NAB Morning Call

Wednesday 16th March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Chinese equities have been hit hard again today, despite data showing very strong retail sales, industrial production and fixed asset investment. NAB’s Ray Attrill says it’s a mix of increasing COVID cases, causing more lockdowns, and China’s position over the Ukraine war. They want to keep the peace with Russia without attracting sanctions from the west. Is it a sign of the shifting balance of influence that China is negotiating with Saudi Arabia to buy oil in Yuan? Besides the war and COVID, inflation is still a major concern, with the FOMC meeting in less than 24 hours. 25 basis points is more or less locked in, but it’s the rate of future rises and the associated commentary that will attract attention in these uncertain times.

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Tuesday 15th March 2022China and the US have been meeting, with the hope that talks can resolve the war in Ukraine. But China is showing little sign of offering total support for the west. NAB’s Tapas Strickland wonders whether they’ll need to, with talks between Russia and Ukraine at least offering the opportunity “for an off-ramp” from the conflict. Oil prices have fallen today, mainly because of further lockdowns in China as the country continues to pursue a zero-COVID strategy. That’ll add to supply chain problems, which will further add to inflation pressures. No surprise then that bond yields have risen sharply ahead of the FOMC later this week.

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Monday 14th March 2022Fighting got very close to the Polish border over the weekend, with Russian attacks on a training base. NAB’s Rodrigo Catril says it’s hard to see the volatility across all asset classes calming down as the uncertainty in Ukraine remains. Although talks are ongoing there has been little grounds for hope so far. This makes it all very tricky for the FOMC, whose members will be submitting their dot point predictions for future rate rises, in an environment where inflation is rising and consumer confidence is falling.

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Friday 11th March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9The war isn’t going to end anytime soon. That was clear with the high-level peace talks on Turkey breaking down after just 90 minutes, acting as nothing more than a conduit for untruths. That’s partly why we’ve seen a shift back in sentiment. The risk-on mood yesterday was a one-off. On the podcast today NAB’s David de Garis talks through the other big turnaround – the attitude of the ECB, who have speeded up their tapering schedule and the opened the door to earlier rate hikes. As a result, there have been sharp moves in peripheral European bonds, such as Italy, Greece and Portugal.

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Thursday 10th March 2021Looking at the markets this morning you might be mistaken for thinking Vladmir Putin had resigned, but sadly not. The war is still on, and just as messy as ever, but equities have risen, oil is down and bond yields are rising. NAB’s Gavin Friend talks us through this broad reversal in risk sentiment, which he says is being driven by a number of factors, but nothing concrete. There’s also discussion about the ECB meeting today, and the EU’ s plans to issue bonds to reduce dependency on Russian resources. Plus, did Philip Lowe’s speech yesterday indicate a rate rise from the RBA this year was more likely, or less? And US inflation numbers tonight.

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Wednesday 9th March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Markets have been encouraged by a possible solution to the Ukraine crisis. The Kremlin had suggested a raft of measures, including a ban on NATO membership. Today, Ukraine’s President Zelenskyy suggested NATO wasn’t a priority. NAB’s Rodrigo Catril says the hope that a peaceful solution might be possible saw a strong risk-on mood hitting markets – although the Aussie dollar is down. Commodities continue to rise, of course. And the EU is meeting this week to discuss the issuance of bonds to cover spending on arms and to end a reliance on Russian energy. Also on today’s podcast, NAB’s Ivan Colhoun talks through yesterday’s NAB Business Survey.

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Tuesday 8th March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9Day 12 of the war in the Ukraine brought more violence and uncertainty. Russia’s offer of a temporary ceasefire so residents could escape was given short shrift when it was clear the escape route was to Russia or Belarus. It was a strong risk-off session across all asset classes, with Brent getting over $139 for the first time since 2007. The Aussie dollar has lost a lot of ground, with NAB’s Ray Attrill saying the US dollar is now the pre-eminent safe-haven currency. Even the Yen has failed to perform its traditional safe-haven role, demonstrating how far and wide the impact of the oil price shock is having on global markets, with no signs of a way out anytime soon.

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Monday 7th March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9For a while over the weekend it seemed like Vladimir Putin was suggesting the west had already declared war with it imposition of sanctions, but, in context, he was really saying it was like a declaration of war, but a no fly zone would be a declaration of war. Whilst that’s a relief, we can all do without that sort of escalation, the uncertainty of the future outcome remains and we can expect more volatility this week as the fighting continues. Today Tapas Strickland talks about the impact of rising commodity prices and the response from central banks, including the ECB that meets this week. Australia meanwhile, seems to be enjoying the benefits of distance from the trouble in eastern Europe, with the Aussie dollar almost 5 percent up on the Euro over the last week. How long will this last?

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Friday4th March 2022The Aussie dollar was one of the winners today, even as the US dollar lurches to highs not seen since the early days of pandemic. It’s been driven by demand for coal and iron ore, as almost all commodities respond to the shock of supply cuts from Russia and Ukraine. Jerome Powell was back on Capitol Hill today, again reiterating the need to control rising inflation. Jobs continue to be part of the problem (with the ISM read overnight showing a fall in services employment) along with rising commodity prices. NAB’s Gavin Friend points to studies from the NY Fed, one noting that the global supply chain pressure index eased in February , a sign, he says, that global supply chains will repair. The question is, how quickly? The ISM numbers overnight didn’t show any improvement.

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Thursday 3rd March 2022View our disclaimer and terms of use: nab.co/3shJyypView our NAB Financial Services Guide: nab.co/3rvJtI9It almost seemed like business as usual for markets overnight. Equities rebounded strongly and demand dipped for bonds, pushing yields higher. As NAB’s David de Garis remarks, it all seems a little topsy-turvey. Investing in shares doesn’t seem a logical choice as the Fed chairman indicated that the path of rate rises in the US will continue unabated, just as the Bank of Canada lifted its rates for the first time since the pandemic. But away from equities, there are still clear signs of disruption from Ukraine, with oil prices continuing to increase, coal rising higher and wheat prices soaring.

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