Talking in all directions
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What are the major geopolitical talks shaping markets this week?
There's a whole lot of talk going on right now in the US. There's talk about how to fix the big, beautiful tax bill. Soon, Donald Trump is going to be talking to Putin and European leaders are trying to talk to Trump before that happens. They're also talking to him about a trade deal and the UK and EU have a trade deal, too, which we might find out about today. That is a lot of talk, isn't it? Particularly busy start to the week. And locally, the talk is just how much will the RBA cut tomorrow? It's Monday, it's the 19th of May, 2025. It's the Morning Call from NAB. Good morning. Well, it was a good week for equities last week, just about everywhere. Even if we saw the Hang Seng and the CSI 300 down half a percent on Friday, the Hang Seng was actually up 2.1% over the week, the same as the Eurostoxx 50.
But the Nasdaq climbed 7.1% last week. The S&P was up 5.3%. The Russell 2000 up 4.5%. So the big moves all happening in the United States. Oil was on the rise too last week, 1.4% for WTI and Brent on Friday. both up about 2.4 percent over the week the brent finishing the week over 65 40 a barrel there was sort of hints that was heading lower for a while on the possibility of more supplies coming from iran well maybe that iran deal isn't quite so close after all over the weekend tehran defended what they saw as their right to uranium enrichment on territory which was a big part of the deal that the United States was proposing. US 10-year treasuries were up almost five basis points on Friday and up 10 across the week.
But the biggest move was the Aussie 10 years. Over the week, yields rose about 24 basis points, up to 4.42%. And currency-wise, the week was good for the US dollar and the CNY, not so good for everybody else. The US dollar gained three quarters of 1% on the DXY, a third of 1% for the CNY, but a Three quarters of a cent fall in the euro, a quarter percent fall in the yen, down almost 0.2% for the pound and a little over 0.1% lower for the Aussie. So Friday, we saw a fall in the US dollar for a spell, but we also saw 10-year treasuries moving higher.
How did Moody’s downgrade of the US sovereign rating affect Treasury yields and market sentiment?
for the yields while yields generally everywhere else were moving down why is that well Ray Attrell is here again today so that move in yields much of that I think is to do with Moody's wasn't it downgrading the US credit rating just before the close on Friday
morning Phil yes that was the ostensibly the reason certainly looking at the tick charts it was fully responsible so the news sort of about half an hour before the New York close from Moody's announcing this one notch downgrade to the US sovereign credit rating to what AA1 from AAA, which matches what S&P did in 2011.
Yes,
the best in saying this is a lagging indicator. It sure is in that respect. And
Fitch did in 2023. So they're the last of the big three. So
I would say it is very much a lagging indicator. And I think more importantly, its significance is approximately zero. I mean, there are no circumstances under which any existing investor in u.s treasury bonds will be compelled um to to sell out of them effectively other than a sort of four or five notch downgrade um no one would be in breach of mandate and of course you know it's just joining the other two right
so it's not it's not
going to affect pricing
in any way
then No, no, effectively, you know, no sovereign has really been trading or the US sovereign hasn't been trading with a full AAA credit rating, essentially. So, no, it doesn't mandate any actions by anybody. But obviously, just on the day, it creates a little bit of a psychological shock. And I think that's why we saw that. basis point tick up in treasury yields. And we did see that US dollar reaction. But in the call out of day, you know, I don't think those moves are justifiably going to be sustained anyway.
What about the reason that they gave for it, though? They said, you know, this reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.
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Chapters
8 chapters
1
What are the major geopolitical talks shaping markets this week?
0:01–2:12
2
How did Moody’s downgrade of the US sovereign rating affect Treasury yields and market sentiment?
2:12–4:44
3
Why did the House reject the “big beautiful” tax bill and what are the fiscal implications?
4:44–7:59
4
What is the current status of US‑EU tariff negotiations and the risk of tariffs reverting to April‑2 levels?
7:59–10:08
5
How do Christine Lagarde’s comments connect US‑dollar weakness to confidence in US policy?
10:08–12:45
6
Which trade issues remain unresolved in the US‑UK and US‑EU talks, especially around agriculture and veterinary alignment?
12:45–14:49
7
What are the expected outcomes of President Trump’s call with Putin and the follow‑up conversation with Zelensky?
14:49–16:42
8
How likely is an RBA rate cut tomorrow and what upcoming data could sway the decision?
16:42–17:51