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Most major US, European, and APAC equity indices closed lower.
US government bonds closed slightly lower and benchmark European
bonds were mixed. iTraxx-Europe and CDX-NAIG closed flat, while
high yield counterparts closed slightly wider. The US dollar closed
flat, oil and natural gas higher, and gold, silver, and copper were
lower on the day.
Americas
US equity indices closed mixed; DJIA +0.9%, S&P 500 flat,
and Nasdaq/Russell 2000 -0.4%.
10yr US govt bonds closed +1bp/1.67% yield and 30yr bonds
+1bp/2.34% yield.
CDX-NAIG closed flat/51bps and CDX-NAHY +2bps/295bps.
DXY US dollar index closed flat/92.14.
Gold closed -0.7%/$1,733 per troy oz, silver -1.8%/$24.87 per
troy oz, and copper -0.5%/$4.02 per pound.
Crude oil closed +0.6%/$59.70 per barrel and natural gas closed
+1.4%/$2.56 per mmbtu.
Averaged over roughly the last week, the count of seated diners
on the OpenTable platform was 18% below the comparable period in
2019. This is a vast improvement over prior weeks, reflecting
relaxation of constraints on indoor dining and expansion of outdoor
dining as temperature rise. Meanwhile, activity at small businesses
(revenues and the number open) weakened at the end of March,
according to the Opportunity Insights Economic Tracker. This seems
at odds with other indicators pointing to broadly firming activity
but, in any event, highlights continued struggles in the
small-business sector. Finally, box-office revenues firmed again
last week, according to weekly data from Box Office Mojo. While
still down about 75% from the comparable week in 2019, revenues are
on the rise. (IHS Markit Economists Ben Herzon and Joel
Prakken)
The US Securities and Exchange Commission (SEC) is warning
financial advisers, firms, and private funds against making
potentially misleading green investing claims. In a risk alert
issued 9 April, the SEC said a Division of Examinations review
uncovered some instances of potentially misleading statements
regarding environmental, social and governance (ESG) investing
processes and representations regarding adherence to global ESG
standards. Despite some companies' claims to have formal processes
in place, SEC staff uncovered a lack of policies and procedures
related to ESG investing including those that were either not
"reasonably designed" to prevent violations of law, or that were
not implemented. SEC staff also found that documentation of
ESG-related investment decisions was weak or unclear, and that
compliance programs also did not appear to be "reasonably designed"
to guard against inaccurate ESG-related disclosures and marketing
materials. (IHS Markit Climate and Sustainability News' Amena
Saiyid)
Attorneys representing a California man suing paraquat
manufacturers for failing to warn him that exposure to the potent
herbicide may cause Parkinson's disease have asked a US judicial
panel to consolidate more than a dozen similar lawsuits. The move
could escalate the legal battle over the litigation, which centers
on claims Syngenta, Syngenta Crop Protection and Chevron Phillips
Chemical Company knew for decades that paraquat could cause
Parkinson's. First registered for use in US in 1964, paraquat is
used on cotton, corn, soybeans, peanuts and more than 100 other
crops. US farmers annually apply an estimated 8.5 million pounds of
paraquat across nearly 16 million acres of crops to control
invasive weeds and plants. Cotton growers also use the herbicide as
a desiccant or plant growth regulator to dry the leaves of the crop
and make it easier to harvest. The herbicide has known health risks
- a single sip can be fatal - and it has long been suspected of
being associated with Parkinson's disease, a neurological disorder.
(IHS Markit Food and Agricultural Policy's JR Pegg)
Canadian supplier Magna has announced a new rear-view mirror
with embedded driver-monitoring technology, a feature designed to
detect driver distraction and focus. According to Magna's
statement, the interior rear-view mirror has an integrated camera
that enables the technology to alert drivers when they take their
eyes off the road too long. Magna's new technology is market-ready
and the company says it meets all regulations globally related to
driver-distraction detection. The driver is alerted using
customizable audio or visual alerts if the technology detects
distraction. Magna says that, compared to other solutions that have
a camera mounted on the steering column, the integration of the
camera into the rear-view mirror "provides the best unobstructed
view to the driver and offers the best vantage point for additional
occupant monitoring features. (IHS Markit AutoIntelligence's
Stephanie Brinley)
The Central Reserve Bank of Peru (Banco Central de Reserva del
Perú: BCRP) directorate opted to hold the policy interest rate
constant at 0.25% at the April meeting, reiterating its intention
to maintain a "strongly expansionary monetary posture" for a
"prolonged period". A gradual rise in inflation continues to be
largely explained by increases in food and energy prices. (IHS
Markit Economist Jeremy Smith)
Consumer price inflation averaged 2.6% year on year (y/y) in
the first quarter of 2021, one-half percentage point higher than at
any point in 2020 and near the upper end of the BCRP's 2% +/- 1%
target range. The bank has largely shrugged off this uptick, citing
its expectation that consumer price inflation will stay within the
target range throughout the next two years amid a substantial
output gap.
The BCRP highlights that, excluding food and energy costs, the
inflation rate was just 1.8% y/y in March 2021; this value is below
the midpoint of the target range and is essentially unchanged over
the past year.
Pre-election jitters continue to weigh on the Peruvian sol in
advance of the country's general election on 11 April 2021,
prompting the BCRP to intervene in the foreign-exchange market
throughout March to smooth volatility. Sales totalled USD1.1
billion over the course of March and reached a daily peak of USD127
million on 30 March, the same day that the sol slid to a record
3.76:1.00 rate against the dollar.
Europe/Middle East/Africa
Major European equity indices closed lower except for Italy
+0.1%; France/Germany -0.1% and UK/Spain -0.4%.
10yr European govt bonds closed mixed; France/Italy flat and
Spain/UK/Germany +1bp.
iTraxx-Europe closed flat/51bps and iTraxx-Xover
+3bps/248bps.
Brent crude closed +0.5%/$63.28 per barrel.
Given extreme weakness in January, eurozone sales remain on
track for a large COVID-19-driven contraction in the first quarter
of 2021. (IHS Markit Economist Ken Wattret)
Eurozone retail sales rose by 3.0% month on month (m/m) in
February 2021, the strongest increase since August 2020 and twice
the market consensus expectation.
However, given the huge decline in January 2021, sales over the
first two months of the quarter were still down by over 4% compared
with the final quarter of 2020. This is despite the upward revision
to the January 2021 figures (with the initial m/m change of -5.9%
revised to -5.2%).
As of February, retail sales were 2.8% below their pre-pandemic
level a year previously.
The outperformance of mail order and internet sales continued,
unsurprisingly given widespread COVID-19-related restrictions, with
sales in February 2021 almost 38% above their pre-pandemic
level.
Sembcorp Marine has awarded a contract to Heerema for the
transport and installation of the HVDC offshore converter platform
for RWE's Sofia offshore wind farm in the UK sector. Sembcorp
Marine was awarded the EPIC contract for the HVDC electrical system
works. The company will fabricate the platform which is scheduled
for offshore installation in 2024. Heerema will utilize its
semisubmersible heavy lift vessel Sleipnir for the job. The Sofia
offshore wind farm is located 220 km off the coast of the coast of
Teeside in the North Sea and will have a total capacity of 1.4 GW
when complete. (IHS Markit Upstream Costs and Technology's Sophie
Dear)
BMW has said that it will only offer Level 3 autonomous
capability on production vehicles when all systems are completely
safe and proofed. The company already offers enhanced Level 2
capability in vehicles in China and the United States, although the
driver has to constantly monitor the vehicle and the car will
insist on manual control being taken back if it does not think the
driver is monitoring the systems. Level 3 autonomous vehicle
technology allows fully autonomous operation on roads with a
central reservation at speeds of up to 37mph, but full level 3 will
not be offered until the company is fully convinced it is foolproof
in every situation. (IHS Markit AutoIntelligence's Tim
Urquhart)
French industrial production declined by 4.7% month on month
(m/m) in February, according to seasonally adjusted figures
released by the National Institute of Statistics and Economic
Studies (Institut national de la statistique et des études
économiques: INSEE). Production had increased by 3.2% m/m in
January. (IHS Markit Economist Diego Iscaro)
Production fell by 6.6% year on year (y/y) in February, its
strongest annual decline in five months.
Manufacturing output also dropped 4.6% m/m in February,
following a rise of 3.3% m/m at the start of the year.
Manufacturing production in February was 7.1% below its
pre-COVID-19 virus pandemic level in February 2020.
Production of transport equipment fell particularly sharply in
February (-11.4% m/m), but production also contracted in most other
sectors.
Manufacture of coke and refined petroleum products was the
exception, rising by 11.5% m/m.
Production of food products and beverages (-2.0% m/m),
machinery/equipment (-5.3% m/m), and manufactured goods classified
as "other" (-4.0% m/m) all declined in February.
Energy production, which had risen by 2.8% m/m in January, fell
by 5.4% m/m in February.
Construction activity, which is published simultaneously but is
not included in the headline index, followed its 13.2% m/m increase
in January with a 6.0% decline in February.
February's figures were worse than expected and will drive a
downward revision of IHS Markit's GDP estimate for the first
quarter.
Sanofi (France) announced on 10 April that it had agreed to
purchase preclinical biotechnology developer Tidal Therapeutics
(US) for a sum of USD160 million. The acquisition enables Sanofi to
gain access to Tidal Therapeutics' mRNA-based technology platform,
which has potential applications in an in vivo approach to
reprogramming immune cells mainly in immuno-oncology and
inflammatory diseases. Sanofi claims that the next-generation mRNA
technology could bring a new wave of novel, in vivo, off-the-shelf
chimeric antigen receptor T-cell (CAR-T) therapies to a "much
broader patient population", and that the deal could create new
"disruptive therapeutic approaches" in a range of oncology and
autoimmune diseases. (IHS Markit Life Sciences' Eóin Ryan)
Michelin is looking to accelerate its diversification program
to branch out into new business sectors, such as hydrogen power
systems and medical equipment, reports Reuters. According to the
report, the company is looking for the diversification program to
add about EUR14 billion (USD17 billion) to it revenues by 2030. In
a strategy presentation on its plans, Michelin outlined how it is
looking to boost annual revenue to EUR34 billion, from EUR20.5
billion in 2020. Michelin partners with Faurecia in a business
called Symbio, which makes hydrogen fuel-cell systems for light
vehicles, utility vehicles, and trucks. Michelin is hoping to grow
Symbio's revenue from EUR200 million in 2025 to EUR1.5 billion by
2030, while it is also looking at medical equipment and 3D printing
as new business avenues. (IHS Markit AutoIntelligence's Ian
Fletcher)
Spanish ride-hailing app Cabify has hired a chief financial
officer (CFO) to accelerate its plan to go public, reports Reuters.
Cabify is considering listing on the Madrid stock exchange and has
tapped Antonio Espana for the role of CFO. Espana, former CFO of
gas pipeline operator Redexis, has previously worked with security
firm Prosegur, leading its initial public offering (IPO). Cabify is
backed by investors that include Rakuten Inc and Inter American
Development Bank. Cabify is currently valued at about USD1 billion,
and operates in Spain, Portugal, and several Latin American
countries, among others. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Greek consumer prices, measured by the harmonized index of
consumer prices, fell by 2% year on year (y/y) in March, following
a decline of 1.9% in February. (IHS Markit Economist Diego Iscaro)
The extension of the winter sales until the end of March (they
had ended in February in 2020) led to a 16.9% y/y decline in prices
of clothing and footwear.
This more than offset weaker declines in the prices of
food/beverages (-0.3% y/y following -0.5% y/y in February),
transport (-0.8% y/y following -4.3% y/y) and the first increase in
housing costs since January 2020 (+0.1% y/y, following a decline of
1.9% y/y in February).
Core inflation (i.e., excluding energy, food, alcohol and
tobacco) stood at -2.1% in March, following a fall of 1.3% y/y in
February.
Year-end data for South Africa show that the banking sector has
remained resilient despite the impact of the COVID-19-virus
pandemic in 2020, with the reported capital adequacy ratio (CAR)
and Tier-1 ratio of 16.5% and 13.6%, respectively, as of December
2020 comfortably above the minimum regulatory requirement of 8% and
6%, respectively. (IHS Markit Banking Risk's Ana Souto)
Credit increased in 2020, aided by first-quarter growth and
stimulus measures. Year-on-year (y/y) credit growth reached 6.8% by
end-2020, compared with y/y credit growth of 4.8% in 2019.
Impairments have begun to accumulate despite significant
restructuring. The non-performing-loan (NPL) ratio rose from 2.8%
in December 2017 to 3.9% at the end of 2019, and from 4% in March
2020 (when the country reported its first COVID-19 case) to 5.2% in
December 2020 despite loan restructuring of about 20% of total
private-sector loans.
Profitability reduced significantly by higher provisioning. The
banking sector recorded an average pre-tax return on assets (ROA)
of 0.5% in December 2020, versus an average ROA of 1.2% in the same
period in 2019 because of higher provisioning requirements.
Capital buffers are likely to remain robust despite increasing
impairments. In December 2020, the banking sector's CAR was 16.5%
and the Tier-1 capital ratio was 13.6%, broadly unchanged from
December 2019, when these ratios stood at 16.6% and 13.5%,
respectively, and well above the regulatory requirements of 8% and
6% for the CAR and Tier-1 ratio.
The sector's liquidity profile benefited from a surge in
deposits. The banking sector recorded a y/y deposit growth of
10.7%, which has moderated the loan-to-deposit ratio (LDR) from
99.9% in December 2019 to 96.6% in December 2020, marginally
improving the stability of banks' funding.
Asia-Pacific
Most APAC equity markets were closed lower except for South
Korea +0.1%; Australia -0.3%, Japan -0.8%, Hong Kong -0.9%,
Mainland China -1.1%, and India -3.4%.
Chinese ride-hailing firm Didi Chuxing (DiDi) has filed
confidentially for an initial public offering (IPO) with the US
Securities and Exchange Commission (SEC). DiDi has hired Goldman
Sachs Group and Morgan Stanley as underwriters to lead its IPO,
which could value the company between USD70 billion and USD100
billion. DiDi has additionally raised USD1.5 billion through a
revolving loan facility ahead of its planned IPO. It is also
considering dual listing in Hong Kong SAR later, reports Bloomberg.
(IHS Markit Automotive Mobility's Surabhi Rajpal)
LG Chem and SK Innovations have reached a settlement over a
trademark dispute, avoiding a decision on whether a US
International Trade Commission (ITC) ban on SK Innovation's ability
to import battery technology (and therefore its ability to produce
in the US). On 10 February, the US ITC had issued the ban, at that
time saying that SK Innovation went to "extraordinary" effort to
destroy evidence in a trade-secret case lodged by LG Energy against
SK Innovation in South Korea. The ITC February ruling included time
for the two to come to an agreement, with the deadline of 11 April
2021. SK Innovation has agreed to pay LG Energy Solution (a wholly
owned subsidiary of LG Chem) USD1.8 billion. The payments will be
two lump sums in 2021 and 2022, as well as royalties over the next
six years. (IHS Markit AutoIntelligence's Stephanie Brinley)
Mahindra & Mahindra (M&M) has announced plans to invest
around INR30 billion (USD400 million) in its electric vehicle (EV)
business in the next three years, reports the Times of India. The
automaker has already invested INR17 billion in the EV business in
India and another INR5 billion in a new research-and-development
(R&D) center. In addition, it has said that it is to invest
INR90 billion in auto and farm sectors in the next five years.
M&M is looking for alliances and partnerships in the EV space,
in addition to its planned investment, and aims to put 500,000 EVs
on Indian roads by 2025. (IHS Markit AutoIntelligence's Tarun
Thakur)
Siemens has partnered with Switch Mobility Automotive Limited,
signing a Memorandum of Understanding (MoU) to set up charging
infrastructure for electric commercial vehicles (CVs) in India,
reports News 18. Siemens Financial Services (SFS) also said that it
will consider a minority investment in OHM Global Mobility Private
Limited. As a part of the MoU, Switch Mobility will import its
electric CVs into India, while Siemens would provide the charging
infrastructure technology as well as a charging infrastructure
management software solution to enable its chargers to be more
energy-efficient. According to Siemens, it will additionally
collaborate with Switch Mobility on new business models like
eMobility-as-a-Service (eMaas), integrated depot energy management,
Vehicle-to-Grid (V2G) and on-site/off-site renewable energy sources
by leveraging batteries from commercial vehicles. (IHS Markit
AutoIntelligence's Tarun Thakur)
Sanofi (France) plans to invest EUR400 million (USD475 million)
over five years in a vaccine manufacturing facility in Singapore in
partnership with the Singapore Economic Development Board (EDB),
the company said in a statement. The planned facility will include
several fully digitalized modules enabling the simultaneous
production of up to four vaccines, and will also enable the use of
multiple vaccine manufacturing technology platforms based on
different cell types. Sanofi expects construction of the plant to
start in the third quarter of 2021, with the site expected to be
fully operational in the first quarter of 2026. (IHS Markit Life
Sciences' Sophie Cairns)
Posted 12 April 2021 by Chris Fenske, Head of Fixed Income Research, Americas
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