Global Markets Podcasts

The dizzying risk-on momentum in November stemming from the euphoria over vaccines was pricing in future hope, but not the immediate realities of a worsening virus surge on both sides of the Atlantic, which adds uncertainty to short-term oil demand. This, in conjunction with sustained higher crude prices – and a rosier outlook for the global economy next year – put OPEC+ in difficult position in confronting its dynamic role in balancing oil markets as it met this week.

Ehsan Khoman, Head of MENA Research and Strategy, believes that the divergence amongst OPEC+ members does not bode well for collective unity in 2021, and the sustainability of the group’s strategy of supporting prices (over defending market share) will be bought into question in the months ahead.

As we get closer to the start of the next calendar year, we are tightening up our models forecasts, while assessing the recovery, thus far, over the year 2020. For the November employment report, John Herrmann outlines his models forecasts for another sharp decline in the U3 unemployment rate and for a solid gain in private sector payrolls. However, John’s models glean adverse risks for employment growth over the coming few months thereafter. By early spring, however, John’s models turn strongly constructive, and the 3^rd Quarter may achieve a growth rate in real GDP in excess of +8.00% q/q SAAR.

In this episode, MUFG’s U.S. Rates Strategist, John Herrmann, shares our clients’ concerns for the very near-term, over the medium-term, and longer-term and also how his forecasts for economic and employment growth significantly outpace both the consensus estimates and the official projections of the FOMC. Is another “taper tantrum” in the offing over the second half of the year 2021? 

2020 was altered in previously unimaginable ways by the COVID-19 pandemic. In March, global financial markets became extremely volatile in reaction to the huge disruption in the real economy. Across the globe, governments and central banks responded with coordinated policy measures that boosted both share and bond prices, as well as basis arbitrage trading of key currencies, which kept FX spot rates in tight ranges. The Bank of Japan responded to the crisis by aggressively supplying funds to the market and buying corporate bonds and ETFs. The USD supply operations helped to stabilize USD funding for Japanese investors, while the corporate bond and CP buying supported the credit market. These moves helped to quell risk contagion for global financial markets, and the Tokyo market is fairly calm as 2020 draws to a close. Compared to previous crises, like the late 1990s and 2008, JPY cross-asset pricing was very different this time.

In today’s episode, MUFG's Chief Japan Strategist, Takahiro Sekido, looks back on 2020 and shares his outlook for 2021. He also discusses the lessons learned from the COVID-19 crisis and his outlook for Dollar/Yen, Dollar/Yen basis, and Yen rate. 

In this week's podcast, Lee Hardman, currency analyst, discusses market optimism following the continuing rally from COVID-19 vaccine developments, Biden's election win, possible advancements in Brexit trade talks and China's strengthening economy in year end.

Lee explains how this rosy outlook is benefitting a range of global currencies – all except USD, that is. 

The recent encouraging developments surrounding COVID-19 vaccines has supported to lift Brent crude oil prices by around 30% since early November to ~USD49 per barrel, as markets begin to form new contours of normality towards a post-virus equilibrium.

Whilst, Ehsan Khoman, Head of MENA Research and Strategy, has remained resolutely bullish oil since early September, he believes that oil prices are racing ahead of even MUFG’s own consensus forecasts of year-end Brent and WTI at USD48/b and USD45/b, respectively. With this, he expects a near-term mild correction owing to three key reasons.

Click to listen to Ehsan’s analysis as he contextualises his thesis as to what can take oil (sustainably) above USD50/b.

COVID-19 patient numbers are on the rise, and the third wave of the COVID-19 pandemic has started to put limits on economic activity. The positive surprise of coronavirus vaccines showing success lasted only a few days, and fears about the growing pandemic have offset the positive news. Looking ahead, the Northern Hemisphere is heading into winter and concerns about other, non-coronavirus illnesses will likely mount. Global investors could focus more on risk aversion. Amidst a dearth of risk takers in the global financial markets, we think that the U.S. current deficit and low U.S. rates will likely support a weaker Dollar.

In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, dissects trends in cross-border flows evident in recent data, as well as the Tokyo market’s microstructure amongst Japanese, overseas investors, and the BoJ. He also shares his outlook for Dollar/Yen, Yen swap rates, and Yen basis.

This week sees USD on weaker footing, and Derek Halpenny, Head of Research for Global Markets EMEA, explains why he expects 2021 to see further dollar depreciation.

Derek also looks at sentiment shifts which means Emerging Markets have seen inflows of USD 30bn in the three week period since the election; can this positive momentum from recent COVID-19 vaccine news be sustained?

Listen for analysis on this and the key market moving events for the week ahead.

OPEC+ is in a spot of bother. The group is set to meet on 30 November and 1 December to determine the next phase of their historic production cuts that helped to carve out a floor under oil prices, at a time when high virus cases continue to weigh on global oil demand.

Ehsan Khoman, Head of MENA Research and Strategy, believes that the group will err on the side of caution and heed the market’s anxieties stemming from the virus resurgence on both sides of the Atlantic and unite behind a three-month delay in its next phase of tapering to April. This, he believes, will provide the group breathing space to adjust its reaction function to market conditions once the COVID-19 winter speed bump is hopefully behind us.

John Herrmann reviews three risk factors of interest: (1) a rapid deterioration in statistical momentum over the 4^th Quarter in consumer and business spending and in total business inventories, (2) strong mobility indicators and surging COVID-19 new infection cases and (3) a fundamentally divided Senate chamber that may be united – if only for a brief moment in the 1^st Quarter – to deliver a relatively forceful stimulus package (of near $1.500 trillion, or greater) to thwart risks of: surging Wave 2 COVID-19 new cases (towards 250,000 to 300,000 per day), more stringent lock-down measures, and another economic contraction. 

In this episode, MUFG’s U.S. Rates Strategist, John Herrmann, finds that the complexion of risk factors remains supportive of his models forecast for real GDP growth over the 4^th Quarter, of near +6.00% q/q annualized, or near -2.10% on a 4q/4q year-over-year rate. However, these very same factors point to a potentially worrisome outcome for 1^st Quarter’s real GDP growth rate, of weaker than +1.00% q/q annualized – but with some risk of an economic contraction. Again, it is ironic that the U.S. Congress can be united only by risk of a near unthinkable rate of community spread of COVID-19 (and its implications for risk of an economic contraction)! As this drama plays out, waiting in the wings, the members of the FOMC begin their review of the policy toolkit to decide how best to support, prolong, and enhance U.S. economic recovery.

Japanese 1H corporate earnings releases have been mixed because of the COVID-19 pandemic, while investment flows among both Japanese companies and investors have been shifting in the wake of the U.S. election. Prime Minister Suga’s administration has noted the need for further economic stimulus and proposed a third supplementary budget to be combined with the FY21 budget and to span 15 months. The Jul-Sep GDP report showed a strong rebound in growth, but the forward-looking signals were decidedly mixed.

In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, dissects the Jul-Sep GDP report and discusses its implications. He also reviews recent cross-border investment flows and shares his outlook for Dollar / Yen, Yen rate, and Dollar / Yen cross-currency basis.