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All major US and European equity indices closed higher, while
most APAC markets were lower. US government bonds closed flat and
benchmark European bonds were mixed. European iTraxx and CDX-NA
closed slightly tighter across IG and high yield. Gold, silver, and
copper closed higher, while the US dollar, oil, and natural gas
were lower.
Americas
US equity indices closed higher; Russell 2000 +2.4%, Nasdaq
+1.2%, DJIA +0.9%, and S&P 500 +0.9%.
10yr US govt bonds closed flat/1.56% yield and 30yr bonds
flat/2.26% yield.
CDX-NAIG closed -1bp/51bps and CDX-NAHY -3bps/294bps.
DXY US dollar index closed -0.1%/91.16.
Gold closed +0.8%/$1,793 per troy oz, silver +2.8%/$26.57 per
troy oz, and copper +1.6%/$4.28 per pound.
Crude oil closed -2.1%/$61.35 per barrel and natural gas closed
-1.3%/$2.69 per mmbtu.
The US gasoline market is in a sharp turnaround from a year
ago, when COVID-19 led to an unprecedented drop in demand. While
markets will continue to feel the effects of the pandemic through
the next few years, the impacts of COVID-19 on miles driven and
gasoline demand are expected to diminish as an increasing share of
the population of the United States is vaccinated and the economy
reopens. (IHS Markit Energy Advisory's Roger Diwan, Brian Stetter,
Susan Bell, Fellipe Balieiro, and Debnil Chowdhury)
Work-from-home levels remain elevated, averaging about 23% as
of February. As a result, work commute vehicle miles traveled (VMT)
is still significantly off from its pre-pandemic highs. However, an
improving employment picture and a slow return to in-office work
should support commuting VMT over the next few years.
Online/hybrid learning is still prevalent, particularly on the
West Coast. Although only accounting for 7% of miles driven, school
VMT has been weak because of the persistence of online and hybrid
learning in both K-12 and higher education schools.
Other VMT sectors are starting to show more substantial
recovery. Recreational/social and shopping VMT are already showing
signs of recovery and are expected to exceed pre-pandemic levels by
next year.
More people were diagnosed with COVID-19 last week than any
other since the pandemic began. The World Health Organization this
week warned that new infections are increasing everywhere except
Europe, led by rocketing numbers in India with cases also rising in
Argentina, Turkey and Brazil. (Bloomberg)
Processing vegetables (excluding potatoes and mushrooms) per
capita availability in the US rose 5% in 2020 totaling 116.6
pounds, the USDA Economic Research Service (ERS) reported. Despite
the pandemic, Federal programs helped, boosting personal income and
driving up demand for food. Although the pandemic led to an
estimated 19% drop in restaurant and bar sales, increased
vaccination rates, warmer weather and income growth are likely to
spur resurgence in consumer restaurant visits this summer and
autumn. The National Restaurant Association expects industry sales
to recover a portion of last year's losses with a projected 11% in
2021. Although an estimated 110,000 restaurant establishments
closed permanently or long-term in 2020, the gain in industry sales
is expected to slightly favor full-service establishments, which
appear to have suffered the majority of the pandemic closures. (IHS
Markit Food and Agricultural Commodities' Cristina Nanni)
Motional, a joint venture (JV) between Hyundai and Aptiv, has
partnered with Derq to develop a technology to provide a 360-degree
bird's eye view of the environment for its autonomous vehicles
(AVs). At the beginning of the pilot project, two intersections in
Las Vegas, Nevada (United States) and their traffic data are to be
analyzed offline. In the next phase of the pilot, Derq's cameras
installed above busy intersections are to be connected to its
artificial intelligence-based perception systems and roadside units
(RSUs). It will then transmit the data to Motional's AVs in real
time to help inform its decision-making. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Minerals firms Energy Fuels (Lakewood, Colorado) and Hyperion
Metals (Belmont, North Carolina) have signed a memorandum of
understanding (MOU) under which Hyperion will supply an unspecified
amount of natural monazite sands for processing into mixed rare
earth elements (REEs) at Energy Fuels' facility in White Mesa,
Utah. The MOU is nonbinding. The monazite sands covered under the
deal will be sourced from Hyperion's Titan Project, a heavy mineral
sands mining development in Tennessee. Hyperion is currently
undertaking a three-phase drilling and bulk sampling program at the
Titan Project. The company is evaluating production of titanium
minerals, zircon, and silica from the site, in addition to
monazite. The site "saw significant historic exploration from 1960
to 1990 by DuPont, BHP, and others," according to Hyperion. The
company expects a full mineral resource estimate from the site,
which is located near Chemours' New Johnsonville, Tennessee,
pigment plant, to be complete in the second quarter of this year.
(IHS Markit Chemical Advisory)
As expected, the Bank of Canada made no interest rate changes
and it is continuing to pull back its quantitative easing weekly
bond purchase program to $3 billion from a minimum of $4 billion.
(IHS Markit Economist Arlene Kish)
The April Monetary Policy Report (MPR) baseline forecast is
stronger than January's estimates as Canada's real GDP rebounds
6.5% this year, advances 3.7% next year, and climbs 3.2% in
2023.
The annual 2021 inflation outlook was revised up to 2.3%,
followed by 1.9% in 2022 and 2.3% in 2023.
The Bank of Canada also raised its estimates for potential
output or moved the target that helps measure the output gap and
the amount of excess slack.
There was some change in the Bank's extraordinary forward
guidance given the upwardly revised outlooks. Excess slack in the
economy will persist until mid-2022. The Bank will look for a
broad-based recovery before hiking rates. The next policy
announcement is scheduled on 9 June.
Canada's consumer prices increased 0.1% month on month (m/m) on
a seasonally adjusted basis (SA) and 0.5% m/m in March on a
non-seasonally adjusted basis (NSA). (IHS Markit Economist Chul-Woo
Hong)
The annual inflation rate accelerated by 1.1 percentage points
to 2.2% year on year (y/y) NSA and by 1.0 percentage point to 2.1%
y/y SA.
Core inflation rates averaged 1.9% y/y, up from 1.8% y/y in
February as all three Bank of Canada core consumer price inflation
rates accelerated.
Partially owing to the effects of the low base year, annual
inflation pressure will remain solid in the coming months.
Europe/Middle East/Africa
Major European equity indices closed higher; France/Spain
+0.7%, UK +0.5%, Germany +0.4%, and Italy +0.3%.
10yr French government bonds closed +8bps/0.07% yield, which is
the worst single-day sell-off since 18 March 2020 and the highest
closing yield since exactly one year ago tomorrow.
10yr European govt bonds closed mixed; UK +1bp, Germany flat,
Spain -1bp, and Italy -3bps.
Conservative policymakers at the European Central Bank have put
aside their discomfort with ultra-loose monetary policy to stand
behind the region's COVID-19 crisis-hit economy. But even as the
continent remains mired in rising infections, the "hawks" are
urging the central bank to prepare to scale back its huge
bond-buying program. This potential shift, which risks dividing the
ECB governing council and unsettling investors in eurozone bond
markets, is expected to be discussed at the bank's monetary policy
meeting on Thursday, although any action is unlikely before its
next meeting in June at the earliest. (FT)
iTraxx-Europe closed flat/51bps and iTraxx-Xover
-3bps/252bps.
The European Central Bank (ECB) announced on 19 April the
results of its "Targeted Review of Internal Models" (TRIM), a
multi-year project involving 65 systemically important banking
institutions and approximately 200 site visits. Although
"institutions generally have the capability to build… adequate
models", the report identified over 5,800 findings regarding
in-house models: 30% "have a high severity". The main weaknesses
related to credit risk modelling, which in the retail and SME
segment focused on inadequate risk differentiation and
loss-given-default (LGD) estimation mechanisms. Many findings
related to low default portfolios (LDPs), notably focusing on
"calibration" and "long term default" levels. Other areas
highlighted relate to market risk models, particularly the use of
value at risk (VAR) and stressed VAR models, and counterparty
credit risk models, along with non-model-specific issues such as
the arrangements for internal validation and management of model
changes. (IHS Markit Country Risk's Brian Lawson)
French ride-sharing firm BlaBlaCar has raised EUR97 million
(USD115 million) in a funding round led by existing investor VNV
Global, according to a company statement. New investors Otiva J/F
AB and FMZ Ventures also participated in the round. The company
plans to use the infused capital to accelerate its expansion
strategy. BlaBlaCar was founded in 2006 and offers a long-distance
car-pooling platform that connects drivers with empty seats. The
company has more than 90 million registered users on its platform
and is present in 22 countries. (IHS Markit Automotive Mobility's
Surabhi Rajpal)
Mario Draghi will next week unveil a €221 billion recovery
package for a radical restructuring of Italy's economy as it seeks
to bounce back from its deepest recession since the second world
war. The plan, which features big-ticket investments in high-speed
rail and green energy, as well fully digitalizing the country's
public administration, will draw on the EU's pandemic recovery
fund. (FT)
Volvo Group has said that it is aiming for battery electric
vehicles (BEVs) to make up half of its truck sales in Europe by the
end of the decade. Alongside the existing medium-duty FL Electric
and FE Electric, its line-up of BEVs will be joined by heavier duty
products which will start production in Europe during the second
half of 2022. For transport, the company will introduce the FM
Electric and FH Electric. The former is said to be intended to
"perform high capacity grocery deliveries, container transports,
crane services and more in metropolitan areas with less
environmental impact", while the latter will be intended for longer
distance, regional transportation. In terms of its specification,
both are offered with the same options. (IHS Markit
AutoIntelligence's Ian Fletcher)
The detailed data released by the Russian Federal State
Statistical Service (RosStat), the headline industrial output index
increased by 1.1% year on year (y/y) in March, compared to y/y
declines of 3.2% in February, and 1.9% in January. (IHS Markit
Economist Lilit Gevorgyan)
The headline index fell by 1.3% y/y in the first quarter,
following y/y declines of 1.7% in the fourth quarter of 2020, 4.8%
in the third, and 6.7% in the second, when the negative impact of
the COVID-19 virus pandemic started to materialize.
The mining sector remains a drag on the overall index,
shrinking continuously since March 2020, in annual terms. The
extractive sector's output fell by 7.3% y/y in the first quarter of
this year, moderating from 8.1% y/y and 11.5% y/y declines in the
fourth and third quarters of 2020, respectively.
Conversely, the manufacturing sector offset partially the
mining sector losses in March, rising by 4.2% y/y. However, the
sector had a poor start to the year. After expanding by 7.9% y/y in
December 2020, it fell by 0.2% y/y in January and 1.7% y/y in
February.
Asia-Pacific
Most APAC equity markets closed lower except for Mainland China
flat; Australia -0.3%, South Korea -1.5%, Hong Kong -1.8%, and
Japan -2.0%.
The world will see a sharp 4.8% rebound in annual
energy-related carbon emissions in 2021, the International Energy
Agency (IEA) said, with emissions from coal, natural gas, and China
leading the surge. This increase would counteract nearly all the
emissions reductions the IEA observed in 2020 when the global
economic slowdown led to a 5.8% reduction in energy-related
emissions to 31.5 billion mt. Issuing what it called a "dire
warning," the Paris-based intergovernmental agency said the global
economic recovery this year will generate a 1.5-billion mt increase
in energy-related carbon emissions to 33 billion mt. It would be
the second-highest year's emissions on record, only behind the
33.4-billion mt level of 2019, and would represent a retreat from
meeting Paris Agreement goals for 2030 or 2050. (IHS Markit Climate
and Sustainability News' Kevin Adler)
Chinese food-delivery giant Meituan has raised USD10 billion in
a stock and convertible bonds sale with an aim to automate
deliveries, reports Reuters. Meituan sold USD7 billion in shares
and roughly USD3 billion in two-tranche convertible bonds. The
company plans to use the proceeds to develop autonomous delivery
vehicles, delivery drones, and other cutting-edge technology.
Meanwhile, Meituan has launched its new-generation driverless
delivery vehicle in China's Shunyi district, Beijing, reports
Caixin Global. The vehicle is able to detect obstacles in its
surroundings within a radius of more than 150 meters. In addition,
the vehicle is able to cover 80 kilometers on a single charge with
a loading capacity of 150 kilograms. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Following a resurgence of COVID-19 cases in India, several
states and union territories have declared fresh restrictions to
curb the spread of the virus. According to several local media
reports, states including Delhi, Rajasthan, Madhya Pradesh, Uttar
Pradesh, and Chhattisgarh have announced partial lockdowns for
several days. Maharashtra had already declared a similar move. The
restrictions mainly include night curfews, the closure of public
places, activities, and services, except essential services, as
well as mandatory RT-PCR tests for inter-state travel. (IHS Markit
AutoIntelligence's Isha Sharma)
According to a press notice issued by DBS Group on 20 April,
the bank has acquired a 13% stake in Shenzhen Rural Commercial Bank
for CNY5.3 billion (USD820 million). This deal is part of DBS's
plan to accelerate "its expansion in the rapidly growing Greater
Bay Area". The stake purchase has already received regulatory
approval from Singaporean and Chinese regulators the Monetary
Authority of Singapore (MAS) and the China Banking and Insurance
Regulatory Commission (CBIRC). In the notice, DBS stated that, for
Shenzhen Rural Commercial Bank, "40% of its total loans are in the
retail segment and remaining 60% in corporate segment, largely to
Shenzhen-based small-and-medium-enterprises" in 2020. (IHS Markit
Banking Risk's Angus Lam)
The Bank Indonesia's (BI) Board of Governors kept its key
policy rate, the seven-day reverse repo rate, unchanged at 3.50%
during the latest monetary policy review on 20 April. The bank also
maintained the Deposit Facility (DF) rate at 2.75% and Lending
Facility (LF) rate at 4.25%. The policy rates were last reduced in
February 2021, ending the series of rate cuts initiated in February
2020 and aimed at cushioning the Indonesian economy from the effect
of the COVID-19 pandemic. (IHS Markit Economist Hanna
Luchnikava-Schorsch)
Consumer price inflation remains low and stable, with headline
CPI inflation hovering at 1.4% year on year (y/y) in February and
March 2021, because of still-compressed domestic demand and
anchored inflation expectations. While citing food prices as a
risk, BI has reinforced its commitment to policy co-ordination with
the government in controlling food inflation, particularly during
the month of Ramadan and Eid ul-Fitr festive period.
BI also highlighted improving monetary policy transmission to
borrowers since the policy rate cut in February and BI's repeated
moral suasion to banks. According to BI's policy statement, the
banks' prime lending rate came down by 171 bps in February, led by
state-owned banks, which reduced lending rates by 266 bps to 8.7%.
The lending rates were reduced across all loan types.
Posted 21 April 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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