NAB Morning Call

Monday 1st March 2021Friday saw a reversal in the bond sell-offs earlier in the week, seeing 10 year yields in the US falling back top 1.4%. Phil Dobbie asks NAB’s Rodrigo Catril whether the RBA can ignore this volatility this morning, particularly as they were arguably slow to respond last week, eventually buying up $7 billion of bonds. What impact will Biden’s $1.9 trillion stimulus package have, even if it does get whittled down by $400 million or so this week? And there’s rising concerns about inflation, particularly in Europe. If we are to keep volatility under control we really need to see data which shows a gradual economic improvement, without upside surprises. Hosted on Acast. See acast.com/privacy for more information.

Friday 26th February 2021Despite the increasing dovishness of central bankers the markets have been selling government bonds like they are going out of fashion. That’s resulting in huge increases in bond yields in around the world, but particularly in the US and Australia. It’s the pace of the move in yields that’s grabbing attention, says NAB’s Gavin Friend in London. Some are also expecting inflation sooner rather than later, evidenced by a rise in yields on shorter term US treasury notes. Spending data tonight could add fuel to this burst of optimism if it suggests there’s more pent-up demand in the US economy. Hosted on Acast. See acast.com/privacy for more information.

Thursday 25th February 2021As the reflation trade continues to push bond prices lower and commodities higher, central bankers are fighting amongst themselves as to who can sound the most dovish. That’s helping push equities a little higher this morning. The Fed’s Jerome Powell and BoE’s Andrew Bailey were both in front of parliamentary committees overnight, each suggesting rates would stay low and any rising inflation was transitory for now. NAB’s David de Garis says the RBNZ was toeing the same party line, suggesting the outlook remains highly uncertain. Today the weekly claims numbers for the US will highlight the strength (or otherwise) of the jobs recovery. By the way, for those who think this is ridiculous title for an episode, doves do fight each other, sometimes to the death, but normally when they are trying to impress hens, not water down inflationary fears. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 24th February 2021Many believe the RBA didn’t go far enough on Monday, buying up a $1 billion of bond purchases in the face of sharply rising bond yields. NAB’s Tapas Strickland points to speculation in the AFR today that the RBA will come out swinging today and tomorrow, buying up more state and federal government debt to make up for the shortfall. Elsewhere, US equities are generally down, driven largely by tech stocks and other rotational shares. They did get a bounce, however, when Jerome Powell gave his testimony to the senate, reiterating that the Fed was still a long way from its targets. It was a similar party line from the Bank of Canada overnight. Today, the RBNZ is the next central bank of the marks, and they’ll be treading a careful line, trying not to inflate the Kiwi dollar, but with the global reflation trade there’s not much they can do to stop it. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 23rd February 2021Australian 10 year bond yields have nudged 1.65 percent for the first time since May 2019. NAB’s Rodrigo Catril says the market was clearly disappointed by the RBA’s resolve to deal with the sharp rise in yields. Meanwhile, US Treasury yields have also been on a roller coaster. It’s been the same situation in Europe, although the yields have dropped back now. The COVID bounce back story continues to push commodities higher too, which is why we’re seeing the Aussie dollar edging even closer to the 80 US cent mark. The pound has also had a strong session, in part perhaps because of Boris Johnson’s lockdown escape route, although his chosen path is very slow and cautious. Hosted on Acast. See acast.com/privacy for more information.

Monday 22nd February 2021There was a big rise in the Aussie dollar and the pound on Friday, both reaching multi-year highs. NAB’s Ray Attrill says rising commodity prices are the single biggest influence on the Australian dollar and the prediction that it could reach 80 US cents by midways through the year could be realised before the end of the first quarter. The pound meanwhile is going strong on an expedited vaccine rollout program, which offset the poor retail sales numbers last week. In the US yields rose sharply. Inflation continues to be a concern, although the technical indicators are that this concern is easing. Hosted on Acast. See acast.com/privacy for more information.

Friday 19th February 2021There have been big falls in US equities overnight after higher than anticipation jobless claims, showing its not a smooth recovery for the US. Bond yields on both sides of the Atlantic suggest there are inflation concerns but, as NAB’s David de Garis suggests, it’s difficult to draw definitive conclusions when most inflation signs have been in the goods sector where there have been significant supply disruptions. Markets seem most enthused about the UK right now, where 16.5 million people have been jabbed and Boris Johnson will be announcing his escape plan from lockdown on Monday. Hosted on Acast. See acast.com/privacy for more information.

Thursday 18th February 2021There was a strong bounce back in US retail sales in January, helped by the arrival of $600 into most people’s bank accounts. NAB’s Gavin Friend says this is a clear sign of the positive impact of the government’s fiscal stimulus, something that won’t be lost in the negotiations for the next round of support measures. Inflation continues to be a debating point in the US, but the UK’s CPI data today shows it’s far from being an issue there just yet. The Bank of England continues to talk up the UK recovery, helped by the high level of personal savings. We also look at the latest FOMC minutes, out only moments ago. And at home, we can expect a strong increase in jobs, helping Australia claw back the losses made last year. Tonight it’s US jobs numbers and housing starts. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 17th February 2021Equities were mixed in the US overnight, but the S&P did manage to claw out a new record high, whilst the NASDAQ fell. The biggest movements, though, have been in treasury yields, particularly in the longer end of the curve. Phil Dobbie asks NAB’s Rodrigo Catril where the money is going, if it is leaving government bonds and not piling into equity markets. The new high for Bitcoin might be part of the answer, as the ECB’s Gabriel Makhlouf likening it to Tulip speculation in Holland 300 years ago. US retail sales and the FOMC minutes are two highlights over the next 24 hours, along with the UK’s inflation numbers. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 16th February 2021America has been off work for Presidents Day, but that hasn’t stopped markets optimistically looking to a world where COVID-19 isn’t centre stage. The reflation trade continues unabated. Overnight we saw the US dollar drift lower, the Aussie climbing and the pound showing strength as the vaccine rollout continues at pace. NAB’s Ray Attrill says the weakness in the Yen was also the result of good news, a higher than anticipated Q4 GDP result for Japan. One downside is the continued rise in oil, which has been accentuated by increased demand from blisteringly cold weather in Texas. Today, Australia’s weekly wages and payrolls data will be the most anticipated numbers locally. Hosted on Acast. See acast.com/privacy for more information.

Monday 15th February 2021There’s absolutely no surprise that Donald Trump has been acquitted in Washington, which means he could stand for office again. It also means a number of Republicans felt their voters are still aligned to the former President, so will that make life harder for Joe Biden to drive the agenda? That’s a question Phil Dobbie puts to NAB’s Tapas Strickland this morning. Plus, a rise in equities and bond yields, driven by strong earnings and stimulus hopes, mixed with inflation concerns. Which will retreat first? It’s gong to be a quiet day today in international markets with the US on holiday, along with China and Hong Kong. Hosted on Acast. See acast.com/privacy for more information.

Friday 12th February 2021It’s been a relatively quiet 24 hours with only slight market moves, with traders absorbing the dovish outlook presented by Jerome Powell at the Economics Club this time yesterday/. NAB’s Gavin Friend says the Euro has held its own despite EU forecasts which have downgraded growth to 3.8 percent, from 4.2 percent. They expect the UK to do somewhat worse, not just because of the virus but also Brexit. Remember that. US China relations won’t immediately return to pre-Trump levels, with Jo Biden hooking up on the phone to President Xi, making it clear that human rights remains a concern and tariffs would remain in place. Hosted on Acast. See acast.com/privacy for more information.

Thursday 11th February 2021Markets have been fairly subdued on the back of soft inflation numbers in the US, and as investors hold off for any revelations from Jerome Powell as he addresses the Economic Club of New York. As it turned out he echoed the words of the Riksbank Governor – central banks, it seems., are in no rush to pull back on purchases or raise interest rates until full employment has returned. They’ll even let the economy run hot for a while to ensure lower paid jobs also return. But, as NAB’s David de Garis explains, inflation seems a way off yet, with soft numbers from the US and China. But metal prices are indicating an expectation that demand will pick up soon, however, with oil adding to its post-pandemic high. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 10th February 2021The Euro gained on two fronts overnight. First, Super Mario Draghi looks set to run the Italian government, and is likely to announce his cabinet today. Secondly, we’ve seen a sharp rise in credit growth in China. NAB’s Ray Attrill says this extra juice to the Chinese economy has helped the Euro, simply because Germany will benefit from export demand fuelled by credit. Meanwhile, inflation numbers are out for the US later today. Phil Dobbie asks whether a higher number could add to the concerns that the stimulus package, it the lands when the economy is recovering, jobs are returning and savings are being spent, could overheat the economy. A nice problem to have, perhaps. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 9th February 2021Janet Yellen shrugged off concerns about the Biden stimulus package unleashing inflation on the US economy. As NAB’s Tapas Strickland discusses on today’s podcast, it continues to be the stumbling block for the deal and inflation talk has influenced markets for another day. As an interesting aside, Elon Musk has announced Tela will buy $1.5 billion in Bitcoin, and will accept Bitcoin payments for cars in the future. Vaccines continue to be rolled out at speed in the US and the UK, and there is positive evidence from Israel that its working, although doubts remain about the efficacy of the Astra Zeneca vaccine against the South African strain. And WA is the envy of the world, heading to an election next month with a budget surplus! Hosted on Acast. See acast.com/privacy for more information.

Monday 8th February 2021Friday’s non-farm payrolls numbers in the US surprised on the downside. NAB’s Rodrigo Catril says a big downward revision to the December numbers also disappointed. The good news is that this softer set of numbers adds impetus to Joe Biden’s drive to push through his $1.9 trillion stimulus package. One sticking point is concerns, even from some Democrats, about whether this extra money injected into the economy will be inflationary. The steepening yield curve is pointing to heightened inflation expectations. In other news over the weekend Mario Draghi has managed to secure support in Italy, whilst news is mixed about the efficacy of some vaccines to the newer strains of the virus. Plus, a look at the data highlights to look out for this week. Hosted on Acast. See acast.com/privacy for more information.

Friday 5th February 2021Today’s moves reinforce the emerging story of two destinies. The UK and the US are well ahead of Europe on vaccine rollouts, and that seems to be the major focus of markets right now. The pound was also helped by a very hawkish stance taken by the Bank of England governor, who is expecting a strong recovery in the second half of the year driven by record savings. NAB’s Gavin Friend says this is all a change in the base case from the beginning of the year when it was assumed the US would be at the back of the recovery queue. Locally there will be a lot of interest in RBA Governor Philip Lowe’s parliamentary testimony, particularly as the AFR today leads on speculation of a raging bull in stocks and housing driven by the expectation of continuing low interest rates. Hosted on Acast. See acast.com/privacy for more information.

Thursday 4th February 2021New Zealand’s labour force data yesterday showed a strong fall in unemployment, possibly down to NAIRU levels. Phil Dobbie asks NAB’s Ray Attrill whether this means inflation could soon emerge and does this mean the RBNZ is the first central bank to seriously think about a post-pandemic rate rise? It’s a very different story in Australia, with Philip Lowe yesterday reinforcing the dovish tone set by the RBA on Tuesday. Strong US data and reflation expectations have pushed oil to the highest level since the pandemic began, even as US reserves fell less than expected. And Mario Draghi is back on the scene. He has accepted an invitation to form government in Italy and there’s been a sharp reaction in local equities and bonds. Hosted on Acast. See acast.com/privacy for more information.

Wednesday 3rd February 2021All eyes and ears will be on Philip Lowe’s speech today, following the very dovish outlook from the RBA yesterday. Despite our expectation on yesterday’s podcast that they would taper their QE program, NAB’s Rodrigo Catril explains how they are extended it by another $100 billion, even though the economy is doing well and the fiscal position is improving. It was a big surprise, he says. In other news, the markets have returned to whatever is normal these days, as the influence of Redditt day traders subsides, for now. There are lots of services PMI numbers today which will give a good indication of how Europe, China, the UK and USA are travelling. Hosted on Acast. See acast.com/privacy for more information.

Tuesday 2nd February 2021In normal times an episode like the Reddit induced short squeeze would eventually see markets return to normal. Normal today, of course, is a market driven by COVID-19 news, whether it’s the valuation of stay-at-home stocks like Amazon and Apple (both due to report tomorrow), or the latest vaccine rollout news. NAB’s David de Garis says the market is also getting more interested in the inflation story, after a big rise in the prices paid element of the US ISM manufacturing numbers. Today, the RBA meets. The question is, what will they do about QE – will they extend it, and if so, by how much? Hosted on Acast. See acast.com/privacy for more information.