NAB Morning Call

Friday 19th January 2024

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US bond yields continue to push higher as the expectation for delayed cuts mounts. The weekly jobless claims will help the Fed’s case here, with a surprise fall showing how tight the labour market still is. But these are volatile numbers, says NAB’s Gavin Friend, particularly over the holiday period. The same applies to the surprise drop in Australian employment numbers yesterday, although the trend is still showing a rise and there’s nothing to change the RBA’s path for now. Plus, peace hopes for the Middle east and a preview of our first Weekend edition of 2024.

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Thursday 18th January 2024

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Markets are pricing more and more for delays in rate cuts. NAB’S Ken Crompton says even with pricing for cuts of 13bp in February that still shows some “irrational exuberance”. The expectations for delays in rate cuts follow Christopher Wallers comments earlier in the week that, with the economy seemingly in good health, why the rush? That view was supported by a range of positive data releases, including retail sales growth continuing into December. In the uK markets were a little surprised by a rebound in UK inflation, delaying chances of cuts by the BoE. In Australia NAB has revised its expectation for a rate rise by the RBA, but there’s a chance that it will stick with its current rate to the tail end of the year.

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Wednesday 17th January 2024

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Bond yields have ushed higher in the US after the Fed’s Christopher Waller made a speech on the economic outlook at The Brookings Institute, called ‘Almost as Good as it Gets, but will it last?’. NAB’s Rodrigo Catril says he appeared less dovish than anticipated, hence expectations for rate cuts have been pushed back. Now the question is, will any central banks be cutting in the first half of this year? Today we look at the latest European data, the UK’s muddy employment numbers, as well as looking ahead to a busy 24 hours, with a swathe of China data, UK inflation and US retail number.

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Tuesday 16th January 2024

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German GDP fell 0.3% last year, even if they did manage to narrowly avoid a technical recession. Europe’s industrial production also fell in the latest data. Yet ECB members continue to talk down expectations for rate cuts at least until the middle of the year. Phil asks JBWere's Sally Auld about the wisdom of keeping rates higher in an economy that is slowing, and does that explain why markets are out of kilter with the central banks rhetoric?. In the US there will be a air bit of focus on what the Feed’s Christopher Waller has to say on rate cuts. There’s also discussion about why the PBoC didn’t cut their medium-term lending facility. Data wise we see Australia’ s consumer confidence today, along with UK wage data, Canada’s CPI and NZ’s quarterly survey of business opinion. Plus the results of the Iowa Caucus.

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Monday 15th January 2024

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There were big falls in 2 year Treasury yields on Friday. NAB’s Ray Attrill says this can be attributed to softer than expected producer prices in the US, which feeds through to the PCE deflator number that the Fed uses as its inflation measure. So what has this done to rate cut expectations? Ray says we’re still not back to where we were in the lead up to Christmas. Inflation is coming down much more slowly in Europe. Will it be delayed further by the crisis in the Red Sea? China published weaker loans data at the end of the week, and the PBoC is expected to lower the medium-term loan rate today. We’ll also see whether there’s any response from China to the Taiwan election result whilst the US holds the first Republican Caucus, in Iowa, where Trump is well ahead in the polls.

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Friday 12th January 2024

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US inflation was a little bit of a surprise. Whilst the headline rate was expected to rise a little, it came in higher than forecast, whilst the core rate didn’t fall as much as had been hoped for. NAB’s Ken Crompton says the Fed’s super core measure is the part of the inflation picture that refuses to come down, all of which could impact the speed at which the Fed will bring rates down. Meanwhile NAB has revised the forecast for Q4 CPI for Australia on the back of this week’s November data. It provides a CPI rate lower than the RBA’s forecast, so does that mean we can expect rates in Australia come down faster? 

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Thursday 11th January 2024

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Australian inflation fell faster than expected in November. Phil asks NAB’s Taylor Nugent what this means for the rate path from the RBA. He says the monthly data is a relatively new indicator and is still volatile, so we should be cautious in interpreting the numbers and certainly there wasn’t anything to make the RBA too comfortable. We can expect a more definitive market response to US CPI later on. If the number falls below consensus and highlights potential for a faster cutting cycle from the Fed expect that to drive the US dollar lower.

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Wednesday 10th January 2024

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Markets have started the year rather cautiously. Bond yields have held up and equity markets are clearly nervous, suggesting many investors are questioning the speed of the path to rate cuts, particularly in the US. Could Friday’s strong non-farm payrolls read last Friday add to the case for delays by the Fed? NAB’s Ray Attrill suggests the markets might be too cautious. We also look at yesterday’s retail numbers for Australia and expectations for the November inflation read out this morning.

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Friday 22nd December 2023

Please note this communication is not a research report and has not been prepared by NAB Research analysts. Read the full disclaimer here.

In our final edition of The Morning Call for the year JBWeir’s Sally Auld joins Phil to look back about the surprises of 2023, and to give some of her predictions for 2024. Few expected interest rates to rise as high as they did, but even so, there was a lot of recession talk. Yet, somehow, we avoided it, with much greater expectations for a soft landing. So, is that the story for 2024? Perhaps, but Sally springs five potential wildcards on us that we should have in the back of our minds. 2024 is certainly not going to be a year low on risk. 

This is our last Morning Call of the year. Thank you for joining us each weekday, and we hope you’ve enjoyed the addition of the Weekend Edition. We’ll be back on Wednesday 10th January ready to interpret whatever the new year throws at us. 

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Friday 22nd December 2023

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Well, you could argue that if the US wants to get inflation down to 2% that its already there. Why? NAB’s Ray Attrill points out that the latest quarterly PCE read – the Fed’s preferred inflation measure – has been revised down to an annual figure that falls within their target range. The monthly number for November, out tonight, could well reinforce this argument and add more weight for rate cuts early in 2024. In other news, Joe Biden has been discussing increased tariffs on the import of EVs from China. Australia could feel the repercussions of that and could be one factor stopping the Aussie dollar reaching 70 US cents anytime soon. Today, Japan’s CPI and the latest revision to UK GDP. Just like the US numbers, could they also be a downward surprise and reopen recession speculation?

This is our last daily edition until January 10th, but this afternoon JBWeir’s Sally Auld gives her thoughts on where we’ve been this year and the prospects for 2024. To be listened to at your leisure over the Christmas break.

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