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All major US and most European equity indices closed higher,
while APAC markets were mixed. US and benchmark European government
bonds closed higher. European iTraxx and CDX-NA closed flat on the
day across IG and high yield. The US dollar, oil, silver, and gold
closed higher, while natural gas and copper were lower on the
day.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our newly launched Experts
by IHS Markit platform.
Americas
Major US equity indices closed slightly higher; S&P 500,
Nasdaq, Russell 2000, and DJIA all closed +0.1%.
10yr US govt bonds closed -3bps/1.59% yield and 30yr bonds
-1bps/2.28% yield.
CDX-NAIG closed flat/50bps and CDX-NAHY flat/285bps.
The Federal Reserve will soon begin selling off the corporate
bonds and exchange-traded funds it amassed last year through an
emergency-lending vehicle set up to contain the COVID-19 pandemic's
economic fallout. The vehicle, known as the Secondary Market
Corporate Credit Facility, or SMCCF, held $5.21 billion of bonds.
In addition, it held $8.56 billion of exchange-traded funds that
hold corporate debt. A Fed official said the sales should be
completed by the end of this year. (WSJ)
DXY US dollar index closed +0.1%/89.91.
Gold closed +0.3%/$1,910 per troy oz, silver +0.4%/$28.20 per
troy oz, and copper -1.3%/$4.59 per pound.
Crude oil closed +1.6%/$68.83 per barrel and natural gas closed
-0.9%/$3.08 per mmbtu.
Organic investments by the world's global integrated oil
companies (GIOCs) on low-carbon projects held stable in 2020 at $6
billion, despite a 30% year-on-year downturn in total capital
spending due to COVID-19 cost-cutting. Low-carbon spending from
this peer group is expected to accelerate to $15 billion/year by
2025, according to IHS Markit. (IHS Markit Climate and
Sustainability News' Kevin Adler)
"Organic spending" is expenditure on existing operations and
company-developed new projects, in contrast to
merger-and-acquisition (M&A) activity. IHS Markit noted that
some of the GIOCs, particularly TotalEnergies, have been aggressive
in low-carbon M&A as well. "Furthermore, given rapidly changing
developments within this area, the balance of risks is skewed
toward higher organic spending," said Chris
DeLucia, director; Franca
Davila, associate director; and senior analysts Claudia
Belahmidi and Alyssa Coelho in a presentation on 19 May.
Identifying BP, Chevron, Eni, Equinor, ExxonMobil, Shell, and
TotalEnergies as GIOCs, IHS Markit said these companies continued
to maintain their low-carbon investments last year despite sharp
overall capex reductions. These decisions mark "an inflection
point" that shows "the rising prominence of low-carbon portfolios"
in their strategies, IHS Markit added.
However, the companies in the peer group are taking different
spending approaches in their low-carbon investments:
BP and Eni have been reallocating capital most heavily to the
low-carbon space, with IHS Markit forecasting it will represent
20-30% of their total organic spending by 2025.
Equinor, Shell, and TotalEnergies are expected to direct 10-20%
of their annual capital to this segment by 2025.
Chevron and ExxonMobil will spend about 3% of capex on
low-carbon activity through the medium term, and IHS Markit said
those investments will "align with or are complementary to the core
oil and gas business."
Average consumer credit- and debit-card spending remained
strong during the week ending 16 May at 13.8% above the January
2020 level, according to the Opportunity Insights Economic Tracker.
This was down slightly from 16.1% above the January 2020 level as
of the prior week but nevertheless suggests robust retail and food
services sales through May. Meanwhile, small-business activity
(revenues and the number open) remained depressed through 23 May,
according to the Opportunity Insights Economic Tracker. These data
suggest that the small-business sector has yet to participate in
the broad recovery. Separately, the IHS Markit GDP-weighted US
weekly containment index declined (eased) 6.1 index points this
week to 14.8, continuing a string of easings that began in late
January and accelerated in March. This week's decline reflects
easing conditions in 33 states, with the largest contributions
originating in Texas, Massachusetts, New York, and Pennsylvania.
(IHS Markit Economists Ben
Herzon and Joel
Prakken)
JBS says 'vast majority' of its facilities will reopen today.
JBS USA and Pilgrim's said that after making "significant progress"
in the wake of the cyberattack and that its systems are "coming
back online." Given the progress made in the past 24 hours, JBS
said Tuesday evening that "the vast majority of our beef, pork,
poultry and prepared foods plants will be operational tomorrow."
(IHS Markit Food and Agricultural Policy's Richard Morrison)
The firm said that on Tuesday, JBS USA and Pilgrim's were able
to ship product from "nearly all its facilities to supply
customers." JBS said it continues to make progress to resume plant
operations in the US and Australia and its Canada beef facility
resumed production.
The firm reiterated its prior assertion that they are unaware
of any customer, supplier or employee data was compromised in the
attack. Meanwhile, USDA released a statement that they have been
reaching out to other meat packers and to food, agriculture and
retail organizations on the matter. "USDA continues to work closely
with the White House, Department of Homeland Security, JBS USA and
others to monitor this situation closely and offer help and
assistance to mitigate any potential supply or price issues," the
agency said.
"As part of that effort, USDA has reached out to several major
meat processors in the United States to ensure they are aware of
the situation, encouraging them to accommodate additional capacity
where possible, and to stress the importance of keeping supply
moving." As for the retail side, USDA said it has emphasized
"maintaining close communication and working together to ensure a
stable, plentiful food supply."
Ørsted and Eversource have signed a charter agreement with
Dominion Energy for its Jones Act compliant Wind Turbine
Installation Vessel (WTIV), Charybdis. The vessel will carry out
turbine installation activities in support of Ørsted and
Eversource's offshore wind developments: Revolution Wind and
Sunrise Wind. Dominion says the charter terms also allow the vessel
to support construction activities at the developer's Coastal
Virginia Offshore Wind project, which is expected to be operational
by the end of 2026. Charybdis is under construction at Keppel
AmFELS in Brownsville, Texas, and is expected to be delivered in
late 2023. During construction of Revolution and Sunrise Wind, the
WTIV will work out of State Pier in New London, Connecticut.
Revolution Wind is a proposed 704 MW windfarm that will sit off the
coast of Rhode Island, while the 924 MW Sunrise Wind project will
be located 30 mi (48 km) east of Montauk Point, New York. The
USD500 million vessel will operate as part of Dominion Energy's
Contracted Assets segment, and will be homeported in Hampton Roads,
Virginia. According to Dominion Energy, the vessel is designed to
handle next-generation turbine sizes of 12 MW or larger, as well as
foundations. (IHS Markit Upstream Costs and Technology's Genevieve
Wheeler Melvin)
Tesla CEO Elon Musk has posted on Twitter that the first Model
S Plaid deliveries are to be on 10 June, and that recent Model 3
and Model Y price increases have been made on materials costs and
supply-chain issues, report several media outlets. On the price
rises, Musk tweeted, "Pricing increasing due to major supply chain
price pressure industry-wide. Raw materials especially." Musk's
tweet was in response to a post on Twitter from someone complaining
about the pricing changing, as well as vehicle content. (IHS Markit
AutoIntelligence's Stephanie
Brinley)
Autonomous vehicle (AV) company Cruise LLC, which is backed by
General Motors and Honda Motor, has urged President Joe Biden to
support efforts to accelerate AV deployment in the United States,
reports Reuters. Cruise has requested that Biden support
legislation raising the cap on the number of AVs that a company can
seek to be exempted from existing federal safety rules. Cruise CEO
Dan Ammann, in a letter to Biden, wrote that the cap, "acts as a
U.S.-only impediment to building these vehicles at scale in the
United States. China's top down, centrally directed approach
imposes no similar restraints on their home grown AV industry. We
do not seek, require or desire government funding; we seek your
help in leveling the playing field." (IHS Markit Automotive
Mobility's Surabhi Rajpal)
The Central Bank of Colombia (Banco de la República de
Colombia: Banrep) on 31 May published its Financial Stability
report covering March 2021 data. The key points of the report are a
sharp increase in the loans-at-risk (LAR) ratio, rising from 9.2%
of total loans at the end of 2019 to 12.4% in January 2021. All
segments of the credit portfolio rose, although corporate and
microfinance were the most affected, reaching their highest levels
since Banrep started to measure them in 2007. Moreover, debt
service ratios are at their highest levels since 2003, with
household debt instalments representing 28.4% of their total
income, well above the historical average at 22.4%. Additionally,
corporations at a "fragile" state (a measure that compounds their
solvency, impairment, and debt service ratios) increased over the
same period, driven by an increase in interest coverage. (IHS
Markit Banking Risk's
Alejandro Duran-Carrete)
The Brazilian Institute of Geography and Statistics (Instituto
Brasileiro de Geografia e Estatísticas: IBGE) has reported that GDP
grew by 1.2% in the first quarter of 2021 compared with the
previous quarter, based on seasonally adjusted data. (IHS Markit
Economist Rafael
Amiel)
GDP has returned to its fourth-quarter 2019 level;
stronger-than-anticipated growth in January to March points to an
upwards revision for the full-year 2021.
Quarter on quarter (q/q), consumption (both government and
private) was down; the interruption of government cash transfers to
households during the first quarter had a negative impact on their
ability to spend. Unemployment also remains relatively high and,
according to the IBGE, wages also did not increase.
Growth in the first quarter was driven by the strong rebound in
fixed investment, coupled with a favorable global scenario that not
only helped volume exported but also revenues as skyrocketing
commodity prices favored exports and tax collection. Exports of
iron ore and soya beans are climbing sharply. Inventory
replenishment also explains growth in January to March.
Credit continued to grow in the first quarter and supported
investment and consumption.
Europe/Middle East/Africa
Most major European equity indices closed higher except for
Spain -0.1%; France +0.5%, UK +0.4%, Germany +0.2%, and Italy
+0.2%.
10yr European govt bonds closed higher; UK -3bps,
Germany/France/Italy -2bps, and Spain -1bp.
iTraxx-Europe closed flat/49bps and iTraxx-Xover
-1bp/243bps.
The y/y rate of increase in the eurozone producer price index
(PPI) jumped again in April, from an already elevated 4.3% to 7.6%,
the highest rate since September 2008. (IHS Markit Economist Ken
Wattret)
This was above the market consensus expectation (of 7.3%,
according to Reuters' survey) and not far below the record high for
the series (of 8.9% in July 2008).
Energy has been pivotal to the recent surge, with the y/y rate
of change in the energy sub-index soaring to over 20% in April,
again close to its record high.
Eurozone PPI inflation excluding energy prices has also picked
up markedly over recent months, with the average month-on-month
(m/m) increase over the three months to April (of 0.8%) not far
short of the equivalent rise in the overall index (of 0.9%).
On a y/y basis, the ex-energy PPI inflation rate rose from 2.3%
to 3.5% in April, the highest rate since September 2011, with the
upward pressure set to continue
The EU has authorized the first insect as a novel food under
the 2015 regulation (2283/2015) clearing French producer SAS EAP
Group Agronutris to sell dried yellow mealworm for use as whole
insects or as a powder ingredient in other foods. A 1 June
Commission implementing regulation authorizes Agronutris to sell
dried Tenebrio molitor larva (yellow mealworm), whole or in powder,
from 22 June. The regulation sets a 10 gram per 100g limit on the
powdered mealworm content, which it specifies can be used in
protein products, biscuits, legumes-based dishes or pasta-based
products. Either snacks containing the whole dried insects or foods
containing the powdered form must be labelled as "Dried Tenebrio
molitor larva (yellow mealworm)". Allergen labelling is also
required. More precisely a statement, which has to appear in close
proximity to the list of ingredients, that the dried yellow
mealworm may cause allergic reactions to consumers with known
allergies to crustaceans and dust mites. (IHS Markit Food and
Agricultural Policy's Sara Lewis)
Porsche is looking at building a rival to the new BMW i4
battery electric vehicle (BEV), which would probably slot into the
brand's range below the Taycan model, reports Autocar. According to
the report, the model would be closest to the forthcoming Audi A4
e-tron model and would use the new Premium Performance Electric
(PPE) architecture being developed jointly by Porsche and Audi.
Autocar reports a source in Porsche's engineering department as
saying, "The modular nature of the PPE platform will allow us to
extend our electric car line-up with a range of different models.
It is engineered for standard and high ground clearance. A second
sedan [saloon] model is one possibility." (IHS Markit
AutoIntelligence's Tim Urquhart)
Total employment in Italy rose for a third straight month when
rising by 0.1% month on month (m/m), or 19,000 to 22.344 million in
April. Nevertheless, cumulative job losses during March 2020-April
2021 stood at 814,000, or 3.5% lower when compared with February
2020, the pre-pandemic level. (IHS Markit Economist Raj
Badiani)
The unemployment rate rose from 10.4% in March to a 30-month
high of 10.7% in April. The number of unemployed people increased
by 88,000 m/m to 2.67 million in April.
The rise in the unemployment rate in April was primarily due to
the inactivity rate falling for a second straight month. Despite
continued COVID-19 containment measures targeting the hospitality,
transport, and retail sectors, the number of people neither working
nor looking for work fell in April.
Furthermore, the labor force participation rate rose to 63.8%
in April, but still remains below its pre-COVID-19 level of 65.2%
in February 2020.
According to a detailed release of Statistics Denmark, Danish
real GDP growth amounted to -1.3% quarter on quarter (q/q) in the
first quarter of the year, which means the economy fell back into
contraction, after rebounding by 0.8% q/q in the final quarter of
2020. As of the first quarter, the total size of the Danish economy
amounted to DKK 526.7 billion, which is still 2.7% below its
pre-pandemic level of DKK 541.4 billion, as of the fourth quarter
of 2019. (IHS Markit Economist Michal Plochec)
The detailed expenditure breakdown reveals that compared to the
last quarter of 2020, the main drag on growth in the first quarter
of 2021 was private consumption, which contracted by 4.9% q/q.
Also, government consumption as well as fixed investment declined
by 2.2% and 0.5% q/q respectively. On a positive note, exports in
the first quarter grew by an impressive 6.1% q/q, while imports
increased by 1.6% q/q.
In annual terms, the economy shrunk for the fourth consecutive
quarter: by 1.3% year on year (y/y) in the first quarter of 2021,
after shrinking by 1.4%, 2.2% and 7.5% y/y in the fourth, third and
second quarters of 2020 respectively. Also, when comparing to the
corresponding quarter of 2020, the main drag on growth in the first
quarter was private consumption, which contracted by 3%, while the
major category which contributed positively to the headline growth
was government consumption, which increased by 2.5% y/y
Fred. Olsen Windcarrier has signed three new wind turbine
transport and installation (T&I) contracts totaling USD151
million (EUR124 million) over the past two months. The awarded
contracts are for work in Europe and Asia Pacific from 2022 to
2024. An upgraded vessel will execute two contracts and the
projects will cover up to 630 vessel days in total. Fred. Olsen
Windcarrier's wind turbine installation vessel (WTIV) Bold Tern is
expected to depart Europe in the summer of 2021 to undergo a
planned crane upgrade and will remain in Asia Pacific to fulfill
commitments during 2022. Bold Tern will replace WTIV Brave Tern to
undertake the T&I of 62 MHI Vestas Offshore V174-9.5MW wind
turbines at Copenhagen Infrastructure Partners' 589 MW Changfang
and Xidao offshore wind farms in Taiwan. The swap will allow Brave
Tern to complete wind turbine installation for Siemens Gamesa
Renewable Energy at developer wpd's 640 MW Yunlin wind farm
offshore Taiwan in a continuous campaign. Meanwhile, Fred. Olsen
has sent WTIV Blue Tern to Moray Offshore's 950 MW Moray East in
the UK North Sea to continue the turbine installation which had
originally commenced with Bold Tern. (IHS Markit Upstream Costs and
Technology's Genevieve Wheeler Melvin)
EasyPark Group has announced the completion of its acquisition
of digital parking services provider Park Now after receiving
approval by the relevant anti-trust authorities, according to a
company statement. Park Now is a part of EasyPark Group effective
from 1 June. The deal enables EasyPark Group to expand in the
digital parking, electric vehicle (EV) charging and mobility
services. Johan Birgersson, CEO of EasyPark Group, said, "This is a
historic milestone in the industry, and we are very excited to
embark on this journey. Most of all, I am proud to be leading such
a strong organization with talented employees. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
The Central Bank of Kenya's (CBK) 2020 Bank Supervision Annual
Report contains the biannual FinAccess Business Supply-Side Survey
conducted in February 2021. This survey highlighted that, as
expected, micro, small, and medium-sized enterprises (MSMEs)
struggled to service their loans in 2020, leading to a significant
rise in defaults when compared with 2017 (the last time the survey
was conducted). (IHS Markit Banking Risk's Ronel Oberholzer)
The survey shows that 15.5% of the total value of MSME loans
was classified as non-performing as of December 2020, compared with
13.6% in 2017. The survey attributes this rise to the
COVID-19-virus pandemic affecting borrowers' debt service
capacity.
It shows that MSME loans constitute around one-fifth of the
overall banking sector's loans. The value of the MSME portfolio was
KES638 billion (USD5.84 billion), 21% of the total banking sector
loan portfolio in 2020, up from KES414 billion or 19.2% of the
entire loan book in 2017.
MSME loans grew at an annual average rate of 15% between 2017
and 2020, higher than the 11% average yearly growth for the overall
banking sector's loan portfolio.
South Africa's unemployment remained broadly unchanged at 32.6%
during the first quarter of 2021, from 32.5% in the previous
quarter, latest figures from South African statistical agency
Statistics South Africa (StatsSA) show. An additional 8,000 people
were added to the unemployed pool, the majority from the private
households, informal, and agricultural sectors of the economy. The
number of people added to the formal-sector job market during the
first quarter amounted to 79,000. Overall, "compared to a year ago,
total employment decreased by 1,4 million", StatsSA reported. (IHS
Markit Economist Thea
Fourie)
The biggest gains in quarterly formal-sector employment were in
the finance sector (215,000), followed by utilities (16,000),
community and social services (16,000), and mining (12,000).
Sectors in which job losses continued were construction (87,000),
trade (84,000), and transport (40,000).
Compared to a year ago, sectors of the economy in which job
cuts were the largest were trade (341,000), construction (265,000),
manufacturing (208,000), community and social services (192,000),
and private households (189,000).
Asia-Pacific
APAC equity markets closed mixed; Australia +1.1%, Japan +0.5%,
South Korea +0.1%, India -0.2%, Hong Kong -0.6%, and Mainland China
-0.8%.
Chery Automobile has deepened its co-operation with iFlytek to
use each other's resources to develop a series of intelligent
products. This includes the development of smart cockpit, Internet
of Vehicles solutions, and intelligent vehicle audio systems. The
partnership also aims at jointly trying in building an autonomous
vehicle that can reach Level 4 under specific scenarios. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
Chinese electric vehicle (EV) startup NIO said that its vehicle
deliveries in May increased by 95.3% year on year (y/y) to 6,711
vehicles. The deliveries consisted of 1,412 units of the ES8 sport
utility vehicle (SUV), 3,017 units of the ES6 SUV, and 2,282 units
of the EC6, a couple-style variant of the ES6. In the first five
months of 2021, cumulative deliveries of the ES8, ES6 and EC6 stood
at 109,514 units. The automaker has maintained delivery guidance of
21,000-22,000 vehicles in the second quarter of 2021. In a separate
statement, EV startup Xpeng said that it delivered 5,686 vehicles
in May, consisting of 3,797 units of the P7 sedan and 1,889 units
of the G3 SUV. In the year to date (YTD), deliveries stood at
24,173 units, up 427% y/y. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
Mitsui Chemicals and BASF's Japanese subsidiary have started a
collaborative study to promote chemical recycling in Japan, Mitsui
says. By cooperating across the value chain, BASF and Mitsui will
evaluate collaborative business models and various options to
commercialize chemical recycling in Japan to address the local
challenge of plastic waste recycling, it says. Mitsui notes that
BASF, through its ChemCycling™ project, is working with technology
partners that use novel technologies to convert post-consumer
plastic waste into pyrolysis oil that can serve as a feedstock to
produce chemicals. These chemicals are used to produce new
materials such as plastics without compromising on quality in even
the most sensitive applications, Mitsui says. The share of recycled
material is allocated to these products according to a third-party
audited mass-balance approach. From 2025, BASF aims to process
250,000 metric tons/year of recycled feedstock, according to
Mitsui. (IHS Markit Chemical Advisory)
Mitsui Chemicals says its affiliate Prime Polymer will
construct a polypropylene (PP) manufacturing facility at Chiba,
Japan. The PP plant will have a production capacity of 200,000
metric tons/year. Construction work will commence in August 2021
and operations will start in November 2024. The project forms part
of plans for a scrap-and-build-style restructuring of Prime
Polymer's production system, Mitsui adds. Prime Polymer, meanwhile,
plans to close an existing PP facility to align its capacity to the
current supply/demand balance. Through the restructuring, Prime
Polymer anticipates an approximately 70,000 metric tons/year
reduction in greenhouse gas emissions compared with 2013 figures.
Mitsui Chemicals says that the new PP plant will meet the need for
lightweight and thin automotive materials. "Through its offering of
recycling-conducive materials here, Prime Polymer will help drive
material recycling," it adds. (IHS Markit Chemical Advisory)
Nissan and Mitsubishi's 50/50 joint venture (JV), NMKV Company
Ltd, plans to add production of new electric minivehicle models
(known as Kei cars in Japan) at Mitsubishi's Mizushima plant. An
investment of nearly JPY8 billion (USD73 million) has been set
aside for the plant to add production of the new models. NMKV
president Junichi Endo said, "NMKV is combining the best of Nissan
and Mitsubishi Motors to create appealing vehicles for Japan's
national car, the minivehicle. Going forward, the three companies
will continue to strengthen the source of their strength, Japanese
manufacturing capabilities, and cross-company and cross-functional
collaboration to promote even better vehicle manufacturing through
the teamwork of the alliance." As of May this year, combined sales
of vehicles produced under the JV had reached a cumulative total of
1.52 million units. (IHS Markit AutoIntelligence's Isha
Sharma)
PepsiCo has announced an exclusive beverage partnership with an
Australian fast food chain. FAT (Fresh. Authentic. Tasty.) Brands
is the parent company of nine restaurant concepts. Under the new
agreement, FAT Brands restaurants such as Fatburger, Johnny Rockets
and Elevation Burger will sell up to a dozen popular PepsiCo
beverages, including Pepsi, Diet Pepsi, Mountain Dew, Brisk Iced
Tea, Tropicana Fruit Punch and Dr Pepper. The companies will also
debut new, brand-specific offerings at the restaurant level, as
well as a variety of items from the PepsiCo food and snacks
line-up. Additionally, many franchisees will expand their bottle
and can offerings of soft drinks and Aquafina and leverage
PepsiCo's digital expertise to further build on their takeout and
delivery business, as consumer demand has increased. (IHS Markit
Food and Agricultural Commodities' Neil Murray)
Posted 02 June 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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