NAB Morning Call

Friday 24th February 2023

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US GDP has been revised down slightly for Q4. NAB’s Ken Crompton says its been driven by lower than expected consumption numbers. The Fed will also be concerned by the quarterly GDP deflator, which has shown prices rising more than anticipated. Eyes will be on the January numbers for prices and consumption out tonight. To add to the US woes, jobless claims fell last week adding to a string of data suggesting the tightness in the labour market is taking a long time to ease. We’re a week away from non-farm payrolls. Remember the impact last time?

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Thursday 23rd February 2023

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There’s not a lot that’s new on the FOMC minutes out this morning, according to NAB’s David de Garis. Several members had talked of higher rate rises, but there wasn’t much too much for investors to change the expected path of hikes this year. But it might be a different story for the RBA with Australian wage inflation lower than expected yesterday. Meanwhile, wages are rising in Japan, higher than the rate of inflation adding extra pressure on the BoJ. And the UK government might increase the rate of public sector pay to try and break the strike deadlock the country is facing. It’s been a wage where wages have been front and centre. 

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Wednesday 22nd February 2023

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The latest PMI data has shown more resilience in the global economy, with service sector reads significantly exceeding expectations in Europe, the UK and the United States. NAB’s Gavin Friend talks about how this will impact central bank decisions, with bond yields rising on these latest findings. Also, the latest inflation numbers from Canada, fighting talk from Putin and Biden, and could the UK be on the brink of a meaningful Northern Ireland border solution? Ahead today Australian wages data and the RBNZ rate decision. 

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Tuesday 21st February 2023

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With the US equity and bond markets closed for President’s Day, trade was thin today and movement was slight. But, with the President choosing to spend his day in Ukraine and China reportedly ready to supply arms to Russia, could a bounce back in world trade be an optimistic outlook? NAB’s Taylor Nugent talks trough the days new releases, including PMIs for Europe, the UK and US, as well as inflation numbers for Canada. Could we see a strong reaction if the Canada numbers are an upside surprise. Plus, will today’s minutes shed any new light on the thinking at the RBA, or did Philip Lowe say it all last week?

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Monday 20th February 2023

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Expect a quiet trading day today with the US enjoying Presidents Day and not much in the way of data releases. Still, as NAB’s Tapas Strickland points out, there’s plenty to look out for later in the week, including the RBNZ’s expected 50 bp rate hike, January’s global PMI numbers, Australian wages and the Fed’s preferred inflation measure. In the meantime, the question is, have yields peaked? Friday saw 10-year Treasury yields pull back a little, although 2 years are clinging to 4.6% and six month treasury notes sat above 5% for most of the day.

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Friday 17th February 2023

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US Treasury yields pushed higher overnight as producer prices came in with a surprise month on month rise, whilst weekly jobs data shows only slight moves in the easing of the labour market. NAB’s Ken Crompton says there’s nothing to distract from the hawkish path being taken by the Fed, that was reinforced by Loretta Mester overnight, who expects rates to exceed 5 percent and stay there for some time. Meanwhile, in Australia yesterday’s employment numbers might be a headache for Philip Lowe when he faces questions in front of House of Reps economics committee. He is bound to be asked why, given such a fall in jobs, the RBA wouldn’t ease of on its rate path. But, as we discuss today, yesterday’s numbers might be a little misleading.

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Thursday 16th February 2023

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US retail numbers for January were strong yesterday, giving no reason for markets to assume the Fed will move from its expected path of hikes following non-farm payrolls earlier in the month. At the same time industrial production was down, but the Empire State manufacturing number was better than expected. NAB’s Gavin Friend says a lot of these variations are weather related, alongside other factors, such as retail inventories. Hence, markets are struggling to get a coherent picture on the real strength of the economy. Australia meanwhile has seen discretionary spending holding up and an expectation that employment numbers will pick up again in figures out today. So, the message seems to be, resilient economies with inflation perhaps taking a bit longer than expected to slow down.

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Wednesday 15th February 2023

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US inflation was shown to be moving down slower than many had hoped, sending bond yields higher. NAB’s Taylor Nugent says it cements in expectations for two more 25 basis point rate hikes in March and May. NAB has also announced a revised rates call for the RBA, which is discussed on today’s podcast. Plus, employment refusing to move down in the UK or across the OECD. And US retail numbers today are expected to show growth, despite the squeeze from the Fed.

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Tuesday 14th Februarey 2023

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US CPI is released later today and NAB’s Rodrigo Catril says we can expect a market reaction whichever way it comes out. Certainly, markets are divided, with bond yields rising today suggesting rising expectations for central bank hikes, whereas equities are also up suggesting an easier path. That expectation of a path with less rate hikes comes from a New York Fed Inflation Survey which showed that household income is expected to fall this year, which it is assumed will ease price pressures. But we’ve also seen evidence of US retail spending picking up post-Christmas. Clearly opinion is divided on today’s number so, as Rodrigo puts it, ‘expect fireworks’.

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Monday 13th February 2023

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Bond yields continue to rise as expectations heighten just about everywhere that central banks will push faster and further on rates. As NAB’s Skye Masters discusses today on the podcast, this hawkish sentiment wasn’t helped by employment numbers for Canada on Friday which, like the US the week before, came out much higher than expected. Central banks continue to be focused on the data, but there’s not much of that today. Instead markets will be jockeying for position ahead of US CPI tomorrow, the one number that really counts.

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