NAB Morning Call

Friday 1st October 2021There’s a fair bit to chew on today, with commodity currencies helped by word from China that they must secure enough energy for winter, whatever the cost. The US has managed to agree an interim budget for now, but the debt ceiling remains an issue and will remain so until the very last minute. Jerome Powell pontificated in his congressional hearing about what to do if high inflation persists, but NAB’s Gavin Friend says nothing that was said deflects from the expectation that rate rises in the US are still a long way away. The US dollar has stalled its steady growth for now, in part because of the rise in commodity currencies, but will it resume its steady path? Maybe Europe will come to the fore. After all, they don’t have to debate spending packages, they already have one.

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Thursday 30th September 2021Markets are much calmer this morning. Equities have managed to climb a little, with the biggest moves in currencies and commodities. NAB’s David de Garis says there’s debate about whether we’re heading to reflation, deflation or stagflation, or all of the above. The Aussie dollar lost more ground, but the pound is taking more of a hammering as fuel shortages will almost certainly be hitting the growth outlook there. Over the Atlantic the debt ceiling is looming, but the short-term issue is passing some sort of budget today, so the government can carry on spending tomorrow.

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Wednesday 29th September 2021It seems like it was a fairly heated Senate Banking Committee meeting in the US overnight. Flags were raised about whether Jerome Powell will win another term as Governor of the Fed, given the background of yesterday’s resignations and with one Democrat Senator overnight calling him ‘dangerous’. The US debt ceiling is also causing concern, with it being used as a bargaining chip for the moderation of Biden’s spending plans. NAB’s Tapas Strickland says we have been here before so the market is not overly concerned about the lack of progress, just yet. We also discuss how the Fed are likely to push ahead with tapering even if employment doesn’t pick up, how China’s growth this year is likely to be hit by rolling power outages, signs that Australia will bounce back quickly out of lockdown and the future for Evergrande.

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Tuesday 28th September 2021It seems markets are still trading on the hawkishness of central banks, particularly the Fed, where we’re seeing bond yields significantly higher and tech stocks weakening. Commodity prices are also pushing higher globally, with Brent Crude now close to $80 a barrel. NAB’s Gavin Friend in London says these extra costs, plus supply constraints make it highly unlikely that the Bank of England will lift interest rates next year, no matter what Governor Andrew Bailey suggests.

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Monday 27th September 2021Last week was a very volatile week, driven by the uncertainty over Evergrande, the unexpected hawkishness of central banks, continued concerns over supply chains and the emerging fuel crisis in the UK and Europe. This week you can add the USD debt ceiling to the list of concerns. NAB’s Ray Attrill says without a stop gap funding resolution we could be going into the weekend with government shutdowns. Also today we look at the German election over the weekend, which could see the government split three ways. And will the Aussie dollar gain ground as “freedom day” in NSW approaches?

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Friday 24th September 2021There’s been a big shift to risk-on overnight, with equities rising and bonds falling, pushing yields much higher in the US and across Europe. But why? The risk of Evergrande remains and with the Fed eyeing jobs data, a rise in weekly jobless claims was hardly a good sign this morning. NAB’s Gavin Friend says part of it is a reaction to the clearer roadmap for the Fed, assuming the next payrolls numbers are strong. Markets were also responding to the Bank of England, who expect inflation in the UK to reach 4 percent this year and that could strengthen the case for “modest tightening of monetary policy”. But if prices are rising because of supply constraints, does a rate hike really make sense?

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Thursday 23rd September 2021As expected, the Fed didn’t give a specific date for the start of tapering, but suggested it should all be done by the middle of next year. NAB’s David de Garis says the bank has also moved forward its expectations for rate rises, with the board split on a rise as soon as next year. The Norges Bank is well ahead of them tonight, likely to be the first G20 central bank to lift rates since the pandemic started. The Bank of England meets today too, and inflation concerns will be front and centre, particularly with the crisis in fuel prices. Meanwhile markets were buoyed by the news that Evergrande will pay bondholders, so that can has been kicked down the road for now. Oil has risen as inventors in the US fell faster than expected. And lots of PMI reads today.

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Wednesday 22nd September 2021Markets are still concerned over the Evergrande debacle, although equities and currencies and bonds have all calmed down a little overnight. China has been on holiday so far this week, so today could provide news on the government’s response before the develop defaults on its bond interest payments. There will be strong interest I the Fed tomorrow morning, of course, but it seems unlikely that they will announce tapering of their asset purchases just yet. NAB’s David de Garis says they will prefer to see another standout jobs report. Also today, can we expect more moves in oil, with the EIA stockpile report tonight. And the OECD has revised growth forecasts down and inflation expectations up.

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Tuesday 21st September 2021Markets have been running for cover overnight over fears that a default by Evergrande could spread beyond the Chinese property sector to the rest of the world. NAB’s Ray Attrill talks through the response, which has seen equities ditched in favour of bonds, and the money markets running to the Yen and Swiss Franc. But it’s the pound that has fared the worst overnight as their energy crisis continues, which has its own multi-industry contagion. By the time you listen in RBNZ Assistant governor Christian Hawkesby will have given a speech that could impact markets locally, particularly if he gives hints on the size of the expected rate rise. And the Canadian election results will start coming in later today, but there’s every chance it’ll be down to the wire and we won’t know for sure till later in the week.

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Monday 20th September 2021There’s more caution in the markets as we kick off a week doinated by central banks – the US Fed, BoE, BoJ, Swiss National Bank, Riksbank, Norgesbank all meeting, but NAB’s Tapas Strickland says it’s the US Fed that has markets on a bit of a holding pattern. There will be particular interest in the mapping of dot points this week. On the podcast there’s discussion about the flattening US yield curve, reasons for the weak retail numbers in the UK, Europe’s gas crisis, and the impact of a potential default by Evergrande in China this week.

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