Global Markets Podcasts

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.

Emerging market currencies are outperforming due to market optimism driven by a favourable U.S. election outcome and positive COVID-19 vaccine trial results. The Turkish Lira, in particular, has seen an increase of almost 10% against USD this week, thanks to a potential policy shift from President Erdoğan.

Listen for EM currency outlook from Lee Hardman, currency analyst, as well as his views on Brexit trade negotiations as time runs out for a deal to be made.

Markets have moved swiftly on from the US elections with a focus back towards the COVID-19 vaccine, broader growth and the accompanying oil demand outlook. The announcement on 9 November that a vaccine achieved 90+% efficacy in stage 3 trials – exceeding investor expectations of 40-60% as well as being above the effectiveness of flu vaccines – has broad and immediate market ramifications.

Ehsan Khoman, Head of MENA Research and Strategy, offers key reasons as to why he remains resolutely constructive on oil prices and how this week’s vaccine announcement reinforces his bullish thesis that vaccine optimism has been underpriced and underappreciated by markets.

With the 4th quarter likely beginning on such a strong trajectory, in terms of income growth and personal and business spending growth, there is a risk that real GDP only declined near -1.90% YoY in all of 2020 – significantly better than the consensus estimate of -3.30% and the Federal Reserve’s projection of -3.70%! Over the course of 2021, John Herrmann forecasts that the level of real GDP will be fully recovered by Autumn 2021, and the U3 unemployment rate fully recovered by Q1-2022. John raises the question: “For how much longer can the FOMC maintain its monthly asset purchase program of $120.0 billion per month? For how much longer will the FOMC be able to convince market participants that front-end interest rates will be anchored at zero lower bound?” While John has concerns over a severe season of community spread of COVID-19 over the coming few months, the “safe place to hide” may be in the 2s-30s yield curve steepener– especially should there be any pull-back over the coming month or two.

In this week’s podcast, MUFG U.S. Rates Strategist, John Herrmann, takes us through the October monthly employment report and all of the constructive signals he sees. As a standout indicator, his “proxy” for personal income growth of private-sector production and non-supervisory workers surged +1.36% month-on-month. That gain in income points to risk of another remarkably strong retail sales spending report next week. He also explores the implications of those forecasts on his investment thesis, the 2s-30s yield curve steepener.

In this episode, MUFG Head of Agency Mortgage Strategy and Prepayment Modeling, Glenn Schultz, gives us an overview of the most recent prepayment report and how those numbers compare to our Katana machine learning model projections.  He also discusses prepayment expectations on the 30-year 1.5 coupon, as well as the impact of the GDP forecast on delinquency rates and forbearance.

The Nikkei Average surged on November 9 as investors reacted positively to the new U.S. administration as it began to lay the groundwork for the next four years. Still there are many unknowns about the policy stance of the new U.S. administration, and the risk of the COVID-19 pandemic flaring up again continues to smolder. Coincidently, the Bank of Japan continues to buy assets and will certainly maintain monetary easing. Japanese companies and investors have not yet reacted to these developments judging by Dollar / Yen cross-currency basis and Yen swap rates that have moved only slightly.

In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, analyzes the October monetary base data and discusses USD fund-supplying operations as well as the “Summary of Opinions” from the October BoJ meeting. He also updates his views for Dollar / Yen, yen rate, and Dollar / Yen cross-currency basis.

How are the markets reacting to Joe Biden’s U.S. presidential win and Trump’s efforts to contest the victory?

In this episode, Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, outlines the key areas of focus for investors, including positive equity market gains, expectations of diminished tensions globally, continued USD weakness and outlook for emerging market flows. He also looks forward to Trump’s lame duck session of Congress.

Will a fiscal stimulus package finally be agreed? Listen now for more. 

The blue wave did not materialise. What appears to be a modest victory for Biden, albeit without a Democrat majority in the Senate jeopardises his ambitious $2 trillion clean energy plan, meant to transform the US energy sector into something greener.

Ehsan Khoman, Head of MENA Research and Strategy, examines the repercussions of a potential Biden administration combined with a gridlocked Congress in this week’s podcast.

Could the shift towards lower-carbon energy transpire in a less ambitious timeframe, and what are the implications for global energy markets?