The 5% Club
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Why did NATO members agree to raise defence spending to 5 % of GDP?
So it's a bit of a quiet one and consequently no wild market moves. What did happen was expected pretty much, including the NATO commitment to five percent defense spending. But Australia's CPI yesterday, that was a bit softer than expected. We can look at the implications of that. And US new home sales really fell a lot, adding to that swathe of soft data that we've been seeing lately. But the ceasefire is holding up for now, and Jerome Powell didn't really say anything new to the uh uh legislative So it's Thursday, it's the twenty-sixth of June 2025. It's the morning call from NAB. Good morning. Well, not a lot of movement today. Uh the US dollar down just naught point two percent on the DXY, the Aussie is up naught point three percent this morning to a little over sixty five US cents.
The euro is up half a percent, the pound up naught point four percent, the yen is down a little bit, and oil has started to rise again. One point three percent up for WTI, one point two percent up for Brent, Brent at sixty-seven eighty a barrel now, but equity is pretty mixed. We've got a naught point two percent fall in the debt. Dow. The S P is unchanged at the close in the US and the Nasdaq up a third of one percent in Europe. The DAX closed down naught point six percent, naught point eight percent off the CATCAR, and half percent off the FTSE one hundred, uh, with the Eurostocks fifty down naught point eight percent. And we've got small movements in bonds flat basically for ten year treasuries, up two in Germany, but just one basis point for UK uh guilt yields, and it's pretty much similar.
Small rise in yields across much of Europe. Aussie ten years, well they rose yesterday. They were at 4.12%. I say should say they fell uh this morning on futures, though they are up six basis points on that, uh so more like four point one eight per cent. So let's dissect all of that with NABS Ken Crompton in Sydney this morning. Now you might have thought that European equities would get a bit of a sugar hit with the prospect of all of this extra government money coming in, but I guess we knew it was coming. So NATO leaders agreed to increase defence spending to five percent of GDP whereas really on average at the moment uh they are spending half of that. But they're gonna do all of this by twenty thirty five.
Yeah, good morning, Phil. It is a big change in in defence spending in Europe. So I think um you're talking about getting the sort of core defence spending for one of a better talent to about three and a half percent of GDP, adding um that further one and a half percent to get to that five percent number that uh the that Donald Trump has been pushing for.
What does Australia’s softer‑than‑expected May CPI mean for the market?
So yeah, sort of significant agreement around that number being achieved. But yeah, in terms of the um sort of stimulus stimulus impossi the the impact on European economies. I guess it's a bit similar to the um yeah to to the to the much vaunted five hundred billion euro package that um that Germany began to move toward a few months ago where, you know, these are over quite a long time frame. So, you know, um yeah, so a lot of monetizers Although
the UK is saying the UK's saying, Well, we're gonna hit four point one percent by twenty twenty seven. So they're moving with us, only two years away.
Yes, there are yeah, there there are others moving moving a lot faster obviously. And then of course at the other uh at the other extreme we we seem to have uh seem to have Spain who's uh who's dig d digging in and um yeah the Prime Minister Sanchez there has said that they're gonna lift their expenditure to two point one percent, uh nothing more, nothing less. He said and um they're they're around sort of one point three percent at the moment, I think. So that's still a material increase, but obviously not meeting the uh the the key headline figures that uh that Mr.
And Donald Trump isn't happy about it. So he said we're negotiating with Spain and they're gonna pay with higher tariffs. How then but you know, he says they're negotiating this trade deal with Spain, which is a bit unusual because uh, you know, I'm sure the uh negotiators thought, well actually it's a European wide uh trade agreement.
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Chapters
8 chapters
1
Why did NATO members agree to raise defence spending to 5 % of GDP?
0:01–2:22
2
What does Australia’s softer‑than‑expected May CPI mean for the market?
2:22–4:43
3
How is the RBA expected to adjust rates after the CPI surprise?
4:43–6:36
4
Why did US new‑home sales plunge and what does it signal for the housing market?
6:36–9:23
5
What is driving Japan’s six‑month slide in the leading index?
9:23–11:52
6
What key points emerged from Jerome Powell’s Senate Banking Committee testimony?
11:52–13:54
7
How are global bond yields and Fed policy influencing mortgage rates?
13:54–16:11
8
What are the market’s expectations for RBA cuts and the broader economic outlook this year?
16:11–17:35