The Morning Call – May 2018
Did Parmageddon go too far? Inflation next to watch for
Thursday 31st May 2018
The markets have retreated somewhat from yesterday’s tumultuous response to uncertainty over who will govern Italy, and their stance on the Euro and EU membership. It’s not over yet, but as NAB’s Tapas Strickland discusses with Phil Dobbie, the parties seem more conciliatory and investors seem to think the response was too great yesterday. Hence, this morning has seen a significant wind back. They also discuss the next big concern – inflation could be rising faster than had been expected. That could mean rate rises sooner than later, with the OECD suggesting a hike in Australia before the end of the year. Are they right on that?
Italian meltdown as early election looms
Wednesday 30th May 2018
Italian two year bond yields rose 190 basis points overnight. It’s the worst sell off in 26 years, with the distinct possibility that Italians will go back to vote as soon as July. Phil Dobbie talks to NAB’s David de Garis about a tumultuous night of activity, looking at the extent of the volatility and just how far its spread. To add to the unrest, President Trump seems to be pushing to introduce tariffs against China as soon as next month. At least North Korean talks are looking positive, for now.
Italian elections looking more likely; oil falls further
Tuesday 29th May 2018
Politics in Italy is messier than usual. As Rodrigo Catril explains to Phil Dobbie in today’s Morning Call, the President is not happy with the populist government’s choice of finance minister who, in turn, are not happy with him overriding their decision. The uncertainty has hit Italian bonds and the Euro – just how far could this impact go? They also discuss monetary policy reforms in Turkey and the continued fall in the price of oil.
Conte out, oil down, talks on
Monday 28th May 2018
The breaking news this morning is that Italy’s premier designate Guiseppe Conte has stepped aside, unwilling to form a government. In today’s podcast NAB’s Ray Attrill tells Phil Dobbie that this news will act as a counter to the threatened downgrade that Moody’s hinted at on Friday. They also discuss Friday’s big fall in oil prices and the likely market reaction to the weekend’s news that a summit with Kim Jong Un and Donald Trump seems to be back on after a meeting between the North and South Korean leaders at the weekend.
Too angry for talks, markets in a half-hearted risk-off mood
Friday 25th May 2018
As Phil Dobbie discusses with NAB’s David de Garis, there wasn’t a strong response to the news that peace talks between the US and North Korea have broken down. Trump blames the Supreme Leader for being too angry. For many the cancellation was as predictable as the likelihood of a Royal Wedding last weekend. Similarly, the news that Trump is talking more about tariffs on cars. Perhaps the UK’s strong retail numbers were a bigger surprise, with the pound and the Euro outperforming today against a sliding US dollar.
Risk-off mood on a raft of growth concerns
Thursday 24th May 2018
Italy’s new government, Turkey’s emergency rate hike, the failing China trade deal, the UK’s weakening inflation, slow growth in Europe, tensions over Iran – there’s a lot to be concerned about. Phil Dobbie talks to NAB’s Rodrigo Catril about today’s switch to risk-off sentiment, evidenced by falling equities in the US, Europe and Asia. Yet the US goes from good to better, it seems with the FOMC minutes suggesting a rate hike at the next meeting.
Oil choppy over Venezuela; Trump doubtful on North Korea outcome
Wednesday 23rd May 2018
NAB’s Gavin Friend joins Phil Dobbie this morning to discuss what’s moving the markets although, it must to be said, it has been a quiet session overnight. Oil rallied as supply fears rose on Trump’s sanctions imposed on the country this week, but it has since retreated. There’s not been much reaction to Trump’s declaration that an outcome with North Korea is looking highly unlikely. China has helped further easing of trade sanctions with cuts to car tariffs. Gavin also updates us on the latest from Italy, Mark Carney’s comments in the UK and what to look for in tomorrow’s FOMC minutes.
US stocks rise and NAB pushes back date for assumed rate hike
Tuesday 22nd May 2018
The positive news regarding China has seen stocks rise in the US today but, as Phil Dobbie discusses with NAB’s Tapas Strickland there has been little movement on Treasuries or the US dollar. They also look at the latest news out of Italy, rumours of a potential UK election to remove the Brexit gridlock, the plight of the Aussie dollar and the expected date of the next rate rise in Australia – NAB has just pushed it back. Find out when and why in today’s Morning Call podcast.
Trade War on Hold, For Now
Monday 21st May 2018
Steven Mnuchin says the trade war with China is on-hold, for now, after the agreement that will see China supposedly buying more from the US, but not the reported extra $200 billion worth. Phil Dobbie asks NAB’s Ray Attrill what this will mean on the markets this morning. With the US economy outshining the rest of the world, they also discuss now long this dichotomy can continue. Europe, for example, is being dragged down by uncertainty in Italy and Canada is contending with drawn out talks on NAFTA. What does this mixed environment mean for the Aussie dollar?
What if Trump’s headline promises don’t come to pass?
Friday 18th May 2018
President Trump has been making headlines with peace treaties and trade pacts, but what if they don’t happen? North Korea has threatened to pull out and now the President is saying the China talks may not be successful. And no word on the progress of NAFTA as deadlines get pushed back. On today’s Morning Call Phil Dobbie asks NAB’s Rodrigo Catril whether these delays – and the emerging uncertainty in southern Europe – could knock confidence in global markets.
European bonds hit by Italian populism
Thursday 17th May 2018
In Italy, the populist parties aiming for a coalition Italian government are said to be demanding a €250bn debt write down by the ECB. Phil Dobbie asks NAB’s Gavin Friend whether they’re likely to get it, what the reaction has been and whether Greece could be joining the queue. Meanwhile, US bond yields rise further and the US dollar is back on the rise. They also look at the Aussie and Kiwi dollars, both strong performers on the currency markets this morning.
Treasury yields hit four-year high, US dollar reaches year’s peak
Wednesday 16th May 2018
US ten-year treasuries were up eight basis points this morning, with the US dollar reaching a new high for the year so far. Phil Dobbie talks to NAB’s David de Garis about the reasons behind the bond sell-off, which has been accompanied by a drop in shares. They also look at the UK’s positive wage data overnight and ask what it would take for Australia’s wage price index today to move markets. The Aussie dollar has already taken a hit from slowing investment in China.
Oil rises on unrest; US and European yields boosted
Tuesday 15th May 2018
This morning, Phil Dobbie talks to NAB’s Tapas Strickland about the continuing rise in oil prices. There was a sharp increase today with increased tensions in the Middle East, particularly after the unrest at the Gaza border. They also look at rising bond yields in the US – where they have tipped the 3% yield mark again – and Europe, on the back of comments from ECB’s Villeroy de Galhau. Plus, the widening gap between Kiwi and Aussie currencies and a look ahead to some of today’s data releases.
Trump blows hot and cold on tariffs
Monday 14th May 2018
President Trump seems to be offering a lifeline to Chinese telecoms company ZTE, whilst threatening car manufacturers with a 20 percent import tariff. NAB’s Ray Attrill suggests the concession to China is a positive step in trade relations, whilst the car tariff is unlikely to be endorsed. They also discuss concerns of the flattening yield curve, Draghi’s talk of a Euro-fund to protect countries in future crises and the fate of the Aussie dollar at the start of a week that is very light on fresh data.
Iran makes oil bumpy, weaker CPI pushes yields lower
Friday 11th May 2018
It’s been a bumpy day for oil one day on from President Trump’s withdrawal from the Iran Deal. But as NAB’s Gavin Friend explains, it’s today’s weaker than expected US CPI data that has had the most influence, driving down Treasury yields and giving a boost to share prices. Phil Dobbie also asks Gavin why the pound fell when the Bank of England did exactly what was expected – keeping interest rates on hold. They also discuss Adrian Orr’s statement at the RBNZ yesterday.
US Treasury Yields, Stocks and Oil Up on Iran decision fallout
Thursday 10th May 2018
The markets have reacted firmly to the US President’s decision on the Iran Deal yesterday, even though other signatories have spoken out against him. Phil Dobbie talks to NAB’s Rodrigo Catril and asks if this could be another case of Trump taking another leaf out of his ‘Art of the Deal’ book. Meanwhile US 10-year treasury yields tip over three percent again, even with $25 billion new ones being auctioned. They also look at the RBNZ and Bank of England announcements today, tonight’s US CPI data and the news the markets don’t want to hear about the Italian government.
Trump pulls a hard exit from the Iran deal
Wednesday 9th May 2018
President Trump has announced the US will reinstate tough economic sanctions against Iran, with the threat of secondary sanctions against those who continue to support the regime. As NAB’s Tapas Strickland explains to Phil Dobbie, the announcement reversed an earlier sharp fall in oil prices. We can expect to hear more from Iran’s trading partners today, including Europe, Russia and China. There’s also discussion on more positive vibes from the US Fed, last night’s Australia Budget, Theresa May’s split cabinet and the risk of another election in Italy.
Oil’s four year high on Iran talk; Tonight’s Budget
Tuesday 8th May 2018
Oil prices reached a new high overnight ahead of President Trump’s decision tomorrow on whether to re-impose sanctions on Iran. Phil Dobbie discusses the shift higher with NAB’s Ray Attrill. They also look at business conditions in Australia, retail sales, emerging markets, China’s trade figures and Jerome Powell’s speech in Zurich this afternoon. And will tonight’s Aussie budget satisfy the ratings agencies?
The week ahead for the Dollar, China, Iran, Argentina and Brexit
Monday 7th May 2018
Will the US dollar rally continue this week? Phil Dobbie puts the question to NAB’s Rodrigo Catril at the start of what promises to be a busy week for traders. They discuss the take-outs from Friday’s US payrolls data, the tough talk on trade with China, Friday’s sudden interest move by Argentina’s central bank (and what it means for emerging markets), a UK cabinet divided on Brexit, and what happens when President Trump pulls out of the Iran nuclear deal. It’s going to be a busy week.
Markets a little testy ahead of payrolls; both sides tight lipped on China trade talks
Friday 4th May 2018
The S&P500 fell a lot in early trade, testing some technical levels before regaining most of the ground. The US dollar has also retreated. Phil Dobbie asks NAB’s David de Garis what is driving his risk-off tone – is it data driven, concern over the China trade talks, or anticipation of tonight’s non-farm payrolls data. Meanwhile, another piece of weak data for Europe and the local council elections in the UK, a litmus test to add to Theresa May’s list of worries.
Is it ‘Mission Accomplished’ for the Fed?
Thursday 3rd May 2018
On Bloomberg this morning one analyst described the US Fed statement as a sign that it was ‘Mission Accomplished’. Phil Dobbie asks NAB’s Rodrigo Catril if that really is the case. Words from the Fed have had little impact on the markets, across all sectors, except oil and gold, which rose on the news that not much has changed. They also discuss Europe’s GDP figures, US trade talks with China and they look ahead to today’s data releases.
Soaring dollar as US leaves the pack behind
Wednesday 2nd May 2018
Today sees a continued strong run on the US dollar. NAB’s Gavin Friend suggests the move reflects the US economy gaining momentum, whilst other economies are failing to keep pace. Phil Dobbie asks Gavin whether this adds to the case for a third rate hike in the US this year. It’s a different tale in the UK, where poor manufacturing data has hit the pound hard. And, in Australia, Philip Lowe continues with the ‘steady she goes’ approach to the local economy.
Iran is Trump’s next challenge; RBA ready to sit on their hands
Tuesday 1st May 2018
Just as the South Korean President suggests Donald Trump should be awarded a Noble peace prize, Israel’s Netanyahu accuses Iran of lying over it’s nuclear aspirations. Phil Dobbie talks to NAB’s Tapas Strickland who suggests the markets are getting used to the US President’s style, and that could ease concerns over future Trumpisms. They also discuss what’s become a familiar tale of late, strong data from the US and slightly less bullish numbers from Europe. And they look ahead to today’s RBA meeting – we know rates will stay on hold, but what else will be said?