Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Major equity indices closed higher across most of the globe
today, with the exception of Japanese markets. US government bonds
closed slightly higher and benchmark European bonds closed mixed.
European iTraxx credit indices were tighter across IG and high
yield, while CDX-NA was close to flat on the day. The US dollar
closed flat, while oil, gold, silver, and copper were all higher.
During the day, markets focused on the official transition of power
to newly elected US President Joe Biden, as he began his first day
in the Oval Office with a flurry of executive orders, many of which
reversed his predecessor's directives.
Americas
US equity markets closed higher; Nasdaq +2.0%, S&P 500
+1.4%, DJIA +0.8%, and Russell 2000 +0.4%.
While hindsight is always 2020 (pun intended), the resilience
of markets last year was remarkable following the significant
disruption in economic activity caused by the COVID-19 pandemic.
Though the global economic outlook remained uncertain at the end of
the year given the resurgence of the virus, the risk-on trade ended
on solid footing as risk appetites were more satiated by the
potential impact of vaccines for a broader economic recovery. In
turn, underperformance of 60-Month Beta extended further into the
final months of 2020 across all our coverage universes. (IHS Markit
Research Signals)
US: Corporate fundamentals such as that gauged by Net Operating
Asset Turnover were favored among large cap investors, while high
risk and short-term price reversal were successful strategies for
small caps
Developed Europe: The Price Momentum Model and related factors
such as Industry-adjusted 12-month Relative Price Strength were
rewarded throughout most of 2020
Developed Pacific: Companies demonstrating high quality and the
highest analyst outlook outperformed for the year, as gauged by
Fixed Assets Turnover Ratio and 3-M Revision in FY2 EPS Forecasts,
respectively
Emerging markets: The Earnings Momentum Model was successful in
distinguishing winners from losers, with a cumulative monthly
return spread of 9.1%
10yr US govt bonds closed -2bps/1.08% yield and 30yr bonds
-1bp/1.83% yield.
CDX-NAIG closed flat/50bps and CDX-NAHY -1bp/297bps.
DXY US dollar index closed flat/90.47.
Gold closed +1.4%/$1,867 per ounce, silver +1.8%/$25.77 per
ounce, and copper +0.3%/$3.64 per ounce.
Crude oil closed +0.6%/$53.31 per barrel.
President Biden on his first day in office took a range of
executive actions, including implementing a national mask mandate
on federal property, revoking a permit for the Keystone XL oil
pipeline and reversing a travel ban from several largely Muslim and
African countries, officials said. (WSJ)
Containment efforts eased in Delaware and Montana this week,
but after rounding the IHS Markit GDP-weighted US weekly
containment index held steady at 51.9. This is materially tighter
than readings from late summer into early fall but still well below
readings from last spring, when containment efforts were first
implemented. Meanwhile, job postings for the week ending 15 January
were 4.4% below the January 2020 level. This was the best reading
in several months, but along with recent readings still indicative
of a soft labor market. (IHS Markit Economists Ben Herzon and Joel
Prakken)
The headline US housing market index fell three points to 83 in
January—still the fourth-highest reading in the index's 35-year
history. A reading above 50 says that more builders view conditions
as good rather than poor. (IHS Markit Economist Patrick Newport)
All three sub-indexes were down. The current sales conditions
index fell two points to 90, the index measuring sales prospects
over the next six months slipped two points to 83, and the traffic
of prospective buyers' index lost five points to 68.
All four regional indexes were down as well. The West fell from
a near-perfect score of 96 to 92, the South lost 5 points to 82,
the Northeast lost 10 points to 68, and the Midwest lost 1 point to
81.
The headline index has shed seven points in two months. The
drop is likely related to lumber prices, which have shot up in the
past two months. The Random Length Lumber Continuous Contract
(ticker symbol: LB00) is currently trading at $700 per thousand
board feet last week, up from about $500 per thousand board feet in
November and $425 per thousand board feet a year ago.
Indeed, the report usually highlights an issue. This month's:
"Builders are grappling with supply-side constraints related to
lumber and other material costs, a lack of affordable lots and
labor shortages that delay delivery times and put upward pressure
on home prices." Tariffs on Canadian softwood lumber were cut from
20% to 10% in December—that will help matters some.
Despite burning numbers, we believe that the recent strength in
the single-family market for new construction is temporary and that
housing starts will start running out of steam in the second
quarter, dipping before stabilizing in about two to three years at
a level set by increases in the number of households.
Ashland says it has agreed to acquire the personal care
business of Schülke & Mayr (Norderstedt, Germany) for €262.5
million ($317.0 million) in an all-cash deal. Schülke & Mayr is
owned by private equity firm EQT (Stockholm, Sweden). The deal will
be financed with available cash and bank financing, and is expected
to be immediately accretive to Ashland's earnings. The acquired
business makes additives for personal care products, with a
particular focus on preservatives. The deal bolsters Ashland's
efforts in its specialty additives business, and "is an excellent
example of the type of bolt-on acquisition opportunities that will
help advance our strategy and support the profitable growth of our
core businesses," says Ashland chairman and CEO Guillermo Novo. The
deal also improves Ashland's environment, social, and governance
(ESG) positioning in the personal and household care markets, the
company says. "This acquisition further aligns our portfolio with
the 'clean beauty' trend in the personal care industry and helps us
solve for a new generation of consumers who are shifting to
products with milder and safer ingredients," Novo says. "Our
combined biotechnology competencies further strengthen our ability
to create new sustainable solutions in broader fields of
application." One analyst estimates that Ashland paid an EBITDA
multiple of about 11.3 times for the business. "We estimate an
additional €83-96 million in sales and €20-23 million in EBITDA
absent any synergies," says Laurence Alexander, an analyst with
Jefferies (New York, New York). The deal boosts personal care to
about 26% of Ashland's 2020 sales, Alexander adds. Ashland is
likely to continue pursuing bolt-on acquisitions, according to
Alexander. "The company has previously indicated that M&A
activity will likely continue in the personal care, life sciences,
and architectural coatings markets," he notes. (IHS Markit Chemical
Advisory)
Paccar and tech start-up Aurora have signed an agreement to
develop, test and commercialize autonomous trucks, according to a
joint statement released on 19 January 2021. Paccar will provide
"autonomous-enabled" vehicles, along with its aftermarket parts
distribution, finance and other transportation solutions. Aurora
will provide autonomous technology, including the hardware,
software and operational services. "Both partners will work closely
together on all aspects of the collaboration, from component
sourcing and vehicle technology to the integration of the Peterbilt
and Kenworth vehicles with the Aurora Driver. The partnership also
includes vehicle validation at the PACCAR Technical Center and
production support in PACCAR factories," the statement says. Paccar
aims to deploy Kenworth T680 and Peterbilt 579 trucks with the
Aurora Driver autonomous technology in the "next several years."
Paccar's tie-up with Aurora comes after Daimler announced a
relationship with Waymo. In December 2020, Aurora also agreed to
acquire Uber's autonomous vehicle (AV) unit, strengthening its AV
development. (IHS Markit AutoIntelligence's Stephanie Brinley)
Rivian has announced that it has closed a USD2.65-billion
investment round. This brings total funding to USD8 billion since
2019, the company noted. According to a company statement, the
financing was led by funds and accounts advised by T. Rowe Price
Associates, with participation from Fidelity Management &
Research Company, Amazon's Climate Pledge Fund, Coatue, and D1
Capital Partners plus other new and existing investors. T. Rowe
Price Associates had led two other financing rounds for Rivian. In
December 2019, it led a USD1.3-billion financing round and in July
2020 a USD2.5-billion financing round. In a statement, Rivian CEO
RJ Scaringe said, "This is a critical year for us as we are
launching the R1T, the R1S and the Amazon commercial delivery
vehicles. The support and confidence of our investors enables us to
remain focused on these launches while simultaneously scaling our
business for our next stage of growth." (IHS Markit
AutoIntelligence's Stephanie Brinley)
There were no interest rate changes by the Bank of Canada, as
expected, and the Bank is continuing its quantitative easing
program of bond purchases of $4 billion per week. (IHS Markit
Economist Arlene Kish)
The January Monetary Policy Report (MPR) baseline forecast
estimates Canada's real GDP declined 5.5% last year, rebounds 4.0%
this year, advances 4.8% next year, and climbs 2.5% in 2023. The
annual 2021 inflation outlook was revised up to 1.6%, followed by
1.7% in 2022. Inflation will average 2.1% in 2023.
Based on historical data revisions, the bank has raised its
estimate for potential output growth average from 1.2% to
1.4%.
There was no change in the Bank's extraordinary forward
guidance. Excess slack in the economy will persist until 2023, when
the Bank is expected to raise interest rates. The next policy
announcement is scheduled on 10 March.
The policy announcement details were as expected. The update on
the Canadian economic and inflation outlooks is aligned with IHS
Markit projections.
The Bank is assuming that after a decent bump in the final
quarter of last year, the elevated pandemic restrictions will
result in a drop in first-quarter real GDP, falling 2.5% quarter on
quarter at annualized rates. The January IHS Markit macroeconomic
forecast calls for a minor uptick in first-quarter growth.
The Bank and IHS Markit assume a moderate economic boost in the
second quarter as restrictions are lifted once again. The Bank
assumes that a lift in foreign demand will support the recovery of
Canadian exports.
The upwardly revised projection for global growth is pegged at
5.6% this year, 4.6% next year, and 3.9% in 2023. The Bank's new
domestic economic forecast is based on positive contributions from
the impact of its earlier-than-anticipated rollout of the vaccine
in addition to Canadian and US government stimulus measures.
Canada's consumer prices increased 0.1% month on month (m/m) on
a seasonally adjusted basis (sa) but declined 0.2% m/m on a
non-seasonally adjusted basis (nsa). (IHS Markit Economist Arlene
Kish)
Annual inflation slowed to 0.7% year on year (y/y).
Two of the three Bank of Canada core consumer price inflation
rates softened, averaging 1.6% y/y.
The year ended on a note of mixed messages as upbeat news with
the initial approval of a vaccine in Canada was offset by the quick
spread of the pandemic resulting in stronger imposed lockdown
measures. Total inflation averaged 0.7% y/y (nsa) and 0.8% y/y (sa)
in 2020, the slowest rates since 2009.
Look for perkier inflation rates this year as the economy comes
out of the lockdown once again and excess capacity is reduced from
stronger demand conditions with the widespread rollout of the
COVID-19 virus vaccination.
Food price inflation was weaker than anticipated at 1.1% y/y,
slowing total inflation. Food price inflation was the weakest in 31
months as there was a big slowdown in food purchased from stores
thanks to the decline in fresh fruit prices. Fewer restaurants were
open for indoor dining, but food prices marginally quickened to
2.3% y/y. Total price inflation was also sharply lower on hefty
discounts on air transportation prices, which were down 14.5%
y/y.
The shelter and health and personal care inflation rates were
trending up through November but reversed course in December.
Prices for recreation, education, and reading bucked the
overall trend as price inflation doubled.
Travel services, specifically tours, advanced markedly, but
because tours were not permitted the increase in the index is
mostly overstated.
Prices for alcoholic beverages and tobacco products and
cannabis products jumped higher compared with a year earlier as
they came off a low base given that prices dropped from the
previous month.
Core inflation measures are weakening but remain within the
Bank of Canada's target range. As such, the Bank will maintain its
accommodative policy measures given that much of the current price
weakness is deemed temporary, like the annual declines in gasoline
prices. Inflation is poised to head higher in 2021.
As per IHS Markit's Commodities at Sea, total coal &
petcoke shipments from WC Canada during 2020 stood at 43.9mt, down
6% y/y. Shipments from Vancouver port (comprising of Neptune and
Westshore terminal) stood at 32mt (down 13% y/y); while Prince
Rupert (comprising of Ridley Terminal) stood at 11.9mt (up 24%
y/y). The decline in shipments from Vancouver port was mainly due
to reduced shipments from Neptune Coal Terminal as the terminal
underwent five months of maintenance from May until September 2020.
During maintenance work at Neptune, Teck Resources diverted coal
tonnage to Ridley and Westshore terminal. In terms of import
countries, during 2020, Canadian coal and petcoke shipments
declined to South Korea (12.4mt, down 4% y/y), Japan (13mt, down
4%), India (3.8mt, down 25%), Taiwan (2mt, down 30%) and the
Netherlands (0.7mt, down 43%). The only exception was shipments to
Mainland China where shipments increased to 6.1mt (up 11% y/y).
Amidst reports of China (Mainland) halting Australian metallurgical
coal imports, there was an expectation of an increase in the
sourcing of Canadian coal from the Chinese steel mills. Teck had
announced late last year it could garner higher prices for its
metallurgical coal sales to China (Mainland) versus other
destinations. Canadian mining major mentioned its additional spot
sales to China achieved an average premium of more than US$35/t
above Australian FOB spot pricing at the time each sale was
concluded. During 4Q20, Teck Resources planned to sell 5.8-6.2mt of
coal, with 20% to China (Mainland). Teck reported sold three
metallurgical cargoes for US$160-165/tonne. In 2021, Teck Resources
plans to sell 7.5mt of coal to China (Mainland) with contracts
priced on a CFR basis. For 2019 metallurgical coal shipments stood
at 25mt and for 2021 anticipated at 21.6-22mt, respectively. (IHS
Markit Maritime and Trades' Pranay Shukla)
The Chilean government has announced the participation of
Chinese electric vehicle (EV) company BYD in efforts to aid the
transition from conventional taxis to electric taxis, reports the
Xinhua news agency. Chilean Minister of Energy and Mining Juan
Carlos Jobet said, "Today, taxi drivers face major hurdles in
accessing electric vehicles, mainly it comes down to the initial
investment, familiarity with the technology and charging."
According to the source, the program will offer subsidies for those
making the transition from conventional to electric taxis, will
sell and install residential electric chargers, and will provide an
annual follow-up of EVs. BYD will offer its e5 sedan as an EV under
the program. The vehicle, which comes with regenerative braking,
has a range of up to 400 kilometers. Chile has been at the
forefront of development of electric mobility and there have been
efforts to stimulate EV demand in the country with the installation
of charging points. Chile also has about 23% of the world's supply
of lithium, which is used in most EV batteries. In December 2018,
the Chilean government set a target for EVs to account for 40% of
private vehicle sales and 100% of government fleet sales in the
country by 2050; to support this, Chile will offer exemption from
taxes and traffic restrictions, as well as subsidies and fast-track
licenses for taxi drivers who switch to more efficient vehicles. In
2019, Chile announced plans to convert its mass transit bus fleet
to EVs by 2050. (IHS Markit AutoIntelligence's Tarun Thakur)
Europe/Middle East/Africa
European equity markets closed higher; Italy +0.9%, Germany
+0.8%, France +0.5%, UK +0.4%, and Spain +0.1%.
10yr European govt bonds closed mixed; Italy +3bps, Spain/UK
+1bp, and France/Germany flat.
iTraxx-Europe closed -2bps/49bps and iTraxx-Xover
-9bps/248bps.
Brent crude closed +0.3%/$56.08 per barrel.
The Office for National Statistics (ONS) reports that the
increase in the United Kingdom's 12-month-rate consumer price index
(CPI) doubled to 0.6% in December 2020. (IHS Markit Economist Raj
Badiani)
During 2020, inflation averaged 0.9%, well below the Bank of
England's target of 2.0%.
The biggest contributor to the higher inflation rate in
December was the increased cost of transport services such as air
fares, with the pace of increase more than doubling to 7.2% year on
year (y/y). The ONS reports that "transport costs, including air,
sea and coach fares, as well as petrol prices, rose as some travel
restrictions eased during parts of the month".
The 12-month rate for prices of food and non-alcoholic
beverages fell to -1.4% in December from -0.6% in November. This
was unexpected given that the strict coronavirus disease 2019
(COVID-19) virus-related restrictions across the UK continued to
boost supermarket food sales. However, the collection of data was
completed by mid-December 2020, which failed to capture the impact
on prices from the reported stock shortages in supermarkets at the
end of the month.
Clothing and footwear prices dropped by 1.8% y/y, a smaller
decline than in November. Nevertheless, they fell in nine months
during 2020, which suggests that high-street retailers resorted to
price discounting to clear stock and improve their financials.
Restaurant and café prices rose for the fourth straight month
in December, by 1.3% y/y. This was unexpected after the value-added
tax (VAT) rate was cut from 20% to 5% in the hospitality,
accommodation, and tourist attraction sectors from mid-July
2020.
The effect of notably lower global crude oil prices, compared
with a year earlier, remains an important narrative. Specifically,
crude oil prices (dated Brent) are likely to fall notably in y/y
terms during the first quarter of 2021, placing further downward
pressure on automotive fuel and energy utility prices. However, oil
prices are expected to post significant y/y gains from the second
quarter of 2021 onwards.
IHS Markit's January update forecasts that inflation is likely
to average 1.4% in 2021 and 1.6% in 2022 after standing at 0.9% in
2020.
An agreement has been reached on funding for a new Jaguar Land
Rover (JLR) global parts distribution hub, reports the Coventry
Telegraph. Intermediate Capital Group is to back a new
3-million-square-foot facility in Mercia Park that is being built
by IM Properties in Leicestershire. A spokesperson for JLR said the
move would enable it to centralize and streamline its UK-based
global spare parts business, adding that it formed part of the
company's long-term strategic global planning. The location will
bring together the operations that currently take place across 10
sites in the UK, including three core locations at Baginton,
Honeybourne, and Desford. These are run by Neovia, Unipart, Ceva
Logistics and Panalpina. As such, this should create efficiencies
and cost savings as well as improvements in its service for
customers overseas. The operations are set to begin moving to this
location in September 2022 and this will be complete in early 2023.
(IHS Markit AutoIntelligence's Ian Fletcher)
The net percentage of European banks reporting a tightening of
credit standards for loans to enterprises rose in the fourth
quarter for the second straight quarter (from +19 to +25). (IHS
Markit Economist Ken Wattret)
The net percentage of banks tightening credit standards reached
the highest level since the first quarter of 2012, although it
remained well below the peaks seen during the global financial
crisis (+68).
The tightening was driven mainly by heightened uncertainty
surrounding the economic recovery and concern over borrowers'
creditworthiness, in the context of renewed COVID-19 virus-related
restrictions.
Credit standards for loans to households tightened in the
fourth quarter, both for house purchases and consumer credit,
although to a lesser extent than for loans to enterprises (net
percentages of +7 and +3, respectively) and at a slower pace than
earlier in 2020.
The deteriorating economic outlook, increased credit risk of
borrowers, and lower risk tolerance were all cited as contributing
to the tightening of credit standards for loans to households.
Loan demand from enterprises continued to weaken in the fourth
quarter, with the net percentage (-12) at its lowest since the
fourth quarter of 2013. However, this followed a record-high net
percentage in the second quarter of 2020 (+62) as emergency
liquidity needs rocketed during the first wave of COVID-19
virus-related lockdowns as economic activity collapsed.
Inventory and working capital needs continued to contribute to
increased loan demand from enterprises in the fourth quarter,
although at a lesser rate than in the first half of 2020, likely
reflecting precautionary liquidity buffers built up in prior
quarters. Demand for loans for fixed investment weakened for the
fourth straight quarter.
Demand for housing loans continued to increase in the fourth
quarter (+16), reflecting a catch-up after the collapse earlier in
2020 during the initial phase of lockdowns. In contrast, demand for
consumer credit and other lending declined (-9), with low consumer
confidence a contributory factor.
At a national level, credit standards on loans to enterprises
tightened in Germany (+6), France (+41), and Spain (+20) in the
fourth quarter, but were unchanged in Italy. Heightened perception
of risk was the main factor driving the tightening, particularly in
France, possibly reflecting concerns about the relatively high
indebtedness of French businesses. Demand for loans from
enterprises was also relatively weak in France (-47).
For loans to households for house purchases, credit conditions
also tightened markedly in France (+24) but were unchanged in the
other three largest member states.
Looking ahead to the first quarter of 2021, the BLS data are
expected to continue in the same vein. Banks expect credit
standards to continue to tighten for loans to enterprises, although
at a lesser rate than in the fourth quarter of 2020 (+20). Tighter
credit standards are also expected for loans to households for
housing loans and consumer credit, although at a lesser rate than
for enterprises (+13 and +5, respectively).
Banks expect net demand to increase somewhat in the first
quarter of 2021 for loans to enterprises (+5) and for consumer
credit (+4), while net demand for housing loans is expected to
decline (-3).
The biggest headline emanating from the EU in 2020 was about
the quantitative reduction targets for chemical pesticides with the
Farm to Fork strategy. The stage for that had already been set at
the close of 2019, when a new European Commission began operating.
(IHS Markit Crop Science's Sanjiv Rana)
After some delays, the Commission revealed its strategy in May,
setting a target to reduce the "overall use and risk" of chemical
pesticides by 50% and the use of more hazardous pesticides by the
same amount by 2030. In order to achieve this, it promised to
"reinforce" the environmental risk assessment of pesticides,
facilitate biopesticide approvals, and take action to reduce the
length of the approval process by EU member states.
Facing criticism from the industry as well as EU Agriculture
Ministers about issuing targets without first doing an impact
assessment, the Commission subsequently admitted that the reduction
targets were only "aspirational". EU Commissioner for Health and
Food Safety Stella Kyriakides said that the quantitative targets in
the strategy were "aspirational targets, based on ambitious but
realistic pathways". Any proposals to make these targets legally
binding will be accompanied by impact assessments, she added.
EU Agriculture Ministers cautioned that the targets must
recognize the different "starting points" and progress made by
individual member states on national pesticide reduction programs.
The Commission must produce "clear, comprehensive, transparent,
science-based and performance-orientated" guidance and
recommendations for member states, the Ministers stressed.
Meanwhile, the European Crop Protection Association (ECPA)
revealed plans to invest over €14 billion ($17.1 billion at the
current rate) in new technologies and more sustainable products by
2030. Of this sum, it intends to infuse €10 billion ($12.2 billion)
into precision technologies and the remaining €4 billion ($4.9
billion) on innovations in biopesticides.
Rolls-Royce is said to be working on a battery electric vehicle
(BEV) product that could be a standalone model in its own right,
reports Autocar. The enthusiast publication has said that it has
learnt of a Phantom BEV prototype at a research and development
(R&D) facility in Munich (Germany), but understands the company
favors an entirely new car as a BEV, rather than basing it on an
existing model. BMW Group is also said to have filed a trademark
for the name 'Silent Shadow' that could be used on such a vehicle.
The magazine suggests that it will use powertrain technology used
in the new BMW iX crossover, while development of the vehicle has
been twinned with that of the BMW i7, a luxury sedan that is set to
rival the forthcoming Mercedes EQS. However, it is also expected to
use Rolls-Royce's new aluminum space frame architecture rather than
a BMW-derived platform. The brand also claim to have developed a
powertrain in both rear- and four-wheel drive layouts with a
battery which could exceed 500km. Autocar reports that plans are
also being firmed up for a BEV variant of the Cullinan, with a
twin-motor system offering four-wheel drive, also derived from the
BMW iX. Rolls-Royce dabbled with the concept of a BEV over a decade
ago when it showed the Phantom-based 102EX concept. Although the
vehicle was said to offer many of the desirable traits that a
customer of the brand could want, such as the instantaneous torque
and silent running, the technology was very much in its infancy and
one of the most notable issues was the short range - said to be
around 125 miles. EV developments in the intervening years seem to
be leading the company to reconsider the possibility, especially as
the brand's CEO Torsten Müller-Ötvös has indicated that the company
will forego plug-in hybrid electric vehicles (PHEVs) as an interim
step. If true, Rolls-Royce would be following in the footsteps of
the announcement made by its former sibling and now rival Bentley,
which intends to launch its first BEV in 2025 and become solely a
BEV brand in 2030. (IHS Markit AutoIntelligence's Ian
Fletcher)
BASF expects to post "better-than-expected" operating profit of
€1.11 billion ($1.35 billion) for the fourth quarter of 2020, up
32% year on year (YOY) and well above analysts' consensus estimate,
driven by strong performances in the company's materials,
chemicals, and industrial solutions businesses. (IHS Markit
Chemical Advisory)
Sales are also expected to beat consensus estimates, rising
more than €1.30 billion YOY, or 8%, to €15.90 billion for the
fourth quarter, BASF says in preliminary figures released today.
This was driven mainly by higher volumes and prices, with negative
currency effects having an offsetting impact, it says. EBIT
including special items are expected to be €932 million, compared
with €579 million a year earlier and also above consensus
estimates, as compiled by Vara Research on behalf of BASF.
The operating business "performed better than expected in the
fourth quarter," with the €1.11-billion EBIT excluding special
items beating consensus by 32% and also up sequentially, €532
million ahead of the third-quarter figure of €581 million, BASF
says.
The materials, chemicals, and industrial solutions segments
"considerably exceeded average analyst estimates for EBIT before
special items," it says. EBIT before special items fell slightly
short of consensus in the surface technologies and nutrition and
care segments, and was "considerably below" consensus for the
agricultural solutions segment, due mainly to negative currency
effects, it adds.
For full-year 2020, BASF expects to post EBIT before special
items of €3.56 billion, down 23% from €4.64 billion in 2019 but 8%
above consensus and 14% more than BASF's own previous guidance of
€3.0-3.3 billion. The decrease is due primarily to "considerably
lower earnings" contributions from the chemicals, surface
technologies, materials, and agricultural solutions segments, it
says.
The nutrition and care segment recorded slightly lower
full-year EBIT before special items and the industrial solutions
segment was level with the prior year, it notes.
Full-year sales are expected to be €59.15 billion, almost flat
with the 2019 figure of €59.32 billion, beating consensus by 2% and
also 3% higher than BASF's most recent guidance issued in October
of €57-58 billion.
Prime Minister Giuseppe Conte's ruling coalition won a
confidence vote in the Senate (upper legislative chamber) yesterday
(19 January), although with 156 votes in favor, 140 against, and 16
abstentions, it fell short of an absolute majority of 161 senators.
The vote was triggered by the defection of Matteo Renzi and his
Italia Viva party from the ruling coalition on 13 January over
disagreements on spending priorities and whether to utilize all
available EU funding capacity, including resources potentially
available from the European Stability Mechanism (ESM), which the
Five Star Movement (Movimento Cinque Stelle: M5S) vehemently
opposes (see Italy: 12 January 2021: Italia Viva threatens to leave
Italy's ruling coalition over spending priorities disagreement, but
snap elections remain unlikely). On Monday (18 January), the Conte
administration comfortably won a parallel vote in the Chamber of
Deputies (lower house), securing 321 votes in favor to 259 against.
The loss of its absolute majority in the Senate after Italia Viva's
defection means that Conte's coalition government is now in a
significantly weaker position to pass legislation. Any major
measures, including annual budgets, require an absolute majority in
the upper house. This position risks impeding the effective
disbursement of funds and the implementation of projects worth up
to EUR209 billion (USD253 billion), Italy's share of the EU
Recovery Fund. (IHS Markit Country Risk's Dijedon Imeri)
Stellantis, the company born of a merger between Groupe PSA and
Fiat Chrysler Automobile (FCA), held its first press conference on
19 January 2021, with CEO Carlos Tavares outlining expectations
that the company's newfound scale will provide a "shield" against
job losses and plant closures. The company's new scale, Tavares
says, will enable far more efficiencies in purchasing and research
and development. Those benefits, Tavares expects, will mean the
company can deliver a stronger mix of vehicles at the appropriate
price points for all of its brands. Tavares focused the
conversation on the benefits that being a larger company can bring
to improved profitability. Tavares noted that if the financial
results of FCA and PSA from 2019 were aggregated, the results would
have included adjusted operating profit of EUR12 billion and
adjusted operating profit margin of 7%, with automotive operational
free cash flow of more than EUR5 billion. Tavares also highlighted
the complementary global operations of the two, although he
acknowledged that neither of the companies had achieved success in
China so far, and this is an area to be addressed and improved. Now
that Stellantis has been formed, the company has to begin the work
of integrating and making the best use of its new scale. Stellantis
will report its full-year 2020 financials on 3 March 2021,
combining FCA and PSA performance during one of the most disruptive
years the auto industry has ever seen. Next steps include
developing the strategies that will take Stellantis and its brands
to profitability and sales targets; with the mix of former FCA and
PSA employees and brand dedication existent in the company, this
may be less of a challenge than it might appear. For the full
fruition of the merger to appear will still take five to ten years,
and as Tavares noted, external forces could alter plans yet again.
(IHS Markit AutoIntelligence's Stephanie Brinley and Ian
Fletcher)
Israeli company Storedot has announced that it has developed a
new battery technology for automotive use that can be charged in
just five minutes, therefore removing one of the key consumer
objections to the mass take-up of battery electric vehicles (BEVs),
according to a Reuters report. The technology is still in its
prototype stage and Storedot is looking for a partner to bring it
to production, which is likely to take some years, but it is still
an important development in the automotive industry's shift to
electrification. Storedot is currently seen as one of the most
exciting companies working in the automotive battery space with
companies such as BP and automotive battery manufacturer Samsung
among its backers. It has already demonstrated its ultra-fast
charging battery technology on small scale applications such as
scooters and drones, and it has now tested the technology
successfully in an automotive battery application. The key to the
new battery technology is that it replaces the graphite that is
used in the existing lithum-ion battery chemistry's anode with a
new material, which is referred to as metalloid nanoparticles. The
battery technology concept will have to go through a rigorous
program of proving and testing before it can be considered for
commercial use, as well as ensuring it can be efficiently and
cost-effectively produced. But there is little doubt that the
claims for the new battery are very impressive, and could be a
major component to increasing the take-up of BEVs if successfully
commercialized. However, rapid charging automotive application
batteries are likely to divert attention to arguably the last major
objection to mass BEV adoption, namely the quality of the public
charging infrastructure. The kind of fast chargers that would allow
Storedot's prototype battery to be fully charge in five minutes are
still relatively scarce. The best current commercially available
fast charging standard is the 350w/h fast charger developed by
Porsche for the Taycan, which can offer 80% of a full charge in 22
minutes. Most EVs cannot charge this fast, and these kind of fast
chargers are still incredibly rare and are being rolled out I small
numbers due to the limited number of vehicles that can use them.
Storedot is targeting being able to offer 100 miles of charge in
five minutes using the current level of charging infrastructure. It
will have to adapt the battery - if it is commercialized - to offer
a faster charging solution no matter what sort of charger it is
plugged into, for the technology step change to really make a
difference. (IHS Markit AutoIntelligence's Tim Urquhart)
Uganda's current-account deficit widened during the third
quarter of 2020 owing to higher government and project imports,
despite a moderate uptick in export growth. (IHS Markit Economist
Alisa Strobel)
The country's goods and services imports reached USD2.667.66
million during the third quarter of 2020, up by 41% compared with
the previous quarter and by 7% from the first quarter of the year.
The biggest driver of this growth in the goods segment was
non-oil-related imports. Both government and project imports
accelerated by 54% compared with the previous quarter and by 13%
compared with the first quarter of 2020. In contrast,
private-sector import demand fell by 7% during the third quarter of
2020 compared with the first quarter.
Total export growth during the third quarter of 2020 was lower
compared with the first quarter, with goods exports reaching
USD588.24 million in the third quarter, down by USD192.20 million
compared with the first quarter of 2020. In contrast, tea, flowers,
and cement exports showed the biggest improvement from the first
quarter of 2020, while coffee exports reached USD140.78 million,
similar to the level seen at the start of the year, the highest
since the first quarter of 2017.
Services-export growth experienced a steep decline in the third
quarter of 2020 compared with the first quarter, despite a moderate
recovery compared with the previous quarter. This is mainly owing
to a steep decline in the tourism segment, with an output fall of
82% during the third quarter of last year compared with the first
quarter.
It comes as no surprise that private-sector import demand
remained downbeat during the second and third quarters of 2020.
While we expect a gradual improvement in private-sector demand as
business expectations suggest a pick-up in business activity in
2021, growth in Ugandan private-sector credit is expected to remain
depressed at the start of the year. This is expected to weigh down
on domestic demand. Subdued credit growth in Uganda's private
sector can likely be aggravated by business closures related to a
return of a lockdown to prevent the spread of the COVID-19
virus.
Although economic growth is expected to rebound in the short
term, we do see increased risks related to externalities for the
Ugandan economy. Lower-than-expected global economic growth could
have a negative impact on the country's trade balance. Therefore,
this is seen as a significant downside risk. Delays in public
investment and weather-related shocks are considered to be
additional problems.
Asia-Pacific
Most APAC equity markets closed higher except for Japan -0.4%;
Hong Kong +1.1%, India +0.8%, South Korea +0.7%, Mainland China
+0.5%, and Australia +0.4%.
The Chinese Ministry of Commerce (MoC) on 9 January issued the
"Rules on Countering Unjustified Extraterritorial Application of
Foreign Legislation and Other Measures" (the "Rules"). (IHS Markit
Country Risk's David Li)
The Rules are modelled on the European Union's Blocking Statute
and are designed to counteract secondary sanctions, or "unjustified
foreign legislation and measures in third countries", almost
certainly referring to recent US actions. Under the Rules, Chinese
persons and entities will have a legal obligation to report
"unjustified measures" and to comply with "prohibition orders"
issued by the MoC. Chinese entities also should not accept,
execute, or observe "unjustified measures" and can pursue legal
action against entities that comply with sanctions, in addition to
applying for government compensation for non-compliance with
foreign rules.
The Rules have been fast-tracked to circumvent the standard
legislative process, indicating political will in the central
government to swiftly implement the measures as the new US
administration takes office. The prompt passage of the Rules is
likely intended to deter possible efforts by the incoming US
administration of Joe Biden to rally US allies to further
strengthen sanctions against Chinese entities.
Unlike the EU's Blocking Statue - which explicitly states the
countries and actions that are involved - the Rules potentially
relate to any "unjustified measures" applied against a Chinese
person or entity, providing the State Council with flexibility in
issuing prohibition orders.
The Rules will increase compliance difficulties for companies
operating across competing sanction regimes, particularly in
defence-related, financial, energy, and technology sectors.
Further, the "Equal treatment" principles set out in China's
2019 foreign investment law strongly suggest that foreign-invested
enterprises in China will be equally bound by the rules, and may be
held directly responsible for practices of their parent companies
or other subsidiaries abroad - and are therefore prone to punitive
action.
If the Biden administration seeks to expand the scope of US
sanctions against China, then more industries will fall under the
jurisdiction of the Rules. For example, the Clean Network
Initiative seeks to remove a wide range of Chinese suppliers
worldwide and establish stronger US export controls banning third
countries from selling goods incorporating US technology to China,
further increasing the potential range of industries and
jurisdictions that could be affected by the Rules.
Signs of weakening economic recovery in China, such as growing
unemployment, corporate and state-owned enterprises engaging in
bond defaults or bankruptcies, or continued low productivity -
particularly in state-owned companies - would increase the
importance of maintaining a positive operating environment for
foreign businesses.
Ratification of the EU-China comprehensive investment
agreement, or acceleration in negotiations of multilateral trade or
investment agreements, would increase the difficulty of the US
forming a broad alliance among Western countries against Chinese
companies, and would reduce the need for China to adopt retaliatory
measures.
China imposed sanctions on former Secretary of State Michael
Pompeo and other Trump administration officials just as Joe Biden
was being inaugurated as president, hitting back at the outgoing
team while leaving open the possibility of warmer ties with their
successors. Also on the list of 28 people being sanctioned were
former President Donald Trump's National Security Adviser Robert
O'Brien and his deputy Matt Pottinger, trade adviser Peter Navarro,
and U.S. Ambassador to the United Nations Kelly Craft, according to
a statement issued Wednesday by China's Foreign Ministry as the
inauguration for Biden was taking place. They and their families
will be banned from entering China, Hong Kong or Macau, or doing
business with China. The officials listed were instrumental in
shaping the Trump administration's more confrontational stance
toward China, which included a raft of sanctions and a declaration,
on its final day, that the government had committed genocide in its
Xinjiang region. (Bloomberg)
China's peanut futures is set to start trading on 1 February
2021 at Zhengshangsuo (ZCE), a commodity exchange at Zhengzhou city
of Henan province. The purpose of the peanut futures market is to
standardize the industry in terms of quotation and specifications,
according to a source at ZCE. The current structure of the spot
market is highly fragmented, in which the cultivation is done
mainly by small-scale farmers while sales are managed by brokers
and traders. China's spot quotations are disorganized with all
sorts of varieties and grades by different producing regions quoted
and this can be confusing. In the absence of authoritative and
standardized practices, farmers and processors tend to receive
inaccurate price predictions. The listing of peanut futures is
conducive to providing forward price guidance and risk management
tools for all the stakeholders in the supply chain. (IHS Markit
Food and Agricultural Commodities' Hope Lee)
China's Zhejiang Geely Holding Group (Geely) has signed an
agreement with Tencent to develop smart car technologies. Areas of
strategic co-operation between the two companies include developing
smart car cockpits and exploring testing of autonomous vehicles
(AVs). An Conghui, president of Geely, said, "With a cooperative
relationship spanning three years, Geely and Tencent is now
deepening their partnership and working to digitalize the entire
automotive value chain. At the same time, we hope to fulfil our
responsibility to society by jointly promoting sustainable low
carbon development throughout the automotive industry." Geely and
Tencent have been partners since 2018. The deal with Tencent is the
third recent partnership by Geely with companies involved in the
tech sector. Earlier this month, Geely partnered with Baidu aimed
at manufacturing electric vehicles. In the same month, Geely inked
a deal with Apple maker Foxconn to provide contract manufacturing
for automakers. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Velodyne Lidar has partnered with Trunk.Tech to develop
autonomous trucks for the logistics market in China. Trunk.Tech has
deployed Velodyne's LiDAR solutions, including Ultra Puck, Puck and
Velarray H800 sensors, to strengthen object awareness and detection
capabilities for its trucks. Anand Gopalan, chief executive officer
of Velodyne Lidar, said, "Trunk.Tech is leading the industry in
demonstrating how autonomous vehicle technology, powered by lidar,
is bringing major efficiency and safety advances to trucking. We
look forward to working closely with Trunk.Tech on creating
next-generation autonomous driving solutions that dramatically
improve how goods and materials move in logistics networks."
Autonomous trucks are gaining a great deal of traction in the
logistics industry because of a growing shortage of drivers, and
the technology's improved efficiency. These trucks enable
autonomous loading and unloading of containers in yards, thereby
improving efficiency. Last year, Shaanxi Heavy Duty Automobile has
partnered with Innoviz Technologies to deploy 600 autonomous trucks
at one of the biggest ports in China. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Aeva has collaborated with Japanese supplier Denso to develop
next-generation sensing and perception systems, reports Reuters.
Aeva provides a unique LiDAR solution by employing frequency
modulated continuous wave (FMCW) technology that can measure
distance as well as instant velocity without losing range. The
companies plan to advance FMCW LiDAR, bring it to the mass market,
and create a society free from traffic accidents. Aeva chief
executive Soroush Salehian said, "Achieving high performance is
table stakes" for LiDAR sensors, adding, "Achieving high
performance at an affordable cost is the holy grail." Aeva, founded
by two former Apple Inc. engineers, is in the process of going
public through a reverse merger with special-purpose acquisition
company (SPAC) InterPrivate Acquisition Corporation (see United
States: 3 November 2020: LiDAR startup Aeva to go public through
merger). The company says that its newest LiDAR product, called the
Aeries, which has a 120-degree field of view, will cost less than
USD500 when manufactured in high volumes. Aeva has signed a
sensor-system deal with Audi subsidiary Autonomous Intelligent
Driving (AID) and ZF Friedrichshafen. Denso is focusing on
developing technologies that enhance road safety and eliminate
traffic accidents. Last year, it established an innovation
laboratory in Pittsburgh (United States), which will focus on
research and development of autonomous vehicles. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Honda has collaborated with General Motors (GM) and Cruise to
launch autonomous mobility service business in Japan. Honda will
start conducting trials in Japan using Cruise's test vehicle this
year. In future, Honda plans to launch mobility service business
using the Cruise Origin, an autonomous vehicle (AV) being developed
by these three companies, with focus on offering new transportation
solutions. Takahiro Hachigo, president and representative director
at Honda said, "This collaboration with Cruise will enable the
creation of new value for mobility and people's daily lives, which
we strive for under Honda's 2030 Vision of serving people worldwide
with the joy of expanding their life's potential. Through active
collaboration with partners who share the same interests and
aspirations, Honda will continue to accelerate the realization of
our autonomous vehicle MaaS business in Japan". Honda's newly
established company, Honda Mobility Solutions, will be the operator
of such business in Japan. In 2018, Honda invested USD750 million
in an immediate equity stake in Cruise as well as commitment for
USD2.0 billion over 12 years to develop AVs and technology with GM.
Microsoft has joined GM, Honda, and institutional investors in a
combined new equity investment of more than USD2 billion in Cruise.
Cruise will use Microsoft's cloud computing platform, Azure, for
its AVs. Last year, Cruise received the necessary authorization
from the state of California to operate without a safety driver in
its AVs, specifically in San Francisco. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
DSME, together with Korea Electric Power Technology (KEPCO),
advanced into the offshore wind substation market. DSME recently
signed a memorandum of understanding (MOU) with Korea Electric
Power Technology to jointly develop floating offshore wind
substations that can be installed either on land or deep seas. DSME
will lead the research with its expertise in the design and
construction of offshore facility while KEPCO will provide its
expertise in design and construction of electric facility. (IHS
Markit Upstream Costs and Technology's Jessica Goh)
Indian electric vehicle (EV) startup Earth Energy EV plans to
launch a new electric mini-truck in the country this year, reports
the Hindu Business Line. The model will be built on a Skateboard
platform that can be adapted to multiple body types. The company
aims for a localization rate of nearly 96% for its upcoming
products in the B2B and B2C segments. The company's other plans
include local production of EV batteries to lower the prices of its
models. "We have diligently invested three-and-a-half years to
perfect the vehicles and underlying technologies to make reliable
and affordable EVs. We are witnessing a huge demand for EV adoption
in the Indian market. Our indigenized vehicles are made ground up
to put a dent in the stereotypical electric mobility landscape in
India," said Rushi Shenghani, CEO and founder of Earth Energy. The
report adds that the company is in the advanced stages of setting
up a greenfield manufacturing facility in Maharashtra state with an
annual capacity of 65,000 units. Earth Energy EV, incorporated in
2017, is owned by Grushie Energy Private Limited. The company is
headquartered in Mumbai and also has a research and development
(R&D) and manufacturing facility on the outskirts of the city.
(IHS Markit AutoIntelligence's Isha Sharma)
Posted 20 January 2021 by Chris Fenske, Head of Fixed Income Research, Americas
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
