NAB Morning Call

Thursday 5th March 2020

Equities and the US dollar have bounced back today, even if bond yields remain low. On today’s Morning Call NAB’s David de Garis suggests the markets are being driven by hope that government’s will follow the lead of their central banks and respond to the virus emergency with stimulus packages to protect their economies. Australia and the UK have both said details will be available soon – two currencies showing gains today – whereas Europe is a little more cagy, with the Euro losing ground. Meanwhile, the Bank of Canada has followed the Fed’s lead with a 0.5 percent rate cut and Guy Debelle, at Senate Estimates last night, reaffirmed that the RBA will look at QE after a further quarter percent rate cut. So, how low will the central banks go and how big will government spending be?

Wednesday 4th March 2020

The US Fed dropped interest rates by 50 basis points in an emergency cut today, well ahead of their next scheduled meeting. It followed a phone-hook up with G7 central banks. Does this mean we can safely assume all other banks will follow their lead, starting with the Bank of Canada tonight? Phil Dobbie puts the question to NAB’s Rodrigo Catril. And will the plan work, given that equities continue to fall and the US dollar has given way to safe havens again today? There’s been a massive rush to government bonds. They also discuss today’s Aussie GDP numbers, which will tell us how the economy was doing before the virus came along.

Tuesday 3rd March 2020

Central bankers and finance ministers are hooking-up on a conference call later today to discuss a coordinated response to the impact of the Corona virus. That’s seen a fall in bond yields and a big rise in equities in the US and Europe. The RBA is likely to announce a rate cut today, ahead of that call. NAB’s Ray Attrill says a 25 basis point cut is likely, with another one next month, at which point they will hit their proposed floor of 0.25 percent. Then what? Plus, Super Tuesday tonight in the US. Will we be heading for a Trump versus Sanders election at the end of the year?

Monday 2nd March 2020

Friday marked a bad end to a tumultuous week for the markets, with equities, commodities and bond yields all hit hard. The PMI numbers from China provided evidence of how hard COVID-19 is hitting production. Phil Dobbie asks NAB’s Tapas Strickland whether these numbers will add to the downward spiral at the start of this week. On Friday the US Federal Reserve issued a statement saying the central bank will use its tools it has available to “act as appropriate to support the economy.” So, does that mean we can expect a significant rate cut at their next meeting – and will they be beaten to it by the RBA tomorrow and the Bank of Canada later in the week?

Friday 28th February 2020

Thursday proved to be a very volatile day towards the end of a very volatile week, that’s seem stock markets firmly in correction territory. Phil Dobbie talks to NAB’s David de Garis about a session that has seen sharp falls in US shares, followed by an attempted recovery, only to start slipping again. Governments and central bankers are talking about a response, but it seems unlikely a monetary response will do anything to calm markets. Economic data is coming thick and fast at the moment but, as it largely predates the virus, markets are largely ignoring it. Just about the only non-virus reaction seems to be a fall in the pound as Boris Johnson announced he would walk away from Brexit talks in June if he didn’t get his Canada style deal, but since then the pound has recovered as traders started to remember that they’d heard all this talk before.

Thursday 27th February 2020

The markets attempted a bit of a rebound earlier, but it hasn’t lasted long and we kick off the day with the Aussie dollar closer to an all-time low, US treasury yields also hitting new lows and equity markets continuing to slide. Phil Dobbie asks NAB’s Gavin Friend whether some of the rebound is bargain-hunters buying the dip, or whether there are positive signs that could indicate we are nearing the bottom of a v-shaped recovery. Even before the virus the Aussie economy was struggling, and yesterday’s construction numbers were testament to that. But could a Chinese stimulus-fuelled recovery be the good news we’ve been waiting for?

Wednesday 26th February 2020

Markets continue to respond to news reports highlighting the (admittedly slow) spread of COVID-19. It’s raised demand for US treasuries, with yields falling further today along with expectations that the Fed will have to react. But how quickly? Phil Dobbie asks NAB’s Gavin Friend in London. They also discuss the widening gap between the EU and UK on Brexit negotiations, as the EU lays out its red lines and the UK to show their hand this week also.

Tuesday 25th February 2020

The extent of the spread of the Corona Virus in South Korea, into Europe and numerous other countries, has driven a major fallout in markets overnight. Equities have fallen further, oil has dropped sharply and bond yields have plunged. NAB’s Ray Attrill talks through the market reaction and where we can expect things to go to from here. Phil Dobbie asks how much attention is being paid to economic data, that would normally be market moving, but is perhaps being overtaken by events.

Monday 24th February 2020

There was a strong risk-off mood on Friday as COVID-19 infections spread further and the impact it is having on the global economy, with many small businesses in China on the brink of collapse. As NAB’s Rodrigo Catril explains, markets were particularly concerned by the PMI data on Friday that suggested the US service sector has started to contract, although he urges caution, highlighting that the number is quite a way from the preferred ISM number last month. US government bond yields have fallen, to an all-time low for 30-year yields, as investors switch from equities. The key data event today is the release of the German IFO survey tonight, which will give a clear indication of the impact of the virus on Europe’s leading export economy.

Friday 21st February 2020

Asian currencies have born the brunt of rising concerns over the spread of COVID-19 beyond the Chinese mainland. NAB’s Rodrigo Catril describes how the Japanese Yen has been one of the hardest hit, whilst the risk-off sentiment added t other fall in the Aussie dollar after yesterday’s rising unemployment rate. Can we now expect a rate cut from the RBA sooner rather than later? The US meanwhile sales along nicely, with a strong read from the Philadelphia Fed’s business outlook. Today we get a swathe of PMI’s, a slew of Fed speakers and the Democratic Caucus at the weekend.