More tariffs and more stagflation fears
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Is the US heading toward stagflation as ISM services data falls and new tariffs loom?
The US services ISM came in weaker than expected with warnings of rising prices and falling employment, what some might call an indicator of stagflation. Is that where the US is really heading? If it's brought about by tariffs, then bad news because more of them on the way. The President is warned about new tariffs on microchips and pharmaceuticals within the next week. And more on India too, if they keep on buying oil from Russia. It's the sixth of August twenty twenty five. It's the morning call from Nab. Good morning. Well, US stocks fell sharply today, then climbed back, but still down on the day. So the Dow is down naught point one percent. The S P has lost not point four percent and a half per cent off the Nasdaq, although the Russell two thousand is up naught point three percent.
Earnings wise, Caterpillar reported before the open, their earnings per share down from five ninety nine to four seventy two, even though revenue was up, albeit by just one point two percent for the quarter. And but the main thing is they warned of a possible one and a half billion dollar hit to earnings from tariffs in the next year. The US dollar was rising overnight, it climbed about 0.3%, but then it lost it all late in the morning in the United States, so ultimately back where it started, which is why there's no major changes on currencies right now, except for the yen, which is down 0.4%, the Aussie sticking around 64.7 US cents. Ten year treasuries are at one basis point, not much. And really not much movement in Europe either.
Aussie ten years were down nine basis points yesterday to four point two two percent, just a couple of basis points higher than that on futures this morning. And oil is lower, one and a half percent off WTI, almost as much for Brent, which is down below sixty seven eighty a barrel now. So what is going on? Here's NABS Sky Masters in Sydney. Uh well we had a uh uh disappointing payrolls on Friday, now a Services disappointment. The non manufacturing ISM for July that was expected to rise from fifty point eight to fifty one point five has actually come in lower at fifty point one and some of these sub indices not looking too great either, which I think is why we lot lost a lot of momentum in uh particularly in equity markets, isn't it?
Yes, Phil, you're correct. There was really nothing very good that came out of the US IS um M services report that was released overnight.
How are weak ISM numbers and rising price‑paid indexes affecting market sentiment and Treasury yields?
Uh, you know, what what the the data was saying is, you know, firms are dealing with with both soft demand and and rising rising costs and n not not a great not a great mix. And And yeah, it it just sort of that report sort of dampened um Uh sentiment within within markets and so as you said, you know, equities equities came off um on on the print and just sort of stayed heavy. Um treasure yields were drifting higher in yield ahead of the release but uh rallied a little bit post and and sort of have h held on to th that those moves. But you know, actually overall when you look at where markets are sitting at the moment, um, sort of small small moves, small moves on the day. Um, but there has been quite a bit of news and information out out overnight.
But you know, obviously that the the key one was that ISM service services report. If you look into the um if you look into the detail, you know the the as you said, the the overall index is now at fifty point one. So I think that's at the the lower end of the post pandemic range, I think um the range has been forty nine to sixty seven point five. So You know, b d down at the lower end of the range you saw broad based weakness, business activity fell one point six points, new orders were down. were down one point, um and employment was also down close to one point as well. Um so yeah, broad broad base brace based weakness there, but then obviously Countering that was the big jump in in the prices paid index, which was quite concerning.
Yeah. I think it's at its highest level now since October two thousand twenty two.
Yeah, and that employment number, so down from uh forty seven point two to forty six point four.
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Chapters
8 chapters
1
Is the US heading toward stagflation as ISM services data falls and new tariffs loom?
0:01–2:15
2
How are weak ISM numbers and rising price‑paid indexes affecting market sentiment and Treasury yields?
2:15–4:34
3
What do the latest European PMI revisions and China’s services surge tell us about global demand?
4:34–6:45
4
Are Trump’s imminent micro‑chip and pharmaceutical tariffs likely to hit the oil market and India’s Russian‑oil imports?
6:45–9:06
5
What does the recent New Zealand unemployment and labour‑cost data indicate for the Kiwi economy?
9:06–10:58
6
How did the recent US ten‑year Treasury auction and RBNZ forecasts shape expectations for rate moves?
10:58–13:27
7
Which Fed officials are signaling policy direction and what could it mean for future interest‑rate decisions?
13:27–15:43
8
What are the key takeaways from today’s market call and what should listeners watch next?
15:43–17:33