NAB Morning Call

Monday 22nd August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Markets seem to have got used to the idea that central banks will be more aggressive with cash rate hikes, ahead of the Jackson Hole symposium at the end of the week. Part of the reason for that is because, what’s been done so far is clearly not enough. UK retails sales increased in July despite all the talk about the dire state of the economy. The Canadians are also out shopping. We also saw a big increase in purchase prices in Germany, in fact the largest monthly rise since 1949. All of this adds to the expectations that the meeting in Wyoming will see an increasingly hawkish stance from all gathered there.

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Friday 19th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Bond markets have been fairly lacklustre today. NAB’s Ken Crompton says there is still uncertainty over the less-hawkish FOMC minutes this week, which is why central bank speakers are out in force pushing the party-line for higher rates faster. There’s still a difference between the markets and the Fed on how quickly those rates will come down. Meanwhile, there’s still plenty of resilience in the US economy, with jobs not really coming down. As we saw yesterday, it’s the same story in Australia. The Euro saw a sharp fall today, as gas prices shot up to a record high. Canadian and UK retail numbers are out later – will they be a other sign of resilience in the face of adversity?

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Thursday 18th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Inflation clearly isn’t easing yet. The UK hit 10.1 percent in numbers released yesterday. NAB’s David de Garis says the sticker-shock of double-digit inflation set the cautious mood off early. But if hiking by central banks is designed to slow consumption it is taking its time about it. US retail sales were up 10.3 percent (YoY) in July. Can an aggressive path of hikes slow demand enough to stop inflation in its tracks? Will the RBNZ be the first to demonstrate success? And will the RBA need to pick up the pace, with some worrying signs in the wages data yesterday, even though the headline number seemed quite tame.

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Wednesday 17th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Central banks continue to keep a close eye on wages data. The UK has just reported a drop in wages growth, alongside a fall in new jobs. We’ll see Australia’s wage growth numbers later today, which NAB’s Rodrigo Catril says shouldn’t be a big rise this quarter, but expect more in Q3 and Q4. Also today, the state of US retail, Canada’s rising inflation (despite all the front-loading of interest rates) and what to expect from the RBNZ. A busy day.

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Tuesday 16th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9The Aussie dollar has retreated from the gains at the end of last week, after a slowdown in China’s retail sales, industrial output and fixed asset investment. All grew well below expectations, as COVID continues to influence behaviour and, clearly, buying habits. We’ve also seen a big drop in oil overnight. NAB’s Ray Attrill says the fall is a combination of the weaker China data and signs that an Iran nuclear deal could be getting closer, which would see more oil pumped into the global marketplace. In the US equities continue to rise, even though the housing market is struggling, and the Empire State Manufacturing Index showed a massive (unbelievable) fall. The RBA minutes will be scoured today for any signs of the direction the bank will take now it is not, in their words, on a “pre-set path”.

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Monday 15th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9There was a lot more positive sentiment around on Friday, because there are more signs that perhaps inflation is peaking. NAB’s Tapas Strickland says strong corporate earnings have helped, and a belief that the Fed will not be moving much further on rate hikes – even though many Fed speakers are keen to argue otherwise. It’s a different story amongst bond markets, were the 2-10 years spread remains firmly in negative territory, suggesting a recession or at least much slower activity for the remainder of the year. The RBNZ meets this week – Phil asks Tapas is they are being viewed as a test case for central banks, given that interest rates are likely to hit 3% this week, amid signs that the economy is slowing.

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Friday 12th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Markets are still behaving as though inflation will not reach the heights predicted by the Fed, and that the path of hikes will be downgraded. Softer PPIs in the US added to this sentiment. But NAB’s David de Garis says energy prices are the big concern. Brent is back over $100 a barrel, with concerns that European demand to substitute gas will push prices higher and add to inflationary pressures. But will inflation create a recession? GDP numbers in the UK today are expected to show a decline, yet unemployment remains persistently low, retail numbers are doing well and Dave says the streets of London are filled with people spending money. It doesn’t feel like a recession, whatever the numbers show.

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Thursday 11th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9US inflation numbers were lower than expected, giving markets a major boost if confidence. Shares rose sharply, thew VUIX index fell to the lowest in quite a while, the USA dollar weakened, and the Aussie dollar was given a major boost. But will the enthusiasm last? As NAB’s Tapas Strickland explains, the falls were largely related to lower energy prices and the low-side core surprise was a payback for the high-side reading in June. In fact, the core reading is still rising and the Fed has made it clear they still have more work to do. So, can we expect markets to retrace their steps a little over the next day or so?

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Wednesday 10th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9The long-awaited US CPI numbers are out today. NAB’s Rodrigo Catril most attention will be paid to the core reading, which excludes energy and food, the two factors which the Fed can have less influence over. If the core reading rises it shows the Fed has more work to do and that will only exacerbate recession fears. On that, we’ve seen the 2-10 yield spread falling ever lower to levels normally only ever seen ahead of recessions. China’s CPI and PPI reads will also be of interest today. There’s also discussion on today’s podcast on the NAB Business Survey yesterday – how can business indicators be so strong, whilst consumer sentiment is falling?

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Wednesday 9th August 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Markets are a bit in limbo today. We’ve seen bond yields reversing some of their initial response to non-farm payrolls, with the US dollar temporarily switching direction, and the Aussie and Kiwi dollars gaining strength. But for how long? NAB’s Skye Masters says what happens next will depend on US CPI numbers tomorrow. There was a glint of hope that the worst is over with slight decline in inflation expectations in the US and New Zealand. Certainly the NAB business survey will be scanned eagerly today for price movement.

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