NAB Morning Call

Thursday 12th May 2022US 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 11th May 2022For 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 10th May 2022Markets 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 9th May 2022Equity 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. Hosted on Acast. See acast.com/privacy for more information.

Friday 6th May 2022Yesterday, 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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 5th May 2022The 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 4th May 2022On 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 3rd May 2022US 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 2nd May 2022Last 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. Hosted on Acast. See acast.com/privacy for more information.

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