NAB Morning Call

Friday 26th November 2021As America gobbles up Turkeys NAB’s Gavi Friend talks through the latest positioning on tightening by central banks. The FOMC minutes suggested a more hawkish approach, and the latest data would suggest that view has been reinforced, but there’s still a disconnect between what the markets expect and the messaging from the Fed. The Riksbank has started to talk about rate rises, but not before 2024. The Bank of England looked certainly to raise rates last month, but it didn’t happen and a rise in December is now looking less certainly. The ECB are continuing down a dovish path, reinforced by their latest minutes overnight. Meanwhile, the RBA is holding firm, even though the bounce back in jobs yesterday (with retail sales data today) suggests a recovery that most nations would be envious off.

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Thursday 25th November 2021There were many more positive signs for the US economy overnight, with initial jobless claims at an all-time low. The US dollar remains in favour, with the DXY index reaching a 16-month high. On today’s podcast NAB’s Tapas Strickland says rising inflation concerns are turning even the most dovish FOMC members, with Mary Daly the latest calling for a faster taper to make room for rate rises. Former US Treasury Secretary Larry Summer spoke again about his concerns about the Fed’s delay, worried that they won’t be able to find “a soft landing”. Meanwhile, the Kiwi dollar has been hit hard by the quarter percent rate rise by the RBNZ. Why was there such a sharp response? Plus, the latest on oil, with prices down today, but we can expect more volatility as OPEC takes on their customers. How dare they dip into reserves!

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Wednesday 24th November 2021There was a surprise for those expecting the PMI numbers on Tuesday to confirm the widening gap between US and European economic performance. Let’s be honest, the NAB Morning Call team were amongst those who weren’t expecting to see the narrowing of the divide, with Europe doing somewhat better than expected, and the US a little worse than forecast. But NAB’s David de Garis says the US bond yields are still up, the market still wants to hold US dollars in anticipation of a quickening of the taper and earlier rate rises. The RBNZ rate decision today will be watched closely – there’s still an outside chance the rise will be as much as half a percent. And Joe Biden’s attempts to bring down the cost of oil seems to have gone awry. Confirmation of a plan to dig into reserves, not just in the US, has seen oil prices shoot skywards.

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Tuesday 23rd November 2021The US dollar and bond yields rose on the news that Jerome Powell is to keep the top job at the Fed for another term, with Lael Brainard as deputy. Even though both are doves, NAB’s Ray Attrill says the market still has two or three rate rises priced in for next year. The Aussie dollar has avoided collateral damage from the raising US dollar, helped by the news of border reopenings, that will help foreign workers to return. Today is PMI day, which is expected to give a further clear delineation between the strength of thew US economy versus the woes faced in Europe. The Euro is expected to continue to bear the brunt of any rises in the dollar.

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Monday 22nd November 2021The divide between the US and Europe became more pronounced at the end of last week, as NAB’s Rodrigo Catril explains 0n today’s Morning Call. On the one side of the Atlantic there are increasing infections, more lockdowns and, in Austria, mandatory vaccines, with a central bank pushing the line that tightening will only damage the recovery. On the other side, central bankers are talking up the need for faster tapering, presumably so they can move to raise rates sooner. But hardly anyone is moving as fast as New Zealand, with the RBNZ certain to lift rates this week, but by how much?

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Friday 19th November 2021US equities have bounced back a little today, but, as NAB’s Gavi Friend describes, it’s been a session without significant event risk or data flow. Equities and bond yields have been stable compared to recent volatility, with the tech sector contributing to equity rises, including news of Apple’s self-drive car. Some companies are also reporting easing of supply chain difficulties. Those issues have certainly been holding back the speed of recovery, evidenced again by higher prices in the Philly Fed’s manufacturing index and a slowdown in the reduction of weekly jobless claims. If supply chains recover and jobs growth picks up, will inflation subside. That continues to be the view of the ECB, with Philip Lane reiterating it again overnight. Europe meanwhile has other issues to contend with – energy supplies, rising COVID cases and a likely trade dispute with the UK.

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Thursday 18th November 2021Australian wage growth is in line with expectations, but where to from here? Phil Dobbie asks NAB’s Ivan Colhoun if there’s a chance we’ll see wages escalate in the next few months? The UK’s inflation numbers surprised everyone overnight, reaching 4.2 percent year on year. Does this concrete in a BoE rate rise, or could they do what they did last time and do nothing? David de Garis gives his thoughts. Canada’s inflation is also increasing, but no more than anticipated. US housing starts are down, but there are clear signs they’ll soon pick up. Join us for a Morning Call triple header!

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Wednesday 17th November 2021It’s been a positive session overnight, with US retail sales rising and US jobs bouncing back. NAB’s Tapas Strickland says it’s difficult to tell how much of the 1.7% month on month increase in sales is a result of rising prices and how much is more goods sold, but it shows consumers are prepared to spend even with supply constraints and inflation concerns. The UK jobs numbers are particulartly good because they have grown despite the end of a job furlough scheme with 1.1 million people on it. Mostly retained their jobs and there were many extra jobs besides. Is this the ammunition the Bank of England needs for a rate rise next month? Meanwhile Governor Lowe continues to be cautious about rate hikes for Australia, reiterating nothing is likely to happen until 2024, even though the market has priced in 2022.

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Tuesday 16th November 2021The Euro has lost ground this morning, with concerns over COVID, following lockdowns in Holland and Austria, and rising cases in Germany. There remains a very different attitude between the ECB and the Fed, with Christine Lagarde reiterating that in Europe they are in no rush to tighten policy. China’s activity data provided hope that the country’s economy was stabilising. In the US there will be a lot of focus to see whether tonight’s retail numbers are strong, or will they have been pulled down with falling consumer sentiment? The UK’s employment numbers will be watched keenly by the Bank of England, but NAB’s Rodrigo Catril says it’s too soon to provide the full picture needed to determine rate rises. And President Xi and President Biden meet (virtually) shortly – the start of better relations, perhaps?

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Friday 15th November 2021Hot on the heels of the surprising increase in inflation in the US earlier last week, Friday saw an unexpected fall in consumer sentiment. The Michigan survey hit an 11-year low. NAB’s Ray Attrill says previous low readings had been associated with rising COVID cases, but now, as the US seems to be faring somewhat better than Europe, the concern is all about rising prices. It’s a significant issue for the Fed and the US government, with wages rising significantly below the headline inflation rate. To counter being worse off, over 4 million Americans quit their job in one month. In Europe COVID itself remains a concern with restrictions re-imposed in Holland and Austria. Could other countries follow as winter draws near? Today, activity data from China will be keenly watched, and later in the week the wage price index will highlight whether Australia too could become subject to wage-push inflation.

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