NAB Morning Call

Wednesday 27th July 2022There gave been sizeable falls in US equities, mainly stemming from a cut to Walmart’s profit estimates. NAB’s Tapas Strickland explains how the rising price of food is leaving less money for people to spend on discretionary items, with more price increases to come. Meanwhile, Europe is hoping to cut gas consumption as Russia halves the supply of gas down the Nordstream pip...

Tuesday 26th July 2022From Wednesday one of two operating turbines on the Nordstream pipeline will be switched off, effectively halving the existing supply, taking gas provision to Europe down to 20 percent of full capacity. There’s no clear evidence that Europe has a coordinated plan to deal with reduced supplies, as EU member nations argue over the equality of calls for reduced consumption. NAB’...

Monday 25th July 2022PMI numbers were much weaker than expected on Friday, particularly for US services, which fell quickly into a contractionary read of 47.1. The composite read for Europe also fell below 50. Will this mean central banks ease off the rate-hike pedal a little? The opposite is expected in Australia. Rodrigo Catril explains how NAB believes the lower-than-expected unemployment rate...

Friday 22nd July 2022As we predicted the ECB lifted interest rates by 50 basis points yesterday, up to zero percent. NAB’s Ken Crompton says this was more than markets had expected and explains there was a short-lived reaction on the bond markets. There was also disappointment in the central bank’s anti-fragmentation tool, which now has a name and a new acronym! Right now it’s light on detail and...

Thursday 21st July 2022There’s some confidence in the markets this morning, despite what seems to be a compendium of bad news for Europe. NAB’s Gavin Friend says gas prices have fallen because Vladimir Putin has indicated that they will meet the reopening deadline for the Nordstream pipeline, but it’ll be at only 20 percent of its capacity. As discussed on today’s podcast, that might be enough to...

Wednesday 20th July 2022Markets are preparing for a big rate rise by the ECB tomorrow. NAB’s Rodrigo Catril says they are hiking when the expectation is that the Nordstream pipeline won’t fully reopen for some time, if at all. “No energy means no growth”, he says, with the likelihood that Europe is heading for a major recession. Is the central bank prepared for that? Politically, can Europe cope w...

Tuesday 19th July 2022The resumption in gas supplies to Europe could well be delayed, but perhaps Russia has a legitimate reason. A bigger move this morning has been the rise in the price of oil which NAB’s Ray Attrill will in part be down to Saudi Arabia’s refusal to increase supplies. Equities have fallen slightly, in part because of reports that Apple are downgrading their hiring and growth pla...

Monday 18th July 2022US equities rallied on Friday as data releases showed some resilience in the economy, but is it enough to stave off recession? Probably not, says NAB’s Tapas Strickland on today’s podcast, but it will be enough to put to bed any ideas of a 100 basis point rate rise by the Fed this month. Also today, China’s fall in GDP was worse than expected, with continuing lockdowns making...

Friday 15th July 2022In a week of surprises (US CPI and labour market data, Canada’s interest rate rise, China’s lockdowns and the US$-Euro parity), yesterday saw a sharp fall in Australia’s unemployment rate. ‘It was our turn to surprise’, says NAB’s Taylor Nugent on this morning’s podcast. Unemployment has now fallen to a level below what the RBA was forecasting for next year, so does this mean...

Thursday 14th July 2022US inflation has picked up more than expected, rising 9.1% in the year to June. The Fed’s Raphael Bostic said later that “everything was in play” when it came to a July rate rise. NAB’s David de Garis says, it doesn’t take a genius to figure out what he meant. The Bank of Canada (BoC) had just raised rates by 100 basis points, more than had been expected, so had that paved t...

Wednesday 13th July 2022There’s no let-up when it comes to the downward expectations around the health of the global economy. US bond yields inverted further, suggesting a heightening of recession expectations. Oil prices fell sharply lower, suggesting demand is expected to fall further. US small business owners who expect conditions to improve in the next six months fell to minus 54%, the lowest...

Tuesday 12th July 2022There’s a more cautious tone in the markets today, with US equities falling, bond prices rising, and the US dollar continuing on the up and up. Sentiment hasn’t been helped today by more lockdowns in China as COVID cases flare up. Ironically, Yuan loans have increased a fair bit. NAB’s Tapas Strickland says this suggests, perhaps, that the economy will pick up once COVID case...

Monday 11th July 2022It is a bit weird that positive US jobs data would be seen as heightening the expectations of a recession, but that seems to be the case. As NAB’s Ray Attrill explains on today’s podcast, the strength in the non-farm payrolls numbers of Friday did nothing to ease expectations that the Fed will continue with a rapid pace of rate hikes, and that could easily lead to a recession...

Friday 8th July 2022There have been slightly less recession concerns in the US overnight, with equities and commodity prices pushing higher and 10 year Treasury yields pushing back over 3%. Jobs have been front and centre, with weekly jobless claims not moving far, and non-farm payrolls adding more data to the picture later tonight. It’s been a torrid day in UK politics, with Boris Johnson resigni...

Thursday 7th July 2022The FOMC minutes are out, pointing to significant risk if inflation isn’t nipped in the bud. Markets are taking this as a sign that the Fed will lift rates more quickly, starting with a 50-75 basis point hike at the next meeting. This has added to concerns about the Fed inducing a recession, yet equity markets continue to climb. Phil asks NAB’s Ray Attrill whether the minutes...

Wednesday 6th July 2022The Euro is getting closer to parity with the US dollar. In today’s podcast NAB’s Skye Masters points out that the Markets team had forecast parity by the end of the year, but it looks like it wil happen much sooner than that. The big moves overnight, including a sizable fall in oil and copper, show recession fears are front and centre, even though there’s been very little d...

Tuesday 5th July 2022The RBA meets today and the NAB expectation is that they will lift interest rates by 50 basis points. Phil asks NAB’s Tapas Strickland whether, by seeing inflation rising slower than many other parts f the world, whether we’ll see a lower peak and hence, less work needed by the RBA. There seem to be lots of hope lately that inflation might be showing signs of peaking, but the...

Monday 4th July 2022Recessions fears continue to rise, pushing bond yields lower. As NAB’s Rodrigo Catril explains, the ISM manufacturing report in the US on Friday added to the fears, showing a contraction in new orders. It’s no longer an issue of supply constraints, demand is also softening. Yet inflation continues to rise. In Europe it grew from 8.1% year on year in May, to 8.6% in June. A big...

Friday 1st July 2022Yields are lower in the US and Europe as recession fears grow, prompted by weaker than expected personal spending in the US, with a very strong chance of a negative Q2 GDP, which would mean the US economy was in recession. Whilst you might hope less consumption would mean falling inflation, NAB’s Tapas Strickland days there’s little sign of it yet. It wasn’t just the US receivi...

Thursday 30th June 2022Markets are confused as to where the global economy is heading. If investors were looking to the ECB Forum in Sintra for clarification, they will have been disappointed, with Jerome Powell confessing that recent experience has shown ‘how little we understand inflation’. NAB’s Gavin Friend says it doesn’t inspire you with confidence, when central banks are feeling their way....

Wednesday 29th June 2022US equities switched direction overnight. NAB’s Taylor Nugent says it was a swift response to a weaker than expected consumer sentiment read in the US, with a particularly sharp fall in the expectations component. European yields are markedly higher today as Christine Lagarde spoke up the task at hand for the ECB, even though she continues to outline a hike of just 25 basis...

Tuesday 28th June 2022The volatility of the past few months means there is likely to be a greater need for rebalancing at the end of the quarter this time, says NAB’s Rodrigo Catril. Hence, we have seen a mixed picture overnight, with equities down, yields rising, the Aussie dollar suffering another fall and oil and iron ore rising in price, but each for differing reasons. Yet the overarching pict...

Monday 27th June 2022These are strange times. Market sentiment improved at the end of last week because of weaker consumer sentiment and a downward revision in consumer inflation expectations. The hope is this means that central banks will need to do less to curb inflation, which is reducing recession fears. But as NAB’s Ray Attrill says, that could all change tomorrow. Or today. The war in Ukrain...

Friday 24th June 2022There have been big movements in bond yields overnight. NAB’s Ken Crompton says there’s been a reaction to weak PMI data from Europe and the US. There were promising signs, though, particularly in Europe were rising inventory numbers suggest demand is softening and prices are weakening, which could lessen the need for aggressive hikes by the ECB. Nothing, it seems, will stop t...

Thursday 23rd June 2022You take whatever you want from a senate hearing, so there have been mixed reviews of Jerome Powell’s performance in front of the Senate Banking Committee. Some picked up on his claim that the US economy was in a strong position, whilst others focused on his warning that a recession was a ‘possibility’. Phil asks NAB’s Gavin Friend if that’s why we’re seeing sentiment split,...