NAB Morning Call
Battle Chess with China
Why It Matters
Understanding the interplay between geopolitics, energy shortages, and financial markets is crucial for investors and policymakers as it shapes commodity prices, inflation, and growth outlooks. The episode’s timely analysis of the Trump‑Xi talks and looming oil deficits offers insight into risks that could affect everything from airline fuel costs to consumer spending in the coming months.
Key Takeaways
- •US equities hit fresh highs; Nasdaq up 1.4%
- •Oil prices dip but remain above $100 per barrel
- •IEA warns oil supply shortage through October, 25% production drop
- •PPI rises 5.2% YoY, but core inflation stays modest
- •Trump‑Xi summit may link Taiwan arms sales to Iran de‑escalation
Pulse Analysis
The morning call on May 14, 2026 showed US equity markets surging again, with the S&P 500 up 0.6% and the Nasdaq climbing 1.4% to a new all‑time high. Commodity prices mirrored the optimism: copper hit a record $671 per pound on COMEX and silver jumped 3.8%, while oil slipped 0.8% to around $106 a barrel. The dollar index nudged higher, the Aussie rose 0.3%, and euro fell 0.3%. Bond markets steadied; ten‑year Treasury yields briefly touched 4.5% before retreating, and the 30‑year auction cleared above 5% for the first time since 2007.
Despite the rally, the International Energy Agency warned that global oil inventories are depleting rapidly and the market will stay severely undersupplied through October. OPEC‑plus production for April fell to 27 million barrels, roughly 25% below the 36 million‑barrel target, tightening jet‑fuel supplies and threatening airline operations. Producer‑price inflation surged 5.2% year‑over‑year, driven largely by a 7.8% rise in energy costs, yet core PCE inflation is expected to stay near 3.3%, keeping the Fed’s policy outlook largely unchanged. Investors are therefore weighing strong equity momentum against a looming energy‑supply crunch.
Geopolitical headlines added another layer of uncertainty. Reports suggest President Trump may negotiate a deal with President Xi that pauses US arms sales to Taiwan in exchange for Chinese influence over Iran, potentially involving roughly $1 billion in weapons. The summit also raises prospects for AI security cooperation, with firms like NVIDIA, Apple and Anthropic’s Mythos in the spotlight. Meanwhile, the Federal Reserve confirmed Kevin Walsh as Jay Powell’s successor, but market pricing still expects only modest rate hikes this year. Together, these dynamics—energy scarcity, inflation pressures, and US‑China diplomatic moves—shape the narrative behind today’s market resilience.
Episode Description
Thursday 14th May 2026
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Is Donald Trump readying himself for a deal that will see him forego arms sales to Taiwan in exchange for China helping end the confict with Iran? It’s one interpretation of what might come from the summit in Beijing, but NAB’s Ray Attrill is doubtful anything too comnstructive will emerge from the talks. Still, oil prices have fallen a little and equities in the US have risen to new highs, despite an EIA report warning of rapidly depleting oil reserves. Meanwhile Kevin Warsh has been approved by the Senate as the next Fed chair, but he’ll find it hard to cut rates, with the latest PPI numbers rising sharply and bond yields rising. Today US retail sales is the main data release, although Ray explains to Phil why it might be difficult to decipher anything useful from it.
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