NAB Morning Call

Thursday 4th August 2022Nancy 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 3rd August 2022There 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? Hosted on Acast. See acast.com/privacy for more information.

Tuesday 2nd August 2022There 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 1st August 2022For 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? Hosted on Acast. See acast.com/privacy for more information.

Friday 29th July 2022US 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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 28th July 2022The 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 27th July 2022There 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 26th July 2022From 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 25th July 2022PMI 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. Hosted on Acast. See acast.com/privacy for more information.

Friday 22nd July 2022As 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. Hosted on Acast. See acast.com/privacy for more information.