NAB Morning Call

Wednesday 17th February 2021Equities 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 16th February 2021America 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. Hosted on Acast. See acast.com/privacy for more information.

Monday 15th February 2021There’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. Hosted on Acast. See acast.com/privacy for more information.

Friday 12th February 2021It’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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 11th February 2021Markets 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. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 10th February 2021The 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. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 9th February 2021Janet 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! Hosted on Acast. See acast.com/privacy for more information.

Monday 8th February 2021Friday’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. Hosted on Acast. See acast.com/privacy for more information.

Friday 5th February 2021Today’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. Hosted on Acast. See acast.com/privacy for more information.

Thursday 4th February 2021New 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. Hosted on Acast. See acast.com/privacy for more information.