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Most major European and APAC equity markets closed higher, while
most US indices were lower. US government bonds closed sharply
lower and benchmark European bonds were mixed. European iTraxx and
CDX-NA closed almost flat on the day across IG and high yield. The
US dollar and gold closed lower, while oil, silver, and copper were
higher on the day. Major news today was that US initial claims for
unemployment insurance increased by a disappointing 231K (NSA) and
the late-day announcement of President-elect Joe Biden's proposal
for a new $1.9 trillion COVID-19 relief bill.
Americas
Most US equity markets closed lower except for Russell 2000
+2.1%; S&P 500 -0.4%, DJIA -0.2%, and Nasdaq -0.1%.
10yr US govt bonds closed +4bps/1.13% yield and 30yr bonds
+5bps/1.87% yield.
CDX-NAIG closed flat/50bps and CDX-NAHY flat/296bps.
DXY US dollar index closed -0.1%/90.24.
Gold closed -0.2%/$1,851 per ounce, silver +0.9%/$25.80 per
ounce, and copper +1.1%/$3.66 per pound.
Crude oil closed +1.2%/$53.57 per barrel, which is the highest
close since 20 February.
President-elect Joe Biden will ask Congress for $1.9 trillion
to fund immediate relief for the pandemic-wracked U.S. economy, a
package that risks swift Republican opposition over big-ticket
spending on Democratic priorities including aid to state and local
governments. The proposal unveiled Thursday will be followed in
coming weeks by a second, broader jobs and economic recovery plan
that will include money for longer-term development goals such as
infrastructure and climate change, a senior incoming Biden
administration officials told reporters. (Bloomberg)
US seasonally adjusted (SA) <span/>initial claims for unemployment insurance
rose by 181,000 to 965,000 in the week ended 9 January, its highest
level since mid-August 2020. The not seasonally adjusted (NSA)
tally of initial claims rose by 231,335 to 1,151,015. This sharp
increase in claims suggests that the recovery in labor markets is
flagging as the pandemic rages on across the country. The
resurgence of the virus has led many states to tighten business
restrictions. (IHS Markit Economist Akshat Goel)
Seasonally adjusted continuing claims (in regular state
programs), which lag initial claims by a week, rose by 199,000 to
5,271,000 in the week ended 2 January. Prior to seasonal
adjustment, continuing claims rose by 474,180 to 5,856,230. The
insured unemployment rate rose 0.2 percentage point to 3.7%.
There were 284,470 unadjusted initial claims for Pandemic
Unemployment Assistance (PUA) in the week ended 9 January. In the
week ended 26 December, continuing claims for PUA fell by 940,499
to 7,442,888.
In the week ended 26 December, continuing claims for Pandemic
Emergency Unemployment Compensation (PEUC) fell by 325,152 to
4,166,261. With the latest extension to 24 weeks for PEUC, eligible
recipients can receive up to 50 weeks of unemployment benefits
between the regular state programs and PEUC.
The Department of Labor provides the total number of claims for
benefits under all its programs with a two-week lag. In the week
ended 26 December, the unadjusted total fell by 744,511 to
18,406,940.
The index of US import prices increased 0.9% month on month
(m/m) in December following a 0.2% advance in November. The index's
12-month growth rate increased to -0.3%. (IHS Markit Economist
Gordon Greer)
The index of import prices increased 0.9% m/m in December.
Among imported fuel price categories, natural gas prices receded
7.5% m/m after surging 44.2% m/m in November, while imported
petroleum prices jumped 9.1% m/m. Excluding petroleum, monthly
import price growth was 0.4% m/m in December.
Fuel import prices jumped 7.8% in December after an upwardly
revised 4.8% increase in November. The cost of imported fuel was
down 19.5% versus December in the prior year.
The index of exported goods prices rose in December, with the
index's m/m change registering at 1.1%. The increase in this index
was driven by growth in both agricultural and nonagricultural
commodities prices.
Agricultural prices growth came in at 0.6% m/m and marked a
5.1% 12-month increase, while nonagricultural commodities growth
came in at 1.3% month on month and was down 0.2% versus December in
the prior year. Industrial supplies and materials export prices
surged 3.3% m/m. Capital goods prices inched up 0.1% m/m, consumer
goods prices rose 0.4% m/m, and automotive goods prices ticked up
0.1% m/m.
The US National Transportation Safety Board (NTSB) has issued a
report requesting that automakers improve guidelines on handling
emergencies involving electric vehicle (EV) battery fires. The NTSB
report is called 'Safety Risks to Emergency Responders from
Lithium-Ion Battery Fires in Electric Vehicles'. The agency studied
three accidents in particular in which vehicle crashes resulted in
battery fires, comprising two in California and one in Florida, as
well as one EV battery fire not resulting from a crash, also in
California. The NTSB report states that, in the accidents,
extensive damage extended into the protected area of the
high-voltage battery cases, rupturing the cases and damaging the
battery modules and individual cells. The NTSB states that each
situation created risks to first responders from batteries related
to electric shock, thermal runaway, battery ignition and
reignition, and stranded energy (electrical energy remaining
without an effective way of removal, typically after battery
damage). In addition, the study reviewed response guidance from
OEMs to such situations. According to the NTSB, from this review,
two main issues emerged. First, vehicle manufacturers' emergency
response guidelines for first and second responders are inadequate
for minimizing risks posed by high-voltage lithium-ion batteries
involved in high-speed, high-severity crashes, says the agency. In
addition, the agency found gaps in safety standards and research
related to the issue. Consequently, the NTSB has issued
recommendations to the US National Highway Traffic Safety
Administration (NHTSA), automakers, and professional organizations
that operate training programs for first and second responders. In
the NTSB's findings, it recognizes that existing standards address
damage to batteries in survivable crashes, but it states that they
do not address high-speed, high-severity crashes. Overall, the NTSB
report issues a set of 10 findings, from thorough reviews of the
crashes studied. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Electric vehicle (EV) startup Lordstown Motors Corporation says
that it is in advanced discussions with the US Department of Energy
on a government loan, reports Reuters. According to the report, the
loan would be used to help pay for the costs of retooling a factory
in Lordstown, Ohio, United States, to build its electric truck and
other EVs in future. Reuters reports Lordstown Motors CEO Steve
Burns as saying that the loan would help "us make more [vehicles]
once we start" and "pull future vehicles forward a little bit".
According to the report, Burns said that Lordstown Motors does not
need the loan to take its plans forward, but that it could "put
things on steroids". The report states that Burns did not disclose
the specific amount sought, but the CEO suggested that it would be
similar in size to the loan that Tesla received in 2010. Tesla's
loan, which the company has since repaid, was for USD465 million.
Lordstown Motors was first reported to have applied for a US
federal loan in January 2020. The latest report indicates that a
decision on the loan is due soon, although one is not likely before
the 20 January inauguration of Joe Biden as US president. (IHS
Markit AutoIntelligence's Stephanie Brinley)
Boehringer Ingelheim Animal Health is set to benefit from a new
collaborative agreement with Google Quantum AI. The wider
Boehringer group has entered a partnership with Google focused on
exploring and implementing "cutting-edge use cases" for quantum
computing in pharmaceutical R&D, including molecular dynamics
simulations. Boehringer said the collaboration combines its own
expertise regarding computer-aided drug design and in silico
modeling with Google's leading resources in quantum computers and
algorithms. Boehringer is the first pharmaceutical and animal
health company to partner with Google in quantum computing. The
three-year partnership will be co-led by Boehringer's Quantum Lab -
a newly established outlet that is part of the firm's plan to
"invest significantly in the coming years to realize the full
potential of quantum computing". Like numerous leading animal
health companies, Boehringer is subject to a digital transformation
strategy. The wider Boehringer organization said it is
significantly increasing investment "in a broad range of digital
technologies, encompassing key areas such as artificial
intelligence (AI), machine learning and data science to better
understand diseases, their drivers and biomarkers, and digital
therapeutics". Michael Schmelmer, member of Boehringer's board of
managing directors, said: "Quantum computing has the potential to
significantly accelerate and enhance R&D processes in our
industry. Quantum computing is still very much an emerging
technology. However, we are convinced this technology could help us
to provide even more humans and animals with innovative and
ground-breaking medicines in the future." Ryan Babbush, head of
quantum algorithms at Google, commented: "Extremely accurate
modelling of molecular systems is widely anticipated as among the
most natural and potentially transformative applications of quantum
computing. Therefore, Google is excited to partner with Boehringer
to explore use cases and methods for quantum simulations of
chemistry. Boehringer brings both an impressive quantum computing
team and deep expertise in real world applications of these
capabilities in the pharmaceuticals space." (IHS Markit Animal
Health's Sian Lazell)
Colombia's index of consumer confidence (ICC) increased by 3.2
percentage points in December from November 2020, registering its
highest level since the start of the COVID-19-virus pandemic in the
first quarter of 2020. It is, however, 0.9 percentage points below
its December 2019 level. (IHS Markit Economist Lindsay Jagla)
Consumer confidence increased on a monthly basis among all
socioeconomic levels as well as in four of the five cities included
in the survey, showing widespread recovery across the country.
In monthly terms, consumer's willingness to buy housing
increased, while willingness to buy durable goods (such as
furniture and household appliances) and vehicles decreased.
Colombia had already begun its reactivation process prior to
December 2020, with the majority of lockdown measures lifted.
However, some areas with high numbers of COVID-19 cases increased
social-distancing measures during the Christmas season, such as
reimplementing curfews, to prevent a spike in cases.
As such, the continued recovery in Colombia's consumer
confidence stems largely from the more optimistic global outlook as
vaccines were approved in record time and vaccination programs have
begun to be rolled out globally.
Up to this point, Colombia has acquired enough vaccines to
vaccinate 29 million people (slightly under the government's goal
to vaccinate 35 million people: 70% of the population). However,
the vaccine will not be available until February.
According to a report by CNN Brazil, four Chinese manufacturers
- Changan, GAC, Geely, and Great Wall Motors - have announced their
interests in buying Ford's Camaçari (Brazil) plant. The report
states that the brands are negotiating with Ford with the help of
local intermediary CAOA Chery. Ford is also reportedly looking for
a buyer for its plant in Horizonte, which manufactures the Troller
sport utility vehicle (SUV). Brazilian President Jair Bolsonaro has
criticized Ford, which has received BRL20 billion (USD3.7 billion)
in assistance in recent years, alleging that the company was
seeking tax breaks and subsidies to compete with other automakers.
He added, "People complained about the Ford factories. I'm sorry,
but I will no longer keep spending your money to support their
factories." Recently, Ford announced that it would end production
in Brazil in 2021. Its shutdown will result in 5,000 employees
being laid off. (IHS Markit AutoIntelligence's Tarun Thakur)
Europe/Middle East/Africa
Most European equity markets closed higher except for Italy
-0.5%; UK +0.8%, Germany +0.4%, France +0.3%, and Spain +0.1%.
The leaders of the two largest parties in Italy's government
have thrown their support behind prime minister Giuseppe Conte
after the resignation of three ministers yesterday left him
scrambling to keep his coalition together. Mr Conte's government
was plunged into crisis on Wednesday after Matteo Renzi, the former
Italian prime minister, announced three ministers from his small
Italia Viva party were leaving the coalition, blaming
dissatisfaction with its response to the COVID-19 pandemic.
(FT)
10yr Italian govt bonds closed +5bps/0.64% yield, further
adding to this week's volatility.
10yr European govt bonds closed mixed; Italy +5bps, Spain +1bp,
France/UK -2bps, and Germany -3bps.
iTraxx-Europe closed flat/49bps and iTraxx-Europe
-2bps/250bps.
Brent crude closed +0.6%/$56.42 per barrel.
The ECB's December policy meeting concluded with a
recalibration of its policy stance focused on a third increase in
the envelope of the pandemic emergency purchase programme (PEPP)
and more generous terms for long-term loans to commercial banks.
The key takeaways from the ECB's views expressed in the published
account of that meeting are below. (IHS Markit Economist Ken
Wattret)
The rebound in eurozone GDP in the third quarter of 2020 had
surprised on the upside. Given the more positive starting point, it
was possible that the second wave of the pandemic would not make
output losses deeper overall, but could make them more drawn out.
This might inflict more lasting damage on a number of sectors, due
to heightened risks of rising insolvencies and unemployment.
Private consumption rebounded strongly in the third quarter of
2020 but remained well below its pre-pandemic level. The extent to
which lockdown-induced pent-up demand had been satisfied was
unclear. Business investment also rebounded but the outlook
remained subdued in light of reduced revenues, low rates of
capacity utilization and fragile corporate balance sheets. Trade
had rebounded strongly but renewed lockdown restrictions were
likely to interrupt the recovery.
Measures of underlying inflation had generally stabilized after
the downward trend seen previously, but they continued to point to
broad-based weakness in price pressures and wage dynamics. The
euro's appreciation also constituted a headwind to inflation.
Market-based measures of longer-term inflation expectations
remained at very subdued levels, after a slight improvement in
response to the positive vaccine news.
December 2020's economic projections pointed to a more
protracted weakness in inflation than previously envisaged. They
implied that by the end of the projection horizon in 2023, eurozone
inflation would have remained below the ECB's inflation aim for
around a decade (with the exception of 2018).
Close attention is being paid to the role of the exchange rate
in the inflation outlook. The nominal effective exchange rate had
reached an all-time high, although the impact of currency strength
on inflation depended on the nature and persistence of the shock
driving its movements.
The next ECB meeting will take place on 21 January, with zero
chance of another change in policy so soon after December's package
of measures. The focus for now will remain on the implementation of
the announced asset purchases and long-term loans to banks which
will continue to drive a huge expansion of the balance sheet of the
Eurosystem.
Still, the ECB has signaled that growth risks are still to the
downside and uncertainty remains high which, in line with its
forward guidance, implies that an easing bias for policy is
explicitly retained, including for policy rates.
With this in mind, a key issue for upcoming ECB policy
communications is whether there will be any more hints about the
possibility of a further cut in the Deposit Facility Rate (DFR)
from the current -0.5%. The rate was last reduced back in September
2019, just prior to former president Mario Draghi's departure.
Germany's "Flash" GDP data for 2020 are modestly more positive
than expected, suggesting broadly flat activity in the fourth
quarter despite the hard lockdown implemented in mid-December. As
the latter will last at least until the end of January and possibly
during part of February, 2021 will start with another GDP
contraction ahead of a strong rebound in the second and third
quarters as vaccination progress enables a successive loosening of
COVID-19 virus-related restrictions. (IHS Markit Economist Timo
Klein)
The initial GDP release for 2020 from the German Federal
Statistical Office (FSO) shows a slightly smaller-than-expected
decline of 5.0% (consensus: -5.1%). Once the additional working
days in 2020 are accounted for (impact of almost 0.4 percentage
point), the calendar-adjusted figure is -5.3% (rounding has
helped). This compares with growth of 0.6% in 2019 and an average
growth rate of 1.9% during 2009-19. The FSO speaks of a massive
impact from the COVID-19 virus pandemic but also points out that
the GDP contraction in 2009 in the wake of the global financial
market crisis was even larger (-5.7% unadjusted).
As usual, implications for data-edge developments are somewhat
difficult to determine given the still high degree of estimation
for the fourth quarter and the implicit (but unpublished) revisions
to data for previous quarters. Ahead of the release of the
fourth-quarter 2020 data on 29 January that will reveal those
revisions, the annual data released today and a hypothetical
assumption of there being no revisions argue for GDP growth in the
final quarter of 2020 having been near zero.
Administrative restrictions (i.e. lockdowns) imposed during
2020 in order to maintain control over COVID-19 virus infections
and thus prevent the healthcare system from being overwhelmed were
the key influence on GDP growth in 2020. In the first wave of
infections in March-April, German industry was hurt to a similar
degree as services because of supply-chain interruptions (notably
linked to China), whereas (export-led) industrial growth was
affected much less during the second wave that emerged during the
fourth quarter of 2020 because economic activity in most Asian
countries was no longer severely restrained by the pandemic. Output
in the automotive industry had plunged by 85% in April but was
within 5% of February's pre-pandemic level by November.
The component breakdown shows that negative net exports
contributed 1.1 percentage point and domestic demand 3.9 percentage
points to the GDP decline in 2020. As net destocking of inventories
is said to have been responsible for 0.7 percentage point of the
latter, this implies that domestic demand without inventory changes
dampened the GDP level by 3.2 percentage points.
German service-sector activity will be hurt markedly anew in
early 2021 by the strict lockdown in place since mid-December 2020
and which will be maintained at least until the end of January, and
quite possibly for several more weeks in February. Notwithstanding
the resilient construction and manufacturing sectors, GDP will thus
contract in the first quarter of 2021 by around 2%. It should
rebound in the second quarter, however, as progress on vaccination
numbers (especially among the most vulnerable elderly population,
which is highly significant for hospitalisation rates) and warmer
weather will allow the government to loosen restrictions
substantially in that period.
Leading indicators (Ifo, PMI, ZEW) are likely to suffer a
setback around the turn of the year due to the need to impose
another strict lockdown of uncertain duration, but this will be
limited in magnitude as knowledge of available vaccines provides
reassurance about a foreseeable end to restrictions in the course
of 2021. We do not expect the now-concluded Brexit to be a major
drag on Germany's economy, notwithstanding the difficulties that
lie ahead for the UK economy in this respect.
IHS Markit currently predicts calendar-adjusted GDP growth of
2.8% in 2020 as the renewed dip in the first quarter markedly
restrains average growth this year.
The Volkswagen (VW) Group has posted a 15.2% year-on-year (y/y)
decline in global sales during 2020 as a result of the impact of
the COVID-19 virus pandemic to 9,305,400 units. The company noted a
concerted recovery in its sales trend towards the end of the year,
with the decline in the fourth quarter limited to 5.7% y/y, while
there was a 3.2% y/y fall December. On an overall basis the VW
Group said as a result of its 2020 sales performance it had
actually expanded its global market share in 2020, as its sales had
fallen at a lower rate than those of its rivals. "The Covid-19
pandemic made 2020 an extremely challenging year," said Dr.
Christian Dahlheim, Head of VW Group Sales. "The Volkswagen Group
performed well in this environment and strengthened its market
position. We are particularly pleased that we hit the ground
running in our e-offensive in spite of the pandemic and thus took a
big step forward in the implementation of our Together 2025+
strategy. We will keep up the momentum this year, adding many more
attractive electric models." The VW Group did not post individual
brand performance figures as part of its 2020 Group sales data,
although the VW passenger car brand reported its own headline data
yesterday, with an overall global decline in line with the wider
group performance. As in the VW passenger car sales data release,
the wider Group was keen to promote the strong sales development of
its plug-in vehicles, combining battery electric vehicle (BEVs) and
its plug-in hybrids (PHEVs). Group BEV sales were up by 214% y/y to
231,600 units, while PHEV deliveries were up by 175% y/y to 190,500
units. (IHS Markit AutoIntelligence's Tim Urquhart)
Fiat Chrysler Automobiles (FCA) has announced that its
shareholders will receive a payout from a special cash dividend on
29 January. According to a statement, the distribution - amounting
to around EUR2.9 billion or EUR1.84 per share - will be paid to
those who hold common stock on 15 January having now become
unconditional. Shareholders holding common shares traded on the New
York Stock Exchange (NYSE) will receive the dividend in US dollars
at the official USD/EUR exchange rate reported on 13 January by the
European Central Bank. The dividend is being paid out by FCA as
part of its merger with Groupe PSA to create Stellantis. It related
to the fact that FCA is a larger business than PSA and is designed
to equalize the transaction, which completes on 16 January. (IHS
Markit AutoIntelligence's Ian Fletcher)
Ziton jackup Wind Enterprise is undergoing its 10-year class
approval at Fayard shipyard in Denmark, before commencing a
long-term turbine maintenance charter with Siemens Gamesa Renewable
Energy (SGRE) on 1 March. Ziton is to acquire the vessel after
signing the three-year and eight month-long charter agreement with
SGRE in December 2020. During final contract negotiations, SGRE and
Ziton agreed to further future-proof the vessel to perform major
component exchanges on larger turbines. Ziton has therefore
committed to extend the crane boom on the Wind Enterprise within
the first nine months of 2021. SGRE will pay the required CAPEX,
estimated at approximately USD1.8 million (EUR1.5 million), and pay
the charter hire during an expected boom extension period of three
weeks. (IHS Markit Upstream Costs and Technology's Genevieve
Wheeler Melvin)
Siemens Gamesa and Siemens Energy have joined forces combining
their ongoing wind to hydrogen developments. The projects target a
total investment of approximately EUR120 million (USD146 million)
over five years in developments leading to a fully integrated
offshore wind-to-hydrogen solution. (IHS Markit Upstream Costs and
Technology's Kamila Langklep)
The companies are developing an innovative solution that fully
integrates an electrolyzer into an offshore wind turbine as a
single synchronized system to directly produce green hydrogen. The
companies intend to provide a full-scale offshore demonstration of
the solution by 2025-26. Through these developments, the companies
aim to contribute towards a decarbonization of the economy and a
solving of the climate crisis.
Over a timeframe of five years Siemens Gamesa plans to invest
EUR80 million (USD97 million) and Siemens Energy is targeting an
investment of EUR40 million (USD49 million) in the developments.
Siemens Gamesa will adapt its development of the SG14-222 DD
offshore wind turbine to integrate an electrolysis system
seamlessly into the turbine's operations. Siemens Energy will
develop a new electrolysis product to meet the needs of the harsh
maritime offshore environment in sync with the wind turbine. The
ultimate fully integrated offshore wind-to-hydrogen solution will
produce green hydrogen using an electrolyzer array located at the
base of the offshore wind turbine tower. The solution will lower
the cost of hydrogen by being able to run off grid.
The developments are part of the H2Mare initiative which is a
lighthouse project likely to be supported by the German Federal
Ministry of Education and Research ideas competition "Hydrogen
Republic of Germany". The H2Mare initiative under the consortium
lead of Siemens Energy is a modular project consisting of multiple
sub-projects to which more than 30 partners from industry,
institutes and academia are contributing. Siemens Energy and
Siemens Gamesa will contribute to the H2Mare initiative with their
own developments in separate modular building blocks.
Siemens Energy owns 67% of Siemens Gamesa.
The Turkish economic recovery continued in November 2020, even
as the central bank moved to a more defensive monetary policy.
However, the tightening of economic policies might have had more
impact in December according to leading indicators. In early 2021,
tighter economic policies are likely to affect retail trade more
notably, though industrial production gains may continue. (IHS
Markit Economist Andrew Birch)
In November, Turkish industrial production continued to grow,
by 1.3% month on month (m/m) in seasonally adjusted data, the
seventh consecutive month of expansion after output plunged in
March and April with the implementation of the first wave of
anti-pandemic lockdowns. Sustained growth since that drop pushed
total production up by 11.0% year on year (y/y) in
calendar-adjusted data, the strongest such gain since the beginning
of 2018.
Retail trade also continued to expand in November. The volume
of retail sales increased by 2.2% m/m in seasonally adjusted terms,
also the seventh consecutive month of expansion. The total volume
of retail sales was up by 11.9% y/y in calendar adjusted data.
Over the course of November, the central bank governor and the
treasury and finance minister were replaced, with the incoming
officials promising tighter economic policies. By the end of the
year, the central bank had raised interest rates and credit growth
had begun to subside.
Leading indicators suggest that this economic policy tightening
will negatively impact both industrial production and retail sales
in December. The IHS Markit Purchasing Managers Index slipped for
the second consecutive month, to 50.8 - still positive but the
weakest it had been since May 2020. Meanwhile, labor data through
October show that the rise of employment that had underpinned the
retail sales recovery faltered, likely further contracting in
November and December.
Based on the resilient economy in November, we have tempered
the expected m/m fourth-quarter retreat in GDP after its
third-quarter recovery. Nonetheless, the full-year 2020 GDP
forecast will fall to 0.2% based on further adjustments to the
third-quarter data.
The International Monetary Fund (IMF) has made a disbursement
of USD34.4 million to the Central African Republic (CAR) following
a favorable program performance under the country's Extended Credit
Facility (ECF) agreement. (IHS Markit Economist Thea Fourie)
The IMF disbursed USD34.4 million to the CAR government
following the completion of the first and second reviews under the
country's Extended Credit Facility (ECF) agreement. The IMF
approved the CAR's ECF, which amounts to USD115.1 million, in late
2019. To date, the disbursements under the ECF total USD51.6
million.
The IMF warns that the negative impact of the coronavirus
disease 2019 (COVID-19) pandemic on CAR's early policy and reform
efforts under the program was significant, particularly through
external channels. However, the IMF says the country's program
performance improved in recent months as the authorities stepped up
efforts to enhance the use and transparency of donor financing to
fight the pandemic while focusing on key structural reforms.
The IMF report states, "Looking ahead, the authorities will
pursue their efforts to support the economic recovery and make
progress toward poverty reduction. They aim to prioritize social
spending, improve domestic revenue mobilization, consolidate the
single treasury account, and enhance public sector supervision.
They will also implement reforms to strengthen governance and the
business climate, including through the submission to parliament of
new anti-corruption law and the publication of public procurement
contracts."
CAR qualified for the deferral of external debt payments under
the G-20 Debt Service Suspension Initiative (DSSI) during April
2020. The potential DSSI debt savings amount to USD7.4 million (or
0.3% of GDP), IMF numbers show. The G-20 is due to re-evaluate the
continuation of the DSSI initiative in mid-2021.
The IMF approved USD38 million of emergency assistance to CAR
under the Rapid Credit Facility (RCF) and debt service relief under
the Catastrophe Containment and Relief Trust in April 2020.
CAR remains one of the poorest countries in the sub-Saharan
African region and has limited economic diversification. CAR's
economic activity is made up primarily of subsistence farming and
forestry. The country remains highly dependent on donor aid flows,
while exports consist of coffee, cotton, diamonds, and forestry
products. This leaves CAR's external liquidity highly susceptible
to domestic and external shocks. CAR is a member of the regional
bloc the Central African Economic and Monetary Community (CEMAC),
which minimizes risk factors weighing on monetary and financial
stability and external liquidity availability.
In January-November 2020, China's garlic exports to the US fell
19% year-on-year to 45,000 tons, at a price of USD1,700 per ton
fob, down 8% y-o-y. US tariffs on Chinese garlic have increased
from 10% to 25% since May 2020, which has encouraged sourcing from
local US produce. China has in turn expanded its exports to Africa,
up 43% to 102,000 tons in the same period, at a price of USD880 per
ton fob. Trade data shows that Chinese garlic are sold in about 44
African countries, with Senegal, Tunisia and Egypt jointly
accounting for 43% of the total volume. In 2020, most export
destinations enjoyed a huge price cut from 2019. (IHS Markit Food
and Agricultural Commodities' Hope Lee)
China tripled its deliveries to Tunisia to 14,000 tons while
sales to Egypt doubled to 11,000 tons compared with the same period
in 2019.
In the first week of January 2021, the wholesale price for
coldstore mixed grade garlic was CNY4.52-4.68 per kilo
(USD0.66-0.69/kg).
Meanwhile, India is also interested in the African market.
However, its price seems a bit high compared with Chinese
offerings. In January-November 2020, India sent 54 tons to
Mauritius at USD1,800/ton fob compared with China's shipments of
1,500 tons for a price of USD890/ton fob.
Zambian farmers are reportedly calling on Chinese garlic
growers to help them gain more knowledge about garlic cultivation.
Norman Kalenga, chairman for Kasumbalesa Farmers Association, said
Zambian garlic growers are intent on growing the cash crop on a
commercial basis. A local trader said that the Chinese should
consider investing in farming in Zambia to get closer to the
African markets.
Zambia has expanded planted areas for high value fruits and
tree nuts. Its blueberries have been exported to China, according
to a Chinese press outlet.
Asia-Pacific
Most APAC equity markets closed higher except for Mainland
China -0.9%; Japan +0.9%, Hong Kong +0.9%, Australia +0.4%, India
+0.2%, and South Korea +0.1%.
Total social financing (TSF) is likely to continue to moderate
into 2021 as monetary policy returns to normalcy; structural credit
support for high-tech manufacturing, environmental protection, and
small firms is still expected. (IHS Markit Economist Yating Xu)
China's TSF, the broadest measure of net new financing in the
real economy, amounted to CNY1.7 trillion (USD262.79 billion) in
December 2020, down CNY383 billion year on year (y/y) and CNY500
billion month on month, according to a release from the People's
Bank of China (PBOC). Stock TSF rose 13.3% y/y in December,
declining by 0.3 percentage point from November, marking the second
consecutive month of deceleration.
The contraction in TSF largely came from declines in
off-balance sheet financing and short-term corporate loans.
Combined, financing through entrusted loans, trust loans, and
undiscounted bankers' acceptance decreased by CNY738 billion,
CNY592 billion more than the reduction a year ago. The
month-on-month decline in trust loans was a historical high.
Corporate bond financing further declined to CNY44 billion, down
CNY218 billion y/y. Moreover, corporate short-term borrowing
declined to a 10-year low and household borrowing fell owing to the
recent resurgence in COVID-19 cases and tightening property market
controls.
Government bond issuance and credit expansion remained the main
drivers of new financing. The net increase in government bonds was
CNY716 billion in December, up CNY342 billion y/y, and new credit
for the real economy increased by CNY68 billion.
Broad money supply (M2) growth dropped by 0.6 percentage point
to 10.1% y/y owing to weakening fiscal spending and reduction in
structural deposits. M1 growth fell by 1.4 percentage points to
8.6%, partially as a result of tightening real estate controls and
the moderation of the property market in lower-tier cities.
TSF increased by CNY34.9 trillion in 2020, up CNY9.2 trillion
y/y. Bank loans increased by CNY19.6 trillion, just below the
annual target of CNY20 trillion.
With milder credit expansion moderation and government bond
issuance expected, TSF growth is likely to decline further in the
first quarter of 2021 from 13.3% y/y in 2020. To date, the State
Council has not issued the early quota of local government bond for
2021, while the 2020 quota was released in early January that
year.
Chinese agrochemical exports grew strongly during the first 11
months of 2020, according to figures published by the country's
Institute for the Control of Agrochemicals, Ministry of Agriculture
(ICAMA). Exports during the period January-November crossed $10.8
billion, overtaking the total exports of $10.2 billion during 2019.
Growth in value terms was witnessed in all months except February.
The year began slowly with exports inching up 1% in January, before
diving by almost a third (-31.7%) in February. There was a quick
turnaround in March, with growth being maintained throughout the
following months. It was a similar picture in volume terms. Exports
of 2.2 million tons during the first 11 months overtook the total
of 1.9 million tons during all of 2019. The monthly trend was
similar as well, with growth in all months except February. (IHS
Markit Crop Science's Sanjiv Rana)
Telecoms equipment company Huawei Technologies has developed
smart roads in Chinese city Wuxi, Jiangsu province, that can
communicate with driverless vehicles. The site is part of China's
first national project for intelligent and connected vehicles. The
road is embedded with traffic lights, street signs, cameras, and
radars that enable the vehicle to receive information from its
surroundings. This helps the vehicle undertake actions such as
making stops, swerving past obstacles, accelerating, and
decelerating. Jiang Wangcheng, president of Huawei's information
and communications technology business, said, "Autonomous driving
is an irresistible trend, but any isolated vehicle alone can't nail
it. The only solution is to get more information from the roads."
Huawei's 5G technology offers advantages such as high transmission
speed, reliability, and latency that meet the technical
connectivity requirements for autonomous vehicles (AVs). (IHS
Markit Automotive Mobility's Surabhi Rajpal)
Chinese automaker SAIC Motor Group (SAIC) has unveiled two new
models from its new electric vehicle (EV) brand IM, and debuted the
logo for the new brand. The mid-size electric sedan and mid-to
full-size electric sport utility vehicle (SUV) will be the first
two production models from the premium brand jointly introduced by
SAIC and Alibaba. The two new vehicles are expected to feature a
93-kWh battery pack with the option to upgrade to a 115-kWh battery
pack with higher energy density. The 115-kWh version of the new
electric sedan can deliver a maximum range of 1,000 km, according
to SAIC. The new IM vehicles will feature a wireless charging
module that promise a maximum charging capacity of 11kW. SAIC said
reservations for its new electric sedan will begin in April, while
the launch date for the new electric SUV will be announced at a
later date. SAIC claimed the two new models it showcased are near
production-ready, but details regarding their specifications and
technologies have not been confirmed at this stage. (IHS Markit
AutoIntelligence's Abby Chun Tu)
Autonomous vehicle (AV) startup WeRide has completed a Series-B
funding round of USD310 million, reports VentureBeat. WeRide said
that USD110 million is an extension of the USD200-million funding
round announced in December 2020 (see China: 23 December 2020:
Chinese autonomous vehicle startup WeRide raises USD200 mil. in
funding). The funding round was led by Yutong Group and attracted
investors including CMC Capital Partners, CDB Equipment
Manufacturing Fund, Hengjian Emerging Industries Fund, Zhuhai
Huajin Capital and Tryin Capital. Previous investors including
Sinovation Ventures, Qiming Venture Partners and Kinzon Capital
also participated in this round. Tony Han, CEO and founder of
WeRide, said, "In the year 2021, more leading investors and
partners are joining us, bringing in their strategic resources to
fulfill the goal of commercializing self-driving technology. WeRide
is capturing the upward trend in the development of AI- empowered
mobility industry, and further accelerates R&D and the
commercialization of our technologies". WeRide and Yutong had
already developed an autonomous minibus for mass production. It has
no steering wheel, accelerator or brakes, and is designed for urban
open road operations. WeRide focuses on deploying Level 4 AVs on
public roads and recently announced that it has started testing
fully driverless vehicles in China. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Japan's private machinery orders continued to rise in November,
suggesting a rebound in fixed investment and larger demand
associated with digitalization. However, uncertainties induced by
the COVID-19 pandemic remain downside risks. (IHS Markit Economist
Harumi Taguchi)
Japan's private machinery orders (excluding volatiles), a
leading indicator for capital expenditure (capex), rose by 1.5%
month on month (m/m) in November following a 17.1% increase in
October. The value of private machinery orders (excluding
volatiles) reached JPY854.0 billion (USD8.2 billion), the highest
level since February, reflecting continued growth in orders from
non-manufacturing (excluding volatiles; up 5.6% m/m), which offset
a 2.4% m/m drop in orders from manufacturing.
The decline in orders from manufacturing was due largely to
drops in orders from non-ferrous metals, automobiles, iron and
steel, and other transport equipment following rises. However,
continued increases in orders from general-purpose and production
machinery and some other industry groupings suggest improved demand
for machinery in line with a recovery in production. The
improvement in orders from non-manufacturing was largely thanks to
orders from telecommunication and construction.
The November results were stronger than expected, and signal
that private capex has started to pick up. The resumption of
economic activity and steadier uptrends of overseas demand are
likely to underpin a recovery in production and then machinery
orders from manufacturing. Another factor that could support a
recovery in machinery orders is stronger demand associated with
digitalization.
A wider decline in domestic orders for metal-cutting machine
tools in December suggests that recovery in machinery orders
remains patchy by industry. The surge in the new confirmed cases of
COVID-19 and the state of emergency for Tokyo and several
prefectures could make companies cautious about starting investment
in capex, although containment measures are limited relative to
those implemented in April and May.
US-based Plug Power is set to raise USD1.5 billion investment
from South Korea's SK Group, according to a company press release.
Under the terms of the investment, a US subsidiary of SK Group will
make the investment in Plug Power by acquiring approximately 51.4
million shares of common stock. Plug Power and SK Group have
decided to form a partnership to accelerate the use of hydrogen as
an alternative energy source in Asian markets. The two companies
have also announced that they will form a joint venture company in
South Korea pertaining to the effort. "SK Group has an established
strategy for building out the hydrogen economy in South Korea and
beyond. The current relationship with SK Group offers immediate
strategic benefits to Plug Power to accelerate its expansion into
Asian markets - and is intended to result in a formal joint venture
by 2022. Due to the complementary strengths in this partnership, we
expect rapid growth and significant revenue generation from the
joint venture that are incremental to our 2024 plan," said Plug
Power CEO Andy Marsh. Plug Power is building the hydrogen economy
as the leading provider of comprehensive hydrogen fuel cell turnkey
solutions. Through this partnership, the two companies intend to
provide hydrogen fuel cell systems, hydrogen fueling stations, and
electrolyzers to the South Korean and broader Asian markets. The US
company has deployed over 40,000 fuel cell systems for e-mobility
and has become the largest buyer of liquid hydrogen, having built
and operated a hydrogen highway across North America. (IHS Markit
AutoIntelligence's Jamal Amir)
Posted 14 January 2021 by Chris Fenske, Head of Fixed Income Research, Americas
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