NAB Morning Call

Tuesday 24th October 2023

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There were no strong data releases over the last 24 hours to give markets direction and some have clearly made the bold assumption that no ground movement into Gaza is a sign that tensions are easing. As a result, we’ve seen bond yields pull off recent highs, equity markets rise, gold fall and the US dollar down. JBWere’s Sally Auld says the geopolitical uncertainty and the sell-off in bond yields has rattled investors and there’s plenty of reason to sit on your hands, which is why we are range trading, albeit with large intraday swings. Todays PMIs might give a little direction, whilst locally eyes and ears will be on Michelle Bullock, the new RBA Governor.

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Monday 23rd October 2023

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US 10-year treasuries got up to 4.996% last week – not quite making it over 5%. So, does that mean they have peaked? Phil puts the question to NAB’s Ray Attrill at the start of what could be a volatile week, as uncertainty remains over the conflict in Israel and Gaza. The key data point for Australia this week is the Q3 CPI numbers, which Ray says will be the arbiter as to whether the RBA does lift rates at the start of November. Elsewhere, the Fed’s Loretta Mester suggested one more hike should do it for the US. Then job done?

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Friday 20th October 2023

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We invited UK-based economist Vicky Pryce on to talk about why Europe was struggling with growth whilst the US was on the road to recovery? How much is down to the issue of applying a single monetary policy across a diverse range of EU member economies? How much is the fact that Europe hasn’t injected as much fiscal stimulus as the US, with its Inflation Reduction program? All of the above applies, but Vicky suggests, with inflation on the way down, the ECB, BoE and other central banks shouldn’t be delaying lowering interest rates, to enable economies to recover. Central banks need to change their rhetoric so bond yields subside, and they need to ease off quantitative tightening until a more appropriate time. A very different perspective to the IMF that has warned that easing too quickly can cause inflation to re-emerge. 

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Friday 20th October 2023

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It’s been a day that has seen sell-offs in equities, treasuries and the US dollar. So where is the money going? NAB’s Ken Crompton says some of it is still pouring into oil, as uncertainty mounts over the Israeli-Gaza war, but we’re also seeing a little diversity between the US, which continues to show signs of resilience, and Europe, where the news is less positive. Australia saw a fall in the unemployment rate yesterday, so there’s also discussion about what that means for the RBA.

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Thursday 19th October 2023

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Bond yields reached new multi-year highs overnight, with sharp rises on 10 years in the US and the UK. NAB’s Ray Attrill says, this time, it isn’t further central bank speculation driving yields higher, it’s the rising tensions in the Middle Easta and concerns about oil prices. Nonetheless, yields might be influenced by the much-anticipated Jerome Powell talk in the early hours of tomorrow morning. The RBA’s Michelle Bullock had a fireside chat yesterday – we give the lowdown on that and what to expect in Australia’s labour market numbers today.

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Wednesday 18th October 2023

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Markets are now more focused on central bank expectations, with the hope that world leaders can contain the war in Israel and Gaza. NAB’s Tapas Strickland talks through the stronger than expected US retail numbers, as inflation expectations rise. The RBA are also sounding more hawkish, with the minutes of the last meeting talking of lower tolerance for the slower return of inflation. UK CPOI today could fuel a hike by the BoE as well. But, two central banks are likely to be on hold, with Canada and New Zealand both seeing inflation come in lower than expected. Plus, which well-paid deejay is hanging up his headphones?

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Tuesday 17th October 2023

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Markets have backtracked on their measure of risk emanating from the middle east, with hopes that some sort of resolution will be brokered to avoid a regional war. NAB’s Skye Masters says it’s a response to the fact that things haven’t escalated in the last 24 hours. Meanwhile, in the world of central banks, markets are waiting in anticipation for a Jerome Powell address later in the week to see if he mirrors the suggestion from others at the Fed that higher yields could negate the need for further hikes in rates. It’s a different message from the BoE’s Huw Pill who said the question of more rises was ‘finely balanced’. Lots of data today, including US retail sales, CPI for NZ and Canada, UK wages data and the RBA minutes.

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Monday 16th October 2023

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The uncertainty surrounding developments in the Middle East is seeing a rush to safe-haven assets, including a sizeable lift in gold prices. NAB’s Tapas Strickland wonders whether many investors had been caught short, buying in on central banks’ higher for longer narrative, without factoring in the risk of geopolitical uncertainty. The Israel Gaza conflict s now being taken seriously, with sharp rises in oil as questions remain around how much of a regional war could emanate from the unrest. Meanwhile, the question remains about how well contained inflation really is? The Michigan survey showed inflation expectations rising slightly. Rising oil prices will only add to that. Plus, an important week for Australian releases, Tapas talks us through it. 

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Friday 13th October 2023

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Our super contributions are designed to ensure we have a happy retirement, so is that working? The median balance for a man in his early sixties is $212k, for a woman its $158k. When will we reach an adequate level for most to lead a comfortable life? And, as the size of Australian superannuation assets grows, where do the investments go? Phil talks to Diane Somerville, Principal for Superannuation Consulting at Deloitte Australia about the growth of Australian superannuation, consolidation within the industry and the impacts of COVID.

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Friday 13th October 2023

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US inflation came in stronger than expected, pushing yields higher and strengthening the US dollar. NAB’s Gavin Friend suggests that markets are questioning the suggestion that higher yields would negate the need for further rises. Elsewhere oil has been steadied somewhat by diplomatic efforts from the US and China. UK GDP came in weak, and there’s a wealth of China data today. Also on the podcast Phil talks to Jennifer Mackinlay, Austrade’s General Manager for Europe, about how they are flying the flag for the Aussie renewables industry.

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