NAB Morning Call

Thursday 7th September 2023

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Bond yields pushed a bit higher overnight as US Services came in a bit higher than anticipated, along with wage growth. NAB’s Gavin Friend talks through how it has been interpreted. The Beige Book is out and has soft landing written all over it, even if it is not explicitly spelt out. In the UK the BoE Governor is hinting that rate hikes are not a full gone conclusion. They didn’t happen in Canada yesterday. There’s also discussion on Australia’s GDP numbers yesterday and the trade numbers to keep across today.

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Wednesday 6th September 2023

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It came as no surprise to anyone when the RBA announced no change to rates yesterday but, as NAB’s Tayor Nugent explains, there were references to further tightening if necessary. NAB still expects there will be one more hike before Christmas. So, can Australia pull off a US-style soft landing? The Aussie dollar fell sharply yesterday, in part because of a weaker than expected Caixin Services PMI. Rising oil prices could present a threat to headline inflation rates, as Saudi Arabia an Russia confirm their production cuts will continue until December. Australia’s GDP read is expected to show modest growth today, and the US Servies ISM will, presumably, continue to support the notion of a soft-landing.

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Tuesday 5th September 2023

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Philip Lowe holds his final RBA meeting today. No press conference either. The expectation is that rates will be kept on hold for now. Bond yields have pushed a little higher, perhaps on the expectation that rates will push higher later in the year, which is NAB’s prediction. Europe saw some more soft data, along with words from ECB’s Christine Lagarde apologising for not always getting forecasts right and saying they needed to be more humble. Part of that humility was giving no indication of what t the ECB will do next. Trading was thin with the US on holiday for Monday, with share and bond markets closed.

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Monday 4th September 2023

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The number of American jobs rose in data released Friday. Normally this would be seen as a sign of a tightening labour market, but a sharp rise in those entering the labour force means the unemployment rate has actually increased, whilst wage increases have slowed. NAB’s Ray Attrill says the Fed and Joe Biden couldn’t have hoped for anything better, even if they wrote the numbers themselves. All in all it has reduced the expectations of a Fed rate hike later this month. Locally, there’s little chance of a rate rise in Philip Lowe’s last meeting at the RBA, but NAB still expects at least one more hike before the year is out. So, what data will drive that decision?

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Friday 1st September 2023

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It started out as a transitory problem driven by post-COVID supply constraints. Central banks thought it would pass. Then the mood switched and monetary tightening kicked in. But different central banks started at different times, hiking at different speeds to end up in very different places. But is monetary policy effective in an environment like this? And what about governments choosing to use fiscal stimulus measures, does that help or hinder the quest for lower inflation? Phil Dobbie talks to JBWere’s Chief Investment Officer Sally Auld about the variety of approaches being taken to tackle inflation. Importantly, how does Australia fare? Her views on that are certainly worth a listen.

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Friday 1st September 2023

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Speaking in Cape Town the Bank of England’s Huw Pill has likened their policy approach to Table Mountain, with interest rates remaining flat for some time before falling away quickly. So, does he mean they’ve reached the summit. It seems likely that the ECB is still in the cable car on the way up, with inflation remaining persistent. NAB’s Ken Crompton says markets have priced in only one more rise, which is a bit optimistic he suggests. The Aussie dollar has been helped by positive capex figures locally yesterday, together with more positive signs from China, including an improvement in PMIs. The key number today, of course, is non-farm payrolls for the US. The markets will be very responsive to any surprises.

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Thursday 31st August 2023

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There seems to be lots of good news in data from the US lately if the assumption is that soft data is good right now. NAB’s Rodrigo Catril says we’ve been seeing a bit of that this week, including a downward revision in US GDP and the latest ADP jobs numbers reaffirming that the tightness in the labour market is continuing to ease. It’s a different story for Europe, where inflation remains persistent. The full Eurozone CPI number is published today, but data from Germany and Spain shows the ECB has more to do. Locally, the RBA is likely to be on hold next week after yesterday’s softer CPI read, but don’t assume inflation has gone away or that the RBA won’t hike again. As we explain in today’s episode.

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Wednesday 30th August 2023

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Job openings declined more than expected in the latest data from the US. That’s seen bond yields drive lower as investors hope this slight weakening in the labour market will see off any further hikes by the FOMC. NAB’s Taylor Nugent says it’ll have to be confirmed with the non-farm payrolls numbers on Friday night. The ADP employment numbers later today have been a notoriously unreliable indicator lately, but markets are still likely to respond if the number falls outside expectations. Locally, Australia’s CPI data is out today, ahead of the RBA next week. Taylor talks through what to look out for in today’s numbers.

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Tuesday 29th August 2023

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Australian retail numbers were a little higher than expected last month, but NAB’s Ray Attrill says the Matildas Effect will be partially responsible for that. Generally, though, the trend is weaker, particularly given the rising population base, so there’s no reason to expect the RBA to see it as a sign of stubborn resilience in consumption. There’s some discussion on the podcast about how signs are showing the opposite, here and in the US. China has announced measures to encourage extra investment, but markets lost their initial enthusiasm fairly quickly. New Zelaand meanwhile, has had its report card from the IMF and has announced plans to cut government spending but, as Ray suggests, not in any meaningful way.  

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Monday 28th August 2023

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If markets were hanging out for some unique wisdom from any central banks at Jackson Hole they would have been disappointed. All it did was dismiss any hopes of a more dovish take from Jerome Powell and his compatriots. NAB’s Skye Masters says the focus on Wyoming, meant less attention was given to the University of Michigan Inflation Expectations survey, which has been heading higher for the last two months. “That stickiness is inflation is a little bit concerning”, she says. With Jackson Hole behind us, the focus is now on a week rich in important data, including Australian retail sales (today) and CPI (Wednesday), and US payrolls numbers on Friday.

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