NAB Morning Call

Tuesday 28th November 2023

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It’s an in-between day, with little ion the way of economic news, but inflation data just round the corner, in the form of Australian CPI and US PCE. There were sizeable auctions of 2 and 5 year Treasuries this morning, with softer demand, but that hasn’t driven the direction of bond markets says NAB’s Skye Masters, because yields are down. Instead it adds to the mood that the Fed will cut rates, perhaps early next year. Softer US data, such as weaker new home sales and drops in employment in the Dallas Fed manufacturing index, add to the supporting evidence. Today Australian retail sales are released, and we talk through some of the findings in the latest NAB Online Sales Index.

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Monday 27th November 2023

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At the end of a quiet week we saw the US dollar fall a little further on Friday. NAB’s Ray Attrill says this reflects the expectation that there will be no further hikes from the Fed. The Aussie dollar hasn’t realised the full potential, largely because of question marks over the speed of the Chinese recovery. There was mixed economic news at the end of the week; US PMIs were a little softer than expected, particularly for manufacturing. It seems Black Friday online sales were strong, and retail sales in New Zealand and Canada were better than expected. So, will too much resilience add to inflation woes. The BoE’s Huw Pill says supply constraints continue to be the issue so they need to hammer demand down to meet it. The key number this week will be the PCE inflation data out of the US. Nobody wants to see that tick up again.

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Friday 24th November 2023

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Consolidation will continue in the superannuation industry as a way of provided better returns for members. That’s the prediction from Mercer’s Chief Investment Officer Kylie Willment, talking to Phil on the Weekend Edition. Mercer recently merged with BP Super, of course, and Kylie says they are always on the look out for other opportunities. They are also focusing more on unlisted assets, that can provide value with more predictable returns. She talks through their key areas of focus. Finally, the Achilles Heal of Australian super is how funds manage the post-retirement relationship with members. Kylie says it’s what stopped Australia getting an A+ grade in the latest Mercer CFA Institute Global Pension Index.

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Friday 24th November 2023

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Markets were relatively quiet overnight with the US off for Thanksgiving, but stronger PMI data from Europe created some interest, pushing the Euro higher, but NAB’s Ray Attrill still says German can expect to enter a shallow recession. The pound performed slightly better because it provided the only PMI number that actually indicated growth. The Riksbank surprised by keeping rates on hold and right-wing anti-EU candidate Geert Wilders won the most votes in the Dutch general election. Today US PMIs will provide a useful comparison to the European numbers, and one month out from the next BoJ meeting we’ll get to see Japan’s CPI numbers today.

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Thursday 23rd November 2023

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Australian inflation is now driven by local factors. That’s what the RBA’s Michelle Bullock said at the Australian Business Economists dinner last night. JBWere’s Sally Auld says it doesn’t sound like a central bank that’s done with interest rate hikes, and points to how we are sitting 100 basis points below our economic peers. So can we really expect to get away with just one more rate hike? Meanwhile softer data from the US, mixed, curiously, with rising inflation expectations. Oil is choppy ahead of the delayed OPEC+ meeting – Sally explains the significance of the delay. And the UK’s min-budget delivered little except a forecast for growth next year, light on business investment and heavily dependent on government consumption, whilst the Chancellor’s rhetoric promised the opposite. European PMIs are the big numbers today but trade will be light tonight as the US starts Thanksgiving.

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Wednesday 22nd November 2023

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The FOMC minutes were cagey when it came to the prospect of rate cuts. The RBA minutes were the same, with Michelle Bullock also reiterating her concerns about persistent wage inflation. And the Bank of England’s Andrew Bailey told UK politicians that markets were getting ahead of themselves when it came to pricing rate drops. Hence the mood is a little more sombre, with falls in equities and little movement in bonds. Oil has also been up and down today ahead of OPEC+ at the weekend. There are geopolitical factors at play too – a budget crisis in Germany and fears Iran is supplying ballistic missiles to Russia. Today it’ll be interesting to see if the inflation expectations from the University of Michigan survey fall back down, after their surprise lift last time.

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Tuesday 21st November 2023

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There was a big 20-year Treasury auction today, which went better than expected. NAB’s Rodrigo Catril says markets had assumed a flood of new issuance in a short week would suppress demand, but that wasn’t the case. Elsewhere, the overseas Yuan hit its highest level since early September. More positive sentiment from China is helping lift iron ore prices further, which is positive for the Australian dollar. Two sets of minutes are out in the next 24 hours – from the RBA and the FOMC. The Fed minutes were quickly outdated by the softer than expected inflation data in the US. 

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Monday 20th November 2023

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It was a quite day on Friday with very little of earth-shattering consequence to report. NAB’s Ken Crompton joins Phil to talk about just how devoid of new sit was. We did see a downside surprise in UK retail numbers but, as flagged on Friday podcast, it was a very wet month. Loil is up on the news that OPEC+ will extend its production cuts into the new year. Today is equally as quiet – if not more so – for data releases, but things do hot up later in the week with the release of PMIs, just as America sits down to its roast turkey dinner.

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Friday 17th November 2023

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Ethical investment, or ESG; it’s being talked about more and more. It seems more people want to be involved, so long as it provides the returns they expect. This week Phil is joined by Maria Loyez, Chief Customer Officer at Australian Ethical, a fund manager specialising in responsible investments. How does she see the balance between making the right choice for the planet and seeing a worthwhile return for investments by your business, your customers, or your own personal fund? Can you make money and save the planet? Yes, you can, says Maria so long as you recognise that ethical investments do not perform in the same way as an index fund. There’s also discussion on the findings in this week’s ‘2023 Responsible Investing Report’, published jointly with industry research firm Investment Trends.  

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Friday 17th November 2023

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So, after the excitement of softening inflation in the US comes concern that its being accompanied by a delayed slowdown in the economy. That was certainly reflected in some of the second tier US data, and could explain a further fall in oil prices. NAB’s Tapas Strickland says Walmart reported weak sales too in October but highlighted an expected period of deflation in the months to come. Put all the pieces together and markets are increasing the expectation for rate cuts next year. It'll be a while before the RBA cuts rates, but at least yesterday’s surprise increase in employment numbers wasn’t enough to raise the likelihood of a December hike. Instead they’ll wait for the next set of inflation numbers.

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