NAB Morning Call

Friday 17th September 2021There was a lot of movement overnight, with US equities falling, then regaining some of the losses in late trade. Most currencies fell against a rising US dollar, but even some of those were pared back as the session progressed. The fall in equities happened despite a rise in US retail numbers, when sales were expected to fall. NAB’s Gavin Friend says markets clearly didn’t know which way to take it. There have, of course, been other surprises in the last 24 hours. Australian employment numbers fell more sharply than anticipated and NZ GDP was stronger than expected, both supporting the relative stance of their respective central banks. There are lots of swings and roundabouts on the road to recovery it seems, creating a lot of investor confusion. Today was one of those days.

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Thursday 16th September 2021There’s a little more optimism in the markets this morning, particularly in US equities. NAB’s Tapas Strickland says there’s no overarching good news, suggesting there’s a strong element of ‘buying the dip’. Which could mean it’s all reversed tomorrow! In fact, the news out of China was largely negative, with industrial production, fixed asset investment and retail sales all below expectations. The huge debts of the Evergrande Group are also likely to see authorities tightening financial controls on the construction industry. Inflation was more than expected in the UK and Canada, and will, in both cases, add fuel to the argument that their central banks will raise interest rates at least once next year. Locally, Australia’s employment data will be the numbers to watch, although they are a little out of date. US retail sales will also be one to watch.

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Wednesday 15th September 2021Inflation in the US has slowed. Is this a win for those arguing it is all transitory? Phil Dobbie asks NAB’s Rodrigo Catril what this means for the Fed and expectations of tapering. Market moves aren’t just a reaction to the US CPI, there’s also a risk-off mood driven by increasing cases of COVID in China which could cause further supply disruption. The Aussie dollar is still weak after Philip Lowe’s dovish speech at lunchtime yesterday. UK jobs numbers were strong but there are still a million job openings to be filled, by who? And today we’re expecting to see weaker activity numbers from China.

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Tuesday 14th September 2021Markets are a little mixed ahead of today’s US CPI numbers. But, just how important are these numbers when the Fed is far more focused on returning the country to full employment. NAB’s Tapas Strickland says supply-led inflation is allowing the Fed to be more accommodative for longer. Oil prices hit a six week high overnight, based on supply constraints and OPEC’s expectations for increased demand. Besides US inflation numbers, the focus later will be on UK jobs numbers and, at lunchtime, a speech by the RBA’s Philip Lowe.

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Monday 13th September 2021Talks between Biden and Xi on Friday added to market concerns. NAB’s Rodrigo Catril says it was the realisation of how long it would take to resolve issues, if ever. A US investigation into Chinese state subsidies also added to the malaise. On top of that, inflation (driven by supply constraints) and the speed of economy recovery remain two other major concerns. On the price side, US PMIs were higher than expected on Friday, whilst UK GDP growth was slower than expected in July. Rodrigo says there are so many factors making the data very noisy. But if the caution is lifting the US dollar at the expense of the Aussie, is there anything that will change that in the near term?

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Friday 10th September 2021As NAB’s Gavin Friend vehemently predicted on yesterday’s Morning Call, the ECB has announced that they will cut back purchases under their Pandemic Emergency Programme. It reflects the optimism in Europe, which is not currently matched in the US, where equities are down on the realisation that the recovery is taking time, largely driven by supply constraints that could be with us for a lot longer. There was positive news on jobs, with the weekly initial jobless claims at their lowest level since the pandemic began. US PPI, Canadian unemployment rate, UK monthly GDP and NZ credit card spending are the numbers to look for today.

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Thursday 9th September 2021As expected, there were no moves from the Bank of Canada overnight, but NAB’s Gavin Friend says the same will not be true for the ECB tonight. They will cut back on bond buying, he says. In fact, it’s taken longer than expected. Currency markets have been fairly quiet, with most moves happening in equities, which have adopted a more cautious air. The Fed’s Beige Book reflected some of this caution, with many consumers wary of eating out or going on holiday for fear of catching the Delta variant. There’s a rising delta between jobs advertised and employment, with the JOLTs figures showing 10.9 million openings in the US. Boris Johnson pushed ahead with his bold move of lifting taxes in the last few hours, running the risk of slowing a recovering economy. Today, Aussie weekly payrolls, China’s CPI and a speech from the RBA’S Guy Debelle.

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Wednesday 8th September 2021The RBA is pushing ahead with its tapering of bond purchases, just as predicted on The Morning Call, but the bank is doing it in a very dovish fashion. There won’t be any further cuts in the quantity until February next year. Does that suggest the RBA is seeing a slower recovery? NAB’s Rodrigo Catril reads between the lines in the RBA statement yesterday, and looks at why the US markets are showing so much caution on the return from the Labor Day holiday. Plus, China’s surprise trade numbers and a look ahead to the Bank of Canada tonight.

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Tuesday 7th September 2021The RBA meets today and the big question is, will they push on with their tapering schedule, reducing weekly purchases from $5b per week to $4b. NAB’s Ray Attrill says that they will, but there are concerns about the optics of making a move when the economy is in lockdown. The same question applies to the ECB later this week. Central banks have a direction they want to take, but the timing is being determined by the rise in COVID cases. On that, a rate hike by the RBNZ is looking even more likely, as the country starts to ease restrictions as cases are contained. Equities in Europe were up today, and will likely rise in the US as they return from the Labor Day holiday. That too is likely to be a response to the Fed delaying tapering, topping up the punchbowl for a while longer.

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Monday 6th September 2021Non-farm payrolls grew well below market expectations I the US on Friday, and are certainly not the substantial progress the Fed has been looming for. Today on The Morning Call NAB’s Tapas Strickland looks at the market response to the payrolls numbers, and other signs that the global recovery might be slowing. Is it just a transitory phase? With that in mind, what will the RBA do about tapering its bond buying, and will the ECB still ease off its purchase under its PEPP? Both meet this week, and the Fed’s Beige Book is out midweek to, to help provide some colour on the state of the US economy right now.

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