The Morning Call – June 2018
Kiwi Slides, Trade Confusion and EU’s Blind Summit
Friday 29th June 2018
The New Zealand dollar has taken a hit. NAB’s Gavin Friend puts it all down to one word change in the RBNZ statement yesterday. Meanwhile markets remain confused and concerned about the continuing trade tensions, whilst the EU Summit kicks off with, for once, Brexit not the main bone of contention. The real issue is putting a lid on migration, but it seems unlikely the Eurocrats will find a solution over one weekend.
A new approach to China, but not a softer one
Thursday 28th June 2018
The markets hoped for a while that President Trump was signalling a more measured approach to China when he announced they wouldn’t be using emergency powers to limit Chinese investment in US technology companies. But, as NAB’s David de Garis discusses with Phil Dobbie, the new approach isn’t any softer. Larry Kudlow was quite clear on that. Plus, a yield curve that continues to flatten, a Renminbi that continues to weaken and a share market that continues to fall.
Oil up as US threatens allies over buying from Iran
Wednesday 27th June 2018
The US wants its allies to all cut imports from Iran to “zero” or face possible sanctions themselves. As NAB’s Ray Attrill explains, it pushed oil prices higher today, whilst equities have rebounded from yesterday’s caution. Phil Dobbie asks Ray whether the Fed has highlighting any changes to its monetary approach given the escalating trade tensions. They also discuss the flattening yield curve, and how the Bank of England’s MPC “rookie” talked the pound down today.
Markets dazed and confused by trade talk
Tuesday 26th June 2018
Harley Davidson has announced they plan to shift some production overseas to avoid retaliatory tariffs slammed on US exports. Phil Dobbie asks NAB’s Tapas Strickland whether this is the same as Airbus threatening to leave the UK after a hard Brexit – a bit of rhetoric that won’t come to fruition? Certainly, the markets are a little uncertain about how to price the rising tariff confusion, with equities hit hard today but other risk-off signs – such as gold and bonds – hardly moving. They also discuss the political climate in Europe, calls for the RBA to lift rates earlier, and why the rising Australian BBSW-OIS spread lately?
More oil and added protection creates early risk off mood
Monday 25th June 2018
President Trump’s protectionist measures and OPEC’s increased oil production could be the two major market influences this morning. Phil Dobbie talks to NAB;’s Rodrigo Catril about the latest trade announcements from Trump, including word on controls on Chinese investments in the US, as well as what came out of the OPEC+ meeting over the weekend. They also look at the health of the European economy, mixed with political uncertainty for Angela Merkel; and could the Bank of Canada delay the next expected rate rise?
Long night, little said; US stocks down, pound up
Friday 22nd June 2018
There wasn’t much progress on trade tariffs overnight. China only responded in words and there’s been little market response. As Phil Dobbie discusses with NAB’s David de Garis, the biggest moves have been in US equities, hit by a court ruling on state taxes, and the pound, after a moderately hawkish Bank of England meeting. They also discuss CPI figures for Japan, preliminary PMIs for the Eurozone, and this weekend’s OPEC meeting.
Trade Tariff Ambivalence Rules the Day
Thursday 21st June 2018
The markets have moved very little today as investors contemplate the next steps in the tariff battle between the US and China. Even the EU response, with tariffs to follow on Harleys, Levis and Bourbon, did little to stir a response. Phil Dobbie asks NAB’s Rodrigo Catril if there’s an element of ambivalence, as though we’ve seen it all before. They also discuss Theresa May’s Brexit win, and look ahead to today’s New Zealand GDP figures and the Bank of England meeting tonight.
Tariff talk hits harder, but is the bark worse than the bite?
Wednesday 20th June 2018
Equities, currencies, bonds and commodities all reacted to more rhetoric from President Trump about Chinese tariffs. He’s promising another $200 billion worth and, if China responds, he’ll heap on another $200 billion worth. But, as NAB’s Gavin Friend discusses, the impact could have been sharper. There hasn’t been a mad-rush for safe heavens suggesting many believe the Trump bark might be worse than the bite. We’ll see.
All quiet except on the oil front
Tuesday 19th June 2018
There’s been very little movement in anything overnight, except the price of oil. In today’s podcast NAB’s Tapas Strickland explains how it stems from an expectation that OPEC will see a smaller increase in production than initially flagged by Saudi Arabia and Russia. He also talks to Phil Dobbie about the political standoff in Germany, adding to the Brexit one in Britain. And the Aussie dollar down, despite the rise in oil.
The Great Tariff Wall of China
Monday 18th June 2018
Trade talks between the US and China took a turn for the worse at the end of last week, with the Trump administration issuing a list of $50 billion worth of products that would be hit with a 25 percent tariff. China reacted, promising the same magnitude of tariffs against the US. In today’s podcast Phil Dobbie talks to NAB’s Ray Attrill about the likely market reaction to the situation today and, in particular, what are the consequences for Australia?
Euro trashed on ECB hike delays
Friday 15th June 2018
The ECB announced today, as anticipated, that their QE program will finish at the end of the year. But markets weren’t quite expecting the anticipated delay in raising rates – which could be late in 2019. As Phil Dobbie discusses with NAB’s David de Garis, the response has been a sharp fall in the Euro, pulling the Aussie down with it and helping the US dollar to continue its rally. They also discuss the US tariffs on China and bad news for Theresa May whose Withdrawal Bill seems to have unwound itself. Plus a look at data and events to follow today.
Fed adds a dot, ECB tonight, tariffs from Friday
Thursday 14th June 2018
The US federal Reserve lifted interest rates this morning, as expected. They also added to their dot points, meaning they envisage two more rate rises this year. We can expect no movement at the ECB tonight, but will this be the meeting they announce the timetable for the ending of QE. NAB’s Ray Attrill talks Phil Dobbie through a busy day for the markets, which also includes UK retail sales data, China’s Industrial Production numbers, and Aussie employment figures. And from left field, President Trump is reportedly set to impose tariffs on China from tomorrow.
On FOMC-eve, a Bromance, a Brexit win and the NAB Business Survey
Wednesday 13th June 2018
There was little market reaction to the big deal and emerging bromance between President’s Kim and Trump. As Phil Dobbie and NAB’s Rodrigo Catril discuss, there was considerably less love in the House of Commons where the Brexit process gets progressively more complex, but is likely to feature more parliamentary involvement from hereon in. Ivan Colhoun, NAB Markets’ Chief Economist also joins in to highlight the key points from yesterday’s NAB Business Survey, and Rodrigo explains why the IOER rate is something to watch for in tomorrow’s FOMC announcement.
Trump’s one – on – Un just hours away
Tuesday 12th June 2018
President Trump is hours away from a one-on-one meeting with Kim Jong Un (just the two of them, plus interpreter), having left the G7 talks in a state of disarray. Phil Dobbie asks NAB’s Gavin Friend if we can expect any market reaction to the Singapore Summit, whichever way it goes. They also discuss the response to the spat between Trump and Trudeau, the disappointing manufacturing data from the UK and the start of a busy week for central banks and Brexit talks.
G7; Brexit; North Korea – Deal or No Deal?
Friday 8th June 2018
Leaders going into G7 seem to be holding their positions firm on trade tariffs and the Iran Nuclear Deal. So much so, it’s unlikely the markets will pay too much attention. It might be the same with the North Korea summit that the President discussed today, saying it will take several meetings to get anywhere. Instead, NAB’s Gavin Friend pays attention to continued strength in the Euro, the outcome of next week’s ECB meeting and what it all means for emerging markets. He also discusses the Tory party’s Brexit talks today that almost saw David Davis, the Brexit secretary, resigning over the whole thing. Who can blame him!
Will the ECB unwind? Less news means more risk-on.
Thursday 7th June 2018
Will they or won’t they? The market has turned its focus on what the ECB will say about the timetable for unwinding its QE program when they meet next week. Meanwhile, NAB’s Rodrigo Catril says a slow news week is adding to a risk-on mood, but it might not last till next week. On today’s podcast he talks to Phil Dobbie about the G7 meeting, the shaky situation in Italy and how the strong GDP figures yesterday have helped the Aussie dollar. A different story in South America where the Brazilian central bank is having difficulty stopping the slide of the Real.
Oil, NAFTA and the Conte Controversy
Wednesday 6th June 2018
It seems Giuseppe Conte didn’t make all the right noises when he gave his first public address as the Italian Prime Minister today. As NAB’s Tapas Strickland explains, the talk hit Italian bonds and reminded investors of EU uncertainty. Oil has also taken another bit it on talks of increased production, ahead of an OPEC meeting later this month. Plus, further speculation that NAFTA talks might fall apart, strong data from the US and UK, and a look ahead to today’s GDP figures for Australia.
Trade war? What trade war?
Tuesday 5th June 2018
The markets seem to be ignoring the risk of retaliatory action on trade, at least for now. That could change at the G7 meet later in the week. For now, though, the markets have switched back to risk-on, helping the Aussie dollar rise faster than any of the majors this morning. Phil Dobbie talks to NAB’s David de Garis about the data that’s driving this positive mood, whether its false optimism, and whether we can expect to see the pound continue to fall as the EU Summit draws nearer.
And now for something completely normal
Monday 4th June 2018
After the excitement of Parmageddon last week, followed by the sudden enforcement of steel and aluminium tariffs on Trump’s supposed allies, the markets can at last look forward to a more traditional week where data and central bank policy drives the agenda. Phil Dobbie asks NAB’s Ray Attrill whether, after strong payrolls data from the US on Friday, we can expect to see indicators returning more closely to where they were before the melodrama last week.
I feel like tariffs tonight
Friday 1st June 2018
As concerns over Italy subside, for now, President Trump has upped the ante against the EU, Mexico and Canada, with tariffs from midnight on steel and aluminium. Phil Dobbie talks to NAB’s Gavin Friend about the market reaction. They also look at rising inflation in Europe, the vote of no confidence in Spain and speculate on tonight’s non-farm payrolls data in the US. Plus, how the President is rehearsing for his meeting with Kim Jong Un this month.