NAB Morning Call

Monday 18th October 2021Equity markets were buoyed by strong US earnings results and stronger than expected retail sales numbers, but there are many reasons to suggest this confidence might be short-lived, according to NAB’s Tapas Strickland. Corporate earnings have been focused on the finance sector, so results from other sectors will give an indication of the inflation impacts on margins and growth potential. Chinese activity data today and the ongoing Evergrande saga could impact global growth hopes. Then there’s inflation, which continues to grow, with the Fed expected to bring forward its first rate hike and the Bank of England Governor reiterating the need for a rate rise in the UK this year. Paying more for a mortgage is unlikely to boost consumer confidence which is already flagging.

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Friday 15th October 2021Markets have taken a more positive outlook overnight, with sharp rises in equities in the US and Europe. NAB’s Gavin Friend says it’s been helped by falling bond yields, showing that there’s less immediate concern about rising inflation. That doesn’t mean the problem has gone away, but company earning results in the US have been positive, and there will be some solace in the fact that the growth in producer prices (PPI) seem to have stalled, albeit at very high levels. On today’s podcast we look at inflation in China (where PPI growth persists), the commodity and supply chain sagas, US jobless claims and yesterday’s employment data from Australia. Today US retail numbers are the data to watch for.

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Thursday 14th October 2021US CPI numbers were a little higher than anticipated. NAB’s David de Garis says we did see some support for bond yields, but markets slipped back when it was realised the core inflation number was pretty line-ball with expectations. As we’re seeing around the world, prices are being influenced by fuel, supply chains and wages. This morning’s FOMC minutes contained nothing in the way of surprises – it simply cemented-in the belief that the Fed will start tapering this year through to mid- 2022, but the timing of a rate rise seems less certain. UK GDP was also close to expectations, although manufacturing and construction were well down thanks to the ‘pingdemic’. We also look at China’s trade data on the podcast today and discuss Australia’s employment numbers out this morning.

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Wednesday 13th October 2021The IMF released revised forecasts overnight, together with a warning that central banks need to tighten their monetary policy if inflation persists. Inflation concerns are certainly growing, backed with evidence in numerous surveys. 30% of small business owners in the US said they expect to lift wages, according to the latest NFIB survey. The latest jobs data for the US and UK shows how tight the labour market is, adding to fears of an inflation spiral. NAB’s Ray Attrill talks through the numbers and the central bank responses, as well as looking ahead to today’s trade data from China and tonight’s CPI numbers from the US.

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Tuesday 12th October 2021Fuel prices are rising, with the gas crisis now pushing up oil and coal prices. On today’s podcast NAB’s Tapas Strickland says central banks are now worried about inflation getting “permanently embedded” (Andrew Bailey’s words) and are becoming more hawkish in their outlook. The latest is the Bank of England, where markets are already pricing in a 50 percent chance of a small increase as soon as next month. Bond yields continue to rise on this new attitude by central banks. Also today, does Australia need to reopen its borders to get the economy back on track? Can we fully recover without the return of a migrant workforce?

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Monday 11th October 2021Non-farm payrolls numbers from the US on Friday were less than expected, but NAB’s Rodrigo Catril says the numbers weren’t as bad as they seem, because they included an upward revision in the month before. The expectation is that the Fed will push ahead with tapering of bond purchases later in the year, with bond yields rising around the world, to multi-year highs in some cases. Inflation remains a concern, because of supply chain disruption, rising fuel prices and wages. That might be good news for the Aussie dollar iron ore rose 6 percent on Friday – but N AB has downgraded forecasts given the expected strength in the US dollar during this climate of uncertainty. Listen in to find out more.

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Friday 8th October 2021Two cans are being kicked. The US debt ceiling can is being kicked into December, but the issues remain. The gas can has been kicked along by a promise of more fuel from Russia, but isn’t Europe’s dependency on Russia part of the problem? Meanwhile, the Bank of England’s new chief economist is warning of inflation for longer. Is he positioning for a rate rise? NAB’s David de Garis talks through the overnight market news, as well as looking ahead to the Financial Stability Review from the RBA today, and tonight’s non-farm payrolls numbers in the US. There are plenty of reasons why this should be a strong set of numbers.

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Thursday 7th October 2021The fuel crisis in Europe and the UK is impacting global markets, with shares taking a hit. There’s been no rush to bonds given the impending inflation concerns, worsened by fuel prices, and most currencies are losing against the US dollar, which is possibly the only safe-haven left right now. It’s been a rollercoaster day, says NAB’s Gavin Friend, with energy prices in the driving seat and upending all markets. The problem is, there doesn’t seem to be a short-term resolution. Listen in to find out why. Plus, strong jobs numbers in the USD. Does this foreshadow a strong non-farms payroll number for the US on Friday? And a vote on the US debt ceiling possible in the next few hours.

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Wednesday 6th October 2021The currency markets suggest there’s a risk on mood this morning, with the US dollar gaining on the Japanese Yen and Swiss Franc. Strong non-manufacturing ISM numbers in the US have helped with that. But oil prices continue to rise too, adding to inflation concerns. Yet tech stocks have risen as well. NAB’s Rodrigo Catril joins Phil Dobbie to help explain market positions this morning, on the day that the RBNZ is expected to lift interest rates, despite expectations that the country will face many more COVID cases as the policy switches to one of living with the virus. US jobs will be the focus for the second half of the week, starting with ADP employment numbers tonight.

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Tuesday 5th October 2021Oil prices rose quickly this morning after OPEC+ announced they would stick with their earlier plans of rising production in November by 400 thousand barrels a day. At one stage Brent and WTI were both up more than 3 percent. NAB’s Ray Attrill says it was a surprising response, because there wasn’t a particular expectation that they would rise production. Nonetheless it has added to inflation concerns, and raised more talk about stagflation – will the price increases dampen demand and slow the jobs recovery? It’s a dilemma for central banks and governments. So far though, inflation isn’t having a big reaction on production. The manufacturing ISM in the US was strong n Friday, so was consumer spending. Markets will be watching the data today to see whether demand from the services sector is continuing to push ahead.

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