NAB Morning Call

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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Friday 12th November 2021Markets have been a little more positive over the last 24 hours, with the NASDAQ back on the rise, although a rising US dollar continues to hurt the S&P, and the Aussie dollar has taken another hit. Part of the fall in the Aussie can be attributed to the weaker than expected jobs numbers yesterday, but NAB’s David de Garis says when you unpack the numbers there was plenty of ground for optimism. He says one interesting factor has been the gross rise in jobs in NSW – many people were switching jobs as the lockdown eased. Australia could be witnessing the start of the great resignation seen in other developed countries. The UK’s recovery slowed, with GDP lower than expected, but that’s been offset by falling COVID cases and high uptakes of the third jab. So, what does that all mean for the expectation of rate rises form the Bank of England?

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Thursday 11th November 2021The inflation numbers from the US have been eye popping. That’s the description by the Fed’s Mary Daly as US CPI hits 6.2%, a 30 year high. NAB’s Gavin Friend points out that there are still four million people in the US who lost their jobs through COVID who aren’t back in the workforce, and the Fed will continue to use that reasoning for not lifting rates. But markets are likely to revert to their expectations that the bank will be forced to move sooner than it intends. Australia’s labour market data today, for October, will still be held back by lockdowns and the UK’s GDP read for Q3 will provide a useful barometer on an economy whose return is slower than anticipated, and will have taken a knock with increased fuel costs.

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Wednesday 10th November 2021There’s been a move away from risk assets. It could just be equity markets running out of steam after a particularly strong rally, but a Financial Stability Report from the fed warning of “perilous lunges for risky assets” probably didn’t help. NAB’s Ray Attrill says it’s hard to join all the dots right now about why the mood has shifted, but inflation continues to be a concern. It was reflected in the NFIB small business report, along with difficulties in obtaining staff. There’s optimism in Australia though, evidenced by the NAB Business Survey yesterday. Today, US CPI will be the focus, along with producer prices from China. Two key numbers for inflation watchers.

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Tuesday 9th November 2021You’d think markets would be bathed in positivity, particularly in the US, with a string of good news, including infrastructure spending, the COVID pill and the reopening of a lot of international travel. There’s evidence of tiredness in the equity market says NAB’s Rodrigo Catril in today’s podcast, but we’ve been here before and then it takes off again. Bond yields meanwhile are still adjusting to a world in which central banks are not quite so quick to raise rates, whilst coping with a high inflation outlook. On top of all that, Europe has to contend with higher gas prices, rising again, and the danger of a trade war over Brexit. Locally, the NAB business survey is out early this morning (7.30am).

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Monday 8th November 2021You might expect a little more optimism in the markets given Friday’s strong non-farm payrolls data in the US, Pfizer’s news about a pill for COVID sufferers, the passing of Biden’s $1.2 billion infrastructure bill and rising consumer credit in the US. Equity markets are riding high on future hopes, but NAB’s Tapas Strickland says bond markets continue to unwind from expectations on the timing of rate hikes by central banks, in particular the surprise move by the Bank of England last week not to move. Today we also look at Friday’s RBA Statement of Monetary Policy, and look ahead to US CPI and Australian labour market data this week.

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Friday 5th November 2021There has been a sharp response in bond yields and currency markets to the Bank of England’s decision not to lift interest rates. Furthermore, Andrew Bailey is suggesting he doesn’t know where everyone got the idea that they would. NAB’s Gavin Friend says the response has been very marked. The fall in yields is pushing riskier assets, hence new highs for the S&P and NASDAQ. Yields could claw back a little as markets assess the possibility of a December hike. Meanwhile, the focus is on tonight’s non-farm payrolls in the US, with indications that it could be a strong number.

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Thursday 4th November 2021There weren’t any surprises in from the FOMC this morning. The Fed will cut asset purchases by $15 billion this month, with a further $15 billion in December, and an expectation that it will continue until the middle of next year. But Jerome Powell was again quick to point out that the tapering does not imply “any direct signal on interest rate policy”. Phil Dobbie talks to NAB’s David de Garis about the meeting, and looks at the latest US data that shows further signs of recovery. Tonight all eyes are on the Bank of England, where we can expect a small move up in interest rates. They’ve practically said as much.

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Wednesday 3rd November 2021Central banks are still grappling with what to do about inflation. The RBA is reluctant to talk about interest rate hikes anytime soon, because they don’t think inflation will be a big problem. The Fed and the Bank of England take a different view, but how hawkish will they be. Today on the Morning Call NAB’s Tapas Strickland looks back at yesterday’s RBA meeting and looks ahead to the FOMC tomorrow morning, whilst discussing the various attitudes to the dimensions of inflation. Concerns over supply chain disruptions, of won’t be helped by the rise of COVID lockdowns in China , with the Commerce department there asking local authorities to stock up for winter.

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Tuesday 2nd November 2021For once we are going into an RBA meeting unsure of what the outcome will be. NAB’s Ray Attrill says we have as much chance of predicting a winner in the Cup today as we do forecasting what direction the central bank will take. Meanwhile bond yields in Europe are being driven by the next central bank meeting – will the ECB abandon its PEPP program? Plus, more evidence of the great China slowdown.

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