Monday 3rd April 2023

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Inflation is showing signs of slowing in the US, with a lower than expected Core PCE deflator read on Friday. NAB’s Tapas Strickland says this was the primary reason for a fall in bond yields on Friday. But models pointing to lower headline inflation driven by lower energy costs will be in need of a revision today, as OPEC+ announce a daily 1.2 million barrel cut in oil production from next month. The announcement was unexpected. It’ll add pressure to European economies, where core inflation rose slightly last month. On todays podcast we look ahead to the RBA and RBNZ this week, and the consequences of the Aston by-election result over the weekend.

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Friday 31st March 2023

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US banking stocks took a hit overnight as central bankers warned of a credit crunch and Joe Biden called for reforms to regulations. Other shares rose though, even though weekly job numbers showed continued labour market tightness. In Australia job vacancies have fallen a little and NAB’s Taylor Nugent talks about how the bank has revised its call on the rate path for the RBA. Today the focus will be on inflation in Europe and the US.

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Thursday 30th March 2023

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Markets were calm overnight, but NAB’s David de Garis says that doesn’t translate to confidence. The market is still wondering what is round the corner, but he points out that a lot of the concern has been contained within the US. Meanwhile inflation in Australia came in lower than expected yesterday. Does that mean the job is done for the RBA? For the rest of the week inflation numbers will garner the most attention, starting with Germany and Spain today, and the US and the Eurozone tomorrow.

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Wednesday 29th March 2023

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There wasn’t much happening yesterday and overnight, so markets were relatively calm. The US senate banking committee quizzed the regulator over banking collapses and perhaps reassured markets that the future looked more peaceful. But JBWere’s Sally Auld says we can’t assume nothing else will break as capital is repriced with rising rates. Australian inflation data is released today after a small positive move up in retail sales in February. It’s the last piece of data to feed into the RBA decision next week, with the evidence leaning to a lift either next week or next month.

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Tuesday 28th March 2023

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Banking fears have subsided somewhat overnight, with a buyer found for Silicon Valley Bank and less concern, for whatever reason, over Deutsche Bank. Hence, equities have risen and so have bond yields, as focus returns on how far central banks will go. Quite a bit further if you listen to the likes of Isabel Schnabel at the ECB or Andrew Bailey at the BoE. But markets are still pricing in cuts later this year. NAB's Ray Attrill talks through why the discrepancy between central banks and markets and makes a bold prediction on what the RBA will do next week. Today’s retail numbers and inflation later in the week could still influence the outcome, of course.

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Monday 27th March 2023

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Uncertainty returned to markets on Friday. NAB’s Rodrigo Catril says concerns over Deutsche Bank was the source of volatility for equity markets in Europe and in early trade in the US. It’s not clear whether there is anything to be concerned about - Olaf Schulz, the German Chancellor, says not. Meanwhile, central banks are determined to continue on their counter-inflationary path of rate hikes, with some I the Fed expecting a few more of them before they are finished. So, what of the RBA? We get the monthly inflation data and retail sales this week, but it seems likely they will raise next week.

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Friday 24th March 2023

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Three more hikes in a day. Even though we reckoned yesterday that the Bank of England wouldn’t do it, overnight they did lift rates. NAB’s Rodrigo Catril says there is no hiding from a rising inflation rate, even if it proves to be a temporary blip in a more gradual move down, it’s still very high. He suggests it could serve as a reminder that the RBA also has to keep its eye on the ball. Only significant signs of a weakening economy will change the attitude of central banks, who have separated out their monetary goals from banking pressures. Todays PMIs will give a snapshot of how some of the leading economies are faring.

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Thursday 23rd March 2023

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As envisaged, the FOMC meeting has agreed to a 25bp rate hike in the US, with Jerome Powell indicating there is more to come. But, as discussed with NAB’s Gavin Friend, the Fed chair has suggested that it’s possible that credit tightening from banks, after the recent turmoil, will do some of the work for them. Next, it’s the Bank of England. It seemed likely that there would be no move but could that change with a surprise increase in UK inflation announced yesterday.

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Wednesday 22nd March 2023

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Markets seem to have cast off concerns about banking risk contagion. NAB’s Skye Masters says market confidence has been helped by reassurances from Janet Yellen that the US federal government is “resolutely committed” to mitigating financial stability risks. Authorities are also investigating ways to remove the upper cap on deposits covered by FDIC insurance. That’s all helped to boost equities and drive strong increases in bond yields. The question remains, has there been any lasting impact on the speed and destination for central banks? A 25 basis point hike is well-priced for the FOMC tomorrow, but the revised dot-plots will be of more interest. Catch all the news on that in tomorrow morning’s podcast.

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Tuesday 21st March 2023

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Markets were relatively calm on the first day after the announcement of the Credit Suisse-UBS deal. One risk of contagion was in the AT1 (addition tier one) bond markets, as Credit Suisse wrote their $17 billion value down to zero, leaving bondholders with nothing. NAB’s Taylor Nugent says there seems to be some acceptance that this is a Swiss-only story, and AT1 bondholders would count before equities in the pecking order in the case of other banking right downs. So, now, as markets seem to be accepting that the banking crisis is contained, does that mean central banks – like the Fed this week – can push higher on rates?

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