Global Markets Podcasts

August total non-farm payrolls came in at +1,371K mom, near to the consensus estimate of +1,350K mom but shy of our models forecast of +1,576K mom. Details of the establishment survey suggest that systematic sampling features may have biased down the reported payroll gain by 300K to 400K. It is likely that the employment gain, as calculated by the household survey, of +3,756K mom is a more reliable indicator of the direction and strength of the employment recovery. Accordingly, in our models calculations, the U3 unemployment rate is tracking a 7.25% outcome by year-end 2020, with risk towards 6.95%. By year-end 2021, the U3 rate likely may track 4.92%, and by year-end 2022, the U3 rate likely is tracking 3.74%. Simply remarkable!

In this episode MUFG US Rates Strategist, John Herrmann, reviews the August employment report, including his forecasts for non-farm payrolls and the unemployment rate versus the actual results. He also explores the implications of the number on his outlook for the economy, the yield curve, and the Fed.

Even though Prime Minister Shinzo Abe’s resignation in August came as a surprise, the impact on JPY market was limited. Accordingly, remain cautious of JPY rates rising, USDJPY falling, and JPY basis taking on a widening bias. We expect to revisit these views as the next administration’s lineup and its policy stance unfold in mid-September. Ahead of that, the Japanese Ministry of Finance Balance of Payments data for August suggest the new administration’s first order of business may be fiscal spending.

In this episode, Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses Japan’s monetary base, JPY fund supply and demand, the Tokyo repo market, cross-border flows, and his views on USDJPY and JPY rate and JPY basis. 

September will be key for central banks globally responding to the looser monetary policy outlined by the Federal Reserve. First up is the ECB, and Derek Halpenny, Head of Research for Global Markets EMEA, explains why he is predicting a forceful message from Christine Lagarde following Thursday’s meeting and the potential impact on the FX markets. Also in this podcast, Derek explains why trade negotiations between the UK and EU are about to become a big focus for investors

MUFG’s oil price conviction is emphatically shifting to be more bullish, reflecting tighter fundamentals, ongoing US dollar depreciation and strategically priced Saudi crude placing upward pressure on the front-end of the oil price curve. Ehsan Khoman, Head of MENA Research and Strategy, discusses the details of MUFG’s oil price forecasts and highlights some of the key risks that investors should embrace as we enter the last four months of 2020.

Despite another weak ADP employment report, John Herrmann is expecting another better than expected gain in payrolls, not to mention a larger than expected fall in the unemployment rate. Delays to public school openings represent down-side risk to our models forecast. Employment isn't the only thing that John is optimistic about. He's expecting growth to rebound by a big 32% in Q3 and many of his forecasts still remain more constructive than the consensus, the Fed, and other official forecasts. That scenario coupled with the Fed's new policy approach and fresh fiscal stimulus after the election could prove to be a powerful potion for the real economy?!

In this episode, MUFG US Rates Strategist, John Herrmann, previews the August employment report, including his forecasts for non-farm payrolls and the unemployment rate. He also explores the implications of those forecasts on his investment thesis, the 2s-30s yield curve steepener.

USDJPY dropped following the announcement of Prime Minister Abe’s resignation last Friday. Although the decline in USDJPY was limited compared to the scale of Nikkei Average drop, since higher US yields catalyzed Japanese investor buying of foreign bonds, thus supporting USDJPY downside. Political risk will only increase through mid-September. Not only USDJPY and JPY rates, but also the Nikkei Average will be prone to these risks, and Japanese investment flows are likely to stay active.

In this episode, Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses the impact of Abe’s resignation on markets and cross-border flows as well as updates of his view on the Yen, Yen rates, and Dollar/Yen cross-currency basis.

Oil prices are flirting at the top of their multi-month trading ranges, driven by supply apprehensions caused by Hurricane Laura. This extends an extremely active Atlantic hurricane season which, worryingly, still has a couple of months to run.

Ehsan Khoman, Head of MENA Research and Strategy, discusses the impact of seasonal hurricanes and tropical storms on oil markets, and puts them into the current context of the already precarious COVID-19 developments on the demand-side of the oil equation.

The FOMC’s economic projection for 2020 was especially pessimistic at their June 9-10 meeting, leading some Staff to examine the suitability of super accommodative policies, such as negative interest rates or yield curve control. Since that meeting, the outcomes of U.S. economic data has been strong, easily beating the consensus estimate. Our models currently forecast growth of +29.00% over the third quarter, with a carry on growth of +2.00% in the fourth quarter, or possibly stronger. If our forecast proves accurate, then real GDP growth is significantly outpacing either the consensus estimate or the FOMC’s core projection. At what point will Wall Street and the FOMC catch up to our model’s forecast for the economy? Perhaps at the Jackson Hole Symposium? And, in this dynamic environment, is it likely that Chair Powell proves not to be as uber-dovish as forward markets and many strategists suggest? In this episode, MUFG Rates Strategist, John Herrmann, previews this week’s virtual Jackson Hole Symposium and discusses what our model is currently forecasting. He also gives listeners an update on his core strategic investment stance of a 2s-30s yield curve steepener.

The trend of dollar weakness and euro gains could be at an end, according to Derek Halpenny, Head of Research for Global Markets EMEA. This week, Derek looks at the prospects for EUR correction as the markets begin to show concern about evidence of a worsening COVID-19 situation in Europe and also gives his outlook for potential dollar recovery. Are key U.S. events this week, the Republican National Convention and Jackson Hole gathering, going to move the markets?

We tee up the likely tone of the Federal Reserve’s virtual Jackson Hole conference next week, by reviewing our forecasts for the key cyclical, macro-economic indicators of the U.S. economy. Then, we review our long-held forecasts over the structural imbalances of the economy, arguing that the persistence of those imbalances require even more forceful policy stimulus from fiscal and monetary authorities. If the political pendulum swings on November 3rd to the Democratic Party, in the Presidency and the Senate, then we anticipate another +2.650 trillion fiscal stimulus by February 2021. U.S. stock markets might advance to never before seen levels next year upon the resilience of the economy, the massive stimulus, and a vaccine(s) at some point over the coming 18 months. In this episode, MUFG Rates Strategist, John Herrmann, reviews forecasts over the coming 12 months and beyond and tells listeners what these structural imbalances might ultimately require. He also offers more insights on the upcoming U.S. election and gives listeners an update on his core strategic investment stance of a 2s-30s yield curve steepener.