NAB Morning Call

Friday 13th January 2023

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As expected, US inflation numbers have lowered, but Fed speakers have been quick to point out that there’s still more work to be done, with further hikes, even if 50 or 75 basis point rises are not on the cards. NAB’s Tapas Strickland talks through the market response and expectations for where inflation and interest rates go from here. Meanwhile, a fall in China’s producer prices bodes well for helping inflation fall, whilst Australia has seen a big drop in job ads, likely to ease the influence of wage pressure on inflation. Markets will now look to the US earning season to answer the next big question, ‘what about growth?’

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Thursday 12th January 2023

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US inflation numbers are out today and the expectation is that they will fall. The markets, it seems, have already decided that inflation has peaked. Today on the podcast we ask, are we over the worst of it? In Australia hard times haven’t really started. NAB’s David de Garis talks about how we will weather the storm better than most, with the retail sector showing massive resilience (evidenced by yesterday’s data), tightness in the labour market likely to be moderated by increased immigration and the re-opening of China ready to ease supply chains. Nonetheless, NAB expects further rate rises from the RBA at the next two meetings.

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Wednesday 11th January 2022

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The year has started on a fairly optimistic tone, with US bond yields falling on expectations that the Fed might have to do less, leading to a fall in the US dollar. As NAB’s Ray Attrill explains, the major beneficiary of all this has been the Aussie dollar, up 1.3% so far this year. Hopes of more growth from China, with the zero COVID policy abandoned and the population moving quickly to herd immunity. But global optimism should be tempered with a reality check – COVID is still a concern and the war rages on in Ukraine. The ultimate reality check will be US CPI later this week? Has it peaked and, if so, how much has it fallen by? 

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Wednesday 21st December 2022

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The Bank of Japan has broadened the tolerance for its yield control curve target. NAB’s Ray Attrill says it surprised markets because Governor Kuroda had previously stated they wouldn’t be doing that. So, why the change and why has it had such an impact on global bond and currency markets? The Australian dollar fell against a US dollar which was itself falling, in part because of the RBA minutes yesterday. We look at what was discussed. And in New Zealand, business confidence hit an all-time low (well since the survey started in the eighties). Also, in this last edition of 2022 Ray explains why this was a bad year for risk parity strategies.

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Tuesday 20th December 2022

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There are only five sleeps to Christmas, but central banks are still cramming in what they can to position markets for the start of 2023. The ECB is ramping up its hawkish messaging, whilst the Fed continues to deny that they will start reversing rates next year, even as the housing market struggles. The RBA, meanwhile, is giving very little away, which is why there is more than the usual interest in the minutes of the last meeting out today. Plus, the Bank of Japan meets with a likely review of their monetary approach and China is promising targeted monetary policy next year.  NAB’s Rodrigo Catril talks us through all of that in the penultimate Morning Call of the year.

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Monday 19th December 2022

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There wasn’t much risk appetite at the end of the week, after a hawkish Fed and the same from the ECB. It still seems markets doubt the Fed will go all the way to 5.1% and are looking for reasons to assume they will relent earlier. NAB’s Skye Masters says the inversion in the Treasury yield curve will remain for some time, but wonders how much of this is being drive by the after effects of QE. Meanwhile China is planning a major comeback next year, with one official at their Central Economic Work Conference last week describing a J-curve recovery.

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Friday 16th December 2022

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As the UK and Europe weather a cold snap, central banks are heating up their rhetoric as the fight to cool inflation. On today’s podcast JBWere’s Sally Auld discusses the unexpectedly hawkish stance taken by the ECB, suggesting it was possibly a trade-off from pushing rates higher this time round. The Bank of England was split three ways on what to do, but ultimately lifted rates by the same amount – 50 basis points. We also look at moves by the Norges Bank and the Swiss National Bank. Meanwhile, Australia’s strong employment numbers add further pressure on the RBA , whilst the RBNZ next year has to tackle inflation in an economy that refuses to slow down. And lots of PMI numbers today, just to add to the information overload a week out from Christmas.

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Thursday 15th December 2022

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Markets weren’t surprised by the FOMC raising rates by 50 basis points this morning – a unanimous decision by the board. But members are more divided on where to go next, with the Fed now predicting a median rate of 5.1 percent by the end of next year, even with talk of inflation having peaked. NAB’s Gavin Friend says this rise in the dot plot is based on continued labour market tightness. It could be a different picture for the Bank of England later today, and the ECB where wage inflation is not such a concern. In a feverishly busy day we also get Australian employment numbers, NZ GDP, China’s retail sales, industrial production and capex investment, and the Philly Fed’s business outlook. It’s the last gasp before Christmas!

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Wednesday 14th December 2022

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US CPI numbers came in lower than anticipated, leading to the inevitable question about whether inflation has peaked, just in time for tomorrow’s FOMC meeting? The market response was swift fall in two-year Treasury yields and a rise in equities, although much of those gains has been pared back since. NAB’s Taylor Nugent says it creates a challenge for Jerome Powell, who will want to acknowledge the good news but remind markets there is still a long way to go. So, perhaps, tomorrow, he will be the Grinch who stole Christmas.

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Tuesday 13th December 2022

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US equities have bounced back, but the rise in the VIX index, which measures market volatility, is perhaps a better measure of where we are ahead of the FOMC meeting this week. It’s risen, highlighting uncertainty about how far the US central bank will go. Nick Timiraos describes a very divided Fed in the Wall Street Journal this morning. Also today, NAB’s Ray Attrill takes us through yesterday’s UK GDP numbers, with employment data out later ahead of the BoE meeting later in the week. Plus, the NAB Business Survey out later today.

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