NAB Morning Call

Friday 10th June 2022The ECB indicated overnight that they will lift rates at their July meeting, and if there’s no sign of a fall in inflation then a bigger hike might be necessary in September. This is the most hawkish the ECB has sounded, but Phil Dobbie asks NAB’s Gavin Friend if it is enough? The prospect of more rate rises has accentuated concerns about the impact of southern European economies and Christine Lagarde’s proposals on how to deal with the problem failed to satisfy markets, with Italian and Greek bonds falling markedly again. Today’s CPI number for the US will be watched keenly. Has inflation peaked?

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Thursday 9th June 2022There’s not much optimism in the air this morning. The OECD almost doubled their inflation expectations and slashed their growth forecasts, with the UK chosen for a particularly pessimistic outlook. NAB has revised its own forecasts for RBA rate hikes, outlined in today’s podcast. Oil prices have shot higher, with NAB’s Rodrigo Catril saying low inventories and the China reopening story means we haven’t reached the peak yet. The ECB meets later on. We know what to expect, although this is an environment where people change their minds at short notice.

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Wednesday 8th June 2022It was only a month ago that RBA governor Lowe was suggesting a 25 basis point hike was business as usual, with the bank wanting to signal that things would return to normal with a standard adjustment in interest rates. As NAB’s Ray Attrill points out, it was only a few months ago that the RBA was suggesting rates weren’t going up until 2024. Things changed sharply yesterday. This morning we look at the market reaction, from bond yields and equities, to the cross-rate with the New Zealand dollar. There’s also discussion on the ECB, with the potential for bond purchases in southern European nations who will be hit hardest from rate hikes.

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Tuesday 7th June 2022There’s been lots of action on the markets overnight, with rates pushing higher and, for most of the session, equities on the rise too. NAB’s Tapas Strickland says reopening news from China has helped push equities higher, but the prospect of rate hikes has seen that optimism diminish as the session neared the close. In currencies, the pound was the best performer in the G10, rising on the news of a leadership challenge for UK Prime Minister Boris Johnson. He won the challenge and the pound started drifting down again, but there’s no guarantee he’ll stay in his job for long. The RBA is the main focus today, with NAB expecting a 25 basis point rise. There’s less urgency and, with more meetings, greater flexibility than with other central banks.

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Monday 6th June 2022It might be a quiet start to a busy week, with the RBA and ECB meeting, and the US releases its CPI numbers at the end of the week. NAB’s Skye Masters says there’s divided opinion on how far the RBA will push tomorrow – anywhere from 25 to 50 basis points. We know the ECB is moving slower, but we can expect they’ll give further signals about when rates will rise and by how much. It all depends on the inflation outlook, of course, with CPI for the US out on Friday. Meanwhile, markets have been looking for any evidence that price rises might have peaked, but with the uncertainty over oil, the war and China’s lockdowns, it’s a bold call to say we are there yet.

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Friday 3rdJune 2022Today saw another session demonstrating the violent swings across all asset classes. Equities, that were well down yesterday, are well up this morning, despite an earnings downgrade from Microsoft. A chunk of the optimism comes from news that OPEC+ will increase oil production, even though oil prices themselves rose today. NAB’s Ken Crompton says we haven’t seen the same response in bond markets because of the likelihood that the Fed will keep rising, even beyond September, Lael Brainard said as much overnight. Tonight US non-farm payrolls will be watched keenly for signs of a softening job market or a reduction in wages.

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Thursday 2nd June 2022If investors were looking for signs of weakness in the US economy, in the hope that it might moderate the expectations for a rapid path of rate rises from the Fed, they didn’t get it, says NAB’s Rodrigo Catril. Instead, the ISM manufacturing PMI for May came in higher than expected, job openings remained high and job quits haven’t really come down much. Nothing there to suggest the Fed needs to tread a more careful path, so bond yields have risen sharply and equities have fallen further. It’s a different picture in Australia, where a stronger GDP read is being taken as a sign that we might weather the storm better than most.

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Wednesday 1st June 2022The EU has agreed to an immediate ban on oil exported by sea from Russia, with a further ban on EU and UK insurance of Russian vessels exporting oil elsewhere. On today’s podcast NAB’s Taylor Nugent discusses the tightening of restrictions and the impact on commodity prices and Europe’s rising inflation numbers – which exceeded expectations overnight. Meanwhile, a meeting between Biden and Powell today, representing two supposedly independent entities, demonstrates the dichotomy between controlling inflation and avoiding economic hardship. Today’s Australian GDP numbers will demonstrate how we have it better than most with 0.7% growth expected QoQ – although that figure would have been higher without a higher negative trade balance.

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Tuesday 31st May 2022There isn’t much in the way of good news today, but that doesn’t seem to matter as far as equity markets are concerned. German inflation was a big upside surprise and other numbers out of Europe suggested things are perhaps worse than imagined. Oil is rising sharply and could well surpass the previous peak. The war in Ukraine continues unabated with Russia making further inroads in the east of the country. China is easing lockdowns, but for how long? Yet European shares rose the Futures suggest the US will open higher on Tuesday too. NAB’s David de Garis talks about markets are looking on the bright side of the downside.

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Monday 30th May 2022Markets seem to be optimistic that the inflation wave can be ridden without us all crashing down on a rocky outcrop somewhere. So, are they right? NAB’s Ray Attrill joins Phil Dobbie this morning to discover the positive mood in the markets – particularly equities – driven by an absence of bad data and a hope perhaps that inflation will be tamed before central banks have to go the full way on interest rate rises. To what extent is demand holding up because people can dip into the extraordinary level of extra savings accumulated since the start of the pandemic. The non-farm payrolls data at the end of the week will be of interest, particularly in relation to wages. Locally, GDP numbers are out middle of the week. There are only three days this week when the US and UK markets are open, with month-end in-between. It could be a choppy week.

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