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All major US and most European equity indices closed higher,
while APAC was mixed. US and benchmark European government bonds
closed higher. European iTraxx and CDX-NA closed almost unchanged
across IG and high yield. Oil, natural gas, and copper closed
higher, while the US dollar, gold, and silver were lower on the
day. Volatility has been relatively constrained this week as the
markets patiently await tomorrow's 8:30am ET US non-farm payroll
report for any indication that the delta variant is materially
impacting the recovery in employment.
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
All major US equity indices closed higher; Russell 2000 +0.7%,
DJIA +0.4%, S&P 500 +0.3%, and Nasdaq +0.1%.
10yr US govt bonds closed -1bp/1.29% yield and 30yr bonds
-2bps/1.90% yield.
CDX-NAIG closed flat/46bps and CDX-NAHY flat/274bps.
DXY US dollar index closed -0.2%/92.23.
Gold closed -0.2%/$1,812 per troy oz, silver -1.3%/$23.92 per
troy oz, and copper +0.6%/$4.30 per pound.
Crude oil closed +2.0%/$69.99 per barrel and natural gas closed
+0.6%/$4.64 per mmbtu.
US seasonally adjusted (SA) initial claims for unemployment
insurance decreased by 14,000 to 340,000 in the week ended 28
August, its lowest level since the week ended 14 March 2020. Claims
continue to move lower and show no signs of a new round of layoffs
in response to the fourth wave of COVID-19. While the level of
initial claims is trending down and is far below the pandemic-era
high, initial claims closer to 200,000 would suggest a normal level
of "churn" for an economy in its prime. (IHS Markit Economist
Akshat Goel)
Seasonally adjusted continuing claims (in regular state
programs) fell by 160,000 to 2,748,000 in the week ended 21 August,
hitting its lowest since 14 March 2020. The insured unemployment
rate edged down by 0.1 percentage point to 2.0%.
In the week ended 14 August, continuing claims for Pandemic
Emergency Unemployment Compensation (PEUC) rose by 6,044 to
3,800,000.
In the week ended 14 August, continuing claims for Pandemic
Unemployment Assistance (PUA) rose by 408,485 to a seven-week high
of 5,413,238.
In the week ended 14 August, the unadjusted total of continuing
claims for benefits in all programs rose by 178,526 to
12,186,158.
US employers announced 15,723 planned layoffs in August,
according to Challenger, Gray & Christmas—down 17% from
July's 18,942. The total for August is the lowest monthly reading
since June 1997 and is 86% lower than the August 2020 reading. (IHS
Markit Economist Juan
Turcios)
For the year to date (YTD), 247,326 job cuts have been
announced, down 87% from the 1,963,458 job cuts announced over the
same period in 2020 and the lowest January-August total on record.
(Challenger began tracking job-cut announcements in January
1993.)
According to Andrew Challenger, senior VP of Challenger, Gray
& Christmas, "Companies are much more concerned about their
talent getting poached than with finding ways to cut staff. They
are in full retention mode."
So far this year employers have cited COVID-19 as a reason for
7,950 planned job cuts. No employer cited COVID-19 as a reason for
planned job cuts in August despite the surge in cases due to the
rapidly spreading Delta variant. Employers have cited other
reasons, including market conditions (48,103), closing (47,142),
demand downturn (45,146), restructuring (43,407), and
acquisition/merger (11,981) more frequently than COVID-19 as causes
of job-cut announcements this year.
Last year, 2,304,755 job cuts were announced, the highest
yearly total on record. COVID-19 was the leading reason cited for
job-cut announcements last year but was cited less frequently
toward the end of the year. As of August, COVID-19 is the
eighth-leading reason for job-cut announcements in 2021 and has
been trending downward.
Job hiring plans picked up in August as Walmart, Michaels
Stores, and USPS announced upcoming seasonal holiday hiring plans.
In August, employers announced plans to hire 94,004 workers with
80,000 of those announced hires being seasonal workers. So far in
2021 employers have announced plans to add 664,074 jobs, down 61.9%
from the 1,743,033 announced through the same time last year. The
robust hiring announcements last year reflected a surge in hiring
in grocers, delivery apps, food chains, and warehouses as employers
dealt with a pandemic-driven increase in demand for online
shopping.
Aerospace/defense has announced 33,303 job cuts so far this
year, the highest number of any industry. Rounding out the five
sectors that have announced the most job cuts this year are
telecommunications (25,085), services (20,826), energy (18,458),
and healthcare/products (16,263).
US productivity (output per hour) rose at a 2.1% annual rate in
the second quarter, revised down 0.2 percentage point from the
previously reported figure, following an increase of 4.3% in the
first quarter. (IHS Markit Economists Ken
Matheny and Lawrence Nelson)
Compensation per hour rose at a 3.4% annual rate in the second
quarter and at a 1.4% rate in the first quarter. The second-quarter
increase was revised up 0.1 percentage point. Compensation per hour
has risen at a 6.4% annual rate from the fourth quarter of 2019,
far higher than the 2.7% annualized increase in productivity over
that span. The marked increase in compensation per hour reflects
pandemic-induced effects on employment: employment in lower-wage
sectors has declined relative to employment in higher-wage
sectors.
Unit labor costs surged in the early stages of the pandemic, as
compensation per hour rose much more than productivity. However,
the rise in unit labor costs has slowed on average in more recent
quarters. During the first quarter, unit labor costs rose at a 1.3%
rate, revised up 0.3 percentage point from the previously reported
figure, but this followed a decline of 2.8% in the first quarter.
Even with the upward revision to the second quarter, unit labor
costs declined at 0.7% rate over the first half of 2021, down from
a 1.1% increase over the second half of 2020 and from a 10.1%
increase over the first half of 2020.
Hours rose at a 6.0% rate in the second quarter, continuing a
strong recovery that began in the third quarter of 2020. Over the
last four quarters, hours have risen 13.7%, reversing more than
three-fourths of the 14.5% decline over the first two quarters of
2020.
As pandemic-induced distortions on labor markets unwind, we
expect growth in compensation per hour and productivity to continue
to moderate, resulting in moderate growth of unit labor costs.
US manufacturers' orders rose 0.4% in July, while shipments
rose 1.6% and inventories rose 0.5%. The increase in orders matched
the consensus expectation; inventories fell short of our
assumption. (IHS Markit Economists Ben
Herzon and Lawrence Nelson)
Orders and shipments of core capital goods (nondefense capital
goods excluding aircraft) remained elevated and were little revised
from the advance estimates.
Both orders and shipments have surpassed their pre-pandemic
levels, but recent gains have been boosted by surging prices in the
manufacturing sector.
Year to date, manufacturers' orders are up 8.5% and
manufacturers' shipments are up 7.0%. Over the same period, the
producer price index (PPI) for manufacturing is up 11.4%, making
clear that the recent strength in orders and shipments is purely
nominal; in inflation-adjusted terms, after mounting a full
recovery last year, orders and shipments are down so far this
year.
In light of current supply-chain issues, we took the soft tone
for inventories in July as an indication that inventory-building
may be more challenging in coming months than we had assumed. So,
we marked down our forecast of inventory investment for August and
September as well.
Supply issues impacted on US light-vehicle sales severely in
August, with sales dropping 17.2% compared with August 2020. The
seasonally adjusted annual rate (SAAR) is estimated to have fallen
to between 12.9 million and 13.3 million units. Light-vehicle sales
in August were at the lowest monthly level since June 2020, which
was just two months after the depths of the COVID-19 lockdown
period last year. Although consumer interest and buying conditions
remain favorable, auto demand levels have been affected by low
inventory levels and are expected to continue to be so over the
next several months. Automakers are using available microchip
supplies to prioritize production of high-margin utility vehicles
and trucks; however, the semiconductor supply issue is not
affecting all automakers to the same degree. (IHS Markit
AutoIntelligence's Stephanie
Brinley)
Caterpillar will begin offering Cat generator sets capable of
operating on 100% hydrogen, including fully renewable green
hydrogen, on a designed-to-order basis in late 2021. More
immediately, the company will launch commercially available power
generation solutions that can be configured to operate on natural
gas blended with up to 25% hydrogen. The new solutions build upon
Caterpillar's hydrogen solutions portfolio, including Solar
Turbines' gas turbine generator sets, which have run on high
hydrogen blends for decades and are capable of operating on 100%
hydrogen today. The ability to work with hydrogen fuel helps
address customers' carbon-reduction goals. (IHS Markit Upstream
Costs and Technology's Kamila
Langklep)
Canada's July merchandise trade surplus narrowed from a month
prior to $778 million. Additionally, June's trade surplus was
heavily revised from $3.2 billion to $2.6 billion. (IHS Markit
Economist Evan Andrade)
Exports advanced marginally at 0.6% month on month (m/m) to
$53.7 billion, while imports jumped 4.2% m/m to a record level of
$53.0 billion.
Growth in real terms was slower, as export volumes remained at
$42.7 billion and import volumes rose 1.2% m/m to $45.3
billion.
The deficit in international trade of services widened to $301
million, with exports rising 1.2% m/m to $9.7 billion and imports
rising 3.7% m/m to $10.0 billion.
According to the Brazilian Institute of Geography and
Statistics (IBGE), the country's real GDP declined by 0.1% quarter
on quarter (q/q) during the second quarter. This was after the
economy expanded by 1.2% q/q during the first quarter. (IHS Markit
Economist Rafael
Amiel)
Growth in volume exported was offset by the decline in fixed
investment, while private consumption (almost two-thirds of GDP)
was flat. The acceleration in growth in the world economy coupled
with higher commodity prices prompted an increase in exports. The
sharp decline in fixed investment obeys a correction after
spectacular growth in the previous three quarters: as of the second
quarter, fixed investment was 14.2% higher than pre-pandemic
levels, while the whole economy was just at the level recorded at
the end of 2019.
Imports of goods and services were down by 0.6% q/q, while
exports jumped by 9.4%, thus the contribution of net trade to
growth was significant, although this was offset, as mentioned
above, by lower investment.
From a supply perspective, agriculture and manufacturing were
the major drag to growth: adverse weather conditions (first a
drought, and then a frost) have significantly hurt the fields and
the harvest of produce, coffee plantations in particular; the
drought has also negatively affected production of electricity. The
Brazilian industry is suffering from the worldwide shortage of
semiconductors, and the all-important automotive industry has
experienced production declines.
On a positive note, construction continued its recovery and
posted its fourth consecutive quarterly increase; the services
sector expanded by 0.7% q/q.
The Brazilian Ministry of Agriculture's crop protection
department has submitted a proposal to supervise and accredit
agrochemical trials bodies to public consultation. The department
has issued a normative instruction establishing criteria for the
accreditation and supervision of public and private pesticide
research entities, as well as the minimum requirements for
conducting studies and reports on the agronomic efficacy and
practicability produced for registration processes. The
Department's general co-ordinator of pesticides, Bruno Breitenbach,
explains the objectives. "One of the points to ensure the quality
of products is that studies and tests be performed with the same
criteria and parameter," he says. "In addition, we are improving
and modernizing the control and audit mechanisms of the companies
that carry out this type of research." The text of the proposed
regulation is available at the Ministry's website. The regulation
would revoke Ministry Normative Instructions Nos 36/2009, 42/2011
and 15/2016 as well as Ordinance No 85/2017. Comments are to be
submitted through regulations monitoring system, Sisman. Ordinance
No 380 has set a 60-day comment period running until October 15th.
(IHS Markit Crop Science's Robert Birkett)
Consumer prices in Peru rose by 5.0% year on year (y/y) in
August, the fastest pace since February 2009. (IHS Markit Economist
Jeremy Smith)
August was the second consecutive month in which the consumer
price index (CPI) increased at the rapid pace of 1.0% month on
month (m/m).
Similar to recent months, nearly all price increases occurred
within just three consumption categories: electricity and housing,
food and beverages, and transportation and communications. These
groups accounted for 94% of the variation compared with July.
Recent increases in international commodity prices continue to
filter into Peruvian consumer goods, especially staple grains,
vegetable oils, and crude oil prices.
The depreciation of the Peruvian sol, now at 13.0% year to
date, only further increases the price of imports and, indirectly,
of goods with imported intermediate components.
Excluding the volatile food and energy categories, inflation
stood at 2.4% y/y in August, up from 1.7% at the start of the year
but comfortably within the 1-3% range targeted by the Central
Reserve Bank of Peru (Banco Central de Reserva del Perú: BCRP).
Europe/Middle East/Africa
Most major European equity indices closed slightly higher
except for Spain -0.1%; UK/Italy +0.2% and Germany/France
+0.1%.
10yr European govt bonds closed higher; Italy/Spain -3bps,
France -2bps, and Germany/UK -1bp.
iTraxx-Europe closed +1bp/45bps and iTraxx-Xover
+1bp/227bps.
Brent crude closed +2.0%/$73.03 per barrel.
Navya has deployed its autonomous shuttle on public roads in
the United Kingdom at the Harwell Science and Innovation Campus,
according to a company statement. The shuttle, which is to be
operated by Darwin, will pick passengers up, transport them around
the campus, and drop them off at their destination. Insurance
company Aviva plc is also a partner and is to build its first
comprehensive insurance model for the autonomous shuttle based on
the result of the trials. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
The year-on-year (y/y) rate of increase in the eurozone PPI
rose by almost two percentage points to 12.1% in July, a record
high for the series and well above the market consensus expectation
(of 11.0%, according to Reuters' survey). (IHS Markit Economist Ken
Wattret)
While base effects have played a key part in boosting y/y
inflation rates during 2021, the month-on-month (m/m) increases in
the eurozone PPI have also been exceptionally robust. July saw a
2.3% m/m rise in the PPI, well above the already robust 1%-plus
average m/m increase over the first half of the year.
Energy prices have been pivotal to the acceleration in PPI
rates, with the y/y inflation rate surging by more than three
percentage points to almost 30% in July, also a record high for the
series.
PPI inflation rates for other goods have also been picking up,
led by intermediate goods, which rose by more than 12% y/y in
July.
Producer price inflation rates for capital and consumer goods
have accelerated much less sharply to date, although upward
pressure is also becoming evident there too. July's 2.6% y/y
increase in consumer goods inflation, although relatively low, was
the highest since 2012.
The eurozone PPI inflation rate excluding energy prices also
hit a new record high in July accordingly, rising from 5.6% to
6.7%.
German battery electric vehicle (BEV) start-up Sono has claimed
that it has 14,000 reservations for its low-cost EV, according to
an RWE report. The company has received an average down payment of
USD3,300 from each reservation, according to the report. With a
unit price for the vehicle starting at USD25,670, this means that
the company has an advanced order value of more than USD350
million. The majority of these pre-orders are from German
customers, according to the report. CEO Laurin Hahn said, "14,000
reservations, with an average down payment of $3,300, is
unequivocal proof that the Sion both is wanted and needed.
Virtually every car we will produce in the first year of production
is already reserved by customers. We want to bring the Sion to the
streets as soon as possible to meet the people's desire for a
resource-friendly and affordable mobility solution." (IHS Markit
AutoIntelligence's Tim Urquhart)
Swiss biopharmaceutical firm VectivBio has announced that it
has entered into a definitive agreement to buy Comet Therapeutics
(US), a privately held company that specializes in the development
of therapies for previously untreated inherited metabolic diseases
(IMDs). The acquisition will enable VectivBio to access Comet's
proprietary small molecule platform dedicated to studying potential
new treatments for IMDs that share a common metabolic pathway,
irrespective of the specific underlying mutation. The technology
developed by Comet is based on a stabilized coenzyme A (CoA)
precursor backbone and, according to VectivBio, has demonstrated
the ability to supply functional CoA and carry tailored
intermediary metabolite cargos in preclinical studies. (IHS Markit
Life Sciences' Ewa
Oliveira da Silva)
Energy company Shell has announced that it is planning to
install around 50,000 electric vehicle (EV) charging posts in the
UK by the end of 2025. According to a statement, Shells Ubitricity
arm would install them. The company added that in order to drive
the expansion, Shell will support local authorities with a
financing offer to install more Ubitricity on-street chargers "at
potentially zero cost". David Bunch, Shell's UK Country Chair,
said, "It's vital to speed up the pace of EV charger installation
across the UK and this aim and financing offer is designed to help
achieve that…Whether at home, at work or on-the-go, we want to give
drivers across the UK accessible EV charging options, so that more
drivers can switch to electric." (IHS Markit AutoIntelligence's Ian
Fletcher)
Turkish economic growth remained relatively robust in the
second quarter. GDP grew by 0.9% quarter on quarter (q/q) in
seasonally adjusted data in April-June 2021. (IHS Markit Economist
Andrew
Birch)
Although growth slowed from the newly revised 2.2% q/q reported
gain in the first quarter, it nonetheless remained relatively
vigorous against the backdrop of ongoing high COVID-19 infection
rates in the country. Turkish officials pushed through some of the
most severe lockdown measures across Europe throughout April, with
restrictions relaxed but remaining relatively severe in May as
well.
Sustained q/q expansion since mid-2020 pushed total GDP as of
the second quarter of 2021 to 21.7% higher than it had been a year
earlier; the fastest annual expansion ever recorded in the country.
Overall, the economy grew by more than 14% year on year (y/y) in
the first half.
After faltering in the first quarter and declining by 2.8% q/q,
exports of goods and services grew by 2.2% q/q in the second
quarter. A revival of tourism service exports - though still well
down from pre-pandemic levels - provided a boost in q/q growth in
the second quarter. Rising demand from Europe meanwhile drove
forward merchandise export expansion.
Imports of goods and services, on the other hand, contracted
throughout the first half of 2021; down 9.7% q/q and 3.3% q/q in
the first and second quarters, respectively.
For the second time since the mid-2020 downturn, domestic
demand contributed more than double-digits to overall GDP annual
growth; by 14.5 percentage points in the second quarter.
Testing platform developer for automated vehicles Foretellix
has raised USD32 million in a Series B funding round, according to
a company statement. This will bring the company's total raised
capital to over USD50 million. The round was led by MoreTech
Ventures in participation with Volvo Group Venture Capital,
Nationwide, NI (National Instruments) and Japan-Israel High Tech
Ventures. All Series A investors, including 83North Ventures, Jump
Capital, OurCrowd and NextGear also participated in this round.
Foretellix, which was founded in 2018, is a developer of safety
verification software for automated vehicles. It recently released
its advanced driver-assistance systems and highway solution, a
verification package for Level 2 to Level 4 autonomy, which now
includes implementation of the new regulation. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
In a press release, Eni announced a new oil and gas discovery
at the Baleine-1x exploration well in block CI-101 offshore Ivory
Coast. The discovery is estimated to hold an in-place volume of 1.5
to 2 billion barrels of oil and 1.8 to 2.4 Tcf of associated gas.
The Baleine-1x well, located approximately 60 kilometers off the
coast, encountered light oil in two different intervals with 40°
API and was drilled to a total depth of 3,445 meters (11,302 feet)
in 1,200 meters (3,937 feet) of water, the company said. This is
the first exploration well in the block (and country) by Eni, which
was awarded in March 2017. Eni is the operator of the block with a
90% interest. State-owned company Petroci is holding the remaining
stake. (IHS Markit Upstream Companies and Transactions' Karan
Bhagani)
Mozambique's real GDP bounced back with growth of 3.7% quarter
on quarter (q/q) and 1.9% year on year (y/y) during the second
quarter of 2021, from 6.5% q/q and 0.1% y/y in the first quarter.
This leaves headline GDP up by 1.0% y/y in the first half of 2021.
(IHS Markit Economist Thea
Fourie)
Latest statistics released by the Mozambique Statistical
Service (INE) show that sectors recording the strongest annual
growth during the second quarter include hotels and restaurants - a
proxy for tourism - (up 4.0% y/y), services (including government
services) (up 3.2% y/y), and transport and communication (up 2.9%
y/y). Output in the trade sector - a barometer for household
spending - rose by 2.2% y/y in the second quarter, from a 0.9% y/y
decline in the previous quarter.
The agriculture and fishing sector, the biggest contributor to
Mozambique's overall GDP, grew by 1.7% y/y in the second quarter,
from 4.7% y/y in the first quarter. Non-agriculture GDP expanded by
2.1% y/y in the second quarter, from a 1.3% y/y contraction in the
previous quarter.
The electricity and water sector was the only sector recording
a contraction during the second quarter, shrinking 9.8% y/y.
Asia-Pacific
Major APAC equity markets closed mixed; India +0.9%, Mainland
China +0.8%, Japan +0.3%, Hong Kong +0.2%, Australia -0.6%, and
South Korea -1.0%.
Mainland China policy is moving toward a more expansionary
position amid the slowdown in economic recovery since the third
quarter. Targeted support for small businesses and sectors related
to people's livelihoods is also expected as part of efforts to
foster "common prosperity". (IHS Markit Economist Yating
Xu)
The Chinese central bank will increase relending quotas by
CNY300 billion to help local banks offer loans to small and
medium-sized firms and self-employed individuals, according to the
cabinet at the State Council meeting on 1 September.
The State Council also pledged to promote effective investment
growth by using local government special-purpose bonds. Meanwhile,
the annual loan aid for undergraduate students will be increased by
50% from CNY8,000 to CNY12,000, with the interest on the loans to
be subsidized by the government.
Chinese regulators have summoned 11 ride-hailing firms to a
meeting to discuss points of concern in the sector. At the meeting,
regulators urged companies including Didi Global Inc. (DiDi),
Meituan's ride-hailing unit, Geely's Caocao, and Alibaba's
ride-sharing and navigation unit Amap, among others, to comply with
relevant rules and protect data security. Authorities also
mentioned that hiring of unqualified drivers and use of promotions
have disrupted fair market order, reports Reuters. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Chinese ride-hailing giant Didi Global Inc. has established a
union for its workers. DiDi's union, announced on an internal forum
last month, will be initially managed by employees at the company's
Beijing headquarters and will be guided by the government-backed
All-China Federation of Trade Unions (ACFTU). This development
stems from Chinese President Xi Jinping's "common prosperity"
campaign that aims to ease inequality. DiDi has faced media
criticism for not paying its drivers fairly and thus it plans to
set up a drivers' committee to improve income stability and
transparency over wages. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
South Korean battery-maker SK Innovation has announced plans to
invest USD1.06 billion in its local subsidiary in Yancheng through
2024 to set up a new battery plant in China, reports the Maeil
Business Newspaper. The new plant, which is expected to be
operational by 2023, is to be the company's fourth in China, after
one in Changzhou with a 7 gigawatt-hour (GWh) capacity, Yancheng
with a 10-GWh capacity, and Huizhou with a 10-GWh capacity.
Construction of the new facility is expected to begin next month,
according to the news source. SK Innovation is one of the leading
global suppliers of batteries for electrified vehicles. Sales of
the company's battery business more than doubled to KRW1.61
trillion (USD1.39 billion) during the full year 2020, compared with
KRW690.3 billion in 2019. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
India has urged domestic automakers to reduce reliance on
electric vehicle (EV) component imports and other automotive parts
from China, reports Bloomberg News. Amitabh Kant, Niti Aayog CEO
said, "It is important that certain automotive components, which
are being imported from China purely on the back of cost
competitiveness and development capabilities, be manufactured
here." He added, "We should not become a major importing nation in
electric-vehicle components like we've done in solar. You've got to
de-risk the supply chain by boosting localization, reducing
dependency on imports and I would like to say imports from China.
Indian manufacturers must clearly read the writing on the wall and
aim to secure a strategic position in the global value chain." (IHS
Markit AutoIntelligence's Tarun Thakur)
AC Energy, the energy subsidiary of the Philippines's Ayala
Group, sold USD400 million of perpetual non-call 3.5-year debt,
priced on 1 September at 4% versus 4.45% guidance after attracting
USD1.88 billion of demand. The issue was in Green Bond format, to
finance eligible projects. Non-domestic Asian buyers subscribed 70%
of the deal with 25% taken domestically, with asset managers
purchasing 59% of the deal. (IHS Markit Economist Brian
Lawson)
Posted 02 September 2021 by Ana Moreno, Director, Product Development, IHS Markit and
Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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