NAB Morning Call

Thursday 18th July 2019

The Fed’s Beige Book was out this morning and NAB’s David de Garis has been flicking through the pages. He tells Phil Dobbie that the report talks of modest growth, with slowing employment growth and concerns about trade related uncertainty. There’s also some concern about the US debt ceiling again. Could we be heading for another government shutdown? The pound has bounced back, despite any Brexit news that doesn’t point to a no-deal or a kamikaze election for the Tories. Whgilst employment data is the big event for Australia – will the numbers march in the direction of the RBA’s target of 4.5% unemployment?

Wednesday 17th July 2019

President Trump has been taking to the Twittersphere again to warn of increased tariffs against China. But, as NAB’s Tapas Strickland explains, China’s commerce minister is also turning up the heat, saying his country is in no hurry to reach a deal. There’s similar bravado in Britain where a leading Tory remainer has advocated precipitating a general election to avoid a no-deal Brexit, whilst Boris Johnson refuses to rule out proroguing parliament to meet the October 31 deadline. Aside from politics though, data has been generally strong. US retail sales were strong and UK wages grew the most in a decade. But its not all good news, and Jerome Powell and other Fed speakers have reinforced the expectation for a July rate cut, with half a percent still on the table.

Tuesday 16th July 2019

Even though President Trump tweeted overnight that tariffs were having a “major effect” on the Chinese economy, the GDP numbers he referred to largely related to growth before tariffs were ramped up in May. What’s more, industrial production numbers were far better than anticipated. As NAB’s Rodrigo Catril explains to Phil Dobbie, this has helped the Aussie dollar become one of the best performing currencies overnight. Meanwhile, the NY Fed’s Empire survey showed a bounce back, offering some encouragement for the US economy, but a rate cut is still anticipated for the end of the month.

Monday 15th July 2019

China reported disappointing import numbers at the close on Friday. It’s significant, says NAB’s Ray Attrill, because it shows that, as demand for Chinese goods falls, the demand for overseas sourced inputs to those products falls. That’s not a healthy outlook for the Australian economy, although we didn’t see any market reaction. Indeed, the Aussie dollar climbed over 70 US cents at end of the week, as the US dollar falls and equities rise on speculation over how deep the Fed will cut at the end of the month. Phil Dobbie asks whether a downturn in corporate earnings this week will dampen equity prices, or is the speculation on interest rates too intense to be side-tracked by anything else.

Friday 12th July 2019

Fed Chair Jerome Powell didn’t alter his stance on day two of his Senate testimony. NAB’s David de Garis says expectations for a cut haven’t wavered from yesterday, despite signs of inflation picking up in the United States. CPI figures exceeded expectations, with an annual rate of 2.1% (vs. 2.0% expected). Equities waivered a little as President Trump tweeted that China hadn’t stuck to their end of the trade deal, as he saw it. Whilst Australia seems mired in bad news, with falling investment, low consumer confidence and, of course, the cricket.

Thursday 11th July 2019

Jerome Powell has sent the markets back to where they were before the non-farm payrolls data last week. As NAB’s Gavin Friend explains to Phil Dobbie, the Fed Governor was more dovish than expected when he started his testimony to the Congress. So, the question is back to how much and when, with bond yields quickly declining as Powell talked. They also discuss UK GDP numbers, the latest on Brexit and what to expect from Home Loans and Investment Lending numbers today.

Wednesday 10th July 2019

In today’s podcast NAB’s Ray Attrill explains how the latest small business data in the US shows signs that tariffs on Chinese imports might be starting to make their mark, and not in a good way. Meanwhile, markets are still in a holding pattern ahead of Fed chair Powell’s testimony to Congress, at midnight tonight (AEST). Ray also talks to Phil Dobbie about the sliding pound, as Boris Johnson notches up the bravado on a no-deal Brexit. And NAB’s Kaixin Owyong looks for bright spots in an otherwise gloomy set of findings on the latest NAB Business Survey.

Tuesday 9th July 2019

There were no big movements on US equities or bonds overnight, as markets wait to see what Jerome Powell has to say in his Congress testimonies mid-week. But he’s not long, there are no less than ten speeches by Fed officials between now and Thursday. That should mean we all have a clearer idea about the Fed will do this month – down a bit, or not at all? Phil Dobbie also talks to NAB’s Tapas Strickland about politics in Greece and Turkey, the latest data from Europe, Aussie house prices, today’s NAB Business Survey and the world’s newest trade dispute.

Monday 8th July 2019

The US payrolls data was stronger than expected on Friday. The US President summarised it in three words, all of them ‘Jobs!’ It boosted the US dollar, hit equities (except banking stocks) ands reversed the downward trend in bond yields. Phil Dobbie asks NAB’s Rodrigo Catril how one report can have such a marked impact – and what does it mean for rate cut expectations from the Fed? The President, of course, wants to see more cuts, suggesting the Fed is the most difficult problem facing the US. How will Jerome Powell respond to that when he faces the Senate on two days this week?

Friday 5th July 2019

Trading has been thin was US markets closed for the 4th July holiday. As Phil Dobbie discusses with NAB’s David de Garis, there’s been little movement in equities, but bond yields continue to fall. In Germany 10 year Bund yields have fallen below the ECB deposit rate. So just how low will yields go? And how will equities respond to the US earnings season that kicks off in earnest next week. They also discuss the Payrolls data tonight and what it could mean for the Fed.