NAB Morning Call

Tuesday 17th November 2020Markets have been lifted higher on further vaccine news, with Moderna saying their trials have shown 94.5 percent effectiveness. NAB’s Rodrigo Catril says markets are pricing in the positive news that we could have vaccines distributed early next year, whilst ignoring the bad news of rising infection rates, particularly in the US. There’s also discussion on today’s podcasts about comments from the RBA’s Philip Lowe yesterday, with a focus on the labour market and the need to contain the strength of the Aussie dollar. Plus, the latest on Europe’s recovery plans and Japan’s trade numbers and US retail numbers due out later today.

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Monday 16th November 2020Last week was a volatile one, but markets enthusiasm stemming from the hope of a vaccine led the charge, with some shifting of focus on equity markets. That said, infection numbers continue to rise, particularly in the US, where the President has flatly stated there will be no lockdowns so long as he’s in charge. NAB’s Ray Attrill says the push-pull effect of vaccine news versus COVID data will drive the markets again this week, with the added diversion of Brexit. There’s an EU Summit this week and Boris Johnson’s chief advisor Dominic Cummings left No. 10 on Friday, which some are reading as a sign that the UK will take a more conciliatory approach and a deal could be forthcoming. Perhaps.

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Friday 13th November 2020This week’s earlier optimism over a possible vaccine for COVID-19 has disappeared completely, with equities falling and bond prices rising. NAB’s Gavin Friend says rising COVID numbers in the UK and Europe have provided a dose of reality, with almost 33.5k cases in the UK on Thursday, despite a national lockdown. Numbers are also rising sharply in the US with the possibility that schools will close again in New York. The pound has taken the hardest hit today. Phil Dobbie asks Gavin how much of that is to do with a lack of progress on Brexit?

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Thursday 12th November 2020Even though the markets continue to respond positively to the hope of a vaccine, central bankers seem to be taking a more cautious tone. NAB’s David de Garis said the tone set by the ECB’s Christine Lagarde was one of concern, at their central banker’s conference. The RBNZ also continued to present a dovish outlook – despite New Zealand’s low infection rates – but the expectation of negative interest rates has diminished significantly. There’s push and pull factors at play – on one side the vaccine hopes, on the other, what’ll happen in the meantime, with the virus still raging. The UK reached the sombre milestone of 50,000 fatalities today.

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Wednesday 11th November 2020Those vaccine hopes continue today, even though there were warnings from Fed officials that the economy still faced ongoing impacts from COVID-19, with structural differences highlighting the need for the fiscal stimulus that now seems unlikely to happen this year. NAB’s Rodrigo Catril says there’s also some caution over the vaccine news, and a response to antitrust action against Amazon ramping up in Europe. On today’s podcast there’s also discussion on yesterday’s NAB Business Survey, which showed business confidence picking up, and today’s RBNZ meeting – will they be less dovish that many had anticipated?

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Tuesday 10th November 2020The markets have scarcely had time to respond to the news that Joe Biden is the next President of the United States than we’re it with the (potentially bigger) news that Pfizer have successfully completed stage three of their COVID-19 vaccine trials, with an astonishing 90% success rate. NAB’s Ray Attrill talks through the market’s response, which includes rising equities in the US and Europe, higher bond yields, a bounce in oil prices. Phil Dobbie asks whether this will alter the approach taken by the Fed and other central banks, starting with the RBNZ tomorrow.

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Monday 9th November 2020There’s still a chance that in January the Democrats will take control of the Senate. Until then, President Trump is still in charge and the US faces rising COVID cases without a fiscal stimulus. Larry Kudlow suggested that Friday’s non-farm payrolls were so strong there isn’t a need for support but NAB’s Tapas Strickland says high-frequency data suggests the job recovery is slowing. Similarly, China reported a big increase in exports, but can that last if demand for goods is subdued by the continued strength of the pandemic. It’s a quiet week this week, except for the President’s legal challenges on the election result, but markets are not likely to respond to the sideshow. Similarly, there’s no market reaction to Brexit talks, even though the clock is ticking louder now.

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Friday 6th November 2020Depending on which news source you choose, Biden has either 253 or 264 electoral college votes. We’re likely to find out today, but Donald Trump’s legal challenges could delay the confirmation of the result. Markets have adopted a risk-on stance, with the hope that there will be fiscal stimulus to counter the impacts of COVID, but other progressive policies, including tax rises, would be challenged in the Senate. Elsewhere, the Bank of England coordinated the injection of extra funds into the UK economy, with extra bond buying coinciding with the extension of the furloughed workers’ scheme. In Europe there’s hope that the EU can progress with the implementation of the Recovery Fund. NAB’s David de Garis says it highlights the need for the same fiscal and monetary coordination in the US, as COVID cases rise and the jobs recovery stalls. Today though, the Fed, offered nothing new.

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Thursday 5th November 2020US equities have climbed as the US goes through Wednesday without a clear winner in the election. It seems likely Biden will win, with five key states still undecided and millions of votes still to be counted. The Senate looks less clear and NAB’s Gavin Friend suggests this explains the behaviour of the bond markets, without the fear of unbridled fiscal spending. Conversely, of course, a delayed election result also delays the passage of any further fiscal stimulus package. Will that influence the Fed’s decision on Thursday – one of two central banks making announcements (the other is the Bank of England). Important those these meetings are, all eyes will remain on the vote counts, and whether President Trump is serious in his proclamation to challenge the result (if he loses).

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Wednesday 4th November 2020The RBA announced cuts to interest rates and a step up in bond buying yesterday. NAB’s Tapas Strickland says, as other banks follow, there won’t be any influence in the strength of the Aussie dollar. Americans are voting right now, with record numbers of postal and early votes, which could delay the outcome, or speed it up. Although there’s a clear expectation than Biden will win, and the Democrats regain control of the Senate, nobody is entirely sure what will happen over the next 24 hours. Meanwhile the expected mega-listing of the Ant Group has been delayed and Brexit talks have left both sides exhausted. Aside from the US election, payrolls for Australia will be the numbers to watch today.

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