NAB Morning Call

Monday 30th January 2023

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It's a busy week ahead for central banks, with the Fed, BoE and ECB all meeting to push their rates higher. To add to the potential volatility there’s a swag of high profile corporate earnings results in the US too. But tech stocks have been pushing higher and higher so far this month, presumably o the assumption that central banks will ease off on rates soon as economic indicators start to soften. But NAB’s Rodrigo Catril says age inflation numbers I the US will be of particular importance this week, as service inflation is taking more time to slow than goods inflation.

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Friday 27th January 2023

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A strong GDP read from the US, together with with falling prices, provided grounds for optimism in markets overnight, particularly equities that were buoyed also by a strong earnings result from Tesla. But NAB’s David de Garis says it’s not all good news. Investment in equipment was down and durable goods orders, if you take out a splurge in aircraft orders, fell in the month. And the weekly job numbers suggest the labour market remains as tight as ever. Meanwhile, what must the RBA be thinking after Wednesday’s Australian inflation number, coming in much higher than expected? Perhaps today’s producer prices will show that things are moving faster in the right direction.

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Wednesday 25th January 2023

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US shares have been shaky overnight, in the runup to earnings results and on the back of mixed economic data. JB Were’s Sally Auld discusses the latest PMI data, which again shows a recession risk for the US, more hope for Europe and a dismal outlook for the UK. The NAB Business Syurvey yesterday showed that business pessimism is not reflected by a fall in business conditions, including profitability. But there was also a sign that inflation might have peaked – something that could be confirmed in Australia’s CPI numbers out today.

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Tuesday 24th January 2023

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There was lighter trade overnight, with little in the way of news and China on holiday. The Aussie dollar was the standout performer in currencies, with NAB’s David de Garis suggesting this reflects the optimistic tone, reflected in US equities, with a substantial rise in the NASDAQ. Today the focus is on PMIs, which will give a clear indication of the expected recovery in Europe versus the US. In Australia the NAB Business Survey this morning will be watched to see whether the falling business confidence last time has translated into a drop in business conditions.

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Monday 23rd January 2023

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As we enter the Year of the Rabbit the big question is, how big will the bounce back be in China? Could it push commodity prices higher and delay the slowdown in global inflation, as suggested by EBC’S Christine Lagarde on Friday? As NAB’s Ray Attrill points out, this is a big week for inflation data, including the US PCE deflator and CPI numbers for Australia and New Zealand. Last week’s soft employment numbers have already lefty many suggesting the RBA will be more dovish in its approach, with a significant drop in bond yields. So, what impact will the latest inflation numbers have this week?

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Friday January 20th 2023

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There was a strong response to the lower-than-expected employment numbers yesterday, with 10 year bond yields falling more than 20 basis points. NAB’s Ken Crompton says this was an overreaction, because unemployment remains low and it won’t allay any of the RBA’s concerns about the tightness of the labour market, or encourage them to change their path on rate rises. No change was also the message from the ECB, reinforced by the minutes of the last meeting, and a speech at Davos by Christine Lagarde. There’s been little market reaction to the US debt ceiling. We’ve been here before and know that Republicans will use it as leverage against the BIden government, but all will be sorted by June. Today Japan’s CPI will reinforce the need for the BoJ to change policy direction at some point.

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Thursday 19th January 2022

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Bond yields pushed sharply lower overnight, despite weaker data that some could argue would support a pause in Fed rate hikes. But, as NAB’s Gavin Friend points out, central bank speakers are arguing that there will be no deviation from earlier guidance. That’s the view in the US, as well as in Europe, despite the Bloomberg report earlier in the week suggesting otherwise. In the UK inflation fell, but not by much and wage pressures continue. In Japan the BoJ is continuing to pursue its yield curve control policy and markets will lump it till they see the flavour of Kuroda’s replacement. Locally, Australian employment data is out today, with the focus on any glimmer of reduction in the tightness of the labour market.

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Wednesday 18th January 2023

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European equities rose overnight with the ZEW survey of analysts suggesting a more positive outlook and reports that the ECB might slow down its path of hikes. That’s in contrast to the US where the NY Empire State Manufacturing index came in much lower than expected, reported company earnings were mixed and equities were struggling to make gains. NAB’s Skye Masters says whatever the news lately US 10 year treasury yields are sticking close to 3.5% and doesn’t seem to be breaking lower, so data that will influence the Fed’s decision-making is crucial right now. Meanwhile, the BoJ is the focus today – and nobody is quite sure what they’ll do.

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Tuersday 17th January 2022

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The Bank of Japan meets tomorrow with a question mark over the action they’ll take, if any. NAB’s Ray Attrill says there will be some changes as the bank faces the potential risk of increasing inflation. The Bank of England will be eyeing up UK employment data today, with Andrew Bailey already warning that the tight labour market and continued strike action could delay the reduction in prices. But couldn’t higher rates from the bank add to public sector wage demands? A slew of activity data from China today, and a multi-year high for the Aussie today – it touched 70 us cents for the ifrst time since August 2021.

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Monday 16th January 2023

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It’s a quiet start to the week, but markets in the US finished last week assuming that inflation has peaked and the Fed will go no further than a couple of 25 basis point hikes. The increasing expectation is that the US will weather the inflation curse without going into recession. That seems less likely for the UK, even with a surprise (but marginal) increase in monthly GDP for November. Today on the podcast NAB’s Taylor Nugent looks at the week ahead, including the possibility of a widening of the tolerance band in the Bank of Japan’s yield control curve, and Australian employment data later in the week – the ongoing tightness of the labour market will be very influential in future RBA rate decisions.

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