NAB Morning Call

Tuesday 22nd September 2020Concerns over the impact if a second wave in the US and Europe seem to be gathering momentum, driving investors to government bonds and safe-haven currencies. NAB’s Gavin Friend says banking stocks have added to the slide today following an investigation into how some big banks failed to stop money laundering up to three years ago. The US election is adding to uncertainty. But it’s the rising virus numbers that are the real concern and what else, if anything, central banks can do about it. All eyes will be on Jerome Powell’s testimony on the Fed and on Guy Debelle’s speech today, to see the direction the RBA is planning to head.

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Monday 21st September 2020As COVID-19 cases rise in many parts of the world, and more restrictive measures likely in the UK and Europe, there’s the question of what more central banks can do to help stabilise the global economy? NAB’s Rodrigo Catril says this should be an interesting week in that respect, with central bank speakers out in force, including Jerome Powell facing a two-day grilling by the Senate and the Congress in the US. Meanwhile, uncertainty is hurting the share markets, which took a tumble on Friday. The pound could be a casualty this week with Boris Johnson set to announce more restrictions for the UK public on Tuesday, whilst, conversely, Victoria’s infection rates are falling and NZ is likely to ease measures from tonight.

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Friday 18th September 2020It’s been a topsy turvy session overnight, that’s seen equities slide even though a day ago the FOMC was signalling years of near zero interest rates. NAB’s Gavin Friend says by extending the expected period of low rates investors dwelled more on the negative impacts of the virus. There was some optimism that a deal would be struck to provide more fiscal stimulus in the US, but despite the President’s calls for Republicans to be prepared to spend more, a deal still seems unlikely. In the UK the pound also twisted and turned, driven up by optimism over a Brexit deal from Ursula von der Leyen and driven down by talks of negative interest rates from the Bank of England.

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Thursday 17th September 2020US interest rates will be lower for longer – that’s the takeout from today’s FOMC meeting. So, what are the implications of three, perhaps four years, of near zero rates? A question put to NAB’s Rodrigo Catril in today’s Morning Call podcast. How concerned should we be about deflation, with figures in the UK today showing a 0.4 percent fall in August? There’s also discussion on today’s labour market data for Australia, GDP numbers for Q2 for New Zealand and what to expect from the Bank of Japan and the Bank of England later on.

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Wednesday 16th September 2020Equities are on the rise again in the US. NAB’s Gavin Friend says it has been driven by a flurry of M&A activity, alongside vaccine hopes and reasonable activity numbers from China, which showed retail sales turning positive for the first time this year. Compared to that, US data was decidedly mixed, with the pace of recovery seeming to slow. The FOMC meeting tomorrow morning will present a dovish view, says Gavin, with the possibility of downgrading some of their economic forecasts. On the podcast there’s also discussion on yesterday’s RBA minutes and why the latest UK employment numbers should be taken with a pinch of salt.

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Tuesday 15th September 2020Shares climbed in the US today on the hope that Pfizer will have a vaccine ready by the end of the year. It’s a promise made by their CEO at the weekend and touted by the US President. The US dollar fell, with the NZ dollar the main beneficiary. NAB’s Rodrigo Catril says speculation is mounting that the RBA will buy more government bonds to bring interest rates down, which accounts for a why there’s been less interest in the Aussie dollar. Plus, more volatility for the pound, and activity numbers from China today will help determine whether consumer confidence has come back yet.

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Monday 14th September 2020It’s just over six months since the COVID-19 pandemic was declared and we’re all still unsure about how it will all end. NAB’s Tapas Strickland said we can expect some optimism today as the Oxford University-Astra Zeneca trials resume, and that could help the Aussie dollar gain some ground? But could it also hit tech stocks, who have been enjoying their moment in the sun as home workers have been more reliant on technology. The tech bubble will be tested this week with a significant number of IPOs in the US. On today’s podcast there’s also discussion on the latest inflation numbers in the US ahead of this week’s FOMC meeting, the UK’s delayed recovery, China’s credit growth and Japan’s new Prime Minister. Plus a look ahead to the RBA meeting tomorrow.

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Friday 11th September 2020The pound lost further ground today as the EU objected to a new government bill that would unilaterally overturn the Withdrawal Agreement. NAB’s Gavin Friend says observers have been aghast at the actions of the UK government and that’s being felt in the pound. But has the weakened pound held back the Euro? The ECB’s Christine Lagarde signalled that the ECB was watching the rising exchange rate, but it was not a target for the central bank. Does that give the currency permission to rise higher? Meanwhile, uncertainty remains in US equities, falling markedly today, with the US dollar holding its own, most likely because of the Sterling effect. Weekly jobs numbers in the US also disappointed a little.

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Thursday 10th September 2020There’s been a rebound in risk sentiment which NAB’s Tapas Strickland has been driven by a buy-the-dip mentality, with opinions still divided as to whether tech stocks remain over-valued. Meanwhile the US dollar has fallen again, boosting the Aussie dollar and the Euro. The rising value of the Euro of late will be of particular concern to the ECB which meets later – higher priced exports could hinder Europe’s recovery. The pound meanwhile is finding it hard to keep up as Brexit uncertainty remains and concerns over rising COVID infections, with new restrictions imposed in the UK today. All that said, the data over the last 24 hours has shown largely positive signs of recovery.

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Wednesday 9th September 2020US equities have had a third session with substantial falls. NAB’s Gavin Friend says the damage is largely confined to the tech sector but there is evidence that it could be broadening to a fuller risk-off mood. The reasons for the uncertainty are clear, beyond irrational exuberance, we have increasing rhetoric from Donald Trump over China, expanding on his earlier decoupling comments; Boris Johnson is turning up the heat on Brexit negotiations, threatening to change the withdrawal agreement, even if it means breaching international law; and COVID-19 cases continue to rise.

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