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All major APAC equity markets closed higher, Europe was mixed,
and US indices were lower. US government bonds closed slightly
higher and benchmark European bonds closed mixed. European iTraxx
and CDX-NA credit indices closed slightly wider across IG and high
yield. The US dollar, oil, and natural gas closed lower, gold was
flat, and copper and silver were higher on the day.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our newly launched Experts
by IHS Markit platform.
Americas
1. All major US equity indices closed lower; Nasdaq -0.6%, Russell
2000 -0.7%, DJIA -0.8%, and S&P 500 -0.9%.
2. 10yr US govt bonds closed -1bp/1.64% yield and 30yr bonds
-1bp/2.36% yield.
3. CDX-NAIG closed +1bp/53bps and CDX-NAHY +3bps/297bps.
4. DXY US dollar index closed -0.5%/89.75, which is the lowest
close since March 2018.
5. Gold closed flat/$1,868 per troy oz, silver +0.2%/$28.33 per
troy oz, and copper +0.3%/$4.73 per pound.
6. Crude oil closed -1.2%/$65.49 per barrel and natural gas
closed -3.1%/$3.01 per mmbtu.
7. Investment in new fossil-fuel supply projects must
immediately cease if the world is going to slash net carbon
emissions to zero by 2050, the International Energy Agency said
Tuesday. The Paris-based energy watchdog also said in a report that
hitting the net-zero target would require a rapid acceleration of
wind and solar capacity and a halt in sales of combustion-engine
cars by 2035. (WSJ)
8. A senior American labor union leader is to inform US
lawmakers today (18 May) that all automated vehicles should have
human operators present behind the wheel to take over in the event
of an emergency, reports Reuters. Greg Regan, president of the
Transportation Trades Department of the AFL-CIO union, is to tell a
US House of Representatives' energy and commerce subcommittee that
autonomous vehicles (AVs) can threaten millions of jobs. In
addition, he is to say that any legislation to accelerate the
introduction of autonomous cars should not extend to commercial
trucks weighing 10,000 pounds or more. Regan said, "We do not allow
passenger airplanes to operate without pilots or passenger rail to
run without engineers, and we should use a similar approach with
AVs that operate on our often-congested roadways and in complex
transit networks." (IHS Markit Automotive Mobility's Surabhi
Rajpal)
9. US single-family permits fell 3.8% (plus or minus 1.0%;
statistically significant) in April and were down in all four
regions. It is too early to make the call, but this category may
have peaked in January, nationally and in each region. Although
lower, recent numbers are still impressive. (IHS Markit Economist
Patrick
Newport)
a. Multifamily permits jumped 8.9% to a 611,000-annual
rate—their third-highest tally in 31 years. This category is
volatile so one should not make too much of this milestone.
Multifamily permits and starts have followed a flat trend since
2015 and show no signs of taking off.
b. Housing starts fell 9.5% to a 1.569 million annual rate (plus
or minus 10.0%, not statistically significant) in April;
single-family starts plunged 13.4% (plus or minus 7.9%,
statistically significant) to a 1.087 million rate; multifamily
starts edged up 0.8% to a 482,000 rate.
c. The costs of building a home have been rising faster than the
selling prices of new homes, so builder margins have narrowed. This
may explain why single-family housing permit numbers have slipped
since January. If builders can raise their selling prices, housing
starts could ramp up again. We are not expecting that.
10. US seasonally adjusted e-commerce retail sales registered
$215.0 billion in the first quarter of 2021, an increase of 7.7%
from the fourth quarter of 2020. (IHS Markit Economist James
Bohnaker)
a. Growth was 39.1% year on year (y/y), up from a growth rate of
32.0% in the previous quarter but below the peak of 43.8% y/y in
the second quarter of 2020.
b. The e-commerce share of total retail trade held steady at
13.6%. Prior to the pandemic, the share was 11.0% in the fourth
quarter of 2019. This share had been increasing at around one
percentage point per year on average during the last five years. In
other words, the shifting shopping patterns induced by the pandemic
thrust the share of e-commerce relative to total retail forward by
nearly three years.
c. This data release included annual revisions to e-commerce
retail sales data. The level of e-commerce retail sales was revised
down in recent years, resulting in $7 billion less in e-commerce
sales than previously estimated as of the fourth quarter of
2020.
11. In North America, IHS Markit forecasts the semiconductor
shortage as having the most significant impact in April, so far
this year. The issue is ongoing and the shortage has begun to
affect the highly profitable pick-up truck segment. The impact from
the issue in March was less severe than in February, and the
current expectation is for resumption of normal output in the third
and fourth quarters of 2021, although opportunities for making up
lost production could shift to 2022. One reason for output likely
being at near or above 100% of planned production in the third
quarter will be automakers forgoing traditional mid-year shutdowns
for a second year in a row. (IHS Markit AutoIntelligence's Stephanie
Brinley)
12. Canoo started taking preorders for its electric pick-up on
17 May, setting a price range of USD34,750-49,950 for the Lifestyle
Vehicle, which is due to arrive in 2022. According to a press
statement from Canoo, Lifestyle Vehicle preorders can be placed
online with a USD100 deposit. The Lifestyle Vehicle will be
followed by a Pick-up and Multi-Purpose Delivery Vehicle (MPDV) "as
soon as" 2023, and preorders can be placed for those, although
Canoo has not announced pricing. (IHS Markit AutoIntelligence's Stephanie
Brinley)
13. Brazil's two largest beef processors JBS and Marfrig both
reported a strong set of global results for the first quarter of
this year - but said margins from their Brazilian operations had
been squeezed by the high cost of cattle. (IHS Markit Food and
Agricultural Commodities' Ana Andrade and Max Green)
a. JBS, the world's largest meatpacker, posted a net profit of
BRL2 billion (USD377 million) in the quarter ended March 31, versus
a BRL5.93 billion loss in the same period of last year. The company
said its US operations had benefited from a recovery in demand and
the wide availability of slaughter-ready cattle.
b. In contrast, margins in Brazil were hit by the high cost of
cattle, which reached record highs in the first quarter of
2021.
c. Marfrig, Brazil's second largest processor, reported its best
first quarter results in Jan-March 2021, posting a net profit of
BRL279 million in the first quarter versus a loss of BRK137 million
in the same period last year. Like JBS, the strength of Marfrig's
US operations helped offset challenges in Brazil, where the high
cost of raw materials caused EBITDA margins to fall 8 percentage
points, to 5% in the first quarter of 2021.
d. Having peaked at BRL320 per 15kg unit in mid-April, Brazil's
indicator price for fattened cattle fell back to BRL307 per 15kg
(USD3.88 per kg) at the end of last week (14 May). Prices are
expected to continue easing back over the coming weeks due to an
increase in the availability of slaughter-ready animals. This
pressure is expected to last until mid-June when the supply of
animals will start to tighten once again.
Europe/Middle East/Africa
1. European equity markets closed mixed; UK flat, France -0.2%,
Germany -0.1%, Italy +0.1%, and Spain +0.3%.
2. 10yr European govt bonds closed mixed; Italy -2bps, Spain
-1bp, France/UK flat, and Germany +1bp.
3. iTraxx-Europe closed +1bp/52bps and iTraxx-Xover
+2bps/256bps.
4. Brent crude closed -1.1%/$68.71 per barrel.
5. Germany's Federal Statistical Office (FSO) data show that
total German employment declined by 0.5 million to 44.361 million
in the first quarter, which exceeds the normal drop for seasonal
reasons. The year-on-year (y/y) decline thus deepened from the
previous quarter's -1.5% y/y to -1.6% y/y, although the base in the
first quarter of 2020 had already been hurt somewhat by the
unfolding pandemic. This compares with a 1.0% average y/y gain
during 2010-19. (IHS Markit Economist Timo
Klein)
a. In seasonally adjusted terms, employment declined by 47,000
or 0.1% versus the fourth quarter of 2020. This contrasts with an
average quarterly gain of 0.26% quarter on quarter (q/q) during
2020-19. Separate monthly data do show a rebound in March following
declines during November-February, however.
b. The breakdown by sector shows that four sectors bucked the
trend and continued to show y/y gains - foremost (understandably)
public services/education/health, followed by construction,
information and communications, and real estate.
6. The CEO of Bosch, the world's largest automotive components
supplier, has said that he expects the global automotive
semiconductor shortage to continue into 2022, according a report in
German newspaper Frankfurter Allgemeine Zeitung. Bosch CEO Volkmar
Denner struck a cautious note when asked about the microchip crisis
in an interview with the newspaper. Denner said, "There are
difficult months ahead of us, and the situation could remain tense
until 2022." (IHS Markit AutoIntelligence's Tim Urquhart)
7. Tesla CEO Elon Musk has complained that red tape and
bureaucracy are delaying the start-of-production (SOP) date at his
company's new plant in Grünheide (Germany). According to a
Bloomberg report, Musk made the comments during a site visit to the
facility yesterday (17 May). When asked about when the SOP at the
plant would be, he said, "It's hard to predict with precision cause
you can only make the cars when all of the pieces are here. It
looks like we're able to start production end of this year." In
addition, when asked if the red tape that Tesla is dealing with in
Germany was an impediment to the company's plans, he said, "I think
there could be less that would be better," adding that rules were
"immortal". (IHS Markit AutoIntelligence's Tim Urquhart)
8. Stellantis' Opel and Vauxhall brands have launched variants
of its battery electric Vivaro-e light commercial vehicle (LCV)
that feature a hydrogen fuel cell range extender. According to a
statement, the Vivaro-e Hydrogen is similar to the existing
Vivaro-e but has had its battery pack replaced by three 700-bar
carbon-fiber hydrogen cylinders that supply a 45kW fuel cell, which
is capable of generating enough power for continuous highway
driving. The powertrain also includes a 10.5kWh lithium-ion battery
located under the front seats that provides "dynamic peak power
when required" such as on start-up or when accelerating. As well as
allowing the fuel cell to run at optimum operating conditions, the
battery can also be recharged through regenerative braking and via
a plug socket. The battery can provide 50km of electric-only range,
while the fuel cylinders offer a range of more than 400km under
WLTP test conditions. (IHS Markit AutoIntelligence's Ian
Fletcher)
Asia-Pacific
1. All major APAC equity indices closed higher; Japan +2.1%,
Hong Kong +1.4%, India/South Korea +1.2%, Australia +0.6%, and
Mainland China +0.3%.
2. Mainland China's year-on-year (y/y) real industrial
value-added growth continued to fall from 14.1% in March to 9.8% in
April as a result of the higher base effect. The growth rate, on a
two-year (2020-21) average basis, picked up by 0.6 percentage point
to 6.8%, while the month-on-month figure remained in expansion.
(IHS Markit Economist Yating
Xu)
a. By sector, the headline acceleration was entirely driven by
the manufacturing sector, which grew 7.6% (on 2020-21 average
basis), up 1.2 percentage points from March and 2.3 points from the
2019 level.
b. Equipment manufacturing and high-tech manufacturing continued
to lead the growth, expanding 11.2% and 11.6%, respectively, on a
two-year average basis. The new energy vehicles, industrial robots,
and integrated circuits segments all reported double-digit
growth.
c. Production in the mining and utilities sectors both slowed
from March to a much lower level compared with the April 2019
level. Impacted by the chip supply shortage, auto, integrated
circuits, and computer production weakened on a month-on-month
basis.
d. The service production index, on a two-year (2020-21) average
basis, grew by 6.2% compared with 2019 levels, down from 6.8% a
month ago and 1.2 percentage points lower than the April 2019
growth rate.
e. Year-on-year FAI growth declined by 5.7 percentage points to
19.9% in April on higher-base effects. On a 2020-21 average basis,
FAI growth continued to accelerate from 1.7% through February to
2.9% through March and to 3.9% through February.
f. Average 2020-21 real estate investment increased by 10.3%
from the 2019 level in April, accelerating from 7.7% in March.
However, construction and sales activities weakened from the first
quarter thanks to the mortgage interest rate hike and tightening of
credit regulations and purchase controls on the housing market. The
floor space of new starts reported faster contraction from 3% to
4%, construction growth slowed from 7% y/y to 6% y/y, and
completions growth deteriorated from 2% y/y to 0% y/y.
g. Year-on-year nominal retail sales growth fell by 34.2% in
March to 17.7% in April. On a two-year (2020-21) average basis,
retail sales growth compared with 2019 levels declined by 2
percentage points to 4.3% in April. Additionally, month-on-month
growth slowed by 0.62 percentage point from March to 0.32%.
3. Mainland China's average new home price inflation inched up to
0.48% month on month (m/m) in April, compared with 0.41% m/m in the
previous month, according to the survey conducted by the National
Bureau of Statistics covering 70 major cities. (IHS Markit
Economist Lei Yi)
a. The uptick in month-on-month new home price inflation in
April largely came from the rising inflation in tier-1 cities,
while the inflation increase in tier-2 and tier-3 cites was
relatively milder.
b. Among mainland China's four tier-1 cities, Guangzhou
continued to report the highest new home price inflation of 1.1% in
month-on-month terms; whereas Beijing and Shenzhen recorded the
largest month-on-month inflation increase from March of 0.4
percentage points. Up to 62 out of the 70 surveyed cities
registered month-on-month new home price gains in April, unchanged
from the March reading.
4. Didi Chuxing's (DiDi) autonomous vehicle (AV) unit has
selected NVIDIA DRIVE for its new fleet of robotaxis, which will be
built in partnership with Volvo Cars. Volvo's autonomous
drive-ready XC90 cars will be integrated with DiDi Gemini, a new
autonomous hardware platform, which is equipped with NVIDIA DRIVE
AGX Pegasus. DiDi Gemini can achieve "700 trillion operations per
second [TOPS] of performance, and includes up to 50 high-resolution
sensors and an ASIL-D rated fallback system". (IHS Markit
Automotive Mobility's Surabhi Rajpal)
5. GAC Aion, the electric vehicle (EV) subsidiary of GAC Group,
has teamed up with DiDi to co-operate on the development of an
autonomous new energy vehicle (NEV) model for large-scale
commercial application, according to Gasgoo. The two companies will
integrate DiDi Autonomous Driving's hardware and software
technologies with GAC Aion's NEV design and manufacturing
capabilities and the resources of autonomous car platform. (IHS
Markit AutoIntelligence's Nitin Budhiraja)
6. Japan's real GDP fell in the first quarter for the first
decline in three quarters, moving down 1.3% quarter on quarter
(q/q, or 5.1% q/q annualized) after a 2.8% q/q (or 11.6% q/q
annualized) rise in the previous quarter. The larger-than-expected
contraction for the first quarter mainly reflected a sharper
decline in government consumption and weak private capital
expenditure (capex). (IHS Markit Economist Harumi
Taguchi)
a. The major reason behind the decrease was a 1.4% q/q drop in
private consumption, reflecting measures to contain the third wave
of the pandemic.
b. Spending in services and durable goods fell by 2.6% q/q and
3.1% q/q, respectively, following two quarters of growth.
c. Spending on semi-durable goods continued to decline with a
3.0% q/q slide. Those weaknesses were partially offset by a rebound
in spending on non-durable goods.
7. The South Korean government has unveiled an ambitious plan to
invest around USD450 billion over the next decade in its
semiconductor manufacturing industry, reports Bloomberg. Samsung
Electronics and SK hynix Inc. would lead in the investment of
KRW510 trillion (USD448.8 billion) in semiconductor research and
production through to 2030 under a national blueprint devised by
South Korean President Moon Jae-in's administration. (IHS Markit
AutoIntelligence's Jamal Amir)
8. Although Thailand's economy showed an improvement in the
first quarter from the previous quarter's contraction, it struggled
to contain the COVID-19 pandemic during the first quarter. Real GDP
fell by 2.6% year on year (y/y) in the first quarter, only slightly
below IHS Markit's projection of a contraction of 2.5% y/y. (IHS
Markit Economist Jola
Pasku)
a. Private consumption fell by 0.5% y/y during the first
quarter, reversing an expansion of 0.9% y/y in the previous
quarter. After almost a year without local transmission, a second
wave of COVID-19 brought back localized containment restrictions in
early January and February. As a result, private consumption
weakened across most spending categories in the first quarter, with
spending on semi-durable products bearing the largest blow (down
7.5% y/y).
b. Fixed investment activity expanded by 7.3% y/y during the
first quarter, reversing a 2.5% y/y contraction recorded in the
previous quarter. Private investment returned to positive growth
for the first time in five quarters with support from investment in
machinery and equipment spending.
9. Gojek will begin providing ride-hailing and e-payment
operations "very, very soon" in Vietnam, country manager Phung Tuan
Duc said, reports Nikkei Asian Review. The company currently offers
motorbike rides, as well as food delivery and parcel shipping
services for Vietnamese customers. Duc said, "Instead of going
after the next shiny technology, we focus on what the market needs
the most. We feel confident to start expanding, and four-wheel
[transportation] and payment are the two most requested [services]
from our consumer base." (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Posted 18 May 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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