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Daily Global Market Summary - 13 April 2021

13 April 2021 Chris Fenske

Major equity indices closed mixed across the US, Europe, and APAC. US government bonds closed sharply higher and benchmark European bonds closed mixed. European iTraxx and CDX-NA closed almost unchanged on the day across IG and high yield. The US dollar closed lower, while oil, natural gas, gold, silver, and copper were higher on the day. Today's March US consumer price index (CPI) report headline number came in higher than expected at +0.6% vs +0.5% consensus, but the fact that a large part of the increase was driven by higher gasoline costs appeared to alleviate concerns of broad based inflation as evidenced by the sharp rally at the long end of the curve.

Americas

  1. US equity indices closed mixed, with the S&P 500 +0.3% closing at a new record high; Nasdaq +1.1% and DJIA/Russell 2000 -0.2%.
  2. 10yr US govt bonds closed -5bps/1.62% yield and 30yr bonds -4bps/2.30% yield. 10s rallied 2bps within 15 minutes after the US CPI report and a very well received 30yr bond auction in the afternoon added further momentum to the rally.
  3. CDX-NAIG closed flat/51bps and CDX-NAHY -2bps/293bps.
  4. DXY US dollar index closed -0.3%/91.85.
  5. Gold closed +0.9%/$1,748 per troy oz, silver +2.2%/$25.43 per troy oz, and copper +0.3%/$4.03 per pound.
  6. Crude oil closed +0.8%/$60.18 per barrel and natural gas closed +2.3%/$2.62 per mmbtu.
  7. The US consumer price index (CPI) rose 0.6% in March, the largest monthly increase since August 2012. This followed a 0.4% increase in February. The price index for gasoline rose 9.1%, contributing to a 5.0% increase in the CPI for energy and accounting for nearly half of the rise in the overall CPI. (IHS Markit Economists Ken Matheny and Juan Turcios)
    • The food index rose 0.1%, while the core CPI, which excludes the direct effects of movements in food and energy prices, rose 0.3%.
    • The CPI for gasoline has surged since last May, rising 59.5% over that span and more than reversing a sharp decline over the first half of 2020. Relative to December 2019, the CPI for gasoline was up 5.7% as of March.
    • The increase in the core CPI in March (0.3%) followed soft readings from October to February.
    • The increase in March was largely attributed to increases in nonenergy services prices, which rose 0.4%. Within this category, the index for motor vehicle insurance jumped 3.3%, continuing an uneven recovery following large declines last year.
    • Other categories within the core CPI posting notable increases in March include hospital services (0.6%) and used cars and trucks (0.5%). Rent inflation remained low in March, with rent of primary residence and owners' equivalent rent each rising 0.2%.
  8. More US establishments have been given the green light to start exporting meat to mainland China, including facilities owned by Tyson, OSI Industries and Sysco. In a statement on 7 April, China's General Administration for Customs said 19 new US beef, pork and poultry establishments had been approved for export. (IHS Markit Food and Agricultural Commodities' Max Green)
    • The US establishments include an OSI Industries plant in Chicago and Tyson facility in Russellville, Arkansas. Others include a facility owned by Sysco International Food Group in Plant City, Florida, along with units owned by Villari Bros, Harrison Poultry and Apex Cold Storage.
    • Five more South American meat establishments have had to suspend exports to mainland China - either because of Covid-19 outbreaks among meat workers or because of labelling issues. Chile's Frigorifico Temuco halted shipments in late March and then a Uruguay beef plant owned by Breeders & Packers Uruguay suspended shipments on 9 April. Three more Chilean units suspended shipments to China yesterday (12 April). Their identification numbers correspond to plants owned by Frigorifico Karmac, Frima S.A. and Goldenfrost.
  9. Autonomous vehicle start-up Nuro will begin delivering Domino's pizzas in Houston (Texas, US) this week, TechCrunch reported. Nuro will deploy its autonomous low-speed vehicle, R2, to allow select customers ordering from the Woodland Heights store on the Domino's website to have their pizzas delivered at their door. The customer will receive texts updating on the vehicle's location and a unique PIN to access the pizzas via the vehicle's touchscreen. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  10. Nova Chemicals (Calgary, Alberta, Canada) says the expansion of its steam cracker in Corunna, Ontario, and the construction of an Advanced Sclairtech (AST) polyethylene (PE) unit at the company's new Rokeby site in nearby St. Clair Township, Ontario, are 65% complete. Nova intends to bring the new capacities online in late 2022, following the Corruna site turnaround, which is scheduled for spring 2022. The new PE unit at the Rokeby site, which is adjacent to the Corunna site, will have a capacity of 450,000 metric tons/year. It will receive feedstock ethylene from the Corruna cracker, which is being expanded by over 50% to 1.2 million metric tons/year. Nova estimates the total cost of the two projects at C$2.5 billion ($2 billion). (IHS Markit Chemical Advisory)

Europe/Middle East/Africa

  1. Major European equity indices closed mixed; Italy +0.6%, France +0.4%, Germany +0.1%, UK flat, and Spain -0.1%.
  2. 10yr European govt bonds closed mixed; UK -1bp, Spain/Germany flat, France +1bp, and Italy +2bps.
  3. iTraxx-Europe closed flat/51bps and iTraxx-Xover +1bp/250bps.
  4. Brent crude closed +0.6%/$63.67 per barrel.
  5. The Office for National Statistics (ONS) reports that the UK economy grew by 0.4% month on month (m/m) in February, which followed a 2.2% month-on-month (m/m) drop (revised from the initially reported 2.9% m/m contraction) in January Nevertheless, GDP was still 7.8% below the level before the first lockdown in February 2020. (IHS Markit Economist Raj Badiani)
    • Industrial production increased by 1.0% m/m in February, with three out of the four sub-sectors posting growth. Manufacturing activity was the best performer, with output rising by 1.3% m/m, aided by a recovery in exports to the European Union.
    • The ONS reports that seven out of the 13 manufacturing sub-sectors showed improvement, with the largest contributor arising from the manufacture of transport equipment sector and computer, electronics, and optical products.
    • Construction output remained on an upward trajectory in February after rising in eight of the past 10 months. The latest improvement was due to growth in repair and maintenance in private housing and in new work in private commercial and public housing.
  6. Startup electric vehicle (EV) battery manufacturer Britishvolt is said to be considering an initial public offering (IPO) and a second plant in Canada, according to recent media reports. The company is said to be looking at a public listing as part of fundraising for its planned facility in Blyth (UK). This could take place through a merger with a special purpose acquisition company (SPAC), and it has appointed Guggenheim Capital LLC and Barclays Plc to explore options. Britishvolt has also said that it has appointed Barclays to advise on the next two rounds of fundraising as it aims to raise up to GBP350 million before the fourth quarter of 2021. (IHS Markit AutoIntelligence's Ian Fletcher)
  7. Utilities that invest in renewable energy have asked the European Commission (EC) to drop current plans to include fossil fuel-origin hydrogen, aka blue hydrogen, in a revision to the EU's main renewable energy growth policy, the Renewable Energy Directive (RED). Spanish electric utility Iberdrola, which plans to double its 33 GW of renewable energy capacity, as well as Italian power and natural gas company Enel, with 49 GW of renewable energy capacity held by its renewable generation subsidiary, both signed a 31 March letter calling for blue hydrogen's exclusion to better align with the bloc's long-term Paris Agreement commitments. Wind power industry body WindEurope and the European Renewable Energies Federation, representing sectors such as wind, solar, and bioenergy, also signed the letter. Other trade bodies on the letter hailed from heating-related sectors, like biofuel and heat pumps, that often compete with natural gas. (IHS Markit Climate and Sustainability News' Cristina Brooks)
  8. April's ZEW economic sentiment index for Germany showed investor morale falling unexpectedly in Europe's largest economy, amid rising fears of a return to harsher lockdown measures. The survey fell to 70.7 points from 76.6 in March, after a Reuters poll forecast a climb to 79.0. (CNBC)
  9. Transport vehicle manufacturing company IVECO has partnered with start-up Plus to develop autonomous trucks, according to a company statement. Under this partnership, IVECO's S-WAY heavy-duty truck will be integrated with the PlusDrive autonomous system. The co-operation will also explore deploying IVECO's liquefied natural gas (LNG) propulsion systems in these trucks. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  10. Volvo Cars will deploy NVIDIA's DRIVE Orin system-on-a-chip (SoC) in its next-generation vehicles to enable autonomous functions, according to a company statement. The autonomous operation will be enabled by NVIDIA's Orin SoC architecture, which is capable of 254 trillion operations per second and has a processing performance seven times higher than the company's previous SoC, Xavier. The first model to feature this SoC is the new Volvo XC90, which will be revealed in 2022. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  11. In February 2021, the Central Bank of the Republic of Turkey (TCMB) reported a current-account deficit of over USD2.6 billion, nearly double what it had been in the same month of 2020. (IHS Markit Economist Andrew Birch)
    • The sharp year-on-year (y/y) worsening of February more than offset the mild, y/y narrowing of the current-account deficit in January, leaving the gap more than USD1 billion larger in the first two months of 2021 as a whole than it had been a year earlier.
    • Through the first two months of the year, the lack of foreign tourism continued to undermine the headline balance. In January-February 2021, Turkey lost more than USD2.7 billion of tourism and passenger transit export earnings, alone, compared to a year earlier.
    • Meanwhile, the four-month surge of foreign portfolio investment inflows ended in February. That month, Turkey attracted only net inflows of only USD273 million, with banks recording a net repayment abroad on the international capital markets and non-residents selling off equity securities on a net basis. In February, markets reacted poorly to the TCMB's failure to raise interest rates after inflation accelerated in January.
    • The first rate-setting TCMB meeting under Governor Kavcıoğlu is 15 April. Markets will be watching the decision closely. IHS Markit believes that despite the clear mandate from President Recep Tayyip Erdoǧan to relax monetary policy, the TCMB will leave the main policy rate unchanged at this first meeting for fear of a severe, negative market reaction. Assuming the rate is kept steady, the recent stability of the lira at between TRY8.00/USD1 and TRY8.50/USD1 is likely to hold. Foreign capital inflows will not turn severely negative.
  12. Magna and electric vehicle (EV) startup REE have announced a strategic collaboration to create EVs on REE technology, according to a joint statement on 12 April. The supplier and the EV startup are looking to create electric mobility vehicles for commercial mobility business uses. The two companies will "explore" modular EVs based on REE technology called "REEcorner Technology, and establish go-to-market teams to identify vehicle development opportunities, markets and consumers. They will also explore a global mobility-as-a-service business model for light commercial vehicles (LCVs). (IHS Markit AutoIntelligence's Stephanie Brinley)
  13. Intel subsidiary Mobileye has partnered with start-up Udelv to deploy autonomous delivery vehicles into commercial service by 2023, according to a company statement. The companies plan to put more than 35,000 autonomous delivery vehicles, dubbed "Transporters", on city streets by 2028. Mobileye will supply its automated system, Mobileye Drive, to Udelv's Transporter, which is capable of Level 4 autonomous operations and is specifically designed for delivery. The vehicle will feature a teleoperations system that will allow maneuvering in parking lots, loading zones, apartment complexes, and private roads. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  14. Dubai is poised to be the first city outside the US to commercially deploy Cruise Automation's robotaxis, according to a Reuters report. The report cites Cruise as announcing the plan, noting that deployment is scheduled to begin in 2023. A joint statement between Cruise and Dubai's Road and Transit Authority says that it will deploy a "limited number" of the Cruise vehicles. By 2030, the two entities have said they expect to see 20,000 units in Dubai. (IHS Markit AutoIntelligence's Stephanie Brinley)
  15. Abu Dhabi National Oil Co. (Adnoc) and OCI NV (Amsterdam, Netherlands) are considering an initial public offering (IPO) of their ammonia and urea joint venture (JV) Fertiglobe (Abu Dhabi), according to a Reuters report quoting two sources familiar with the matter. Fertiglobe was formed in 2019 after Adnoc merged its fertilizer business with OCI's nitrogen fertilizer activities in the Middle East and North Africa. OCI holds 58% of Fertiglobe and Adnoc has 42%. Adnoc and OCI have invited international and local banks to bid for possible roles in Fertiglobe's share listing, the report says. Bids were submitted last week for the IPO, which could raise at least $1 billion, the report adds. Adnoc, Fertiglobe, and OCI have declined to comment on the report. (IHS Markit Chemical Advisory)

Asia-Pacific

  1. APAC equity markets were closed mixed; India +1.4%, South Korea +1.1%, Japan +0.7%, Hong Kong +0.2%, Australia flat, and Mainland China -0.5%.
  2. The US state of California's Department of Motor Vehicles (DMV) has issued a permit to Chinese start-up WeRide to test its autonomous vehicles (AVs) without a human back-up driver. The new permit allows the company to test two AVs without a driver behind the wheel on designated streets in San Jose, TechCrunch reported. WeRide is the seventh company after Waymo, Nuro, AutoX, Zoox, Cruise, and Baidu to receive a permit from the DMV for driverless testing. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  3. Huawei has announced plans to invest USD 1 billion this year in research and development (R&D) of components for smart cars, according to Gasgoo, citing Huawei's chairman Xu Zhijun. The telecoms company has also partnered with three automakers - BAIC BJEV, Changan Automobile, and GAC Group - to jointly introduce self-driving car brands from the end of 2021. Huawei is seeking to expand its presence in the automotive industry, and it established its intelligent vehicle business unit in May 2019. The business focuses on five aspects: smart driving, smart cockpit, intelligent connectivity, smart electrification, and cloud service. (IHS Markit AutoIntelligence's Nitin Budhiraja)
  4. South Koreans must learn how to work alongside machines if they want to thrive in a post-pandemic world where many jobs will be handled by artificial intelligence and robots, according to the country's labor minister. "Automation and AI will change South Korea faster than other countries," Minister of Employment and Labor Lee Jae-kap said in an interview Tuesday. "Not all jobs may be replaced by machines, but it's important to learn ways to work well with machines through training." (Bloomberg)

Posted 13 April 2021 by Chris Fenske, Head of Fixed Income Research, Americas

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