekly new claims are below a million for the first time since March. In Australia unemployment has risen to 7.5%, before the Melbourne lockdown. NAB’s Gavin Friend talks through the data, and the market reaction, with equities still high and the bond sell-off continuing even as the US Treasury auctions off a heap more of them. And will Auckland stay in lockdown? Also today, a slew of performance data from China and US retail sales.
Thursday 13th August 2020
US equities continue to race upwards, at or near record highs. NAB’s Ray Attrill attributes it to same reasons we’ve heard a lot lately – easing infection rates, hopes of a stimulus and hanging out for a vaccine. There was less optimism in the UK, where the reality of an economy falling by one fifth in Q2 struck home. In Europe, industrial production numbers eased off a little, whilst infection rates in some countries are continuing to pick up. Whilst US inflation was higher than expected, Aussie wage growth was much slower than anticipated. And the RBNZ yesterday was much more dovish than expected, ramping up its QE. Today jobs numbers are the focus, with the Australian Labour Force data and the weekly jobless claims for the US.
Wednesday 12th August 2020
Markets in Europe seem to have been encouraged by the news that Russia is to start vaccinated key workers in the next few weeks, although, as NAB’s Rodrigo Catril explains, there are concerns about the efficacy of Russia’s solution to the virus. Still, strong confidence in Germany’s ZEW survey shows the region is bouncing back, although te UK’s employment numbers were concerning and today’s GDP read is expected to show a massive fall (-20.7% expected) in Q2. On today’s podcast we also discuss yesterday’s NAB Business Survey, the Auckland lockdown, the RBNZ Monetary Policy Statement and US CPI later today.
Tuesday 11th August 2020
Markets haven’t moved much overnight, mainly because there’s not been much in the way of data or geopolitics to offer any direction. The latest JOLTs (job openings) showed that there are 5.9 million jobs available, more than expected, but it didn’t give markets any kick. Meanwhile, there’s hope that a deal will be struck for stimulus in the US economy and that will negate President Trump’s executive order. NAB’s David de Garis suggests the President ultimately needs a deal to access the funds to provide the level of fiscal support beyond a few months. Oil prices have risen on the expectation that extra money will be available to boost consumption. China and the US have engaged in tit for tat measures, imposing sanctions on officials – the question is, will it interfere in a review of the phase one trade deal later in the week? Today the NAB Business Survey and weekly payrolls numbers will give an indication of how Australia is faring, in particular the relative strengths of each state.
Monday 10th August 2020
President Trump has been busy signing executive orders. First, late Thursday I the AUS, he signed one banning USD companies from dealing with Tik Tok and WeChat. It seems unlikely that China will take this lying down. NAB’s Tapas Strickland said the news hit technology stocks in the US and China on Friday. Markets were subdued anyway, as Congress failed to reach an agreement on the next phase of stimulus support. Over the weekend the President signed several more executive orders to continue some of the measures, to an extent, but there are likely legal ramifications. There’s also discussion on jobs numbers from the US, the RBA’s monetary policy statement from Friday, and a look ahead to the key events from the week ahead.
Friday 7th August 2020
Equities are rising in the US, again. This time it’s a mix of positive data – including weekly jobless claims, which are down a little on the week before – and further hopes of a resolution on the fiscal stimulus. On today’s podcast we explain why this stimulus is so important to the US economy. President Trump has indicated if no deal is reached he will use his executive powers, but NAB’s Tapas Strickland isn’t so sure he’ll be able to, and suggests a deal will be struck soon. There’s also discussion on the Bank of England’s latest forecasts and those from the RBA, plus what to expect in the US non-farm payrolls tonight.
Thursday 6th August 2020
Gold has broken the $2,000/ounce mark, so is it making a run for it? That’s a question Phil Dobie puts to NAB’s David de Garis in this morning’s Morning Call podcast. Some see it as a better investment than the negative real-yields of government bonds. Yet equities continue to rise, driven by the hope that Congress in the US will arrive at a fiscal stimulus package to keep the economy ticking over for the remainder of the year. They’d better hurry, senators are heading home for the summer recess. Stronger than expected services numbers added to the confidence overnight. Jobs could be the weak point – ADP data showed far fewer new jobs than anticipated. Other indicators are showing a similar story, so non-farms payrolls tomorrow night will be watched keenly.
Wednesday 5th August 2020
Treasury bond yields are reaching new lows, which has heightened the appetite for gold, with Comex finally remaining above the $2,000/ounce mark. NAB’s Tapas Strickland says there’s uncertainty in equity markets, driven by the continuing stand-off over the next phase of fiscal stimulus for the unemployed in the US, a number which shows signs of rising. Unemployment could reach 10 percent in Australia, according to the baseline forecast from the RBA – we’ll get the details on Friday. There’s a round of PMI releases later on – Tapas talks through them.
Tuesday 4th August 2020
There was a lot of optimism in the markets overnight, driven by strong manufacturing numbers in the US and Europe, the slow down in new COVID-19 cases in America, the hope that President Trump will be able to push on with some sort of fiscal stimulus and the success of the tech sector. As NAB’s David de Garis says, it’s looking fine if you ignore bank earnings and the continued lockdowns around the world. And the risk that the President fails in his endeavours and the US falls over the fiscal cliff. On today’s podcast there’s also discussion on the RBA’s latest forecasts due out this week, and today’s retail numbers for Australia. Oh, and Tik Tok. Sell to an Americna company or leave. That’s the ultimatum.
Monday 3rd August 2020
The Australian economy will take a hit from the stage four lockdown in Melbourne, but its not alone. Lockdowns continue in Europe, including Manchester in England’s north. NAB’s Rodrigo Catril says this trend is a growing concern. The US government still hasn’t reached agreement on a fiscal stimulus and the concern is that it will take some time, cutting back on the spending of millions of Americans. China‘s Caixin Manufacturing PMI and US Manufacturing ISM (both for July) will be watched for signs of recovery.
Friday 31st July 2020
The US dollar continued to slide, with a fall in shares and US Treasury yields, as GDP numbers showed the extent of the shock to the US economy in Q2. Shortly afterwards, President Trump tweeted the suggestion that the US election in November be delayed. A rise in continuing jobless claims added to the bad news from America, where the administration is no nearer reaching an agreement on the next phase of the fiscal stimulus program. In Europe Germany’s flash GDP umbers were worse than expected, as infection rates rise in numerous countries. At home cases might have peaked, but more controls will hit the economy harder. The AFR is suggesting today that last week’s mini budget is already out of date.
Thursday 30th July 2020
“We’re in a tough situation” – that was the response from Jerome Powell to one question during the FOMC press conference this morning. Without offering anything new, he reiterated the importance of fiscal support, without referring to the cliff that could see most support measures finish, without a replacement, tomorrow. Phil Dobbie talks to NAB’s David de Garis about the tone of the conference, which offered little in the way of optimism. Powell highlighted the way the virus has split the fortunes of the US population, evidenced in the US Household Pulse survey overnight. Meanwhile, even though little has changed since yesterday, equity markets are back on the rise. Perhaps disappointing GDP and jobs numbers today (for the US and Germany) will knock the wind from the sails.
Wednesday 29th July 2020
The US is no nearer reaching agreement on their fiscal stimulus package. NAB’s Tapas Strickland says its highly likely that some of it will be addressed before recess, so GOP candidates don’t go out campaigning ‘empty handed’. Otherwise the USD could be heading for a sizeable fiscal cliff. Meanwhile, COVID cases are rising in many US states, even if Florida and California are, possibly, reaching a plateau. Consumer confidence fell in the US in June, just as Australian job numbers fell. The only positive news is for those holding quantities of gold and those in New Zealand, where job numbers rose in June.
Tuesday 28th July 2020
Gold has reached a record high, whilst the US dollar continues to slide. NAB’s Ray Attrill says it partially reflects the expectation that the Fed will reinforce its commitment to not raise interest rates until inflation is back up over 2 percent, which will be year away. The weaker US dollar has seen the Euro reach US$1.178, the highest its been since 2018 (on a trade weighted basis, the highest since 2014). Phil Dobbie asks whether this suggests a long overdue correction in the relationship between the Dollar and the Euro. Locally, weekly job numbers will be important, although they predate the full force of the lockdown in Victoria.
Monday 27th July 2020
The US dollar lost a lot of ground last week as Congress argued over the shape and form of the next recovery package. NAB’s Rodrigo Catril says hopefully there will be some agreement on the continuation of the supplementary unemployment benefit. But that’s not the only influence on the weaker mighty dollar – tensions are ratcheting up with China, with an arrest of a researcher allegedly acting on behalf of the Chinese military, and COVID-19 cases continue to rise. The Aussie dollar could lose some of its shine on COVID news too, with the number of cases in Victoria continuing to rise over the weekend.
Friday 24th July 2020
It’s been a classic risk-off session so far, with the US and Aussie dollar losing ground, more interest in the Yen, US shares and oil prices plunging, with government bonds and precious metals in demand. Phil Dobbie asks NAB’s Gavin Friend whether it’s because, as well as some negative news, like a rise in new US unemployment claims, there’s also an absence of anything to positive for investors to cling hope on to? The exception being the lingering optimism surrounding the European recovery plan and the fact that COVID-19 is now relatively well contained in Europe. They also discuss Josh Frydenberg’s mini budget yesterday and Brexit hopes, which, on the face of it, aren’t going well, but how much of that is good old fashioned negotiating tactics.
Thursday 23rd July 2020
Europe’s done it, Australia’s done it. Now it’s the US’s turn to extend their fiscal support, and the deadline is looming. NAB’s David de Garis talks about the likely direction of the US fiscal package, with the President likely to want to spend more as infection rates rise and his support falls. He also talks about the significance of the deal in Europe – could this be the start of a new direction for the EU? Meanwhile, Josh Frydenberg presents the budget numbers for Australia today, Victoria presents their own budget and, tonight, the weekly jobless numbers for the US.
Wednesday 22nd July 2020
The Aussie dollar rose over 1.7 percent in this session. It's been helped by the gain in the Euro, after leaders there reached an agreement on a Europea Rescue Plan, less than two days after their weekend summit ended without a resolution. On today's podcast Phil Dobbie asks NAB's Ray Attrill whether this is Europe's time in the sun, with a rescue plan sorted and the virus contained across the continent. In the US the race is on to extend stimulus measures before Congress breaks for summer, and virus numbers continue to rise. Meanwhile, will the extension of support measures see further rises in equities and in the value of the Aussie dollar?
Tuesday 21st July 2020
Scott Morrison Scott Morrison will unveil changes to the JobKeeper and JobSeeker programs today – although Josh Frydenberg has already spilled the beans in today’s AFR. NAB’s Rodrigo goes through the changes with Phil Dobbie, as well as discussing the latest ‘hopes’ in the vaccine race. Just how to protect jobs is a challenge for policy makers the world over. How do you keep unemployment down, whilst encouraging labour mobility? Philip Lowe’s talk today should be interesting from that perspective. Markets seem less fussed about Britain’s stance over China today, or the restart of Brexit talks.
Monday 20th July 2020
After three days arguing over the size and shape of their European Recovery Plan, EU leaders failed to reach an agreement. Phil Dobbie asks NAB’s Tapas Strickland what it’ll mean for the Euro and European bonds. COVID-19 infection numbers continue to rise – could the Michigan consumer sentiment read on Friday mark a shift in direction, as more lockdowns seem likely? Closer to home New Zealand’s PMI reading was positive – how different is the story for Australia now? There will be a lot of interest in a lunchtime address by the RBA’s Philip Lowe tomorrow and the government’s budget update on Thursday.
Friday 17th July 2020
There have been a lot of employment numbers out over the last 24 hours – for the US, the UK and Australia. NAB’s Gavin Friend reiterates that government job support programs muddy the waters, but looking at hours worked shows that Australia is better positioned than the UK. China has shown a strong recovery in GDP, but retail sales are the Achilles heel. Meanwhile, all eyes will be on the EU leaders meeting over the weekend. The ECB’s Christine Lagarde gave the strongest hint yet that an agreement will be reached sometime, with grants and loans. That could be a game changer for the Euro.
Thursday 16th July 2020
Just how long will the impact of COVID-19 drag on for. Shares are up today on more hopes that a vaccine will be found soon, but NAB’s David de Garis points to comments from the US Fed’s Patrick Harker who suggests we all need to adapt to the new abnormal. The Bank of Canada released its Monetary Policy report for July, charting the recovery, with growth easing after the reopening phase, during a period of recuperation. As discussed in today’s podcast, that’s when reality starts to set in, as government support measures are eased. That’s why you need to specifically look at ‘hours worked’ in today’s jobs numbers in Australia, rather than total employment numbers. There’s another possibly shape – the W recovery. The UK’s Sir Patrick Vallance released a report today suggesting a second wave in winter could be worse than the first.
Wednesday 15th July 2020
The US dollar fell again today, driven by a rise in the Euro. NAB’s Tapas Strickland says the Euro’s rise is based on hopes that European leaders will reach a consensus on their rescue package this week. The Aussie dollar remains resilient, even as jobs growth stalled and there are fears that Victoria will enter a stage four lockdown. In the US banks are preparing for loan defaults, whilst the Fed’s Lael Brainard has said the central bank will “run the economy hot” until recovery is well underway, whilst warning of a second wave. Meanwhile, as the UK pulls Huawei out of its 5G networks, China is showing signs of conforming to the phase one trade deal. Perhaps they want to show they have complied in the hope that someone else will be in the White House next year.
Tuesday 14th July 2020
Equities in the US spent most of the session rising, driven by the news that Pfizer and BioNTech’s experimental vaccine was being fast tracked in the US. But then, as NAB’s Rodrigo Catril explains on today’s podcast, Mike Pompeo declared China’s expansive claims in the South China Sea as unlawful, a shift in the direction of the US rhetoric against the regime. It’s an important day for Australian data today, with the NAB Business Survey and the weekly payrolls data, as well as China’s trade data. There’s also discussion on European trade and the Brexit negotiations, with the pound taking quite a hit today.
Monday 13th July 2020
Markets opted to take the positive news on Friday, sending shares higher and the US dollar lower. As NAB’s Ray Attrill explains, the good news was results of Remdesivir testing showing that the drug could reduce the mortality rate for those who contract COVID-19. The bad news was the number of infected people in the US continues to rise, with Florida recording its highest number so far on Sunday. China also provided mixed news – aggregate financing increased markedly in June, so more money is circulating in the economy. The bad news is that President Trump has no interest in a phase two trade deal anymore. So, what does all this mean for the direction of the Aussie dollar?
Friday 10th July 2020
It was a choppy session overnight, with markets split between the confidence that things might be getting better versus the realisation that in the US southern states infection rates (and fatalities) are getting worse. On the positive side, the number of people filing for unemployment benefits was less than expected. But rising virus numbers could cause more lockdowns which could impact employment numbers. NAB’s Gavin Friend says the Confidence-COVID dichotomy is playing out in the currency markets, where the impact of Europe reaching a positive outcome in their recovery package next week shouldn’t be underestimated.
Thursday 9th July 2020
The pound was helped a little today by the Chancellor’s next step in the country’s stimulus package. Phil Dobbie talks to NAB’s David de Garis about the plan, which includes a sales tax cut for the hospitality and travel industry and, curiously, the government going halves on lunch if you eat out in the first half of the week, through August. If that sounds impractical, trying to break the peg of the Hong Kong dollar to the US dollar is an idea floated that is likely to fall into the too hard basket. Back home, the cabinet meets on Friday to look at the next steps in Australia. Meanwhile stocks continue to rise, even as COVID cases increase in the US.
Wednesday 8th July 2020
There isn’t an immense amount of confidence about how quickly economies will recover. The Fed’s Raphael Bostic raised concerns about the impact of the rising infection numbers in the US. At home, the Melbourne lockdown will also slow things down. As NAB’s Tapas Strickland discusses on today’s podcast, this uncertainty is why the RBA, and others, are in ‘wait and see’ mode. Europe has updated its forecasts with a bigger decline this year followed by less of a recovery next year. China tensions add to the uncertainty, with the authorities there suggesting the UK would be a ‘hostile partner’ if it pulled Huawei out of its mobile networks. With a quiet day ahead there’s more time to mull over the mix of sentiments.
Tuesday 7th July 2020
Ray Attrill turns a proverb inside out in this morning’s podcast. Everyone is seeing the silver lining, but clouds could be forming. The markets are in buoyant mood right now, as data suggests economies are recovering from the worst of the impacts of COVID-19. The non-manufacturing ISM for the US is the latest demonstration of the rebound. And the cloud? COVID cases are rising. In Australia Victoria has just seen its highest number of new infections so far, and lock downs will have an economic impact. So, what stance will the RBA take today? Will they see that hey have to do more, particularly as the government starts to wind back its own stimulus measures. Then there’s China. What will be the next move from President Trump?
Monday 6th July 2020
Which way will the markets be pulled this week? Economic data is proving to be generally positive, helping create a risk-on bias. Yet COVID-19 cases continue to rise in the United States, not to mention the cases in Victoria, which rose over the weekend and could lead to a lockdown in Melbourne CBD. Then there’s the increased tensions with China, with China potentially threatening retaliation if Australia offers a safe-haven for Hong Kong residents. Phil Dobbie talks to NAB’s Rodrigo Catril about which of these conflicting forces will have the most influence on global markets and the Aussie dollar this week.
Friday 3rd July 2020
US stocks rose higher still overnight, helped on by the latest non-farm payroll numbers. NAB’s David de Garis says there was such a wide range of estimates for the jobs numbers that someone was bound to be right, but 4.8 million new jobs in June was seen as a very good sign ,with the President declaring that the economy was roaring back. Meanwhile Florida recorded more than 10 thousand new COVID-19 cases on Thursday, the worst yet, and the Congress and Senate passed a bill to impose sanctions on financial institutions that are seen to be interfering in Hong Kong. That news tempered market enthusiasm, but not enough to totally offset the gains from the jobs numbers.
Thursday 2nd June 2020
The overnight session started on a sour note over increasing concerns about Hong Kong. As NAB’;s Gavin Friend describes, the number of arrests under the new security law has increased in the last few hours. The UK’s Boris Johnson has offered a lifeboat to millions of residents to move to the UK, adding to the tensions with China. A possible COIVD-19 vaccine has lifted sentiment since, helped by strong manufacturing ISM numbers in the US and data showing a rebound in activity for Germany. Jobs are the big concern for the US though. The ADP employment numbers fell short of expectations, travel bans and the reversal of lockdown easing will challenge future jobs growth. Non-farm payrolls numbers tonight will be watched with keen interest.
Wednesday 1st July 2020
China has passed the new security law for Hong Kong, with the US already responding by targeting Huawei and ZTE. Dr Fauci has declared the virus as ‘out of control’ in the US and more measures need to be brought in to contain it. Despite all this uncertainty equities continue to rise in the US. NAB’s Rodrigo Catril says it has been driven by the expectation of economic recovery as the lockdown eases, but there could be a swift reversal if the infection numbers continue to rise. There’s also discussion on Boris Johnson’s (underfunded) New Deal and a swag of data releases today, some of which could drive market sentiment.
Tuesday 30th June 2020
There’s a little positive sentiment pushing shares higher again today and helping the US dollar gain on the Yen and Swiss Franc. Why the optimism? Because there wasn’t really any new bad news. NAB’s Ray Attrill says the housing market seems to be the brightest spot in the US economic recovery, with a 44 percent increase in pending home sales. The Dallas Fed manufacturing index also gave some encouragement, even with the rising COVID-19 infections in Texas. Today China’s PMI numbers, Aussie weekly jobs numbers, words from Guy Debelle and US consumer confidence numbers from the Conference Board will all be worth watching.
Monday 29th June 2020
Rising infection rates in US southern states hit equities hard on Friday. NAB’s Tapas Strickland says the expectation was that the economy would bounce back as consumer restrictions were eased, but the reimposition of some of those measures has dented confidence. It means COVID-19 data will continue to be watched closely. The results of the Fed’s stress test also hit banking stocks, as share buybacks were prohibited and dividends capped. This week much of the focus will be on jobs numbers, with ABS payrolls data tomorrow and non-farm payrolls for the US at the end of the week. Lawmakers also meet in China to discuss the implementation of the National Security Law, which could see increased tensions with the US over the next few days.
Friday 26th June 2020
Despite growing concerns about the rise in COVID-19 cases in the southern states of the US, equities rose today. NAB’s Gavin Friend explains how the easing of banks’ investment rules contained in the so-called ‘Volcker Rule’ has helped to boost stocks. Otherwise, good news is few and far between. Durable goods orders were higher than expected, but distorted by volatile aircraft orders, and the number of newly unemployed in the US last week is higher than expected. Meanwhile, the distraction of a global pandemic seems to have put Brexit on the back burner, but could there be a determination to reach a conclusion quickly?
Thursday 25th June 2020
Markets have been hit with a triple whammy – disturbing COVID-19 numbers emerging from the United States, a worse than expected downgrade to growth forecasts from the WTO and a big rise in oil inventories, suggesting consumption isn’t picking up as much as hoped. Phil Dobbie talks through all three with NAB’s David de Garis, and the market reaction, which has seen equities take a big hit, the US dollar reverse its downward trajectory and a sharp fall in oil prices. To add to the unease, the US is back to threatening Europe with tariffs, including many new items like biscuits and gin.
Wednesday 24th June 2020
There’s a lot of positive sentiment again today, with US equities on the up and the NASDAQ reaching a new high. Phil Dobbie talks to NAB’s Tapas Strickland about yesterdays PMIs, which have helped perpetuate the hope that a V-shaped recovery is still possible. Yet the lockdown in two regions of Germany serve as a reminder that the virus is not contained, alongside the growth in infections in the United States and Latin America. Still, the UK is easing restrictions further from July 4th, allowing pubs to reopen and Boris to get a haircut. Any concerns over a potential collapse in the US-China Phase One Trade Deal were quickly dismissed with a tweet from the President.
Tuesday 23rd June 2020
In a day that’s been light on news, markets have had a chance to take a more positive outlook, pushing equities higher and the US dollar lower. That’s helped the Aussie dollar and oil – although gold too is rising and close to a seven year high. Phil Dobbie asks NAB’s Rodrigo Catril how influential today’s cornucopia of PMIs (for Australia, Europe, Japan, the UK and US) will be on market sentiment.
Monday 22nd June 2020
Last week was a choppy week as markets tried to balance out positive economic news against rising concerns about COVID-19 infections, particularly in the southern states of the US. As NAB’s Ray Attrill explains, Friday got off to a positive start on rumours that there had been a positive outcome from trade talks between US and China, but then the direction changed when Apple announced it was closing down stores that had re-opened out of the lockdowns, in light of rising infection levels in the US. Retail sales in the UK and Australia provided some positive data but only one can claim a V-shaped recovery.
Friday 19th June 2020
Markets continue to be jittery, with news of reopenings offset by concern about rising infection rates. Then there’s the jobs numbers. Last week 1.5 million more jobless claims were made in the United States, even though the economy has been opening up. “Is it because businesses are finally throwing in the towel as partial reopening reality bites?” asks NAB’s Gavin Friend on today’s Morning Call. It’s not clear yet, but unemployment numbers in Australia give an equal cause for concern. Plus, the curious response to the Bank of England’s decision to purchase another GBP100 billion in government bonds, triggering a fall in the value of the pound and in bond prices. Is the expectation that they need to do more?
Thursday 18th June 2020
Australia’s latest unemployment numbers are out this morning and the rate is expected to rise. But NAB’s David de Garis says we won’t have a real handle on unemployment until the JobKeeper program comes to an end. In today’s Morning Call he points to research from YouGov in the UK, where a significant proportion of employers expect to retrench a chunk of their staff when the furloughing of workers comes to an end. Dave reckons the US job numbers – of which we get the latest weekly read tonight – could be a more significant indicator of the impact on jobs. There’s also discussion on a choppy session for equities and what to expect from the Bank of England today.
Wednesday 17th June 2020
Market sentiment is higher again this morning from a surprise rebound in US retail sales, coupled with talk of a $1 trillion infrastructure program from the Trump administration, and more stimulus from the Fed. News that an existing low cost drug can significantly reduce the COVID-19 death rate has added to the good news. On the downside, the virus is staging a comeback in various places, including Texas, and the UK is facing worse than expected unemployment numbers.
Tuesday 16th June 2020
Globally equities have been dampened by fears of a second wave of COVID-19 and the attest activity data from China, which showed a slower than expected recovery. So why are equities back on the rise in the US – a question Phil Dobbie puts to NAB’s Ray Attrill in today’s Morning Call podcast. The answer lies with the Fed, which is pushing beyond buying government bonds to fuel the economy. There’s also discussion on Australia-China relations and today’s RBA minutes.
Monday 15th June 2020
The market lost a chunk of optimism last week. Jerome Powell’s pessimistic outlook didn’t help and probably destroyed hopes for those still set on a V-shaped recovery. Some exuberance returned on Friday, but Phil Dobbie asks NAB’s Rodrigo Catril whether that can continue, given increasing concerns of second waves – highlighted by a lockdown in Beijing and Seoul - and the question of whether opening up shops is enough to get people shopping. Activity readings from China might bring some relief, if the news is good, of course – but is it as simple as applying the rate of China’s recovery to the rest of the world?
Friday 12th June 2020
There’s been a swift move to bonds and safe haven currencies since the Fed’s message yesterday that it would take a couple of years at least for life to return to normal. Fears of a second wave of the virus in the US has added to concerns and weekly job numbers in the US suggest there isn’t exactly a rush back to work. The result has been a big drop in global equities. Phil Dobbie asks Ray Attrill how the rally had gone so far, and why Australia, which is relatively COVID-19 free, is suffering more than most. With oil, we’re back to worrying about over-supply and under-demand.
Thursday 11th June 2020
The US Fed has reiterated that they will do whatever it takes to protect the US economy, with inflation expected to remain below 2 percent through to 2022. Chair Jerome Powell painted a bleak picture and suggested that more action will be needed by Congress and, possibly, by the Fed. This comes on a day that the OECD has released forecasts for a six percent contraction in the global economy. Still, another good day for equities, with the NASDAQ reaching a new high – low interest rates for a long time won’t eactly hinder that growth, will it?
Wednesday 10th June 2020
The rally in equities has stalled for now – except for the NASDAQ. Phil Dobbie asks NAB’s Tapass Strickland whether caution is growing or just a bit of short-term profiteering. The cautionary air could relate to concerns about a second wave of infections. In Australia there are more grounds for optimism, but the Aussie dollar is weaker, even though the Treasury has revised down peak unemployment, from 10% to 8%. No new virus cases add to Australia’s good news, although China’s warning for students to stay away offsets some of that positivity. Tomorrow morning all eyes will be on the Fed, with the FOMC meeting wrapping up with a press conference just ahead of tomorrow’s Morning Call podcast.
Tuesday 9th June 2020
Equity markets continue to rise and the US dollar continues to weaken with increasing risk-on sentiment, helped along by the surprising rise in jobs in the US in Friday’s non-farms payroll data. NAB’s Gavin Friend says the numbers raise the question as to whether the US economy will bounce back sooner than expected. The Australian and Kiwi dollars are beneficiaries for now, largely through the fall in the US dollar, but also the rise in iron ore prices and the fact that New Zealand is now COVID-19 free. Phil Dobbie asks whether the US job numbers will impact the Fed’s decision later in the week. There’s also discussion about the NAB Business survey, out this morning.
Friday 5th June 2020
The ECB announced that it will extend its bond buying program by a further €600b, with forecasts not expecting inflation to pick up for the next few years. NAB’s David de Garis says the pessimistic forecasts from the central bank assume no further fiscal stimulus from the ECB, which might be a realistic assumption given further resistance to an EU fiscal stimulus, with Finland now joining the frugal four. The strength of the Europe on the back of the ECB news has helped the Aussie dollar rise again, helped by job ads adding to hopes of a fairly rapid recovery. The non-farm payrolls umbers will give a clearer picture of unemployment in the US later on.
Thursday 4th June 2020
Australia has entered a recession but, as Josh Frydenberg was quick to point out yesterday, the Q1 fall in GDP was miniscule compared to most of the rest of the world. Market focus, meanwhile, is what comes next. NAB’s Gavin Friend talks to Phil Dobbie about the continued optimism that is perpetuating the rally in equities, the sharp rise in bond yields today and a fall in gold. The Aussie dollar continues to gain on the back of a weakening US dollar. The pound, whilst up against the US dollar, is faring less well – if Brexit talks collapse this week that won’t help. Plus, the ECB meets today – do they really need to extend their bond purchase program? Gavin suggests it could do more harm than good.
Wednesday 3rd June 2020
Equities continue to rise on hopes of a global rebound as COVID-19 infections start to lessen, ignoring the riot sin the US, Hong Kong unrest and Donald Trump’s response to it, and Brexit talks. It’s all good news as far as the markets are concerned, pushing the Aussie dollar even higher, with the RBA’s Philip Lowe reiterating yesterday that things aren’t as bad as anticipated. So, what could possibly go wrong? Phil Dobbie asks NAB’s Rodrigo Catril who suggests historically markets don’t tend to be phased by events of civil unrest in the US. Today all eyes will be on Australian GDP for Q1 and the Caixin Services PMI from China.
Tuesday 2nd June 2020
The Australian dollar has climbed even higher this morning, reaching 68 US cents. NAB’s Ray Attrill discusses the factors that have come together to boost the currency. It’s not all down to weakness in the US dollar, but that’s part of it. Riots, the virus and China relations are playing on the US currency, even if equity traders continue to look beyond those inconveniences to focus on – as Phil Dobbie puts it – the “sunny uplands that await them”. There’s also discussion on what to expect from the RBA today and what GDP partials that will give a clearer picture of what Australian growth was in Q1. There’s a slim chance that the economy actually staved off a slight decline. Could we weather the COVID-19 storm without entering a technical recession? Doubtful, but imagine!
Monday 1st June 2020
President Trump has announced that Hong Kong is no longer autonomous and threatened to remove benefits and impose tariffs on the former British colony. But is it all words, with very little action? Meanwhile we’re seeing iron ore prices rise, largely because of concerns over supply from Brazil. With China planning a large infrastructure program to aid their recovery, won’t this be good news for the Australian economy? It’s a question Phil Dobbie puts to NAB’s Tapas Strickland on today’s Morning Call podcast. Plus the optimistic tone set by markets as lockdowns ease and this week, what’s the real jobless number for America?
Friday 29th May 2020
US equities continued to rally today as investors looked for signs that the economy would be getting back on track. But then, just to show how fickle trade is right now, all those gains were lost on the news that President Trump would be making an announcement later on his policy towards China. He’d already managed to knock almost 5 percent off Twitter shares at one stage, threatening action after they slapped a fact-check warning on his tweets. Europe is altogether less complicated, bond yields are down and the Euro is up, on the hope that the 750 billion euro recovery fund will proceed. Phil Dobbie talks to NAB’s Gavin Friend about market action this morning, as well as looking back at Philip Lowe’s statements yesterday and the take-out from Australian Q1 private capex numbers.
Thursday 28th May 2020
The Australian dollar lost ground today as China threatened to ban imports of Australian coal. Phil Dobbie asks NAB’s David de Garis whether it’s in-part because they want to move away from imported coal, or is it a punishment for siding with the US? There’s also discussion about the new stimulus deal for Europe. It has to be debated and agreed by all EU members next week but markets have taken it as a big step forward. And how much optimism is there amongst Australia businesses post COVID-19 – the forward expectations from today’s private capital expenditure numbers will be a strong indicator of that.
Wednesday 27th May 2020
There’s a strong risk-on mood in the markets this morning, with the Aussie and Kiwi dollar showing significant rises against a falling US dollar. Phil Dobbie asks whether news of more easing of lockdowns around the world is offsetting any bad news about tensions between the US and China? They also discuss a UBS report that suggests a second wave of infections is unlikely. Even if it was, a repeat of the mass lockdown the world has seen seems unlikely. All this is helping market sentiment, along with hopes that vaccine research is progressing, with Novavax undertaking human testing in Australia.
Tuesday 26th May 2020
Equities have staged a broad based rebound today and are expected to continue later today as markets reopen in the US and UK. Oil continues to rise too, as demand increases and supplies fall. On today’s Morning Call NAB’s Rodrigo Catril talks to Phil Dobbie about the continuing US-China unrest, weakening the value of the Yuan, with China’s Foreign Minister calling it ‘the new cold war”. There’s renewed optimism in Germany and rising expectations that the ECB will deliver new stimulus next week. And Scott Morrison uses the Press Club today to explain how he will get the Australian economy back to work and out of intensive care.
Monday 25th May 2020
The unrest in Hong Kong with residents ignoring social-distancing to take to the streets to protest against China’s new national security laws. NAB’s Ray Attrill says it’s likely to impact the Australian dollar today and put paid to the strong correlation it’s been having of late with the US share market. It also raises questions about the US response. At home, bond yields responded to the underspend on the JobKeeper allowance, whilst the ECB looks set for further stimulus measures and the Bank of England’s David Ramsden isn’t ruling out negative interest rates, if it’ll help the UK economy.
Friday 22nd May 2020
Market sentiment was tempered somewhat overnight by rising rhetoric between the US and China. NAB’s David de Garis says we can expect more of this as the gap in the President’s polling against Joe Biden has narrowed. China’s decision to impose new legislation on Hong Kong, without going through the legislative council, will add more fuel for Trump’s agenda, creating more market uncertainty. The good news over the last day was largely ignored by the markets – PMIs for the US and Europe were a little better than expected, and the Philadelphia Fed Manufacturing survey showed that many expect the current slump to last less than six months. Here’s hoping.
Thursday 21st May 2020
It’s been another positive session, driving equities higher and giving another boost to the Australian dollar. NAB’s David de Garis says the Aussie’s rise is despite trade tensions with China, instead driven by the prevailing risk-on mood and the rising price of iron-ore. Markets largely ignored yesterday’s Australian retail sales numbers – we knew they were going to be bad – but there will be hope that we’ll see things turnaround a little in the PMI numbers due later for Europe, the UK and the US. UK gilt yields moved into negative territory today as the Bank of England governor admitted that negative interest rates were being ‘actively’ considered. And the FOMC minutes echoed the sombre tone adopted by Jerome Powell yesterday – the bounce back won’t be quick.
Wednesday 20th May 2020
Markets have controlled their excitement after yesterday’s burst of optimism over a potential COVID-129 vaccine. As NAB’s Ray Attrill points out, equities have nonetheless held on to most of the gains. The Aussie and Kiwi dollars saw two of the biggest gains today, despite threats from China to extend the hefty tariffs on Australian imports. Perhaps New Zealand sees this as an opportunity. There’s also discussion about Jerome Powell’s testimony to the Senate Banking Committee, the findings from yesterday’s Australian job numbers and the UK chancellors remarks on their unemployment numbers. And a better than expected ZEW survey reading from Germany.
Tuesday 19th May 2020
There’s been big increases in equity markets and bond yields on the news of a successful stage one vaccine trial in the US. NAB’s Tapas Strickland says the fact that there have been no adverse reactions and could be available for emergency use as soon as the (northern) Autumn. That said, the Fed’s Jerome Powell says it could take till the end of next year for the US economy to recover. China, though, seems to be getting back on track, with oil demand in-line with this time last year, giving a big boost to Brent and WTI crude prices this morning. And ABS payrolls data this morning could show that unemployment has troughed.
Monday 18th May 2020
The US President has said the US needs to get back to work, vaccine or not. He’s also announced the blocking of microchip supplies to Huawei, with threats of retaliation from China. NAB’s Rodrigo Catril says the market response to news of the trade war was very limited – COVID-19 is a far bigger concern. Retail data from China on Friday was unwelcome news for those hoping for a V-shaped recovery. Whilst in the UK the pound has struggled on Brexit talks and, over the weekend, the BoE’s chief economist suggesting negative interest rates are on the table.
Friday 15th May 2020
The US and Australia have both reported dour job numbers, although markets were braced to expect it. Phil Dobbie talks to NAB’s David de Garis about the calls for more fiscal support, most recently from the Fed’s Neel Kashkari. New Zealand isn’t holding back on stimulus, announcing … an extra $50 billion in spending. US China relations worsened slightly, after President Trump said he could “cut off the whole relationship”. And later today we’ll get more evidence of whether (or not) China is witnessing a V-shaped recovery, with industrial production numbers for April.
Thursday 14th May 2020
The Fed’s Governor Jerome Powell took a very sombre tone about the response to the COVI-19 crisis, highlighting the need for more fiscal stimulus, whilst denouncing the likelihood of negative interest rates. As NAB’s Gavin Friend says, the markets didn’t entirely concur, whilst in New Zealand there was a swift response when the RBNZ didn’t denounce the prospect of rates going below zero. Today the focus in on job numbers, for Australia and the US.
Wednesday 13th May 2020
There’s been a swift reversal in sentiment overnight, with White House COVID-19 Task Force advisor Anthony Fauci suggesting an early lockdown will increase infection rates in the US. NAB’s Rodrigo Catril talks to Phil Dobbie about the market response, which has seen the US dollar lose ground, but trade uncertainty with China means the Australian dollar hasn’t been a been a beneficiary in that fall. The pound is also feeling unloved, with death rates still high and concerns over how the government has managed the situation. Today, the RBNZ meets, whilst Australian consumer confidence numbers will be of some interest.
Tuesday 12th May 2020
When we’ve had positive risk sentiment in the past we’ve tended to see a stronger Aussie dollar, but that’s not the case today. NAB’s Ray Attrill suggests the steeper US yield curve is strengthening the US dollar, which has weakened the Aussie. The optimism in markets continues to be around the lifting of lockdowns around the world, and hopes that more countries can bounce back as quickly as China. The NAB business survey and US small business survey will show the extent of that optimism. And oil, down today, even as Saudi Arabia announces further cuts. Go figure.
Monday 11th May 2020
The non-farm payrolls data on Friday showed 20.5 million new job losses in one month in the US and yet equities rose. NAB’s Tapas Strickland explains how investors are looking to the recovery, hoping that extra activity by central backs will help economies get back on track, sooner rather than later. He says activity data from China is vital for understanding how quickly the bounce back could happen. US-China trade talks will garner some attention this week, along with the emerging unease between China and Australia. And Brexit talks resume today – just like in the olden days.
Friday 8th May 2020
Future contracts for Fed funds turned negative overnight for the first time. NAB’s Gavin Friend explains what’s happening. Is the Fed expected to move to negative interest rates soon? The Bank of England didn’t budge on their stimulus activity, but could well next time. Meanwhile they’ve outlined various scenarios for the UK economy, one seeing a contraction of 14% this year, the most since 1706. Today we’ll see the scenarios envisaged by the RBA. And equity markets seem buoyed again by the hope that the economy will bounce back, helped by China’s balance of trade figures yesterday. Plus, of course, some sectors are benefiting from the lockdown.
Thursday 7th May 2020
Two questions remain over the COVID-19 crisis: when is it safe to lift lockdowns, and what will the debt-impact be on the economy? Bond yields rose in the US today as focus turned to the sheer size of debt issuance coming from the Fed, whilst a European Commission report highlighted the variance in the impact between the north and the south of Europe. Phil Dobbie talks To NAB’s David de Garis about the speed of the recovery around the world – the gap demonstrated today, perhaps, by Australian trade data, unemployment numbers for the US overnight and forecasts from the Bank of England.
Wednesday 6th May 2020
The Euro and Italian bonds took a hit overnight with German judges challenging the ECB on its QE activity. NAB’s Tapas Strickland says it won’t interrupt the bank’s current bond buying, including the pandemic emergency purchase program, and would not over-rule any decision from the European Court of Justice. It does demonstrate, again, the complexity of the European experiment. Elsewhere, optimism abounds around a return to work, pushing equities up in the US and Europe, and helping a resurgence in oil. This has been helped by the news that Pfizer and BioNTech might have a vaccine ready by September if their trials in the US are successful. Did you notice the word IF in that sentence?
Tuesday 5th May 2020
US equities have managed to clamber out of negative territory this morning but, as Phil Dobbie discusses with NAB’s Rodrigo Catril, airline stocks have taken a heavy hit after Warren Buffet’s decision to bail out at the weekend. Tensions between the US and China have added to the uncertainty, but it’s European stocks showing the biggest falls. This, in part, reflects the importance of a court ruling in Germany tonight, over the ECB’s QE program. It’s expected the court will throw out the challenge, but if it rules in favour, it calls into question the ECB’s massive recovery program. Also today, construction data and jobless numbers for Australia, plus the RBA meets.
Monday 4th May 2020
May got off to a bad start on Friday with falls in equities and the Aussie dollar the worst currency on the day. NAB’s Ray Attrill says it signals the start of a more measured month. April saw the best month for US equities since 1987. That’s not going to happen again, particularly with more uncertainty thrown into the mix as President Trump threatens China with hefty tariffs, given his belief that the virus started in a Wuhan laboratory. So how will the Aussie dollar respond to a week in which the RBA meets and the size of US unemployment is revealed, in Friday’s non-farm payrolls.
Friday 1st May 2020
Month-end has seen a broad sell-off of the US dollar says NAB’s Gavin Friend in today’s podcast. We’ve also seen equities hit, in part because of more bad indicators, incuding further unemployment claims in the US. Growth numbers from Europe also looked bad, with the ECB extending its low cost loans for banks to pass on to businesses, but we’re still waiting for grants – not loans – from the EU. The markets also seem to have reassessed optimism around the US government’s fast tracking of Remdesivir trials, as a possible cure for COVID-19.
Thursday 30th April 2020
The Fed unanimously kept interest rates on hold at near zero levels, whilst warning that the economic risk in the medium term was unprecedented. David de Garis discusses Jay Powell’s remark that the Fed’s powers are limited to monetary policy, a suggestion perhaps that the White House should be doing more on the fiscal front. In Europe the job is even bigger, whilst at home in Australia we could be amongst the first out of a lockdown. Are we already starting to see the relative strengths of post-virus economies, whenever that is?
Wednesday 29th April 2020
The Aussie dollar has been steadily rising, now around 65 US cents. Phil Dobbie asks NAB’s Ray Attrill whether it’ll last, or even push higher. They also discuss the markets continued optimism that the impact of COVID-19 will be short-lived, with equities pushing higher again today. But with entire industries struggling – airlines in particular – have fiscal policies gone far enough. Is there more central banks can do? Will the Fed, for example, announce anything more tomorrow. Meanwhile, the New Zealand dollar has lost ground over speculation that the RBNZ may push interest rates into negative territory.
Tuesday 28th April 2020
Again, it seems markets are ignoring the bad data, of which there’s plenty, and optimistically looking to businesses returning to normal. The continued, unprecedented action by governments and central banks has added to the optimism, with the Bank of Japan pulling out more stops yesterday. But is Australia in the box seat? It’s a question Phil Dobbie puts to NAB’s Tapas Strickland as, again, the Aussie dollar is one of the best performing currencies. Plus, oil, falling by a quarter. Are you getting that déjà vu feeling again?
Monday 27th April 2020
US Treasury Secretary Steve Mnuchin spoke of the US economy re-opening in May and June, with a rapid recovery in the few months that follow. But, NAB’s Rodrigo Catril says equities are facing resistance to any further rises – the bullish sentiment may have subsided for a while. Phil Dobbie asks whether bonds are likely to respond more to the prospect of deflationary pressures, with lower cost oil and continued subdued consumer demand. But will Australia fare better than most and give further strength to the Aussie dollar? And it’s an important week for central banks, with the Bank of Japan, the Fed and the ECB all meeting.
Friday 24th April 2020
In today’s podcast Phil Dobbie asks NAB’s David de Garis, ‘what’s going on?’ US unemployment registrations have added another 4.4 million, European PMIs hit record lows and the EU failed to reach an agreement on how to fund a recovery package for Europe. Despite this, oil prices have rebounded, and the US stock market is trading at levels we were seeing early last year, when the idea of the economy taking such a global hit was unthinkable. There’s still only one question that remains, of course – when will it end?
Thursday 23rd April 2020
Oil prices have calmed down a little and equities have risen again, but not much has changed. Oil inventories in the US continue to rise, Steve Mnuchin has said it’ll take to the end of the US summer to see there economy back in operation and Corona virus stats out of Europe are taking along time to slow. On today’s podcast NAB’s Gavin Friend also talks about the meeting of EU leaders tonight/tomorrow – could this be the opportunity for Corona bonds to be resuscitated? And the ECB looks set to follow in the Fed’s footsteps, buying high yield bonds. Plus, a bunch of PMIs out in the next 24 hours – will they tell us anything we don’t already know?
Wednesday 22nd April 2020
Oil rout spills over and sours risk sentiment across the board. Phil Dobbie talks to NAB’s Rodrigo Catril about the impact on the markets and the economic outlook from this crash in oil prices, with Brent also showing big falls today. There’s also some discussion about the latest corona virus statistics, why the pound and the NZ dollar have fallen so far today, some confidence emerging from Europe, what to expect from Australian retail sales numbers today and how useful are they anyway?
Tuesday 21st April 2020
Yesterday on the Morning Call we raised the prospect of oil prices lurching into negative territory. This morning, that’s exactly what has happened for WTI, with a vengeance. Phil Dobbie talks to NAB’s Ray Attrill about why this happened and the impact on other sectors – which has actually been fairly constrained. There’s also discussion on government stimulus measures – including signs that the furloughed worker approach is working – plus, words from the RBA Governor today and the New Zealand easing of restrictions.
Monday 20th April 2020
Friday’s industrial production numbers from China on Friday gave investors hope that a swift economic recovery is possible globally once lockdown measures are eased. NAB’s Tapas Strickland says New Zealand might announce some steps in that direction today, whilst progress on antibody testing could help a selective escape from home confinement for people in all economies. Meanwhile oil prices hit an 18 year low on Friday. With a significant fall in US rigs Phil Dobbie asks whether President Trump will impose a short-term tariff on imports – something he suggested was possible a fortnight ago.
Friday 17th April 2020
Many countries have announced extensions to their lockdowns over the last 24 hours. President Trump will be talking shortly, but NAB’s David de Garis expects him to backtrack on his earlier talk of lifting restrictions soon, against the wishes of various State governors. His country is accounting for an increasing proportion of COVID-19 casualties and the unemployment claims numbers overnight were a sobering reminder of the economic impact. Markets, though, have been relatively subdued – perhaps because any bad news was expected.
Thursday 16th April 2020
You’d expect the markets to be primed for a lot of negative economic data, says NAB’s Gavin Friend in today’s podcast. Yet the size of the drops in numbers from the US has had a psychological impact on investors – with massive falls in US industrial and manufacturing production and retail sales. Those numbers are for March, so a bigger impact is expected in April. Oil also continues to weigh on markets, with inventories up further in the US, continuing to push prices lower. There’s also discussion on Australians consumer confidence numbers and widening bond spreads across Europe.
Wednesday 15th April 2020
Australia joined the bull run in the share market yesterday, clocking up 20.7 percent growth since March 23rd. Since then US equities have continued to rise on the hope that virus infections are levelling off and lockdowns will be eased soon. In the US an announcement is expected any day. Phil Dobbie talks to NAB’s Tapas Strickland about the positive impact this is having on the strength of the Aussie dollar, even after a disturbing set of numbers in yesterday’s NAB Business Survey. That sentiment was echoed in an IMF report, but trade figures from China yesterday surprised on the upside.
Tuesday 14th April 2020
The US Fed has extended its QE shopping list. Agreeing to buy junk bonds from corporations that are suffering the impacts of the Corona virus. Phil Dobbie asks NAB’s Ray Attrill whether it’ll work, given some government and central bank measures are failing to cut through. The market was impressed initially, but shares fell again today. Oil prices are also falling again, despite the OPEC+ agreement to cut oil production. Clearly, it’s not enough, or there’s concerns that participants won’t follow through. In Europe an agreement has been reached to provide support for governments through the European Stability Mechanism. It’s not gone down well with Italy, who will undoubtedly have to borrow the most and, therefore, pay back the most. Meanwhile, the Aussie dollar continues to be the best performing G20 currency. We look at why that is, and look ahead to today’s NAB Business Survey, US earnings and China’s trade data.
Thursday 9th April 2020
There’s more optimism today that countries are reaching the peak of COVID-19, which is pushing US equities higher. NAB’s Gavin Friend says it’s another day where the curve is driving markets. Yet many countries are still reporting record fatalities, the WTO is suggesting world trade could fall by 32 percent. After 16 hours EU finance ministers failed to reach agreement on how to fund stimulus measures within Europe and the EU chief scientist, Mauro Ferrari, quit saying he was extremely disappointed by the EU’s response to the pandemic. Oil prices are rising in the hope that OPEC+ will reach a solution to oversupply, but will Russia insist the US is part of any cuts and, if so, will President Trump play ball. And Joe Biden looks set to be the Democrats nominee for this year’s Presidential elections.
Wednesday 8th April 2020
It’s staggering that, with so much uncertainty still remaining over the length and depth of the Corona virus, that US equity markets are close to a bull run – a 20% increase since March 23. On today’s Morning Call, NAB’s Ray Attrill talks about how the optimism is being driven by the infection and fatality curves for COVID-19 in Europe and the US. There’s also discussion about the RBA meeting yesterday and the bank’s attitude to tapering it’s new QE program; the EU meeting underway to discuss the potential for Corona Bonds that could help direct funding to countries most in need – should Germany play ball – and tomorrow’s FOMC minutes. But it’s mainly all about the curve.
Tuesday 7th April 2020
Equities have bounced back in a big way today on the hope that countries will start to ease restrictions and get more people back to work, as the death rate from COVID-19 starts to plateau. But NAB’s Rodrigo Catril reminds us that all eyes will be on any resurgence in infections as lockdowns are lifted. As a reminder of the virulence of this disease, the UK the British Prime Minister was moved into hospital on Sunday night and then, on Monday night (UK time) his condition worsened, and he was moved into intensive care. The RBA meeting today is likely to come and go largely unnoticed and most data releases pre-date the onset of country lockdowns.
Monday 6th April 2020
Hope is a rare commodity these days – unlike oil. In parts of Europe the morbidity rate from the Carona virus seems to have slowed (slightly) as lockdowns seem to be having an impact. It’s also having a monstrous impact on the economy as well, of course. NAB’s Tapas Strickland says that, whilst Friday’s non-farm payrolls showed a 700k fall, there are estimates that the April number could see a fall of between 15 and 20 million. Meanwhile, could oil prices call today? They peaked at the end of the week on the hope that President Trump would engineer a solution to the Russia-Saudi standoff, but nothing has happened yet. The US has threatened tariffs to protect its domestic industry if no progress is made.
Friday 3rd April 2020
Oil shot up in price overnight – as much as 47 percent for Brent Crude – after President Trump tweeted that Russia and the Saudis would be cutting as much as 15 million barrels a day. Phil Dobbie asks NAB’s David de Garis who really spoke to whom, and the reaction if this all amounts to nought. Meanwhile, shock jobless numbers from the US, with 10 million new claims in a fortnight. Sadly, there’s little end in sight for this turmoil, with more than one million Carona virus cases now recorded globally, and the US now in third place for fatalities. Tonight’s non-manufacturing ISM numbers from the US will provide further evidence of the downturn, whilst the Caixin Services PMI from China will hopefully provide at least one positive.
Thursday 2nd April 2020
Q2 has started with big falls again on equity markets and lower Treasury yields, whilst oil prices continue to be driven downwards. As NAB’s Gavin Friend discusses, part of the hit reflects the warning from President Trump yesterday that 240,000 deaths could occur in the United States. The only hope in the offing is a slide in new infections in Italy and a rise in the Caixin PMI for China, but we have no indication of the size of their recovery and the streets of Wuhan are still fairly empty. Whilst data releases over the last 24 hours – including US ISM and European PMIs – weren’t rosy, things will only get worse. The road ahead looks more uncertain than ever.
Wednesday 1st April 2020
Equities are heading in opposite directions across the Atlantic this morning – Europe is on the rise, the US is on the slide. Phil Dobbie asks NAB’s Rodrigo Catril about the shift during what’s been a calmer 24 hours on the markets. Stimulus measures continue – with a massive new program for Japan, and New Zealand and the US now looking at infrastructure spending as a way to help with the bounce back. When will that bounce back happen? The PMI numbers from China yesterday were an encouraging sign, but the Caixin numbers today might give a more realistic appraisal of how much of their country is getting back to work.
Tuesday 31st March 2020
As anticipated Scott Morrison has launched a massive job retention program, telling companies to hang on to their workers, because they’ll need them on the other side. It helped equities yesterday, but that doesn’t explain the rise in the US and Europe. NAB’s Ray Attrill says we can expect a bit of rebalancing of portfolios at the month end, which might also account for the fall in Australian government bond yields (the opposite of what you’d expect after a massive government stimulus announcement). There’s further discussion on COVID-19, the price of oil and the expectation that China’s official PMI’s will show a strong recovery in figures out today. Plus, when all this is over, could the EU face another existential crisis?
Monday 30th March 2020
PM Morrison is set to announce a subsidy for workers, similar to the approach taken by the UK Chancellor. NAB’s Rodrigo Catril says it should help companies remain ready for the rebound, once the COVID 19 pandemic has retreated. The question on everyone’s lips is, how long will that take. In their daily press briefing a few hours ago, the word from the UK government was that the lockdown there could last months. This uncertainty helps explain Friday’s big fall in US stocks, even though President Trump finally added his signature to his $2 trillion economic rescue package.
Friday 27th March 2020
US equities rose sharply overnight despite the news that unemployment claims in the US have risen to 3.2 million for the week to March 21st. It seems the markets are responding to the news that the rescue package has passed through Congress. Phil Dobbies talks to NAB’s Gavin Friend about the increasing hope that, with the right stimulus, the impact will be short, albeit very deep. On the stimulus front the UK government will now support self-employed workers, but, as elsewhere, the issue is getting the money out fast enough.
Thursday 26th March 2020
Equities are on the rise in the US and Europe this morning. NAB’s Gavin Friend says on thin trade in the current environment you can expect volatility and it’s difficult to ascribe any reasoning behind some market moves. Certainly, the global picture continues to look dire, with rising COVID19 infection and mortality rates in Europe and the US, and government measures to keep the economy ticking over whilst retaining the spread are feeling the pressure. In Europe talk of Corona bonds are moving slowly, in the UK 5 million self-employed are still without any state assistance and in the US the Senate has yet to sign the $2 trillion stimulus bill – and, even when it does, how quickly can the money get into the hands of those who need it?
Wednesday 25th March 2020
Markets reversed a little overnight, with US and European equities rising, oil also on the climb, but the US dollar losing to the Euro and the pound. NAB’s Rodrigo Catril says its probably being driven by encouraging news about a slowdown in the rate of the virus growth in Italy, plus hopes that the US will arrive at a stimulus agreement sometime today. But Phil Dobbie asks, could it just be because Tuesday seems to be more optimistic than any other day of the week – that’s the way it’s played out over the last few weeks.
Tuesday 24th March 2020
We are in a world of radical uncertainty, according to former Bank of England governor Mervyn King. That’s clear, as the US Fed announces unlimited QE. NAB’s Ray Attrill says we are entering into the realm of modern monetary theory, as banks and governments do what they must to protect their economy and their populations from the impacts of COVID19. More could be done in the US though, with Congress again failing to pass a stimulus deal, just as the World Health Organisation warms that the global infection rate is escalating.
Monday 23rd March 2020
US equities continued to fall at the end of the week, even though Australia and Europe saw a brief reprieve. But NAB’s Tapas Strickland says it’s likely prices will fall further as more countries and regions go into lockdown, including almost a third of the US population. Phil Dobbie asks whether the US’s slow response to an effective fiscal response is hurting markets over there, what’s now driving an upward move in bond prices, and whether more uncertainty will drive even more investors to the safety of US treasuries. A question being asked repeatedly is how long will this go on for, and how deep will be the impact?
Friday 20th March 2020
Oil has shot up in price, with equities rising too and there’s a bit more interest in government bonds. So, what’s changed? Phil Dobbie asks NAB’s David de Garis if it’s down to bargain hunters, a bit more liquidity, hopes that things will get better – either on the virus front or the oil price war – or is it confidence that governments are starting to do the right thing to minimise the impact of the virus and keep people in work. On the latter point, is reverse taxation the answer? Listen in for an explanation.
Thursday 19th March 2020
We’ve seen big falls in equities and oil, as well as widespread selling of government bonds, even gold is being ditched. The only winner is the US dollar. Phil Dobbie asks NAB’s Tapas Strickland when we can expect to see this volatility end – is there a single piece of news that could signal there’s an end in sight? Meanwhile the oil price war continues, with prices down to levels we haven’t seen this century. Expect more stimulus measures from world governments, plus a rate cut from the RBA. We’re also starting to see economic data, such as German IFOs, that relate to dates since the growth of the COVID19 spread.
Wednesday 18th March 2020
Okay, it might not meet the technical definition of helicopter money, but President Trump is hoping to land $1,000 into the bank accounts of most Americans in the next two weeks. He gave the news at a press conference around the time that the UK’s Chancellor Rishi Sunak was promising extended loans to business and a three-month mortgage holiday for some. Phil Dobbie asks NAB’s Ray Attrill which approach will work best, with Ray suggesting that both approaches show governments are taking the threat to their economies seriously and changes are fast moving. Perhaps that’ll stabilise equity markets. Meanwhile the Aussie dollar has fallen below the post GFC low, not helped by the continuing argy-bargy over oil.
Tuesday 17th March 2020
Despite extreme measures by the Fed yesterday, cutting interest rates by a full 1%, and the return of QE, markets were far from impressed, with Monday seeing another massive fall in US and European shares. Phil Dobbie asks NAB’s Gavin Friend what needs to be done to satisfy markets that there’s a plan to see us all through to the light at the end of the tunnel. Data for China yesterday show how hard the virus has hit, signalling how other economies are likely to suffer. Is this the time for even more serious stimulus, given government and central bank officials seem to be repeating the call that they are ready to do “whatever it takes”?
Monday 16th March 2020
The RBNZ has slashed rates this morning to a quarter percent, promising to keep them at that level for a year. It’s the latest emergency move by central banks, with an expectation that the Fed cut rates a full one percent later this week. Phil Dobbie talks to NAB’s Rodrigo Catril about moves by central banks and governments – is enough going on to calm markets about the enormous volatility we saw at the end of last week? They also discuss moves on oil prices and the G7 meeting later today, which could see further announcements on a more globalised approach to tackling the virus impacts.
Friday 13th March 2020
Markets are in free fall as containment measures impact heavily on business, not least President Trump’s ban on visitors from mainland Europe. Central banks are doing what they can – not much in the case of the ECB – but the focus is on the inaction of governments to provide sufficient stimulus. NAB’s Gavin Friend says that the UK, at least, has had a coordinated approach, whilst the US argues politics and the Eurozone largely fails to respond. Even where action is being taken, Phil Dobbie asks whether the injections are enough. As Christine Lagarde commented, spending pledges from Eurozone governments amounted to just €27 bililon – just 0.25 percent of GDP. Does that seem a realistic response to such a massive global crisis?
Thursday 12th March 2020
The Bank of England and the UK government launched a coordinated approach on tackling COVID-19, with an emergency rate cut and fresh fiscal stimulus. Today measures are expected from the Australian government, and tonight the ECB will announce their moves, but when can we expect fiscal measures from European governments? And what about the US? Phil Dobbie talks to NAB’s David de Garis about the latest market news, as the WHO finally declares the virus a pandemic. And oil prices continue to fall, with inventories in the US much higher than expected. Another day of concern, for traders, businesses and the public.
Wednesday 11th March 2020
Markets have bounced back a little today, even though the battle over oil seems to be getting worse. On today’s Morning Call podcast NAB’s Tapas Strickland says the market recovery has been driven by hope of a stimulus package from the White House, together with President Xi’s visit to Wuhan, taken as a sign that the virus is under control and China is getting back to business. Phil Dobbie asks, if governments are slow to respond with appropriate stimulus measures, could we see another collapse in market sentiment? The first test could be the UK budget tonight, but the markets will be also wanting the White House to get measures through Congress.
Tuesday 10th March 2020
There has been a massive fall in oil prices, as bond yields fall further to new lows, whilst the US dollar has lost more ground and equities fall further, even causing trading to cease for a while in New York. The week hasn’t got off to a good start. So, what will cause things to turn around? NAB’s Rodrigo Catril suggests regions that will do well will be those where there’s a coordinated response from governments and the central bank. But, Phil Dobbie asks, if the response isn’t far-reaching enough could we be on the verge of GFC number two?
Monday 9th March 2020
The rush to bonds continued on Friday, hitting new lows for Treasury yields, even as equities in the US saw a last-minute push and actually finished the week up a little. Phil Dobbie asks NAB’s Ray Attrill whether we’ll see a correction early today, particularly as a battle is emerging over oil supplies. Russia is refusing to cut supplies, leading to a likely price war with Saudi Arabia, pushing oil to multi-year lows. Meanwhile, COVID-19 continues to spread, with a large part of Northern Italy now in lock-down. So, will the markets be heartened by contingency plans from governments this week?
Friday 6th March 2020
Markets have switched back to risk-off mood – as if they ever really went away – with big falls in equities, a shift to safer haven currencies and weakening bond yields, as the number of COVID-19 cases nears 100,000. Phil Dobbie talks to NAB’s Gavin Friend about the latest market moves, predictions on the impact of the virus on the global economy, and the latest responses from governments around the world. Normally, the US non-farm payrolls wold be a topic of discussion at this time of the month, but like so much data lately, it has somewhat been overtaken by events.
Thursday 5th March 2020
Equities and the US dollar have bounced back today, even if bond yields remain low. On today’s Morning Call NAB’s David de Garis suggests the markets are being driven by hope that government’s will follow the lead of their central banks and respond to the virus emergency with stimulus packages to protect their economies. Australia and the UK have both said details will be available soon – two currencies showing gains today – whereas Europe is a little more cagy, with the Euro losing ground. Meanwhile, the Bank of Canada has followed the Fed’s lead with a 0.5 percent rate cut and Guy Debelle, at Senate Estimates last night, reaffirmed that the RBA will look at QE after a further quarter percent rate cut. So, how low will the central banks go and how big will government spending be?
Wednesday 4th March 2020
The US Fed dropped interest rates by 50 basis points in an emergency cut today, well ahead of their next scheduled meeting. It followed a phone-hook up with G7 central banks. Does this mean we can safely assume all other banks will follow their lead, starting with the Bank of Canada tonight? Phil Dobbie puts the question to NAB’s Rodrigo Catril. And will the plan work, given that equities continue to fall and the US dollar has given way to safe havens again today? There’s been a massive rush to government bonds. They also discuss today’s Aussie GDP numbers, which will tell us how the economy was doing before the virus came along.
Tuesday 3rd March 2020
Central bankers and finance ministers are hooking-up on a conference call later today to discuss a coordinated response to the impact of the Corona virus. That’s seen a fall in bond yields and a big rise in equities in the US and Europe. The RBA is likely to announce a rate cut today, ahead of that call. NAB’s Ray Attrill says a 25 basis point cut is likely, with another one next month, at which point they will hit their proposed floor of 0.25 percent. Then what? Plus, Super Tuesday tonight in the US. Will we be heading for a Trump versus Sanders election at the end of the year?
Monday 2nd March 2020
Friday marked a bad end to a tumultuous week for the markets, with equities, commodities and bond yields all hit hard. The PMI numbers from China provided evidence of how hard COVID-19 is hitting production. Phil Dobbie asks NAB’s Tapas Strickland whether these numbers will add to the downward spiral at the start of this week. On Friday the US Federal Reserve issued a statement saying the central bank will use its tools it has available to “act as appropriate to support the economy.” So, does that mean we can expect a significant rate cut at their next meeting – and will they be beaten to it by the RBA tomorrow and the Bank of Canada later in the week?
Friday 28th February 2020
Thursday proved to be a very volatile day towards the end of a very volatile week, that’s seem stock markets firmly in correction territory. Phil Dobbie talks to NAB’s David de Garis about a session that has seen sharp falls in US shares, followed by an attempted recovery, only to start slipping again. Governments and central bankers are talking about a response, but it seems unlikely a monetary response will do anything to calm markets. Economic data is coming thick and fast at the moment but, as it largely predates the virus, markets are largely ignoring it. Just about the only non-virus reaction seems to be a fall in the pound as Boris Johnson announced he would walk away from Brexit talks in June if he didn’t get his Canada style deal, but since then the pound has recovered as traders started to remember that they’d heard all this talk before.
Thursday 27th February 2020
The markets attempted a bit of a rebound earlier, but it hasn’t lasted long and we kick off the day with the Aussie dollar closer to an all-time low, US treasury yields also hitting new lows and equity markets continuing to slide. Phil Dobbie asks NAB’s Gavin Friend whether some of the rebound is bargain-hunters buying the dip, or whether there are positive signs that could indicate we are nearing the bottom of a v-shaped recovery. Even before the virus the Aussie economy was struggling, and yesterday’s construction numbers were testament to that. But could a Chinese stimulus-fuelled recovery be the good news we’ve been waiting for?
Wednesday 26th February 2020
Markets continue to respond to news reports highlighting the (admittedly slow) spread of COVID-19. It’s raised demand for US treasuries, with yields falling further today along with expectations that the Fed will have to react. But how quickly? Phil Dobbie asks NAB’s Gavin Friend in London. They also discuss the widening gap between the EU and UK on Brexit negotiations, as the EU lays out its red lines and the UK to show their hand this week also.
Tuesday 25th February 2020
The extent of the spread of the Corona Virus in South Korea, into Europe and numerous other countries, has driven a major fallout in markets overnight. Equities have fallen further, oil has dropped sharply and bond yields have plunged. NAB’s Ray Attrill talks through the market reaction and where we can expect things to go to from here. Phil Dobbie asks how much attention is being paid to economic data, that would normally be market moving, but is perhaps being overtaken by events.
Monday 24th February 2020
There was a strong risk-off mood on Friday as COVID-19 infections spread further and the impact it is having on the global economy, with many small businesses in China on the brink of collapse. As NAB’s Rodrigo Catril explains, markets were particularly concerned by the PMI data on Friday that suggested the US service sector has started to contract, although he urges caution, highlighting that the number is quite a way from the preferred ISM number last month. US government bond yields have fallen, to an all-time low for 30-year yields, as investors switch from equities. The key data event today is the release of the German IFO survey tonight, which will give a clear indication of the impact of the virus on Europe’s leading export economy.
Friday 21st February 2020
Asian currencies have born the brunt of rising concerns over the spread of COVID-19 beyond the Chinese mainland. NAB’s Rodrigo Catril describes how the Japanese Yen has been one of the hardest hit, whilst the risk-off sentiment added t other fall in the Aussie dollar after yesterday’s rising unemployment rate. Can we now expect a rate cut from the RBA sooner rather than later? The US meanwhile sales along nicely, with a strong read from the Philadelphia Fed’s business outlook. Today we get a swathe of PMI’s, a slew of Fed speakers and the Democratic Caucus at the weekend.
Thursday 20th February 2020
The markets have spun around again, with renewed optimism and not much lingering concern from Apple’s revenue warning yesterday. In fact, Apple shares rebounded today. NAB’s David de Garis says the rise is more to do with the continued strength in the US economy, versus the weakness in Europe. Phil Dobbie asks him whether it’s possible to support a simultaneous rise in equities and the US dollar for long? They also discuss today’s employment numbers for Australia and tonight’s Democratic debate from Nevada.
Wednesday 19th February 2020
The markets have returned to adopting a more cautious approach to the impact of COVID-19, after Apple said it didn’t expect to meet its forward guidance. NAB’s Gavin Friend talks about the market impact, which has seen further strength in the US dollar and a fall in global equities. A survey of analysts in the Eurozone showed that hope is diminishing that the slide in the economy is bottoming out, although it might spark finance ministers to move faster on stimulus measures. Locally, the RBA minutes yesterday suggested they are more accommodating to an easing policy than many had expected. Japan’s trade balance numbers today could help determine whether they will be the first major economy this year to hit a recession.
Tuesday 18th February 2020
Nobody was expecting anything other than a bad GDP read from Japan but, as NAB’s Tapas Strickland explains, it was worse than bad. Yet there’s renewed confidence in China, with government stimulus measures helped to boost the CSI300 almost to pre-virus levels. Does that mean the concerns for the Australian economy are lessened? Philip Lowe downplayed the impact a little last week, will the minutes of the last RBA meeting reflect that sentiment, and does that mean a rate cut in the short term is looking less likely? And what about reports that the US will impose further restrictions on supplying semiconductors to Huawei? Plus, the end of the road for Holden. So sad.
Monday 17th February 2020
Markets are cautiously hoping the worst of the Corona Virus is over, with equities creeping up slowly in the US and commodity currencies gaining some ground last week. But, as NAB’s Ray Attrill tells Phil Dobbie, there’s still a lot of ground to recover and the impact on demand from China could be felt for some time. A key factor to influence the Australian economy this week will be whether bans on visitors from China are lifted this week. There’s also discussion on the US retail sales numbers from Friday, Japan's GDP read today, and the White House’s tariff increase on Airbus.
Friday 14th February 2020
The markets slipped momentarily into risk-off as the number of Corona virus infections jumped in volume, but concern slipped back a little as it became clear that the way cases were being measured had changed. Phil Dobbie discusses the shift in mood with NAB’s David de Garis in London. They also talk about the resignation of the UK’s Chancellor, Sajid Javid. The pound has gained somewhat, perhaps on the hope that more control from Boris Johnson will clear the way for some of his high-spending election promises. The Euro fell further, ahead of GDP numbers today and could fall below technical levels in the next 24 hours.
Thursday 13th February 2020
The markets are continuing to discount the impact of the Coronavirus as the infection rate and mortality rate eases in China. Bond prices have fallen, and equities have hit new highs. Phil Dobbie discusses the riser in oil prices with NAB’s Gavin Friend, even as OPEC makes a significant downward revision to its Q1 forecasts. They also discuss the hawkish tone set by the RBNZ yesterday and it’s impact on the NZ dollar, which has held much of its gain in the overnight session. Europe, meanwhile, has little to offer in terms of positive sentiment – even though shares are up there, industrial production numbers showed a significant fall in December and the Euro is paying the price today.
Wednesday 12th February 2020
President Trump tweeted as Jerome Powell launched into his testimony at Capitol Hill, saying that shares were falling the more he spoke. NAB’s Ray Attrill says this indicates where the President’s focus is ahead of this year’s election, so perhaps we can discount him becoming too aggressive against Europe on trade. The European economy continues to look lacklustre, which will be evidenced by industrial production numbers tonight. More government spending was the repeated call from the ECB’s Christine Lagarde today, whilst Boris Johnson is doing just that, committing to continue with the overspent, heavily delayed HS2 rail project, just as UK GDP numbers show a quarter without growth. Meanwhile, remember the Corona Virus. It seems to have been momentarily discounted by the markets, but for how long? The Aussie dollar was boosted by yesterday’s housing numbers and the RBNZ offers its monetary policy statement which, virus aside, could be fairly hawkish – we’ll see, around lunchtime.
Tuesday 11th February 2020
As China’s factories start to reopen, and the PBoC do everything they can to maintain economic stability in the country, there seems to be hope of an early recovery to the impacts of the Coronavirus. Phil Dobbie talks to NAB’s Rodrigo Catril about what that recovery would look like, should it come soon. Meanwhile, Australia faces its own issues – to what extent will trade with China, plus the recent bushfires, impact business sentiment and conditions in the NAB Business Survey today, whilst the UK publishes Q4 GDP numbers today. And it’s a day for central bankers to face parliament – Jerome Powell and Mark Carney are both answering questions from politicians. And, speaking of politics, Angela Merkel’s heir apparent has quit, creating more uncertainty in Europe and hurting the Euro a little today.
Monday 10th February 2020
There were lots of positive take-outs from the US non-farm payrolls on Friday night. In today’s podcast Phil Dobbie suggests to NAB’s Tapas Strickland that ordinarily these numbers would be a cause for optimism in the markets, yet concerns of the impact of the corona virus are having the opposite impact. That saw the Aussie dollar hit s post-GFC low on Friday, So, with little in the way of new data today, could the virus cause more market contagion? There’s also discussion about Philip Lowe’s parliamentary testimony on Friday, and what we can expect from the Fed’s Jerome Powell who faces politicians for two days this week.
Friday 7th February 2020
China will halve the tariffs on a swathe of US imports next week, driving optimism in equities in the US and Asia. NAB’s Tapas Strickland says this, together with earnings and positive economic data is helping to drive equities still further, despite continued concerns over the Coronavirus. The pound, meanwhile, is struggling as the EU pushes hard on the need for regulatory control of the City. Locally, retail sales have been well received, pushing back the expectation for when the RBA will cut rates. Today the RBA publishes its statement on monetary policy, including revised forecasts, just as Philip Lowe appears in front of the parliamentary committee. And tonight, the non-farm payrolls data is expected to show further signs of US strength.
Thursday 6th February 2020
Markets are on the rise again this morning, based on positive economic data from the US and, to an extent, for Europe, whilst hoping that the Coronavirus won’t deliver any worse news. As Phil Dobbie discusses with NAB’s Gavin Friend, this combination has delivered a further rise in US equities and strengthened the US dollar, with bond yields also rising. The US non-manufacturing ISM read for January was up more than expected, actually at its best level since August. Gavin says there’s optimism from a number of central banks lately, which was reflected in Philip Lowe’s address to the Press Club yesterday. Today, all eyes will be on Australian retail sales numbers.
Wednesday 5th February 2020
On Monday NAB’s Rodrigo Catril said the markets are blowing hot and cold on the Coronavirus – since then the markets have dived, then climbed back again. Today has been largely positive across currencies, equities and commodities, with bond yields also driven up. Phil Dobbie asks how much of this positivity is responsible for the Aussie dollar picking up from a near post-GFC low yesterday, and how much is from the optimistic (perhaps too optimistic) outlook from the RBA? They also discuss NZ employment numbers today and US non-manufacturing ISM numbers out tonight.
Tuesday 4th February 2020
US equities bounced back today – perhaps because there wasn’t a lot of new news on the Coronavirus, but also because US ISM numbers exceeding expectations. As Phil Dobbie discusses with NAB’s David de Garis, perhaps this suggests that, without the virus, the global economy would be returning to a good place. Even revisions to Markit PMIs for Europe provided some room for home. All the more reason, then, for the RBA to sit tight today. The only real volatility today came from the pound, hit surprisingly hard considering we knew there would be some argy-bargy with Barnier.
Monday 3rd February 2020
The Australian dollar – and emerging markets more broadly – were hit by further concerns over the spread of the Coronavirus. Phil Dobbie asks NAB’s Rodrigo Catril whether this is a market overreaction, almost to the point of ignoring key economic data? All eyes will continue to scan headlines for signs that the virus is being contained, or spreading further, and there will be attention on China today where the equity markets reopen after the Lunar New Year holiday. Plus, will the double whammy of the virus and bushfires impact the RBA’s decision tomorrow?
Friday 31st January 2020
The Corona virus continues to cause concerns, hitting all asset classes today, including US and European equities overnight. NAB’s Gavin Friend suggests the news is mixed, with the virus still well contained, but there will be economic fallout in the region and the Aussie dollar is one of the casualties. It was 50:50 as to whether the Bank of England would cut rates or not. In the end, they decided to keep rates on hold, reflecting the optimism shared by other central banks of late. And the US economy continues to grow, but it slowed in 2019 and was a way off the 3 percent target that the White House had promised.
Thursday 30th January 2020
The least surprising news today is the decision by the FOMC to keep rates on hold in the US. As Phil Dobbie discusses with NAB’s Tapas Strickland the Fed has determined that their policy is appropriate for now. Tonight’s GDP numbers from the US will help determine whether they are on the right path. It might be a different story for the Bank of England tonight, and question marks remain over the RBA next week. Will yesterday’s slight pickup in inflation exert any influence? Meanwhile news around the Corona virus continues to darken, raising the question, which asset classes have factored in the damage this worsening crisis could do.
Wednesday 29th January 2020
US stocks have rebounded after a day when they were hit hard over concerns on the spread of the Corona virus. NAB’s Ray Attrill suggests to Phil Dobbie on today’s podcast that it’s the lack of new news that has force the rethink, indicating that further volatility is possible. Meanwhile, we await the latest CPI figures for Australia today. Yesterday’s NAB business Survey highlighted continuing weakness in the economy, so what does that mean for the RBA decision next week. It’s unlikely the FOMC will change rates in the US tomorrow morning, but we’ll be here first thing to cover anything that comes out of the press conference.
Tuesday 28th January 2020
The Australian dollar has fallen more than one percent today as concern continues over the spread of the Corona virus. As Phil Dobbie discusses with NAB’s David de Garis, the Aussie economy will be one casualty if the virus spreads and China’s economic growth is hit hard, just as it was with the SARs outbreak in 2003. They also discuss today’s NAB Business Survey, more evidence of a ‘Boris Bounce’ in the UK and disappointing ne whom sales from the US, and a weaker than anticipated IFO from Germany.
Friday 24th January 2020
Concerns over the spread of the Corona virus have heightened, with two further Chinese cities now in lockdown. NAB’s Gavin Friend talks to Phil Dobbie about the market reaction, with classic risk-off sentiment evident right now. The Aussie dollar has been saved from a bigger fall by the positive jobs numbers yesterday, which will perhaps push back the timing of a rate cut from the RBA. Could it be a similar story in the UK? Expectations of an imminent cut have diminished; will today’s PMIs support the more optimistic view of the UK economy? There are PMIs for Australia and Europe today, so it’s a big day for numbers. Meanwhile the ECB seems to be on a holding pattern, pending their strategic review.
Thursday 23rd January 2020
There continues to be concerns about the spread of the Corona virus. As Phil Dobbie discusses with NAB’s David de Garis, US equity markets have regained composure but will news of a lockdown of the Wuhan district fan further volatility? The UK seems to be enjoying a bounce after the recent election, with positive business sentiment pushing the pound higher, whilst a very dovish statement from the Bank of Canada has sent the Canadian dollar lower. Locally, the focus will be Australian employment numbers today, although the read is likely to be influenced somewhat by the bushfires. And President Trump has indicated a deal with the EU is his next target, by November, threatening auto tariffs if things don’t moved forward satisfactorily.
Wednesday 22nd January 2020
Whilst President Trump was self-aggrandising at Davos, US equities stalled and the US dollar lost a little ground to the Yen. NAB’s Rodrigo Catril suggests that all markets are taking a breather at the start of the impeachment proceedings, along with concerns around the corona virus. The UK provided one bright spot, with employment numbers far better than expected and the ZEW survey showing optimism in Germany at a four a half year high. Consumer confidence numbers in Australia will be of particular interest today, along with earnings results from the US.
Tuesday 21st January 2020
The US was on holiday Monday so it’s been a quiet session all round. As Phil Dobbie discusses with NAB’s Tapas Strickland the most volatility was in oil prices, with supply concerns from Libra and Iraq. The IMF released revised economic forecasts, cutting their expectation for growth in 2020, but it’s still an improvement on 2019, thank goodness. Given that little is expected to change with the Bank of Japan, the main focus tonight will be what President Trump has to say at the opening of the World Economic Forum in Davos. We know he always likes to surprise when he’s on foreign soil.
Monday 20th January 2020
The rally in US equities continued at the end of the week, with the optimism spreading to Europe. The ASX200 also hit a new record on Friday. Phil Dobbie talks to NAB’s Ray Attrill about the economic data that is supporting the optimistic tone. The UK, though, is not joining the party. Whilst shares rose, that was largely because the pound fell, after retail sales fell well below expectations. Perhaps it was too early for a Boris bounce? Today, the markets will be quiet with a US holiday, so we look ahead to the key data points this week.
Friday 17th January 2020
US equities rose higher still today, on the back of the latest US retail numbers. NAB’s Gavin Friend says trading is still cautious – it’s not a ‘fear of missing out’ scenario. The data is supporting the cautious optimism, with a particularly strong result in the Philadelphia Fed survey knocking well above market expectation. In Australia yesterday the value of home loans surprised on the upside, whilst today the manufacturing PMIs for New Zealand will be of interest and UK retail sales will be watched by the Bank of England, who have been making increasing sounds of moving to a rate-cut in the short term. There’s also discussion about surprise rate cuts in South Africa and Turkey.
Thursday 16th January 2020
Even though we don’t know the full details of the deal signed between the US and China today, equities have used it to post further gains and new record highs. NAB’s Alex Stanley questions whether the impact will be too significant, with all the difficult issues likely to be pushed back to a phase two deal. They also discuss UK’s weaker than anticipated inflation numbers, which hit UK gilt yields and today’s Australia housing credit numbers and US retail sales.
Wednesday 15th January 2019
Sometime today or tonight the US and China will sign the phase one trade deal. Shortly after we’ll see the text, outlining exactly what has been agreed. Phil Dobbie asks NAB’s Tapas Strickland what we already know and how sensitive will the markets be to the detail of the deal. They also discuss yesterday’s Chinese trade numbers, the rise and rise of the US stock market, tonight’s UK CPI and the latest addition to the US list of currency manipulators.