NAB Morning Call

Thursday 15th August 2019

It’s far from a quiet day on the markets. Bond yields have fallen as Chinese industrial production and retail sales numbers came in lower than expected. Germany is also struggling with GDP for Q2 returning to negative territory. Phil Dobbie talks to NAB’s Alex Stanley about why the markets have reacted so sharply to this, particularly after the risk-on mood just 24 hours ago. He also asks whether we should be concerned about the 2yr 10yr Treasury inversion, the first time we’ve seen this since 2007.

Wednesday 14th August 2019

There’s been a sharp turnaround in market sentiment as the US announced delays to the extra tariffs on Chinese imports planned for the end of the month. That’s seen a move away from safe-haven currencies and from bonds, to US equities and the dollar. NAB’s Tapas Strickland says its unlikely to impact the Fed’s roadmap for rate cuts just yet. We’ve also seen a higher than expected rise in US CPI and in UK wages, whilst Germany has suffered the worst ZEW sentiment survey since 2011. The Aussie dollar has been a beneficiary of the risk-on mood, even though yesterday’s NAB Business Survey showed no real improvement in business expectations.

Tuesday 13th August 2019

There’s a continued risk-off mood in the markets today, not helped by protestors forcing the closure of Hong Kong Airport and a surprise defeat of Argentina’s President Macri in primary elections at the weekend. Phil Dobbie talks to NAB’s Ray Attrill about the market impact of both of these factors, plus the weaker than expected credit growth in China. Does that mean the government’s policy to fuel growth with easy money isn’t working? And what of the repercussions for the Australia dollar. They also discuss today’s NAB Business Survey, CPI numbers for the US tonight and labour market data from the UK.

Monday 12th August 2019

The US President hinted that a resumption of trade talks with China wasn’t a done deal, adding uncertainty in an already shaky market. Phil Dobbie talks to NAB’s Rodrigo Catril about the impact this could have, including NAB’s revised expectations for the Aussie dollar. They also discuss the state of the UK economy, which saw GDP unexpectedly fall 0.2% last quarter; the mixed messages from Canada’s employment data on Friday; and the political uncertainty that’s driving investors away from Italian bonds. It’s a quiet start to the week data wise, but politics is bound to throw something up.

Friday 9th August 2019

Are the markets more concerned about the relative strength of the Chinese currency than they are about tariffs? That’s a question Phil Dobbie puts to NAB’s Tapas Strickland, as currency controls by the PBoC have helped quell concerns, boosting US equities. President Trump, meanwhile, continues to argue against the Fed for refusing to lower rates as fast as he would like. Meanwhile Saudi Arabia has stepped in to try and limit the damage from falling oil prices, Italy looks like it is heading to an election and the UK could be moving towards a constitutional crisis. A confusing end to a hectic week.

Thursday 8th August 2019

Bond yields have been all over the place. US 10 year treasuries fell 10 basis points, before climbing back 11, whilst UK gilt yields hit a record low of 0.43 percent for a spell. NAB’s Rodrigo Catril explains to Phil Dobbie what’s driven this latest bout of volatility. Part of it is the surprise half percent rate cut by the RBNZ yesterday, but really bad industrial production numbers from Germany added to the turmoil. The RBNZ cut has been an inspiration to one man – President Trump wishes the Fed had the gumption to follow in their footsteps. Will China’s trade numbers today add to his agitation?

Wednesday 7th August 2019

US stocks have bounced back, the US dollar has picked up against the Yen and Treasury yields have climbed a little. As NAB’s Gavin Friend explains to Phil Dobbie, this has happened despite the US Treasury declaring China currency manipulators. In fact, the People’s Bank of China helped contain falls in the Yuan, helping improve market sentiment today. The RBNZ is expected to cut rates today, even though the employment numbers yesterday surprised on the upside. As for the Fed, well James Bullard spoke overnight, pushing a wait-and-see message. He said the Fed certainly shouldn’t respond to tit-for-tat trade disputes. Get across the market news, as always, with the Morning Call podcast from NAB.

Tuesday 6th August 2019

Markets continued in risk-off mood as China announced its response to President Trump’s threat of extended import tariffs. The price to pay is a halt to the purchase of US agricultural products and a weakening Yuan. As Phil Dobbie discusses with NAB’s David de Garis, the market knows this trade dispute isn’t going to get better anytime soon. Meanwhile the 3m 10y US Treasury curve is now at its most inverted since 2007, just before the global financial crisis. Is this a signal that the world is heading for a recession? Ad on the Brexit front, more signs that Boris Johnson is heading for a no-deal departure. With all this going on, the RBA is still expected to keep rates on hold, but what signals will they send about the rest of the year?

Monday 5th August 2019

As we reported on Friday’s Morning Call, there was a swift market reaction to President Trump’s announcement on further tariffs on imports from China. Equities, currency and commodities all pulled back a little from the initial response, but, as Ray Attrill explains to Phil Dobbie, we are still left in a very different place. Treasury yields have fallen significantly, making further rate cuts seem even more likely, even though Jerome Powell seemed to be downplaying the speed of cuts earlier in the week. So, what does this mean for the Aussie dollar, in a week that sees the RBA and the RBNZ make rate announcements. Plus, with a majority of one MP, several Tory detractors and a basket of spending promises, could Boris be heading for a UK election?

Friday 2nd August 2019

A tweet from President Trump promising a 10% tariff on the remainder of imports from China has sent the markets into a tailspin. Phil Dobbie talks to NAB’s David de Garis about the reaction, which has been seen a move to the Yen, a fall in US equities, a huge drop in oil prices and a 16 basis point intraday drop in 10 year Treasury yields. Before the tweet, shares had recovered from the fall post FOMC. In light of the President’s words, tonight’s non-farm payrolls are likely to take on a little less influence than usual. Meanwhile, the Bank of England has downgraded growth forecasts for the UK, and that’s without a no-deal Brexit. The week is finishing with a bump.