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All major US and European equity indices closed higher, while
all major APAC markets were lower. US government bonds closed lower
and benchmark European bonds closed mixed. European iTraxx was
close to flat on the day, while CDX-NA closed tighter. The US
dollar, natural gas, oil, copper, and gold closed higher, while
silver was 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
All major US equity indices closed higher; Russell 2000 +3.0%,
DJIA +1.6%, Nasdaq +1.6%, and S&P 500 +1.5%.
10yr US govt bonds closed +3bps/1.22% yield and 30yr bonds
+5bps/1.88% yield, and yields reached as low as 1.13% and 1.78%
near the NY open, respectively.
CDX-NAIG closed -1bp/51bps and CDX-NAHY -6bps/292bps.
DXY US dollar index closed +0.1%/92.97.
Gold closed +0.1%/$1,811 per troy oz, silver -0.6%/$25.00 per
troy oz, and copper +1.5%/$4.26 per pound.
Crude oil closed +1.3%/$67.20 per barrel and natural gas closed
+2.6%/$3.88 per mmbtu.
US single-family permits, a key number in the report, dropped
6.3% (plus or minus 1.4%; statistically significant) to a 1.063
million rate in June. This category fell for the third straight
month; it is down 16% from its January peak, but still about 5%
above its February 2020 pre-pandemic reading. (IHS Markit Economist
Patrick
Newport)
Multifamily permits fell 2.6% to a still-impressive 535,000
annual rate. This category recorded its highest first-half total
since 1986.
Housing starts and permits declined in the second quarter; both
were down in all four regions.
Housing starts jumped 6.3% (plus or minus 11.5%, not
statistically significant) in June to a 1.643 million annual rate
in June; single-family starts rose 6.3% (plus or minus 11.7%, not
statistically significant) to a 1.160 million rate; multifamily
starts climbed 6.2% to a solid 483,000 rate.
The pace of new single-family construction is still strong, but
slowing. Builders are facing two major headwinds: higher material
costs and material shortages.
The good news is that the shortages and high material prices
are temporary and some material prices, such as lumber prices, are
falling back to earth.
The bad news is many material costs have not come down and
strong demand will likely raise labor costs.
EPA has been hit with a lawsuit contesting its registration of
trifludimoxazin, a BASF herbicide recently approved for use on
corn, soybeans and other crops. The Center for Food Safety and the
Center for Biological Diversity filed the petition for review on
July 19 in the US Court of Appeals for the Ninth Circuit, alleging
the agency violated federal pesticide law and the Endangered
Species Act (ESA). EPA approved the BASF product in May after a
review jointly conducted with Canada's Pest Management Regulatory
Agency, finding "no dietary, aggregate, or occupational risk
concerns for potential human health exposure" from use of the
herbicide. Trifludimoxazin is also not likely to result in "risks
of concern" to non-target animals, EPA said, concluding that any
concern to aquatic species is address by mitigation measures. In
its May 12 decision, EPA said it had determined that the herbicide
"will benefit the agriculture industry, as an additional tool to
combat pest management issues, thereby helping the growers
throughout the nation to increase production and prevent
significant financial loss." The agency specifically touted
trifludimoxazin as a new tool for weed control of waterhemp and
palmer amaranth in field crops - notably corn and soybean - where
herbicide resistance is a problem. (IHS Markit Food and
Agricultural Policy's JR Pegg)
While Brazil has always been a sizeable food animal market, it
has been dogged by issues regarding its scale and infrastructure.
At the recent Animal AgTech South America Summit, local experts
discussed how innovation has helped Brazil evolve into a bankable
and modern livestock sector. (IHS Markit Animal Health's Joseph
Harvey)
According to Delair Angelo Bolis of MSD Animal Health, it takes
only 30 minutes for Brazil to produce enough animal protein to feed
a city of 100,000 habitants for one year - a clear illustration of
the magnitude of the country's capacity.
The nation's meat and dairy production sector has witnessed
rapid growth in recent years, with obstacles such as African swine
fever and COVID-19 providing opportunities to boost exports
overseas. This acceleration of the livestock industry has been
enabled by the adoption of innovation in the form of digital
technologies, on-farm automation and vaccines.
Yet issues remain in Brazil, where connectivity and
infrastructure still pose barriers to the uptake of on-farm
innovation. These deficiencies have created a market that still has
to take on more new technologies. Many of the tools being created
for the country will come from domestic players that have an
understanding of the market's needs and idiosyncrasies.
Europe/Middle East/Africa
All major European equity indices markets closed higher; France
+0.8%, Spain +0.7%, Italy +0.6%, Germany +0.6%, and UK +0.5%.
10yr European govt bonds closed mixed; Germany/France/Italy
-2bps and Spain/UK flat.
iTraxx-Europe closed flat/49bps and iTraxx-Xover
-1bp/246bps.
Brent crude closed +1.1%/$69.35 per barrel.
In the Eurozone, export recovery is moderating and construction
sector rebound stabilizing. However the negative impact from
supply-chain disruptions on industrial output, and through it on
exports as well as construction activity, is becoming clearer. (IHS
Markit Economist Venla
Sipilä)
Similarly to the latest industrial output results, May's trade
and construction sector data in the eurozone show some
deterioration in performance.
While industrial production is mostly suppressed by supply
constraints, interpretation of trade developments and construction
sector activity - alongside output - continues to be obscured by
base effects from the high point in the COVID-19 pandemic during
comparison months last year.
Following a surge of over 46% year on year (y/y) in April,
exports from the eurozone in May increased at a decelerated annual
pace of 32.2% y/y, even as the base effect turned more favorable.
With import growth moderating, even if remaining substantial
following the April charge, the trade surplus in May managed to
increase by 2.0% y/y.
However, month-on-month (m/m) comparison reveals deterioration
in export performance, with May showing exports contracting by 1.5%
m/m in value terms. Apart from January 2021, this marks the first
decrease in extra-eurozone exports since April 2020, given that
April 2021 results have been revised to show marginal growth of
0.1% m/m after they initially signaled contraction of 2.3%
m/m.
The deceleration of import growth to under 1% m/m in May was
not enough to prevent the trade surplus from shrinking by over 30%
m/m. With revisions resulting in an April surplus of EUR13.4
billion, the May surplus of EUR9.4 billion (USD11.1 billion) marks
the lowest extra-eurozone surplus for the monetary bloc since May
2020.
In May, exports remained 2.0% below their pre-pandemic level in
February 2020, while imports have now climbed 6.7% above their
monthly value just before the COVID-19 pandemic. Consequently, the
May trade surplus makes just 44% of the average in January-February
2020.
Eurozone construction output in May returned to modest m/m
growth, expanding by 0.9% m/m following a contraction of 0.5% m/m
in April (revised up from a fall of 2.2% m/m). This increase
remains below the March gain of 4.0% m/m.
On a more positive note, May output volume in the construction
sector now exceeds the pre-pandemic level of February 2020 by 0.5%.
Moreover, the positive trend in construction sector sentiment
signaled by the European Commission's confidence index since
September 2020 continued in July, with the confidence indicator
edging further up on the positive part of the scale.
The herbicide, propoxycarbazone, is to be removed on August 8th
from the EU list of active ingredients that are considered
candidates for substitution with safer alternatives. The ai was
added to the list in 2015 but a reassessment completed in 2017 did
not confirm certain hazardous properties. This outcome meant that
EU member states no longer had to check if safer alternatives were
available before approving propoxycarbazone-based products. The
Commission subsequently proposed to remove the ai from the
candidate list "to avoid confusion" and the action was cleared by
EU member states in June. (IHS Markit Crop Science's Jackie
Bird)
German firm BioNTech has announced plans to acquire
individualized solid tumor neoantigen T-cell receptor (TCR)
cellular therapy research and manufacturing assets from US firm
Gilead Sciences' Kite division. This includes a US manufacturing
facility based in Gaithersburg, MD, which could provide scale-up
capacity to support US clinical trials of innovative TCR-based
cellular therapy products for cancer, and complementing BioNTech's
existing cellular therapy manufacturing plant in Idar-Oberstein,
Germany. All Kite employees at the Gaithersburg site will be
offered a transfer to BioNTech prior to closure of the deal, and
BioNTech also plans to hire additional staff and invest further in
this facility. Kite will receive an upfront payment from BioNTech
for purchase of the TCR discovery platform and Gaithersburg
facility, but further financial terms of the deal were not
disclosed in the company statement. Closure of the transaction is
expected by the end of this month. Following this divestment, Kite
is planning to refocus on rapid progression of its current chimeric
antigen receptor T-cell (CAR-T) therapeutic pipeline, and will
still retain its CAR-T manufacturing facility in Frederick, MD.
BioNTech has CAR-T therapeutic candidates of its own, including the
CAR-T cell amplifying mRNA vaccine CARVac, and other candidate
cellular therapies, such as the NEOSTIM platform; this pipeline
will be expanded significantly with addition of the new
individualized neoantigen TCR program from Kite. (IHS Markit Life
Sciences's Janet Beal)
Botswana's annual inflation rate maintained its upward
trajectory, increasing to an over nine-year high of 8.2% year on
year (y/y) in June from 6.2% y/y in May, thus remaining above the
upper bound of the Bank of Botswana's medium-term objective range
of 3-6% it breached in April for the first time since June 2013.
(IHS Markit Economist Archbold
Macheka)
The jump in the June inflation reading was driven largely by
higher prices of Transport which rose 17.4% y/y from 8.9% y/y in
the previous month. This was attributed to increases in the
subcategories of Purchase of Vehicles (19.4% y/y), Operation of
Personal Transport (18.7% y/y) and Transport Services (12.0% y/y),
largely reflecting the impact of adverse base effects.
Additional upward pressure came from prices of Housing and
Utilities, which accelerated by 8.6% y/y from 6.6% y/y in May,
largely reflecting the rise in Rent Paid by Tenants of 6.6% y/y.
Food and non-alcoholic beverages inflation ticked up marginally to
6.8% y/y from 6.7% y/y in May, as prices of Bread and Cereals
firmed by 9.3% y/y.
Miscellaneous Goods and Services, which include personal care
and insurance costs grew 6.0% y/y, the same growth rate recorded in
May. On the other hand, inflation slowed for Clothing and Footwear
(down from 3.9% y/y to 3.8% y/y) and Alcohol and Tobacco (down from
13.0% y/y to 9.3% y/y). On a monthly basis, consumer prices rose
0.6% compared to 0.5% in May.
Social unrest broke out in South Africa during the week
beginning 11 July, resulting in mass looting of retail and
warehouse stock, destruction of infrastructure and other assets
(particularly heavy vehicles hauling cargo), and blocking of major
logistics routes in the country. A state of emergency has been
avoided following the deployment of 25,000 South African National
Defence Force (SANDF) soldiers to assist the police in ending the
violence. (IHS Markit Economist Thea
Fourie)
The social unrest has been localized to KwaZulu-Natal (KZN)
province and parts of Gauteng province, primarily in the
Johannesburg area. One of the busiest import and export ports in
South Africa and the southern African region, namely Durban, lies
within the eThekwini Metropolitan Municipality (MM), also situated
in KZN.
KZN also houses two special economic zones (SEZs), comprising
the Dube Trade Port and the Richards Bay Industrial Development
Zone respectively, being strategically located within the area of
the Durban and Richards Bay ports. The Richards Bay Coal Terminal,
one of the world's largest coal export terminals, is located at
Richards Bay port. Both ports witnessed disruption to business
operations due to security and logistics concerns during the week
beginning 11 July. The Toyota vehicle assembly plant at Prospecton,
whose output is primarily for the export market, is also located
close to the Durban area.
KZN accounts for 16% of South Africa's overall real GDP, while
the eThekwini MM accounts for 60% of the province's real GDP and
53% of the province's employment. The province's community
services, financial, manufacturing, and transport industries
account for roughly 69% of KZN's total real GDP and 72% of
eThekwini's total real GDP.
Retail trade, the sector expected to have suffered the biggest
disruption in economic activity in the province over the short
term, accounts for 14% of KZN's overall GDP. However, trade is a
large provider of employment in KZN, accounting for 22% of total
employment in the province, of which 34% is estimated to form part
of the informal sector.
Asia-Pacific
All APAC equity indices closed lower; Mainland China -0.1%,
South Korea -0.4%, Australia -0.5%, India -0.7%, Hong Kong -0.8%,
and Japan -1.0%.
WeRide has acquired Chinese autonomous truck startup MoonX.AI
for an undisclosed amount, according to a blog posted on the Medium
website. Qingxiong Yang, founder and chief executive (CEO) of
MoonX.AI, will become vice president of WeRide and dean of the
firm's research institute. More than 50 engineers from MoonX.AI
will join WeRide. WeRide focuses on deploying Level 4 autonomous
vehicles (AVs) on public roads, and recently received a permit to
test two AVs without a driver behind the wheel on designated
streets in San Jose (California, US). In 2020, it began testing
fully driverless cars in Guangzhou. The company has also launched a
mini-robobus trial service for the public at Guangzhou
International Bio Island. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
DeepRoute.ai has opened its robotaxi pilot service to the
public in Shenzhen (China), according to a company statement. Users
above the age of 18 can reserve the robotaxi ride free of charge
through DeepRoute's official WeChat account. The company has
deployed 20 robotaxis operating across 124 miles of public roads in
Shenzhen's downtown business district, covering 100 pickup and
drop-off locations. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Baidu has opened its Apollo Go robotaxi service to the public
in the Chinese city Guangzhou, reports Gasgoo. Residents using the
Apollo Go app can hail Baidu's robotaxis, which will transport
passengers along a route that encompasses schools, hospitals,
parks, hotels, and offices. Currently, the service is available in
Guangzhou Science City, a science and technology park located in
Guangzhou's Huangpu district, with 237 pick-up and drop-off
locations. Baidu's robotaxi service is available in Beijing,
Cangzhou, Changsha, and Guangzhou, with plans to expand to 30
cities over the next three years. The company through its smart
driving unit Apollo plans to offer robotaxi services to 3 million
users in China in 2023. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Taiwanese export data show the growth rate cooling in the
second quarter, corroborating recent PMI survey findings of slower
export gains as the global economy cooled amid further COVID-19
waves. (IHS Markit Economist Chris
Williamson)
Official data showed Tawian's export orders rising some 31.1%
above levels of a year ago in June, marking the sixteenth month of
continuous year-on-year expansion. Although down from a peak of
49.3% in January, the annual rate of increase remains higher than
anything seen since 2010.
Seasonally adjusted data results in a new series which suggests
export orders peaked in April 2021 at US$58.4bn, and have since
eased to $56.8bn, the lowest since March - though clearly still
very elevated by historical standards.
This slowing of growth in the Taiwanese PMI series corresponded
with a cooling of global manufacturing output growth in June, which
moderated to the slowest since February. However, the good news is
that the global economy continues to expand at a rate which is
historically consistent with solid growth of demand for Taiwan's
exports, with electronics goods and components seeing especially
marked demand growth.
IHS Markit global electronics PMI in fact shows demand for
electronic goods continuing to outstrip production, to a large
extent due to input shortages curbing production capacity. Taiwan's
electronics firms therefore look set to benefit from this
developing backlog of work, assuming supply conditions can improve
in coming months.
Japan's CPI rose by 0.3% month on month (m/m) on a seasonally
adjusted basis in June and by 0.2% year on year (y/y). (IHS Markit
Economist Harumi
Taguchi)
The CPI, excluding fresh food, increased by 0.1% m/m and 0.2%
y/y. The CPI, excluding food and energy (core-core CPI), grew by
0.1% m/m, but the y/y contraction continued with a 0.2% drop.
The first y/y rise in nine months for the CPI was thanks
largely to increases in prices for gasoline and kerosene and fresh
food. The continued sluggishness in the core-core CPI was
attributed to low mobile phone charges introduced by major carriers
in April, which offset other rises, including higher charges for
education as well as furniture and household utensils.
Money Control reported on 19 July that Union Bank of India,
Indian Bank, and Bank of India are aiming to sell 90.3% of ASREC
India Limited, an asset reconstruction company (ARC) in India. This
is in addition to Punjab National Bank (PNB), which had been
intending to sell its 10.0% stake in Asset Reconstruction Company
(India) Limited (ARCIL) in February 2021, as well as IDBI Bank's
plan to sell its 19.8% stake in ARCIL. For the ASREC purchase, the
minimum requirement bidder will need to have at least INR1 billion
(USD13.4 million) net worth and INR5 billion assets under
management (AUM). IHS Markit research shows that PNB, IDBI Bank,
ICICI Bank, and State Bank of India are listed as the main sponsors
for ARCIL, and of the four, two banks had already noted that they
will sell down their stakes. Since PNB announced that it would sell
its stake in February this year, no news has emerged and IDBI Bank
only announced in June that it would sell its stake and there has
been no progress so far. According to ASREC's latest annual report,
as of FY2019/20, the ARC had total assets of INR2.1 billion, with
total AUM of INR82.1 billion. The total acquisition cost for these
assets was INR17.8 billion, suggesting a potential discount of 78%.
(IHS Markit Banking Risk's Angus
Lam)
Tata Power Limited, an Indian integrated electrical utility and
power company, has signed a collaboration agreement with Hindustan
Petroleum Corporation Ltd (HPCL), reports Autocar India. As a part
of the agreement, Tata is to provide end-to-end electric vehicle
(EV) charging stations at HPCL's existing petrol pumps across
multiple cities and along major highways across India. Currently,
Tata Power has a network of over 500 EV chargers across 100 cities
in India, while HPCL has more than 18,000 petrol pumps across the
nation. According to the news source, the charging is enabled via
the Tata Power EZ charge mobile platform. (IHS Markit
AutoIntelligence's Tarun Thakur)
New Zealand's consumer price inflation surprised above
expectations in the June quarter, rising 1.3% quarter on quarter
(q/q) or 3.3% year on year (y/y) - both the largest increase in 10
years. This is above the Reserve Bank of New Zealand's (RBNZ)
informal inflation target of 2%. (IHS Markit Economist Andrew
Vogel)
The largest contributor to the uptick in CPI in the June
quarter was housing and utilities costs (up 1.9% q/q, or 3.9% y/y),
which includes prices for house construction (up 4.6% q/q, or 7.4%
y/y) and rent (up 0.9% q/q, or 2.9% y/y), driven by both high
demand and supply-chain problems. Regionally, rental prices
increased 0.5% q/q in Auckland, 1.3% q/q in Wellington, and 0.6%
q/q in Canterbury.
Transport costs also contributed notably to the increase in
inflation (up 2.2% q/q, or 9.4% y/y), driven by higher prices for
petrol, international airfares, and used cars. The increase in
petrol prices (up 6.1% q/q, or 16.0% y/y) is due to global oil
prices recovering to approximately pre-pandemic levels after
collapsing in early 2020. International airfares actually fell 7.6%
q/q with the changing of the one-way travel bubble with Australia
to two-way, but are still higher than they were one year ago; the
weight of international airfares in New Zealand's CPI may also be
changed in following quarters as travel restrictions are
loosened.
Food prices were similarly up (1.5% q/q, or 1.6% y/y), in
particular influenced by higher prices for vegetables such as
tomatoes, cucumbers, peppers, and lettuce (up 17% q/q, or 6.2%
y/y), as well as restaurant meals and ready-to-eat food (up 2.0%
q/q, or 4.3% y/y).
Posted 20 July 2021 by Ana Moreno, Director, Product Development, IHS Markit and
Chris Fenske, Head of Fixed Income Research, Americas
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