NAB Morning Call

Friday 20th February 2025

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It’s not all good news from the US. Although Walmart reported strong profit growth yesterday the outlook is less certain, and there are indicators that their customer base is a section of US society that is suffering. The dollar is weaker today and shares, generally are lower. Nonetheless, NAB’s Rodrigo Catril says support for President Trump remains strong and markets did respond to a comment that a new deal with China was “possible”.

Locally, there were no surprises in the latest Australian employment data yesterday. Unemployment did tick higher, but job numbers also increased, some of which can be explained by seasonality factors.  He senses Michelle Bullock’s appearance at the House of Representatives Standing Committee on Economics could be a little politically charged, as the next election nears. And politics dominates the agenda in Europe, with Germany’s federal election on Sunday. How this could influence Europe’s plans for a more unified approach to defence and energy is a key question, looked at in the Weekend Edition out later.

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Thursday 20th February 2025

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Markets reacted strongly to comments from the ECB’s Isabel Schnabel who questioned whether they have already gone as far as they need to. She wonders whether the policy rate is restrictive anymore. NAB’s Skye Masters talks about the market reaction to that, and other central bank news over the last 24 hours. The FOMC minutes suggest slower moves by the Fed, rhe RBNZ seem set to reduce the size of cuts from hereon in, and UK inflation ticked higher than expected, which won’t see the BoE moving any faster. Today the RBA (and markets) will be focused on Australia’s unemployment rate. Skye said expectations are within a very tight range,from4 to 4.1%, so anything outside that could prompt a reaction.

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Wednesday 19th February 2025

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The RBA cut rates yesterday, but is the first one in this cycle also the last one for a little while? Governor Michele Bullock said successive cuts wasn’t the lay-down misère that markets had been expecting. NAB’s Taylor Nugent talks through the decision, the forecasts and the commentary. There’s also discussion about UK employment, Canadian inflation and today’s RBNZ decision. Plus, the latest on Europe, where the idea of a more cohesive approach to defence seems to be gaining traction, whilst exploratory talks between the US and Russia provided nothing to get excited about. Nobody in the room looked happy.

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Tuesday 18th February 2025

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The whole European defence issue is becoming very complicated. Phil makes sense of it all with NAB’s Tapas Strickland on the day that US and Russian delegations meet in Saudi Arabia to discuss a cease fire deal, without Ukraine present. Worried about their ongoing reliance on the US, EU leaders (and the UK) met to discuss future defence spending, perhaps supported by Eurobonds, hitting existing bond prices and pushing European defence stocks higher. In other news, President Xi met with tech leaders, OPEC+ could be delaying production increases, Japan’s GDP growth is higher than Bank of Japan forecasts and the RBA is likely to cut rates today but NAB says it’s not as certain as markets suggest.

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Monday 17th February 2025

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You’d have thought, perhaps, that the threat of tariffs on any country charging GST on US imports (most OECD countries) would have had a string market reaction at the end of the week, but it didn’t. Phil asks NAB’s Ray Attrill whether markets have stopped believing him and assumes all such proclamations and merely a prelude to some sort of negotiated deal. The US dollar, meanwhile, continues to weaken and is now actually lower than when the President  returned to the Oval Office. The RBA is expected to cut interest rates tomorrow, but Ray says it’s not as a clear a cut as markets are suggesting.

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This week Phil talks with NAB's CEO, Andrew Irvine, discussing the uncertainty of international trade and the slow road to lower inflation. What impact does he think a global trade war (if it gets to that) could have on Australia? And what can we expect after the assumed RBA rate cut next week? 

The NAB chief has spent some time in Europe and talks through how our economic fundamentals stack up against the UK and Europe. Whilst Australia has many natural advantages, he points to the lack of productivity growth as the biggest issue we face. Confidence is also key he says, because that drives investment decisions.

There’s also discussion about scam regulation. Phil points to the UK where banks are obliged (to an extent) to refund scam victims. Do we need the same approach or are there more significant ways of reducing the problem, particularly as AI threatens to make the issue worse.

Listen in for Andrew Irvine’s take on the economy and the prospects for the year ahead.

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Friday 14th February 2025

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President Trump has announced that his reciprocal tariffs could start as soon as April. The surprise has been that he is not just looking at the topline balance of trade. He considers a VAT imposed on American goods as an impost that needs to be countered. That could be bad news for the EU, the UK, Australia and other countries who have favoured indirect taxation higher income tax. NAB’s Ray Attrill says it’ll be bad news from Europe, where shares rallied today on the hope that peace-deal for Ukraine will see energy costs come down. Meanwhile, US retail sales are out later, will this add to the watering down of American exceptionalism that we’ve seen this year?

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Thursday 13th February 2025

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Donald Trump posted on Truth Social that the Fed should lower interest rates to go hand in hand with tariffs, adding, “lets Rock and Roll, America!!!” It hasn’t unnerved Jerome Powell who was giving his testimony the House Economics Committee. His case for moving cautiously was evidenced by US inflation data which ticked unexpectedly higher hitting the dollar and US equities. JBWere’s Sally Auld says today is another day where markets have reversed their enthusiasm late last year for US exceptionalism. It was a strong day for the Euro and European equities, though, thanks to a positive phone call between Trump and Putin and hopes that the end is in sight for the Ukraine war. But, obviously, way too early to assume too much.

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Wednesday 12th February 2025

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The Trump administration is pushing ahead with 25% tariffs on all steel and aluminium. Australia still hopes it will be exempt, but there are no guarantees and, in any case, NAB’s Taylor Nugent argues there will be second-order impacts as the tariffs hit China. The EU meanwhile has promised swift retaliation, with the various trade ministers meeting today to map out their approach. Curiously, European equities are doing somewhat better than the US. The US dollar has also weakened, despite the President’s promise that the tariffs will make America rich again. The NAB Business Survey showed a slight rise in confidence, as business conditions softened. The latest small business survey in the US also back tracked a little. Today the main focus, apart from tariff news, is the latest setoff US CPI numbers.

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Tuesday 11th February 2025

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Tariffs could be back, with Donald Trump warning of 25% tariffs on all steel and aluminium imports into the US. That would hit Mexico and Canada particularly hard, just as they thought they were off the hook (for now at least). But NAB’s Gavin Friend says there hasn’t been much more news on this since the President made the announcement on Sair Force One on Sunday. There’s some discussion about the three different classes of tariffs Trump could deploy and whether regions like Europe could be in the firing line. Gavin suggests a string representation of the new US administration at events in Europe this week could be part of a fact-finding mission to guide policy. Meanwhile, markets are positively sanguine, as they wait the next chapter in Trump’s trade plan.

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