NAB Morning Call

Wednesday 2nd February 2022The RBA is still reticent to signal a rate rise this year, even as they lift their inflation forecasts. NAB’s Ivan Colhoun says a lot rests on what Governor Lowe has to say today. The ECB is also playing it cool, but with 2-year German Bund yields climbing higher than the loan rate its clear the markets don’t agree with them either. NAB’s Rodrigo Catril talks through the latest data from Europe and the US, and reasons why equities are so much calmer and why the Aussie dollar has bounced back today.

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Tuesday 1st February 2022It seems more likely than not that the RBA will announce an end to QEW today. NAB’s Tapas Strickland says core timed mean inflation is running two years ahead of the RBA’s forecasts which suggests a rate rise this year is also likely. The front end of the yield yield curve rose a little in the US after Raphael Bostic argued for a 50 basis point rate rise in March, although he retreated a little form those remarks today. Inflation is rising in Europe, with figures out just in time for the ECB this week, and the BoE will almost certainly raise rates too. So is inflation the only driver now? What if the rates push major economies into a downturn?

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Monday 31st January 2021Whilst it was quite a night for Rafael Nadal, Friday had a less positive ending for the Aussie dollar, falling below 70 US cents to its lowest level since mid-2020, despite rising commodity prices. NAB’s Ray Attrill says the sharp fall could be the result of portfolio rebalancing by Aussie investors, which means it could stay low today but recover after month-end. We’ll see. Meanwhile equities bounced back in the US on Friday but markets are still choppy. Wages grew slightly less than expected in the US in Q4 and consumption has slowed, which makes the path for interest hikes a little murkier. All eyes will be on the RBA tomorrow, with markets still expecting rate rises this year. Will the RBA join the group-think? And China takes a holiday this week, we look at the impact that could have on the Aussie dollar, as we welcome in the Year of the Tiger.

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Friday 28th January 2022There has been quite a turnaround after the sharp falls in share prices and the rise in bond yields that we saw kicking off during the Jerome Powell press conference after the FOMC yesterday. Today, bond yields have been falling and shares attempted a climb back. So, given the Fed delivered exactly what was expected, why the strong market reaction. NAB’s Gavin Friend says markets were surprised by the hawkishness of the conference, but have perhaps since evaluated the vagueness of what was said. There was no timeline or detail on the number of rate hikes, for example. Today’s GDP numbers for Europe will provide evidence of the sharp contrast with the US, but that is expected to narrow as the year progresses.

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Thursday 27th January 2022The FOMC has met and reaffirmed that rates will rise from March. NAB’s David de Garis says it was exactly what the markets were expecting, although the response has been a rise in yields and a fall in equities. Jerome Powell was more reticent to talk about the speed of tightening beyond the next meeting, given the uncertainties that remain. The Bank of Canada will also hike rates soon. Also on today’s podcast, what does the US widening trade deficit mean for their GDP numbers out later today, how will The RBNZ react to today’s inflation numbers, and Brent oil hits $90. Where to from here?

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Tuesday 25th January 2022Markets have been gearing up for the FOMC meeting this week, but for a while at least tensions over Ukraine seem to have driven a strong risk-off push, with significant falls in share prices, a fall in bond yields and, to an extent, the US dollar seen as a safe-haven. But as the session progressed there was some re-evaluation of the risk, with shares and bond yields regaining some of the lost ground. As to the Fed, NAB’s Ray Attrill says the rising inflation is a major political headache for the Biden administration, so he’ll be eager to see the FDOMC do what it has to do to keep price sunder control. The question is, what will it do to the growth of the economy in the process?

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Monday 24th January 2022On today's podcast:Curiously bond yields retreated at the end of last week even though the assumption remains that the Fed will signal a March hike. NAB’s Tapas Strickland says the fall in yields is a response to the sharp sell-off in equities at the end of the week which is, itself, a response to the rising interest rate environment. Locally, the CPI numbers for Australia tomorrow will put the RBA’s timeline for rate rises into sharp focus. Global PMIs today might have less influence given they are influenced by transitory factors, such as lockdowns, and the focus on the Fed.

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Friday 21st January 2022Australia’s job numbers were well above expectations yesterday. NAB’s Ivan Colhoun talks about what this means for the RBA, who are still at odds with the market on their timetable for rate hikes. NAB’s David de Garis in London talks about the move up in equities and bond prices this session, suggesting it is likely to be nothing more than a bounce. The expectation is still that the Fed will end QE and move to rate hikes swiftly this year. It’s a less definitive picture in Europe, with the ECB minutes highlighting the divided opinions of the board. UK and Canadian retail numbers are out later today.

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Thursday 20th January 2021The sell-off of US bonds has halted, temporarily, but it continues in Europe, particularly in the UK where high inflation numbers will heighten the Bank of England’s resolve to raise rates next month. Canada also reported a higher-than-expected level of CPI, increasing the expectation for a rate rise there next week. In Germany, 10-year bund yields moved into positive territory for the first time since 2019. As NAB’s Gavin Friend says, it’s not just a US dynamic, as central banks attempt to grapple with inflation. But what of Australia? Labour numbers today are expected to show the unemployment rate fall to 4.2%. Given many parts of the world are seeing wage-push inflation, could we see prices rise faster than anticipated?

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Wednesday 19th January 2021US bond yields are now at their highest levels for two years, with equities now joining the sell-off, particularly for tech stocks on expectations of rising bank rates. NAB’s Rodrigo Catril says markets oil is also rising sharply on the expected rise in demand in a post-COVID area, or at least a time when we learn to live with the virus. The UK has shown how that can be done, with better-than-expected employment numbers, despite the rising number of cases in late 2021. So, how prepared is Australia to live with COVID? Today’s monthly consumer confidence numbers will give us an indication.

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