Global Markets Podcasts

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?

Japan's major life insurance companies recently released investment plans for the second half of fiscal year 2020. MUFG's Takahiro Sekido notes three themes: (1) a return to JGBs; (2) an interest in alternative investments and spread product; and (3) careful selection of foreign bonds that lack appeal when considering the need for improved asset efficiency and despite low FX hedging costs. Concurrently, the start of the second half of the fiscal year has seen uneventful price action in Japanese financial markets with JGBs, Dollar/Yen, and Dollar/Yen cross-currency basis all flat. Japanese investors were doing little more than adjusting positions ahead of the U.S. presidential election, so there was nothing to drive a JPY weakening. At the same time, cross-currency basis was favorable for JGB buying, and overseas investors turned to JGBs as a short-term USD asset management product, and fund flows did not push JPY higher. These mixed flows kept Dollar/Yen in a narrow range on the eve of the U.S. elections.

In this episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses Japanese lifers’ investment plans for the second half of fiscal year 2020 and their implications on JGBs, Dollar/Yen, and Dollar/Yen cross-currency basis.

MUFG's John Herrmann is expecting a more moderate increase in headline payrolls for the month of October but another large drop in the unemployment rate. Perhaps a "deep dive" into the October employment is in order?! Separately, as the U.S. election concludes, it is pretty clear we didn't get the "Blue Wave" many expected. At the same time, it does appear likely that Biden will take the presidency (albeit with a much tighter margin than expected). What do all these developments mean for this week's FOMC meeting? Throw in a sharp rebound in growth in the third quarter against an equally sharp rebound in COVID-19 infections and one's investment thesis is "muddy" at best...

In this episode, MUFG U.S. Rates Strategist, John Herrmann, previews the October employment report, including his forecasts for non-farm payrolls and the unemployment rate. He also discusses the rebound in the broad economy in the context of the October FOMC meeting.

With a sharp acceleration in the number of COVID-19 cases globally, and a raft of new restrictions for several major European economies, the outlook is darkening for Q4. Lee Hardman, currency analyst at MUFG, notes that despite the doom and gloom, there may be some light at the end of the tunnel. With positive Brexit talks suggesting a trade deal is nearing agreement between the UK and the EU, sterling seems to be performing well.

Elsewhere, the hotly debated US election is finally coming to a head. While Joe Biden is ahead in the polls, Donald Trump still has a narrow path to re-election. Lee believes this would be a surprise for markets, but it’s certainly within the realm of possibilities.