NAB Morning Call

Thursday 2nd April 2020

Q2 has started with big falls again on equity markets and lower Treasury yields, whilst oil prices continue to be driven downwards. As NAB’s Gavin Friend discusses, part of the hit reflects the warning from President Trump yesterday that 240,000 deaths could occur in the United States. The only hope in the offing is a slide in new infections in Italy and a rise in the Caixin PMI for China, but we have no indication of the size of their recovery and the streets of Wuhan are still fairly empty. Whilst data releases over the last 24 hours – including US ISM and European PMIs – weren’t rosy, things will only get worse. The road ahead looks more uncertain than ever.

Wednesday 1st April 2020

Equities are heading in opposite directions across the Atlantic this morning – Europe is on the rise, the US is on the slide. Phil Dobbie asks NAB’s Rodrigo Catril about the shift during what’s been a calmer 24 hours on the markets. Stimulus measures continue – with a massive new program for Japan, and New Zealand and the US now looking at infrastructure spending as a way to help with the bounce back. When will that bounce back happen? The PMI numbers from China yesterday were an encouraging sign, but the Caixin numbers today might give a more realistic appraisal of how much of their country is getting back to work.

Tuesday 31st March 2020

As anticipated Scott Morrison has launched a massive job retention program, telling companies to hang on to their workers, because they’ll need them on the other side. It helped equities yesterday, but that doesn’t explain the rise in the US and Europe. NAB’s Ray Attrill says we can expect a bit of rebalancing of portfolios at the month end, which might also account for the fall in Australian government bond yields (the opposite of what you’d expect after a massive government stimulus announcement). There’s further discussion on COVID-19, the price of oil and the expectation that China’s official PMI’s will show a strong recovery in figures out today. Plus, when all this is over, could the EU face another existential crisis?

Monday 30th March 2020

PM Morrison is set to announce a subsidy for workers, similar to the approach taken by the UK Chancellor. NAB’s Rodrigo Catril says it should help companies remain ready for the rebound, once the COVID 19 pandemic has retreated. The question on everyone’s lips is, how long will that take. In their daily press briefing a few hours ago, the word from the UK government was that the lockdown there could last months. This uncertainty helps explain Friday’s big fall in US stocks, even though President Trump finally added his signature to his $2 trillion economic rescue package.

Friday 27th March 2020

US equities rose sharply overnight despite the news that unemployment claims in the US have risen to 3.2 million for the week to March 21st. It seems the markets are responding to the news that the rescue package has passed through Congress. Phil Dobbies talks to NAB’s Gavin Friend about the increasing hope that, with the right stimulus, the impact will be short, albeit very deep. On the stimulus front the UK government will now support self-employed workers, but, as elsewhere, the issue is getting the money out fast enough.

Thursday 26th March 2020

Equities are on the rise in the US and Europe this morning. NAB’s Gavin Friend says on thin trade in the current environment you can expect volatility and it’s difficult to ascribe any reasoning behind some market moves. Certainly, the global picture continues to look dire, with rising COVID19 infection and mortality rates in Europe and the US, and government measures to keep the economy ticking over whilst retaining the spread are feeling the pressure. In Europe talk of Corona bonds are moving slowly, in the UK 5 million self-employed are still without any state assistance and in the US the Senate has yet to sign the $2 trillion stimulus bill – and, even when it does, how quickly can the money get into the hands of those who need it?

Wednesday 25th March 2020

Markets reversed a little overnight, with US and European equities rising, oil also on the climb, but the US dollar losing to the Euro and the pound. NAB’s Rodrigo Catril says its probably being driven by encouraging news about a slowdown in the rate of the virus growth in Italy, plus hopes that the US will arrive at a stimulus agreement sometime today. But Phil Dobbie asks, could it just be because Tuesday seems to be more optimistic than any other day of the week – that’s the way it’s played out over the last few weeks.

Tuesday 24th March 2020

We are in a world of radical uncertainty, according to former Bank of England governor Mervyn King. That’s clear, as the US Fed announces unlimited QE. NAB’s Ray Attrill says we are entering into the realm of modern monetary theory, as banks and governments do what they must to protect their economy and their populations from the impacts of COVID19. More could be done in the US though, with Congress again failing to pass a stimulus deal, just as the World Health Organisation warms that the global infection rate is escalating.

Monday 23rd March 2020

US equities continued to fall at the end of the week, even though Australia and Europe saw a brief reprieve. But NAB’s Tapas Strickland says it’s likely prices will fall further as more countries and regions go into lockdown, including almost a third of the US population. Phil Dobbie asks whether the US’s slow response to an effective fiscal response is hurting markets over there, what’s now driving an upward move in bond prices, and whether more uncertainty will drive even more investors to the safety of US treasuries. A question being asked repeatedly is how long will this go on for, and how deep will be the impact?

Friday 20th March 2020

Oil has shot up in price, with equities rising too and there’s a bit more interest in government bonds. So, what’s changed? Phil Dobbie asks NAB’s David de Garis if it’s down to bargain hunters, a bit more liquidity, hopes that things will get better – either on the virus front or the oil price war – or is it confidence that governments are starting to do the right thing to minimise the impact of the virus and keep people in work. On the latter point, is reverse taxation the answer? Listen in for an explanation.