NAB Morning Call

Tuesday 17th May 2022There’s been a fair bit of volatility in equity and bond markets overnight. Stocks are generally down after swings back and forth through the session. NAB’s Ken Crompton says there’s a continuing tension between the Fed talking up rate rises and whether that will prompt a recession. The data flow hasn’t offered anything encouraging. China’s retail sales were well down the NY S...

Monday 16th May 2022There was a slight reversal in sentiment on Friday, with the US dollar losing ground, equities climbing and bond yields rising. NAB’s Tapas Strickland says news of the easing of lockdowns in Shanghai this week might have provided an excuse for this switch around, but news over the weekend could make this change in direction very short lived, with China relinquishing its staging...

Friday 13th May 2022US equities continue to take a hit as inflation concerns continue and two of the biggest contributors – the war and China lockdowns – show no signs of abating. The war won’t go away, with Sweden and Norway now pushing for fast-tracked NATO membership. Reports suggest Beijing is now significantly in lockdown, which could further damage the Chinese economy and foreign trade. Here...

Thursday 12th May 2022US inflation numbers didn’t fall as much as hoped, in fact the core number is up, making the job for the Fed that little but harder. There’s been a sharp response on the share markets, particularly for tech stocks, but less of a reaction in the bond markets. On today’s podcast NAB’s Skye Masters says there’s been a flattening of the yield curve, suggesting that the expectatio...

Wednesday 11th May 2022For a while today US shares were pushing higher, with tech stocks leading the way. Then as market close neared, prices started to fall and gains were effectively halved. NAB’s Rodrigo Catril says he is sceptical about hopes of a rebound, because the headwinds remain, particularly continued lockdowns in China, which will have a lag impact on the rest of the economy. How much...

Tuesday 10th May 2022Markets are clearly concerned that there will be no soft-landing. There’s the big fear that rate rises won’t cut demand enough to compensate for inflation driven by supply chain disruption. The result, we’re seeing inflation expectations remaining high, stocks taking big hits and the US dollar possibly the only safe haven there is. So, what will turn this situation around? NAB...

Monday 9th May 2022Equity markets continued their falls on Friday, driven by concerns that the FOMC will let the economy slip into recession if it’s needed to keep inflation under control, just as the BoE warned last week. NAB’s Tapas Strickland says some Fed speakers have suggested a faster rate of tightening will be needed if supply chain difficulties aren’t corrected in a hurry. Given the China...

Friday 6th May 2022Yesterday, as Jerome Powell gave the post-FOMC press conference, the US dollar strengthened, equities shot up and front-end bond yields fell sharply. Today, there’s been a swift reverse. The dollar is the highest in years, 10-year Treasuries are well over 3% and the share market has seen one of the biggest turnarounds ever. Does this suggest markets have a growing fear of a hard...

Thursday 5th May 2022The FOMC announced a 50 basis point rate rise for the US. As NAB’s Skye Masters notes in today’s podcast, the market response was fairly muted until Jerome Powell gave his press conference shortly afterwards. One comment, that they were not contemplating a 75-basis point rise, sent bond yields diving lower and equities shooting higher. Skye says markets had priced well ahead f...

Wednesday 4th May 2022On today’s podcast NAB’s Ivan Colhoun talks through the RBA’s higher-than-expected rate hike yesterday. Taylor Nugent adds that it was clearly more than expected, given the rise in front-end bond yields after the meeting, buoyed on by more hawkish rhetoric from the RBA’s Governor Lowe after the meeting. Next it’s the FOMC, early tomorrow morning, with a 50 basis point rise st...

Tuesday 3rd May 2022US 10-year Treasury yields snuck over three percent overnight, albeit briefly. But NAB’s Ray Attrill says this could be the psychological baseline that sees rates grow higher. The latest ISM showed a slowing growth in US manufacturing, the result of lockdowns in China, but the Fed is still expected to push ahead with a significant rise later this week. Before that, the RBA meet...

Monday 2nd May 2022Last week finished with stocks well down in the US, particularly amongst high-growth tech-stocks. The reason, growing inflation concerns. NAB’s Rodrigo Catril says a 50-basis point hike from the Fed is very likely later this week, with growing market expectations that it could be followed by a 75-basis point rise next month. Meanwhile, there were further signs of growing inflati...

Friday 29th April 2022The US delivered a sharp fall in GDP in the first quarter. It wasn’t expected and could naturally spark fears that recession could be coming to the US sooner rather than later. But NAB’s Tapas Strickland says ‘beneath the hood’ the numbers showed that the US economy was still performing relatively well, with the numbers dragged down by a larger negative trade balance and lowe...

Thursday 28th April 2022Australian inflation rose more than expected yesterday. NAB’s Ivan Colhoun said it didn’t come as a complete surprise. NAB’s Business Survey has been showing rising input costs, and its likely inflation will rise till further in the next quarter. All that points to a high likelihood that the RBA will lift interest rates next week. Elsewhere, markets have had a temporary doe...

Wednesday 27th April 2022Big market moves today, with US shares plummeting, bond yields also falling, and commodity prices rising sharply. European gas prices shot up on the news that Russia intends to turn off gas supplies to Poland and Bulgaria almost immediately, for not paying in Roubles. Whilst Europe debates whether they should ban buying Russian gas, perhaps the decision will be made for th...

Tuesday 26th April 2022There’s been a strong risk-off sentiment to the start of the week. NAB’s Taylor Nugent says equity investors belatedly “got the memo” on the Fed’s front-end loading for rate rises. Fears of more lockdowns in China, including Beijing, have added to the uncertainty, even though the fatality rates are low in comparison to many opened-up western nations. It seems China’s zero-CO...

Friday 22nd April 2022Markets are a little easier to understand today. Bond yields are back on the rise, given inflation expectations and more hawkish rhetoric from central banks. That’s hit equities. NAB’s Ken Crompton agrees that it’s a more text-book response to what we have been seeing, with equities and yields rising in tandem. There have been particularly strong moves for front end yields of...

Thursday 21st April 2022Bond yields have fallen sharply overnight, but that doesn’t mean inflation expectations are going away, or does it? NAB’s Taylor Nugent says the Fed’s Beige Book, out overnight, highlights some examples of how inflation might be nearing its peak, but there are plenty to suggest otherwise. For example, Canada’s CPI and German PPIs, two sets of numbers showing prices are stil...

Wednesday 20th April 2022It’s not something that will continue for long, but US bind yields have risen sharply today, and so have equities. Which one will give in first? Equities have risen because of strong earnings results but, as NAB’s Ray Attrill observes in today’s podcast, there’s still a long way to go. Bond yields are rising as Fed speakers up the ante on the path of interest rates, with o...

Tuesday 19th April 2022There’s a fundamental difference in the approach of the ECB and the Fed, as NAB’s Tapas Strickland explains on today’s podcast. Whereas the Fed is focused on inflation, the ECB is also concerning itself with growth. Could we see rising prices curtail that growth faster than anticipated? What about rising rates. The IMF has warned that rising rates will drive deleveraging tha...

Thursday 14th April 2022Despite 50 basis point hikes by the Bank of Canada and the RBNZ over the last 24 hours, bond yields haven’t moved a great deal. NAB’s Gavin Friend says the market has taken a bit of a breather, which has offered a reprieve for stocks, with the NASDAQ climbing 2 percent at close. The path is certain for Canada and New Zealand, but it’s a less clear direction for the ECB, whi...

Wednesday 13th April 2022US inflation rose as expected, but there’s still been a reaction in the bond markets. NAB’s Taylor Nugent says investors latched onto the core CPI read coming in slightly softer than expected or feared. The subtly of the change wasn’t picked up by equity markets which fell, pushed lower by rising oil prices and the realisation that inflation is still here and could get wor...

Tuesday 12th April 2022US bond yields continue to career higher. ‘IT was another blistering night’ says NAB’s Tapas Strickland, with 10-year Treasury yields reaching a three-year high. With no new news, he says, it’s a continued reaction to the hawkish Fed agenda. But could it all backfire? The Fed has never had successive 50 basis point rises. There are still concerns that they could spark a rece...

Monday 11th April 2022Although there’s clearly volatility in markets, NAB’s Ray Attrill says the common thread is that yields are still rising. Even if the inversion in the curve has dissipated, the fact remains 10-year yields are at multi-year highs as inflation fears grow and central banks respond. Food prices have risen almost 13 percent in one month, even worse if you cook with vegetable oil....

Friday 8th April 2022As bond yields continue to rise, particularly in the US, it seems there’s not much impact from all the hike talk on consumer spending just yet. Consumer credit numbers in the US shot up in February, much of it revolving credit. Will that just add to the Fed’s concerns and the accelerated rate of hikes, which has seen bond yields push ever higher. Ken Crompton says NAB’s foreca...