NAB Morning Call Phil Dobbie

Friday 7th June 2024
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The ECB cut interest rates as expected, but there’s no clear indication of when the next cut will come. NAB’s Gavin Friend says staff forecasts have pushed inflation higher. Hence, a hawkish cut. So much so, you wonder whether they would have carried through if it hadn’t been so clearly signalled beforehand. Now the focus is on the US labour market and what it means for the Fed. The ADP jobs number came in soft earlier in the week and the jobless claims number rose last night, with a softer read is expected tonight. Just as important ifs the question of wages. Q1 labour costs were downgraded yesterday, so will the fall carry through to the May number tonight?

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Thursday 6th June 2024
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US equities hit new highs today and bond yields continued to fall. The Bank of Canada cut rates overnight with indications there will be more to follow. They pipped the ECB to the post, with their cut expected later today. Equities and bonds have been buoyed by positive sentiment, helped by a surprisingly strong ISM Services number for the US, after a weaker ADP jobs report – combined they add to the case for cuts from the Fed. NABs Ken Crompton joins Phil today to talk through all this central bank action, as well as digging into yesterday’s Australian GDP data.

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Wednesday 5th June 2024
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Bond markets continue their rally, with yields down again this morning. NAB’s Rodrigo Catril says it’s in part down to the JOLTS data in the US overnight, which showed job openings slowing. That’s pushed forward expectations for Fed rate cuts slightly. He also points to the election result in India, which saw the PM lose his majority, which could impact future growth and, therefore, energy demand. We’ve seen commodity prices coming down again, hitting the Aussie dollar. Today we get Australia’s GDP for Q1. What should we expect? And could the bank of Canada be the first G7 central bank to cut rates in this cycle? We’ll find out later.

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Tuesday 4th June 2024
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Longer end yields pushed higher overnight. NAB’s Skye Masters says it was in part down to softer manufacturing data from the US, although there’s a chance markets have overreacted to what was a pretty mixed picture. For example, whilst the Manufacturing ISM fell, the Manufacturing PMI, for the same month, released at the same time, rose. Markets are hoping, though, that softer data on the back of falling inflation means more cuts can be squeezed in by the Fed at the back end of the year. There’s also discussion on the Australian minimum wage decision, why oil has fallen so sharply overnight and the importance of US job openings data tonight.

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Monday 3rd June 2024
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Europe’s core inflation number rose slightly on Friday. That won’t change the ECB’s bolted-on decision to cut rates this week, but the likelihood of more than one other cut this year is diminishing. NAB’s Tapas Strickland says Friday’s Core PCE Deflator number in the US was lower than last time, but if it had been 0.002% higher it would be the same as last time. Not enough to change expectations from the Fed, with speakers now in the blackout period ahead of the June 14 meeting. Today |Australia’s wage award decision will be watched, and GBP for Q1 is out this week too.

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Friday 31st May 2024
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Assuming he stays out of prison, Donald Trump has an even chance of winning the next Presidency. What does that mean for the Fed? Trump has often argued for the need to keep interest rates low, so he’s probably not too happy with the higher for longer strategy being used to fight inflation right now. We also know he wants to challenge the independence of the central bank. But how would that work exactly?
On this Weekend Edition Mary Rosenbaum, Managing Director of the Observatory Group, an analyst firm in Washington specialising in geopolitics and macroeconomics, gives her take on what President Trump 2.0 could do to achieve his low-interest aims. Will he try and replace people in the Fed, or change the Federal Reserve Act so the government has more control over how the Fed operates, with Treasury members on the board perhaps. Or will Trump resort to bullying the Fed to see things his way?
Mary talks through the various scenarios and what the implications could be on bonds, interest rates and the dollar. Some useful insights that’s worth half an hour of your weekend.

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