NAB Morning Call

Tuesday 14th July 2020

Equities in the US spent most of the session rising, driven by the news that Pfizer and BioNTech’s experimental vaccine was being fast tracked in the US. But then, as NAB’s Rodrigo Catril explains on today’s podcast, Mike Pompeo declared China’s expansive claims in the South China Sea as unlawful, a shift in the direction of the US rhetoric against the regime. It’s an important day for Australian data today, with the NAB Business Survey and the weekly payrolls data, as well as China’s trade data. There’s also discussion on European trade and the Brexit negotiations, with the pound taking quite a hit today.

Monday 13th July 2020

Markets opted to take the positive news on Friday, sending shares higher and the US dollar lower. As NAB’s Ray Attrill explains, the good news was results of Remdesivir testing showing that the drug could reduce the mortality rate for those who contract COVID-19. The bad news was the number of infected people in the US continues to rise, with Florida recording its highest number so far on Sunday. China also provided mixed news – aggregate financing increased markedly in June, so more money is circulating in the economy. The bad news is that President Trump has no interest in a phase two trade deal anymore. So, what does all this mean for the direction of the Aussie dollar?

Friday 10th July 2020

It was a choppy session overnight, with markets split between the confidence that things might be getting better versus the realisation that in the US southern states infection rates (and fatalities) are getting worse. On the positive side, the number of people filing for unemployment benefits was less than expected. But rising virus numbers could cause more lockdowns which could impact employment numbers. NAB’s Gavin Friend says the Confidence-COVID dichotomy is playing out in the currency markets, where the impact of Europe reaching a positive outcome in their recovery package next week shouldn’t be underestimated.

Thursday 9th July 2020

The pound was helped a little today by the Chancellor’s next step in the country’s stimulus package. Phil Dobbie talks to NAB’s David de Garis about the plan, which includes a sales tax cut for the hospitality and travel industry and, curiously, the government going halves on lunch if you eat out in the first half of the week, through August. If that sounds impractical, trying to break the peg of the Hong Kong dollar to the US dollar is an idea floated that is likely to fall into the too hard basket. Back home, the cabinet meets on Friday to look at the next steps in Australia. Meanwhile stocks continue to rise, even as COVID cases increase in the US.

Wednesday 8th July 2020

There isn’t an immense amount of confidence about how quickly economies will recover. The Fed’s Raphael Bostic raised concerns about the impact of the rising infection numbers in the US. At home, the Melbourne lockdown will also slow things down. As NAB’s Tapas Strickland discusses on today’s podcast, this uncertainty is why the RBA, and others, are in ‘wait and see’ mode. Europe has updated its forecasts with a bigger decline this year followed by less of a recovery next year. China tensions add to the uncertainty, with the authorities there suggesting the UK would be a ‘hostile partner’ if it pulled Huawei out of its mobile networks. With a quiet day ahead there’s more time to mull over the mix of sentiments.

Tuesday 7th July 2020

Ray Attrill turns a proverb inside out in this morning’s podcast. Everyone is seeing the silver lining, but clouds could be forming. The markets are in buoyant mood right now, as data suggests economies are recovering from the worst of the impacts of COVID-19. The non-manufacturing ISM for the US is the latest demonstration of the rebound. And the cloud? COVID cases are rising. In Australia Victoria has just seen its highest number of new infections so far, and lock downs will have an economic impact. So, what stance will the RBA take today? Will they see that hey have to do more, particularly as the government starts to wind back its own stimulus measures. Then there’s China. What will be the next move from President Trump?

Monday 6th July 2020

Which way will the markets be pulled this week? Economic data is proving to be generally positive, helping create a risk-on bias. Yet COVID-19 cases continue to rise in the United States, not to mention the cases in Victoria, which rose over the weekend and could lead to a lockdown in Melbourne CBD. Then there’s the increased tensions with China, with China potentially threatening retaliation if Australia offers a safe-haven for Hong Kong residents. Phil Dobbie talks to NAB’s Rodrigo Catril about which of these conflicting forces will have the most influence on global markets and the Aussie dollar this week.

Friday 3rd July 2020

US stocks rose higher still overnight, helped on by the latest non-farm payroll numbers. NAB’s David de Garis says there was such a wide range of estimates for the jobs numbers that someone was bound to be right, but 4.8 million new jobs in June was seen as a very good sign ,with the President declaring that the economy was roaring back. Meanwhile Florida recorded more than 10 thousand new COVID-19 cases on Thursday, the worst yet, and the Congress and Senate passed a bill to impose sanctions on financial institutions that are seen to be interfering in Hong Kong. That news tempered market enthusiasm, but not enough to totally offset the gains from the jobs numbers.

Thursday 2nd June 2020

The overnight session started on a sour note over increasing concerns about Hong Kong. As NAB’;s Gavin Friend describes, the number of arrests under the new security law has increased in the last few hours. The UK’s Boris Johnson has offered a lifeboat to millions of residents to move to the UK, adding to the tensions with China. A possible COIVD-19 vaccine has lifted sentiment since, helped by strong manufacturing ISM numbers in the US and data showing a rebound in activity for Germany. Jobs are the big concern for the US though. The ADP employment numbers fell short of expectations, travel bans and the reversal of lockdown easing will challenge future jobs growth. Non-farm payrolls numbers tonight will be watched with keen interest.

Wednesday 1st July 2020

China has passed the new security law for Hong Kong, with the US already responding by targeting Huawei and ZTE. Dr Fauci has declared the virus as ‘out of control’ in the US and more measures need to be brought in to contain it. Despite all this uncertainty equities continue to rise in the US. NAB’s Rodrigo Catril says it has been driven by the expectation of economic recovery as the lockdown eases, but there could be a swift reversal if the infection numbers continue to rise. There’s also discussion on Boris Johnson’s (underfunded) New Deal and a swag of data releases today, some of which could drive market sentiment.