No end in sight

0:00Well, it's not over till it's over and it's looking increasingly like that could take a long time. So, unsurprisingly, the US and Israel vs Iran and Iran vs almost everybody else is dominating market action overnight and the longer it goes on, the more likely it is to impact inflation and central bank policy. Plus, US jobs today, it's non-farm payrolls tonight after some early indications that employment numbers are looking strong in the US. It's Friday. It's the 6th of March, 2026, it's the morning call from NAB. Good morning. No surprise, perhaps, that we are back to a risk off mood in the markets. The US dollar is higher. It's up half a percent to 99.2 on the DXY index. The Aussie has lost 1.3 percent down to 69.8 US cents. The South Korean won down again, losing another 1.4 percent. Bonn yields are higher, particularly in Europe, up to 10 basis points for 10-year guilds in the UK, up 12 in France, 13 in Italy, 9 in Germany compared to the US, where they are up. Four basis points for 10-year treasuries, Aussie 10 years, we're up five basis points

1:02yesterday. This morning, add another six basis points on futures up to 4.85 percent and Bitcoin is down almost 3 percent today. Small bickies, when you consider it's down 37 percent over the last six months and Asian equities, well, they would cover yesterday. Korea's Cosby was up nearly 10 percent, for example, but maybe it's going to be different today because equities close much lower in Europe. One and a half percent of the Eurostocks 51.6 percent lower for the DAX in the US. One percent off the NASDAQ as we were called, this 0.9 percent off the S&P, industrials hit the hardest, they're down almost 3 percent. But everything is down, basically, except for energy, speaking of which, WTI, up 6.8 percent, we're end up another 4 percent, close to 85 a barrel now. So higher oil prices, lower share prices, face simple formulas, and for the last podcast of the week, here's NAB Skymasters in Sydney, and this big move in Bond yields as well. So clearly, people are starting to look at the long game in this and wondering whether

2:04it's going to impact the decisions made by central banks further down the track. Yeah, good morning Phil. As you've highlighted in your introduction, some relatively big moves in financial markets overnight. And think what stands out for me is the fact that that stock bond correlation remains broken as the tensions in the Middle East continue. So big swings in bonds overnight, and this has really been led by Europe, and there's no surprise there, given Europe's exposure to the energy sector. And so what you're sort of starting to see is this investors are repricing the outlook for central banks as it becomes sort of apparent, at least for now, that these tensions in the Middle East aren't ending any time soon, and so that repricing on central banks

3:04is feeding through into bond markets, but we can dig into that in a minute. Yeah, well, the European situation Vladimir Putin hasn't helped either, because he's come out and said that those remaining gas supplies to Europe, which is supposed to end next year anyway. He said he might cut those off quicker, not out of spite, just because of all the circumstances, he reckon he can get better price selling it elsewhere. So I mean, all that's just going to add to European inflation, isn't it, you know, oil and gas. Yeah, no, definitely it is, it is, and you know, it's interesting. You've had a couple of central bankers out overnight talking and their focus has really been on the impact on inflation. So, you know, you've had ECB Nagel, who is on the hawkish end of the spectrum, but you know, he's saying, you know, they're on impacting, you know, what's going on, the conflict in how it's impacting your air inflation is the focus now, rather than what it will do to growth, and he's just pointing out, you know, the ECB's commitment to delivering price

4:09stability. So, you know, that, that, that, his comments there around the ECB focusing on inflation, you know, has, as I said before, has fed through into expectations for the ECB. And you've seen the Euro, the OAS curve now currently prices accumulative 16 base points of hikes by the year end for the ECB, naracore, they all pricing around, you know, six base points of cuts last late last week, so quite a meaningful repricing there. And then also on other central bank commentary, you had fed Bach and he was, I think, talking on a Bloomberg TV interview, and, you know, he also was focusing on, you know, the textbook monetary policy, you know, way of looking at these short term supply shocks, and just pointing out that, you know, their focus remains very much on, on inflation, and he was also noting that, you know, ahead of this Iran-US conflict, he was actually noting that,

5:14that inflation was maybe not heading in, in the right, in the right direction, and that inflation sort of remained, you know, still remained quite high, and, you know, suggesting that the fed, you know, that they are on pause, and, you know, that they haven't finished their fight against inflation. Yeah. So in terms of, in terms of the pricing in the US, US curve, the OAS curve is now pricing accumulative 38 base points of cuts by the end of the year, and late last week was pricing around the accumulative 16 base points of cuts, so big move in, or big repricing there as well. That could change, of course, because, I mean, the big question is how long, isn't it? You know, as we said a couple of times, the sweet how long does this go on for? So Nargel was saying, if it ends soon, then the inflationary impact could be quite small, but if it drags on, he did actually say it could impact growth as well, if it drags on, but obviously, as you said, his main concern was inflation. So it isn't that question of how long, and polymarket betting odds, which now I'm back

6:16in Australia, I know she can't actually get on the site, because it's blocked by the regulator, but anyway, they say the chance of a ceasefire by the end of the month, 28% by the end of April, 47%, so expectations, this is going to drag on for a long time, and you think the only thing that could stop it, maybe that President Trump looks at the impact it's having on, because he gets, you know, his midterm promises, obviously, he wants lower oil and gas prices, he wants share prices to go up, he wants lower mortgage rates, all of those obviously going in the wrong direction as a result of all of this. Yeah, no, you are correct, there's commentary around that on Bloomberg, that the financial market price section at the moment is going completely in the wrong direction in terms of what he was, he was after, you know, we've got weaker, weaker equities, higher bond yields and a stronger, a stronger U.S. dollar, but I think Phil, we take each day as it comes, when I read, you know, sadly, when I read the news reports overnight, you know, it doesn't

7:22sound as though this conflict is, is, and you're going to be a two to four week type of conflict. No, well, it seems however much Iran is attacked, they still managed to fire back out, and then they, so now, Turkey and Azerbaijan have been included, oil tankers seem to be very much the target now, not just in the straights of our moves, one was attacked near Iraqi port, another anchored off Q8 just in the last hour or two, which is spilling oil, there's been nine vessels that have been attacked since all of this kicked off, so, and we've got oil, you finally shutting down as well, so they're cutting production because they're running out of storage space in many places, and so, I mean, there are real energy concerns around this, which can't be ignored for growth and for inflation, so that's the real issue. Yeah, no, it definitely is, and I think, as you said, Nuggle did point out that if it was protracted, there will be growth impacts, and I think that is why you're seeing equity markets repricing, they're down quite a bit,

8:23as you said, overnight, energy stocks are doing okay, but your consumer and stable are weaker, and that is definitely off the back of concerns around the growth, the growth backdrop, but for now, I think central bankers are the fears of what happened to inflation when the Russia-Ukraine war began, and what we saw post-pandemic with supply shocks, that's still front of mind, and so the focus is definitely on the inflationary impact, and so that is why, as I said, you see that repricing, I guess, curves, and you are seeing so many for repressing in bond markets as well, so if I look at where bond yields are tracking relative to Friday's clothes, if you look across Europe, the UK and the US yields are tracking around 20 basis points higher in yield. Yeah, wow, and shares down today. Part of it is actually

9:31because this reports from Bloomberg that officials in the US have written draft regulations that would restrict AI chip shipments to anywhere in the world without American approval. So Nvidia, they sank 2% today on that. Oracle, meanwhile, their share prices up because they're saying, well, we're going to get rid of thousands of jobs because we need more cash for AI. So yeah, anyway, meanwhile, closer to home, and the Q4 GDP that we talked about yesterday, one of the concerns was this slide in household spending. The numbers we got yesterday showed that actually it's continued, hasn't it, through to January? Yeah, look at on a headline basis, the household spending came in at 0.3, and I think Nab's view and the consensus was around 0.4, so a little bit softer there. Looking at the detail, there was another fall in good spending, but our sort of write-up suggests that that was consistent with expectations of further payback

10:33from the strong gains that you saw both in October and November. But on a positive front, they say if you do smooth out the shifting spending patterns, consumption sort of has averaged around 0.5 over the past four months. So consumer spending, I guess, if you look at what have a positive tilt on it, consumer spending has retained much of its momentum, but it hasn't growth is not accelerating. And Australia's trade surplus yesterday fell a little bit, but I think gold, I mean, gold is affecting, is moving around so much, is affecting trade balances everywhere, is it? I think Australia imported quite a chunk of it with rising prices, of course, so I think that's had quite an impact. And then China has lowered its growth rate. This is the culmination of the People's Congress this week, so not 5%, 4.5%, but sort of that was sort of expected, wasn't it? So not a big market reaction. Yeah, you're correct there, Phil. As you said, they came out and announced a target of 4.5,

11:35which is down from five, but as you said, this was largely anticipated. So limited, limited impact, limited impact in market. Right, so non-farm payrolls tonight, normally we get very excited about this is sort of yes, and then it's another thing, isn't it? So we've also US retail sales, so we did get some job numbers yesterday, so the jobless claims didn't really move much last week and the challenge of job reports, just 48,000 layoffs in February, which is actually the lowest for February in four years. So what will we see today in the non-farm payrolls? And the other thing is productivity in the United States as well is actually growing at a fair old whack. Yeah, so as you said, the focus, obviously the focus is on the news headlines around the conflict in the Middle East, but in terms of the macro backdrop and the data, the focus coming up today is as you said, US non-farm payrolls. And ahead of that report, as you said, we did get some positive

12:37data out of the US in the weekly jobless claims data. I think that did impact pricing in the OS curve at the margin, but it's sort of really hard to unpack that impact. And then obviously what was seen in the repressing in energy prices and fear around inflation. But on the weekly jobless claims data remain unchanged at 213,000, so that was slightly better than expected. And you know, I think the general view is that that, you know, claims continue to track below year ago levels and they remain at consistent levels that sort of a low pace of layoffs. So some positive news they're going into today's payrolls or tonight's payrolls report. Having said that there is a bit of payback expected this month. So if you recall in the January payrolls, we did see very

13:38strong surge up, 130,000 jobs in January. So we're expecting that to pull back or the consensus view is there was a smaller increase for February. So pull back to just around 55,000 rise in payrolls. But the unemployment rate is expected to hold steady at 4.3 percent. So, you know, all eyes on the payrolls, payrolls report. But I do think that what's going on in the Middle East is going to be the focus for financial markets. A bit front and center. Absolutely. Yeah. And who knows every day is the news is just shocking, isn't it? So let's hope it does. A sense of seeing at some point by everybody is involved in it. We'll leave it there for now. Thanks Sky. Have a great weekend. Thanks for now. It's something to celebrate. Sunday is International Women's Day. So we're going to talk to one woman in Australia who's climbed to the top and find out what led her down that pathway of success. Maybe this is an episode for your daughter to listen to. She's starting her career path. Annalise Clark, CFO at Charter Hall.

14:42One of the country's top CFOs joins me on the weekend edition, which is out this afternoon. Ready for you to listen to whenever you want to over the weekend. And of course we are back on Monday as well. We're always here. I'm Phil Dobby for NAB. Enjoy the weekend.