Global Markets Podcasts

The Suga Administration unveiled additional economic stimulus is huge, including JPY73.6 trillion in total projects and JPY40 trillion in fiscal spending. Interestingly, the JGB market has taken all that issuance in stride, even last week’s 20Yr auction. USDJPY has stayed in a narrow range and JPY basis is tight. Tokyo market trading at year’s end has been quiet, but there is a slew of market events, including the release of the third supplementary budget on December 15, the BoJ’s meeting on December 17-18, and the Ministry of Finance’s release of FY21 JGB issuance plans on December 21, for investors to navigate before the calendar year’s end.

In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses JGB trends in light of Prime Minister Suga’s additional economic stimulus measures and the third supplementary budget, as well as takeaways from the December Tankan survey. He also reviews recent cross-border flows and shares his outlook for Dollar / Yen, cross-currency basis, and Yen rate.

The market is getting increasingly pessimistic over no-deal Brexit fears and what that could mean for the UK economy. Reports this morning are suggesting positive developments over the weekend, however, with vows to “go the extra mile” to get a deal reached.

Will this be enough to stave off elevated risk for GBP? Lee Hardman, currency analyst, looks at outlook for the pound amid continued Brexit chaos and his forecast for the upcoming Fed meeting this week.

The precipitous decline in oil prices this year has led GCC authorities to drawdown on FX reserves, renewing apprehensions surrounding the sustainability of US dollar pegs in the region.

Ehsan Khoman, Head of MENA Research and Strategy, believes that the willingness and capability of GCC policymakers to safeguard US dollar pegs remains intact. He argues that the US dollar pegs serve as an appropriate policy framework and a credible anchor in providing a stabilisation mechanism for inflation and output growth. Given the existing structure of the GCC economies as hydrocarbon exporters – the price of which is in US dollar denominated receipts – a devaluation would have limited impact on GCC export competitiveness, which would quickly be eroded by the higher cost of imports and with it higher inflation.

The precipitous decline in oil prices this year has led GCC authorities to drawdown on FX reserves, renewing apprehensions surrounding the sustainability of US dollar pegs in the region.

Ehsan Khoman, Head of MENA Research and Strategy, believes that the willingness and capability of GCC policymakers to safeguard US dollar pegs remains intact. He argues that the US dollar pegs serve as an appropriate policy framework and a credible anchor in providing a stabilisation mechanism for inflation and output growth. Given the existing structure of the GCC economies as hydrocarbon exporters – the price of which is in US dollar denominated receipts – a devaluation would have limited impact on GCC export competitiveness, which would quickly be eroded by the higher cost of imports and with it higher inflation.

Over the past 8 months, it has been ironic to watch Chair Powell strengthen his economic growth and employment tracking projections, while he doubles down upon his view over the downside risks to the outlook and of the need to enact greater fiscal and monetary policy measures over the near-term. The latest news on the roll-out and effectiveness of COVID-19 vaccines suggests upside risks to the dour outlook over the medium-term.

In this episode, MUFG U.S. Rates Strategist, John Herrmann, previews the December FOMC meeting. John expects the FOMC to strengthen its GDP growth estimates and to lower its unemployment projections. He also thinks there is a decent chance that Chair Powell convinces the Committee to extend the duration of its Treasury security purchases and/or increase its monthly pace of Treasury purchases. These actions would support the economy in the face of current COVID-19 strains and also serve to restrain the extent of the sell-off in the back-end of the yield curve as the economy moves into many consecutive quarters of strong economic growth starting in Q2 2021.

The autumn Diet session ended on December 5. A risk of increased JGB issuances is lurking amidst the government ruling coalition’s announcement of a 15-month budget in mid-December and the Ministry of Finance’s release of its FY21 JGB issuance plans later in the month. Ahead of this, spot Dollar / Yen and Dollar / Yen cross-currency basis have been fairly flat and the Nikkei Average has stabilized around 26,000. The coronavirus crisis roiled markets in 2020, but markets in Tokyo are closing the year calmly.

In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, previews economic stimulus, reviews the Bank of Japan’s monetary operations in November, discusses fiscal fund supply and demand in December, and examines recent investor cross-border flows. He also offers his outlook for Yen rate, Dollar / Yen cross-currency basis, and spot Dollar / Yen.

With ongoing speculation around a no-deal Brexit, the markets continue to bounce as sterling’s volatility continues. With the ECB meeting on Thursday, the expectations of an extension to the quantitative easing programme and no rate cuts will strengthen.

MUFG’s Research Desk highlights a short US dollar and Swiss Franc, outperforming other G10 currencies, as well as a short Aussie dollar against the US buck (please note Derek meant to say “long Aussie dollar” at 10.22).

Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses how the next 48 hours will be crucial in determining the outcome for the markets and Britain’s future as a whole.

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?