Happy Hawkish Halloween
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Why is the US economy growing faster than expected and what does it mean for Fed policy?
The US economy is growing a little faster than expected thanks to strong consumer spending. Does that mean less urgency from the Fed? Australia's CPI didn't surprise, so that really doesn't move the goalposts for the RBA. German inflation bounced back a little. Could that delay the ECB or at least reduce the size of expected cuts? And a big spending budget in the UK. What does that mean for the Bank of England? Lots to chew over today. It's shaping up to be a fairly hawkish Halloween. It's Thursday, it's the 31st of October 2024. It's the Morning Call from NAB. Good morning. Well, the US dollar is falling today. It's down 0.2% after a fairly choppy session. The Aussie dollar is up 0.2%. The euro up 0.3%. The pound, though, is down 0.4%.
Budget worries, perhaps? Bond yields were fairly flat for most of the session in the United States, now up five basis points for 10-year treasuries. The same for German 10-year bunds, same in France, and up three basis points in the UK. Aussie 10-year yields... Well, they were up two basis points yesterday to 4.46% on futures now, closer to 4.5%. And at the close today in the US, a sea of red. The Dow down 0.25%, the S&P down 0.3%, the Nasdaq down 0.6%, the Russell 2000 down 0.25% as well. But after the close, strong earnings for Microsoft. Sales were up 16% for the quarter with net income of £24.7 billion which beat forecasts of £23.2 billion. Shares up 2% in after hours trade on that news. Meta also doing better than expected, a 19% jump in sales year on year.
$40.6 billion in sales against expectations of $40.19 billion. Earnings per share, $5.29 expected, came in at $6.03, although shares have fallen in after-hours trade.
How are European inflation and GDP trends influencing ECB rate‑cut expectations?
And in Europe, stocks at close wear generally lowered, down 1.3% for the Eurostoxx 50. The DAX and the Cat Caron both down 1.1%. The FTSE 100 down three quarters of 1%. And oil is higher, 2.8% higher for WTI, 2.7% for Brent. Brent over 73 a barrel now. So lots of movement. NAB's Gavin Friend joins me from London. So in a session that has, well, has it reduced the chance of a big cut anyway from the ECB before Christmas? Because we saw Eurozone GDP growth higher than anticipated. But German inflation has rebounded almost back up to 4% year on year. So two reasons to be hawkish there.
Yes. So higher than forecast advanced Q3 growth numbers in France, Spain and Germany, lowering Italy and higher than forecast inflation in Germany amid what has been an extended run of negative news, as we know, for Europe in terms of growth and inflation. If we just look at the detail, France GDP up 0.4%. percent q and q versus a 0.3 estimate spain was up 0.8 you know that's strong again q and q versus a 0.6 estimate uh spain has been the outperformer of course as we know in europe offsetting the weakness in germany but germany as well posted q3 growth of 0.2 versus a forecast minus 0.1 but do note that q2 was revised down two tenths so up up three tenths versus the estimate for q3 but down two tenths
in the previous quarter. Overall, growth lifted in Europe to 0.4 from 0.2, as the consensus had. It's all small beer, isn't it, really? A tenth or two here. And it'll take, I think, more time to convince markets that The sort of the negative narrative that they've had for Europe really changes. But, you know, all three, you know, figures, countries coming above forecast as they did kind of knocks against market sentiment, market pricing. of where the ECB is going. There's been a lot of speculation, not least fired on by some official comments from the ECB over the last couple of weeks that maybe they're considering a 50 basis point move. It hasn't been our view. And part of that view has been predicated on the idea that inflation towards the back end of the year, at least the headline level and possibly at the core level, will push back up again above 2%.
And we saw from Germany today preliminary inflation coming in at 0.4% on the month for 2.4% on the year above a 2.1% forecast. And that sets the scene really for Eurozone numbers today where we're going to get a push up, as I say, in that headline number from 1.7% to 1%.
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Chapters
8 chapters
1
Why is the US economy growing faster than expected and what does it mean for Fed policy?
0:01–1:46
2
How are European inflation and GDP trends influencing ECB rate‑cut expectations?
1:46–5:06
3
What do the latest US stock market moves and tech earnings reveal about market sentiment?
5:06–7:53
4
How are mixed European economic data and business confidence shaping ECB outlook?
7:53–10:25
5
What does the UK budget’s tax hikes and spending plans mean for bond yields and growth?
10:25–13:10
6
How are the Bank of Japan’s policy stance and yen volatility affected by upcoming elections?
13:10–15:45
7
What impact will the surprising US non‑farm payroll numbers have on monetary policy?
15:45–17:45
8
What are the key takeaways for the RBA and upcoming Australian CPI data?
17:45–17:48