NAB Morning Call

Friday 28th May 2021Three 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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 27th May 2021The 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? Hosted on Acast. See acast.com/privacy for more information.

Wednesday 26th May 2021Okay, 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? Hosted on Acast. See acast.com/privacy for more information.

Tuesday 25th May 2021Equities 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 24th May 2021There 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? Hosted on Acast. See acast.com/privacy for more information.

Friday 21st May 2021Equities 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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 20th May 2021The 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 19th May 2021It’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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 18th May 2021US 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 17th May 2021Share 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. Hosted on Acast. See acast.com/privacy for more information.