NAB Morning Call

Wednesday 8th June 2022It 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 7th June 2022There’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. Hosted on Acast. See acast.com/privacy for more information.

Monday 6th June 2022It 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. Hosted on Acast. See acast.com/privacy for more information.

Friday 3rdJune 2022Today 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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 2nd June 2022If 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 1st June 2022The 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 31st May 2022There 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 30th May 2022Markets 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. Hosted on Acast. See acast.com/privacy for more information.

Friday 27th May 2022US 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? Hosted on Acast. See acast.com/privacy for more information.

Thursday 26th May 2022The 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. Hosted on Acast. See acast.com/privacy for more information.