NAB Morning Call

Thursday 3rd September 2020The US dollar managed a slight recovery in the overnight session, which has also seen continued growth in US equities, echoed across the Atlantic. On today’s podcast Phil Dobbie asks NAB’s Ray Attrill why the positive sentiment when the data we’re seeing isn’t so positive? ADP employment numbers were softer than expected and the Fed’s Beige Book suggested the recovery in the US is slowing. They also discuss yesterday’s GDP numbers for Australia and the whole gamut of services PMI numbers out later today.

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Wednesday 2nd September 2020Deflation in Europe comes as no surprise, just as the shift in the Fed’s monetary policy seems likeold news, but NAB’s Gavin Friend explains how the markets are still adjusting to it. Data releases have largely been positive, with a higher than expected increase in the USA ISM, and the Caixin PMI for China is at its highest level since 2011. So, what can we expect from Australia’s GDP numbers for Q2? Will they signal that the RBA, and the government, needs to do more to help the economy recover?

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Tuesday 1st September 2020The Australian and NZ dollars reached two-year highs in the overnight session, with the US dollar declining further. Phil Dobbie asks NAB’s Rodrigo Catril whether the trend will continue, wand whether we could see the Aussie reach 80 US cents late next year. There’s also discussion on Warren Buffet’s investments in Japan, Richard Clarida’s explanation on the Fed’s policy change and how the rate of US COVID-19 fatalities seems to be reacting sluggishly to the fall in cases. Plus, what to expect from the RBA today and the US ISM manufacturing number tomorrow morning.

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Monday 31st August 2020NAB’s Ray Attrill says the US dollar bore the brunt of Friday’s reflective thinking on Jerome Powell’s Jackson Hole speech. He says, if the market believes the Fed will run inflation up to 3%, then real US interest rates would be lower and higher inflation should force the currency down over time, hence the response. But isn’t this somewhat hypothetical when inflation has struggled to get anywhere near 3 percent? There’s also discussion about US confidence data, China’s ISM numbers today and the impact of Shinzo Abe’s resignation announcement.

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Friday 28th August 2020Jerome Powell used his virtual address to the Jackson Hole Symposium to announcer the Fed’s strategy of targeting an ‘average’ 2% inflation rate, a subtle change that is likely to keep interest rates lower for longer. NAB’s David de Garis says that lower rates will help to propel investment once confidence returns, but it’ll take a while to eat into the current spare capacity. Meanwhile another million people signed for unemployment benefit in the US, business confidence seems to be picking up in Europe and the ABS provided confirmation that private capex in Australia was way down in Q2. Of course, the Q3 numbers will be a lot more interesting.

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Thursday 27th August 2020There’s continued optimism in the markets, with equities reaching new highs again, helped on by better than expected durable goods orders in the US, and despite rising US-China tensions and the potential impact of Hurricane Laura. NAB’s Rodrigo Catril also discusses the continued interest in Australian bonds and the impact on GDP of yesterday’s construction numbers and today’s private capex read. Plus, what will be said at the virtual Jackson Hole, which kicks off today.

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Wednesday 26th August 2020The US dollar is down again this morning, with equities up and touching new highs again. More significantly, we’ve seen sizeable increase in government bond yields in the US and Europe. NASB’s David de Garis talks through the factors at play, including hope that the US China trade relationship will continue as planned in the phase one deal, and concerns that a bigger supply of bonds in the pipeline could be inflationary. Meanwhile the IFO numbers from Germany gave ground for some optimism, despite rising COVID-19 cases in the country. Yet consumer confidence in the US has fallen, even as home sales increase 13%, to levels not seen since the subprime crisis. Good news or bad?

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Tuesday 25th August 2020US equities reached new highs again, with big gains also in Europe. NAB’s Rodrigo Catril says investors are back to reacting to the vaccine hopes, with President Trump announcing he will fast track roll-outs in the US – faster than a ‘traditional’ administration. Meanwhile, NZ’s retail numbers yesterday fell significantly during Q2 as expected – so will they pay the price for a protracted lockdown? And will German IFO numbers today confirm that the European economy is recovering at a slower rate than the US? Plus, Australia’s payroll data today will show the early impacts of the Victorian lockdown.

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Monday 24th August 2020Europe’s PMI’s disappointed markets on Friday, whereas the US numbers were better than expected, helping to lift equities to new highs (again). The UK provided mixed news, with string PMIs offset by a week of Brexit negotiations that led nowhere. Donald Trump is pushing out all the stops on a virus and cure for COVID-19, with announcements expected today on one, if not both. NAB’s Ray Attrill talks through all of this, and reports that the take-out from the National Cabinet Meeting on Friday was that States and Territories should do more to fund Australia’s recovery. In the week ahead, the meeting of central bankers at Jackson Hole should provide a steady stream of news and views.

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Friday 21st August 2020US equities continue to rise, even though the jobless claims numbers rose last week. Phil Dobbie asks NAB’s Gavin Friend, at what point will they appear to be overvalued? There’s also discussion on bond movements, the continued fall in the Kiwi dollar, even against a weaker US dollar today, and the rise in the pound. There’s lots of PMIs released today – services and manufacturing for the UK, Germany, the Eurozone and the US – what will they tell us about the shape of the global recovery?

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