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Most major European equity indices closed higher on Friday, APAC
was mixed, and most US markets closed lower. US government bonds
closed sharply higher, while benchmark European bonds closed mixed.
iTraxx-Europe and CDX-NAIG closed flat, while high yield indices
iTraxx-Xover and CDX-NAHY were slightly wider on the day. The US
dollar, oil, natural gas, silver, and gold closed higher, while
copper 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 Experts
by IHS Markit platform.
Americas
Most major US equity indices closed lower except for DJIA
+0.2%; S&P 500 -0.1%, Russell 2000 -0.2%, and Nasdaq
-0.8%.
10yr US govt bonds closed -6bps/1.64% yield and 30yr bonds
-8bps/2.07% yield.
CDX-NAIG closed flat/52bps and +4bps/302bps, which is flat and
+2bps week-over-week, respectively.
DXY US dollar index closed +0.1%/93.64.
Gold closed +0.8%/$1,796 per troy oz, silver +1.2%/$24.45 per
troy oz, and copper -1.3%/$4.50 per pound.
Crude oil closed +1.5%/$83.76 per barrel and natural gas closed
+3.2%/$5.28 per mmbtu.
U.S. private sector businesses recorded a sharp and accelerated
upturn in output led by the service sector during October, with
growth the strongest for three months, albeit still much weaker
than seen earlier in the year. October also saw a survey-record
rise in backlogs of work as firms struggled to meet demand due to
supply chain bottlenecks and labor shortages, in turn driving the
steepest rise in prices yet recorded by the survey. (IHS Markit
Economist Chris
Williamson)
Flash U.S. Composite Output Index at 57.3 (55.0 in September).
3-month high.
Flash U.S. Services Business Activity Index at 58.2 (54.9 in
September). 3-month high.
Flash U.S. Manufacturing PMI at 59.2 (60.7 in September).
7-month low.
Flash U.S. Manufacturing Output Index at 52.3 (55.7 in
September). 15-month low.
Alongside its first annual update report (released on 13
October) on its G20-backed "Roadmap for Enhancing Cross-Border
Payments" initiative to improve the cost, speed, access and
transparency of global payments, the Financial Stability Board
(FSB) has released quantitative targets. (IHS Markit Economist Brian
Lawson)
The FSB specifies targets for the four areas, looking at
wholesale, retail, and remittance flows.
The targets apply from end-2027, other than for remittances,
where cost and speed objectives relate to end-2030.
For retail payments, the FSB specified that the average cost of
payments should not exceed 1%, with no "corridors" costing above
3%, while for remittances the target is a 3% average and 5% maximum
cost.
On speed, the goal is for 75% completion within one hour - and
the remainder within a day - in all three categories.
For access, the FSB targets that all wholesale and retail users
should have at least one option by end-2027 to send or receive
cross-border payments (flagging that for retail users this should
be electronic), while seeking access for 90% of individuals -
including those without bank accounts - to an electronic remittance
mechanism by end-2027.
Finally, in all three categories, all payment service providers
should disclose the cost, duration, and their terms of service by
end-2027.
Dow posted net income of $1.7 billion compared with a
$1.0-million loss in the year-ago quarter as strong demand and
higher pricing more than offset significant storm-related supply
disruptions. Net sales were $14.8 billion, up 53% year on year
(YOY) and 7% sequentially, with gains in all operating segments and
regions. Price was up 50% YOY and 5% sequentially over the second
quarter with gains in all businesses, segments, and regions.
Reported operating earnings was $2.75/share, up from 50 cts in the
year-ago period and 6% above analyst estimates as reported by Zacks
Investment Research. (IHS Markit Chemical Advisory)
"Despite higher energy costs and industry-wide value chain
disruptions from hurricanes on the US Gulf Coast, our proactive
storm preparations enabled us to maintain the safety of our team
and operations, and recover quickly," says Dow chairman and CEO Jim
Fitterling. "Coupled with our global footprint, feedstock
flexibility, and structural cost advantages, we continued to
capture robust end-market demand and price momentum."
Packaging & specialty plastics segment net sales were $7.7
billion, up 69% YOY. Operating EBIT was $2 billion, compared to
$647 million in the year-ago period, reflecting strong margin
improvement in the core business, which was up 1,110 basis points,
Dow says. Local price increased 63% YOY due to tight supply and
demand dynamics. Volume increased 5% YOY, as gains in energy and
olefins were partly offset by lower polyethylene volumes due to
weather-related supply constraints.
Industrial intermediates and infrastructure segment net sales
were $4.5 billion, up 47% YOY. Segment operating EBIT was $713
million, an increase of $609 million YOY, primarily due to
continued tight supply and demand dynamics in both businesses.
Despite strong demand, segment volumes declined 4% YOY due to a
planned transition of a low-margin coproducer contract,
weather-related outages and third-party supply constraints.
Performance materials & coatings segment net sales were
$2.5 billion, up 26% YOY. Operating EBIT was $284 million, compared
to $75 million in the year-ago period. Margins increased 750 basis
points due to strong price momentum and robust demand recovery for
silicones and industrial coatings offerings. Local price increased
23% YOY due to tight supply and demand dynamics. Volume increased
2% year-over-year as stronger demand for mobility, electronics,
personal care and industrial applications was partly offset by
supply constraints for acrylic monomers and architectural
coatings.
Higher raw material and energy costs are expected to reduce
packaging and specialty plastics segment operating EBIT by
approximately $350 million in the fourth quarter compared with the
third quarter, partly offset by a benefit from $175 million in
lower costs following the completion of a turnaround at a Canada
cracker.
US clinical-stage biotech F-star Therapeutics has announced
that it has granted Johnson & Johnson (J&J, US)'s Janssen
Biotech unit a worldwide, exclusive license to research, develop,
and commercialize up to five novel bispecific antibodies directed
at Janssen's therapeutic targets using F-star's proprietary Fcab
and mAb2 platforms. Janssen will be responsible for all research,
development, and commercialization activities. Under the terms of
the agreement, F-star will receive upfront fees of USD17.5 million,
as well as near-term fees and potential further milestones of up to
USD1.35 billion. F-star is also eligible to receive tiered
mid-single-digit royalties on annual net sales of any products
developed via the collaboration. F-star's proprietary platform
allows substitutions in the Fc region of a natural antibody,
creating two additional distinct antigen binding sites. The
resulting building blocks - known as Fcabs (Fc with antigen
binding) - can be rapidly inserted into a natural IgG antibody
format to create so-called mAb2 bispecific antibodies that
simultaneously bind to two different antigens. F-star's mAb2
bispecific antibodies are designed to have minimal systemic
toxicity, a low immunogenicity risk, and to be easy to manufacture.
For F-star, the size of the deal comfortably eclipses a
USD300-million collaboration signed in July with AstraZeneca (UK)
for the development and commercialization of next-generation
stimulator of interferon genes (STING) inhibitors. (IHS Markit Life
Sciences' Milena
Izmirlieva)
The head of Ford Pro, the company's new commercial vehicle
division said during an industry presentation that the company is
seeing early resistance to electric vehicle (EV) trucks and vans
from current commercial fleet owners. According to a Reuters
report, executive Ted Cannis commented on the issue during a
Reuters Events Automotive Summit. Cannis reiterated that the
Lightning pick-up and the E-Transit van "are targeted at real
people doing real work", but that some are taking a wait-and-see
approach as a result of a lack of experience with EVs and a lack of
clarity on government policy and regulation around them. However,
Cannis was also cited as saying that Ford does not see these as
insurmountable obstacles over the longer term. (IHS Markit
AutoIntelligence's Stephanie
Brinley)
Autonomous truck startup Embark said that carriers
participating in its partner development program has placed 14,200
non-binding reservations for its autonomous software equipped
trucks. The reservations run from 2024, when its Embark Driver
software is expected to be commercially available, through 2028.
Embark, which recently announced that it is going public through a
reverse merger agreement with a special-purpose acquisition company
(SPAC), takes a different approach to autonomous trucking than
other tech firms. Embark focuses on providing autonomous software
as a service (SaaS) for the trucking industry, rather than building
and running a fleet of trucks itself. Carriers and fleets can pay a
per-mile subscription fee to access Embark's services. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Stellantis's Free2Move is expanding its presence by launching
its mobility service in Denver, Colorado (United States). The
company is to offer car-sharing, rental, and subscription services
from a single app, accessible through the user's smartphone.
Free2Move's Car on Demand service is the latest addition to its
offerings, which include insurance, maintenance, and assistance
with no hidden fees, it says. Over the next few months, the company
plans to ramp up its fleet size to 160 Jeep vehicles in Denver, in
services which will be available by the minute, by the day, and by
the month. Rentals are charged either at a rate of USD0.49 per
minute or USD89.99 per day. (IHS Markit Automotive Mobility's
Surabhi Rajpal)
UGI Utilities has received regulatory approval from the
Pennsylvania Public Utility Commission (PAPUC) to purchase RNG and
start a five-year pilot program. The pilot is the first of its kind
in Pennsylvania, said the state's second-largest utility on 22
October. Earlier this year, UGI Utilities signed an interconnect
agreement with Archaea Energy to accept delivery of RNG into its
high-pressure natural gas pipeline that serves its distribution
system. When fully operational, the system will be designed to take
up to 16,000 mcf/d of RNG, making this the largest RNG supply point
in the United States to-date. (IHS Markit PointLogic's Kevin Adler)
"The approval of this pilot program is a significant step
forward as we continue to develop sustainable, environmentally
responsible energy solutions for our customers," said Robert F.
Beard, executive vice president - natural gas, global engineering
& construction and Procurement. "UGI remains committed to
developing renewable energy sources for the communities we
serve."
In a joint statement, PAPUC Commissioners Ralph Yanora and John
Coleman, Jr. said the program "represents an innovative economic
model that balances environmental, customer, and gas supply
requirements consistent with the Commonwealth's least-cost gas
supply requirements."
Health advocates are hailing a decision by a California court
that ruled the state cannot penalize cities from enacting sugary
drink taxes. In 2020, Cultiva La Salud, a California health equity
group, and Martin Watkins, a Santa Cruz City Council member, sued
the state in response to a 2018 state law that prevented cities
from enacting new sugary drink taxes until 2031. Pressured by the
beverage industry that had gained enough signatures to place on the
ballot a measure that could have cut local governments' ability to
raise revenue, the state legislature passed a bill in 2018 that put
a freeze on local sugary drink taxes. Fearing the penalty
provisions in the state law, the California city of Santa Cruz
backed down from pursuing its drink tax. Earlier this month, the
Sacramento County Superior Court ruled the penalty provision in the
state law, California's Keep Groceries Affordable Act of 2018, is
unconstitutional. (IHS Markit Food and Agricultural Policy's Joan
Murphy)
According to the Brazilian Institute of Geography and
Statistics (Instituto Brasileiro de Geografia e Estatística: IBGE),
the monthly index of economic activity for industrial production
(MIEA) declined by 0.2% in August compared with July (month on
month); this marks the third monthly decline in the first eight
months of the year. MIEA has recorded five expansions, indicating
some growth volatility, as different sectors re-adjust after the
pandemic lockdowns and restrictions. (IHS Markit Economist Rafael
Amiel)
Industrial production was down, mostly due to supply chain
disruptions and shortages of semiconductors.
Retail sales contracted significantly in August after recording
strong expansion in July, while sales of durable goods such as
electronics, appliances, and automobiles were constrained by a lack
of supply rather than a decline in demand. Sales of non-durable
goods may have been constrained by the decline in income, as high
inflation is hurting real wages.
IBGE also publishes an indicator of sales of non-financial
services, which has been recovering strongly since the second half
of 2020. IHS Markit assesses that there is still room for further
expansion as reopening continues, especially in the hospitality and
air transportation sectors.
Europe/Middle East/Africa
Most major European equity indices closed higher except for
Spain -0.4%; France +0.7%, Germany +0.5%, UK +0.2%, and Italy
+0.2%.
10yr European govt bonds closed mixed; UK -6bps, Spain -1bp,
Germany flat, France +1bp, and Italy +2bps.
iTraxx-Europe closed flat/50bps and iTraxx-Xover +3bps/260bps,
which is flat and +4bps week-over-week, respectively.
The Office for National Statistics (ONS) has reported that the
UK's 12-month rate of consumer price index (CPI) inflation fell to
3.1% in September from 3.2% in August, the highest rate since March
2012. (IHS Markit Economist Raj
Badiani)
Restaurant and café prices increased by 5.0% year on year (y/y)
in September, down from a gain of 8.6% y/y in August. The annual
comparisons in August and September 2021 have been distorted by
restaurant prices being artificially low in August 2020 when the
government launched its 'Eat Out to Help Out' scheme offering
diners discounted meals. The latest price developments compare
prices to September 2020, after the scheme expired at the end of
August.
Food prices rose at brisker rate, rising by 0.9% y/y in
September from 0.2% y/y in August.
Energy-related prices continued to rise rapidly on an annual
basis, with transport fuel and lubricant prices growing by 17.8%
y/y, the sixth successive double-digit increase. This was in line
with global crude oil prices rising by 82.1% y/y to average USD74.5
per barrel (pb) in September, the ninth successive y/y gain since
February.
The ONS reported that average gasoline (petrol) prices stood at
134.9 pence a liter in September, compared with 113.3 pence a liter
a year earlier.
A further rise in second-hand car prices occurred during
September because of the shortage of semiconductor chips disrupting
production of new vehicles.
All-services price inflation retreated to 2.6% in September
from 3.0% in August; for goods, it stood at 3.4%, up from 3.3% in
August.
Core inflation, excluding energy, food, alcoholic beverages,
and tobacco prices, moved down to 2.9% in September from 3.1% in
August.
The IHS Markit/CIPS flash manufacturing PMI rose to 57.7 in
October from 57.1 in September. However, dig down into the
components of the PMI and we can see worrying signals about the
health of manufacturing in the UK. (IHS Markit Economist Chris
Williamson)
Drilling down into the reasons provided by those manufacturers
who reported a fall in production during October, some 43% reported
that output had been hit by shortages of components or supply chain
delays. These shortages were highlighted by the survey's suppliers'
delivery times index falling further in October, indicating the
greatest lengthening of supply lines since the initial global
factory closures seen at the start of the pandemic. Worst affected
were food & drink producers and manufacturers of electrical and
electronic goods.
However, more worryingly, almost one-in-three firms (some 29%)
simply reported that their output had decreased due to weakened
demand. Although the survey's new orders index picked up slightly
during the month, it remained far below levels seen in the six
months prior to September, suggesting the UK factory sector has
seen a downshifting of demand growth since the summer. Although
some pull-back in spending on goods was to be expected as the
service sector continues to open up from COVID-19 restrictions,
this weakening of demand growth can also be linked to a second
consecutive monthly fall in new export orders during October, which
fell at the fastest rate since the January lockdown. Analysis of
the reasons cited for falling export orders in October shows that
one-in-three firms blamed Brexit.
A project that intends to undertake large scale-electric
vehicle (EV) battery manufacturing in Coventry (UK) has revealed
its plans. Known as the West Midlands Gigafactory, its facility
will be built at Coventry Airport and will eventually cover over
500,000 square meters and will have the capacity to deliver up to
60GWh of batteries per annum following investment of around GBP2.5
billion. It is also expected to create up to 6,000 highly skilled
jobs. It also aims for electricity to be supplied from 100%
renewable resources through a combination of solar panels and grid
supply. The first phase of the project is hoped for completion in
2025. (IHS Markit AutoIntelligence's Ian Fletcher)
The headline IHS Markit Eurozone Composite PMI® fell for a
third successive month in October, according to the 'flash'
reading*, dropping from 56.2 in September to 54.3. The decline
indicates a further cooling of the rate of expansion from July's
15-year high. (IHS Markit Economist Chris
Williamson)
Growth slowed especially sharply in Germany, down to the lowest
since February, and slipped to the weakest since April in France.
The rest of the region as a whole also recorded the slowest
expansion since April.
By sector, services outperformed manufacturing output for a
second month running, the factory sector having now reported a
slowdown in growth for a fourth straight month to register the
weakest increase in production seen over the past 16 months.
Hiring was stepped up as firms sought to clear backlogs,
resulting in a jobs gain that matched July's two-decade high. Jobs
growth accelerated in both Germany and France, and notably was one
of the fastest in 21 years in the rest of the region.
Shortages were meanwhile once again seen as the key driver of
higher prices for many goods and services in October, leading to a
survey record increase in firms' input costs. An unprecedented
input cost increase was recorded in manufacturing while service
sector costs rose at the sharpest rate since September 2000.
Tesla's plan to begin trial production at the company's plant
in Grünheide (Germany) next month appears likely to be halted by
another bureaucratic delay, according to a Reuters report. The
company undertook an online consultation of local citizens before
beginning production. However, this process now apparently has a
second stage, which is likely to delay the beginning of production
beyond November. The second stage, which is only open to those who
expressed an objection in previous rounds, will run from 2-22
November, the statement said. CEO Elon Musk said recently that he
hoped that the facility would begin trial production this month.
(IHS Markit AutoIntelligence's Tim Urquhart)
Air Liquide reports a 17% rise year on year (YOY) in sales to
€5.83 billion ($6.79 billion) for the third quarter, beating
analysts' consensus estimate of €5.78 billion, with the company
flagging growth in activities across all divisions and regions. The
third-quarter sales figure is also up sequentially from €5.51
billion in the second quarter. Air Liquide has not provided
quarterly earnings figures. Revenue at the company's gas and
services business, which accounts for 96% of overall sales, rose
almost 17% YOY to €5.58 billion, slightly higher than consensus of
€5.53 billion, provided by Vara Research (Frankfurt, Germany). Air
Liquide says the higher group revenue figure confirms an upward
trend seen in the first half of the year, and that its gas and
services business sales benefited from a strong energy effect of
9.3%. Activity was supported in particular by momentum in the
electronics industry, continued recovery of the industrial merchant
business, and robust healthcare activities, it says. (IHS Markit
Chemical Advisory)
CGG GeoSoftware and Amazon Web Services (AWS) are expanding
their collaboration in the global E&P industry to China to
bring out benefits of cloud computing technologies. The strong
collaboration between CGG GeoSoftware and AWS has resulted in cloud
computing deployment which can support in resolving common
reservoir modeling challenges in China, owing to complex geology,
thin layers, and strong heterogeneity within reservoirs with
greater precision required in estimating uncertainty to reduce
risk. By combining Jason inversion technology within
GeoSoftware11.0 with the ability to scale and access vast computing
resources it is possible to understand more modeling scenarios with
greater complexity and simultaneously generate hundreds of
realizations from geostatistical seismic inversion. (IHS Markit
Upstream Costs and Technology's Lopamudra De)
Poland's unadjusted industrial output rose by 8.8% year on year
(y/y) in September, the weakest figure since February.
Nevertheless, results were positive in seasonally adjusted terms,
with production rising by 0.9% month on month (m/m). (IHS Markit
Economist Sharon
Fisher)
September's industrial output growth benefited from growth in
all three sectors: mining, manufacturing, and utilities. Coal
mining surged by 19.5% y/y, as soaring natural gas prices have
increased demand for other energy sources.
Manufacturing output was boosted by double-digit growth in
several branches, including metal products, chemicals, and
construction materials. Motor vehicles production plunged by 17.3%
y/y owing to supply-chain challenges.
By industrial group, Poland reported double-digit y/y gains in
energy and intermediate goods, alongside more moderate growth in
consumer goods production. Only capital goods output declined in
September (down by 0.8% y/y).
Industrial producer prices continued to surge in September,
rising by 0.7% m/m and 10.2% y/y, the highest figure since
1997.
Although industrial output results were broadly in line with
expectations in September, construction activity disappointed on
the downside, rising by 4.3% y/y but falling by 2.0% m/m in
seasonally adjusted terms. Specialized construction activities were
the main driver of September growth (up by 21.7% y/y), while civil
engineering works rose modestly (up by 1.2% y/y) and building
construction dropped by 3.6% y/y.
Retail sales (including the automotive sector) rose by 5.1% y/y
in real terms, while high inflation pushed up nominal growth to
11.1% y/y. In seasonally adjusted terms, real sales rose by 0.2%
m/m.
By category, the largest increase in real retail sales came in
clothing and footwear (up by 14.5% y/y). In contrast, car sales
fell by 4.1% y/y.
On the labor front, enterprise employment edged downwards in
August-September (reaching 0.2% below the July high), signaling
that layoffs may be occurring in certain sectors as government
stimulus measures are phased out. Employment growth slowed to 0.6%
y/y in September.
Norway's Labour Party has formed a minority coalition
government with the Centre Party after winning a plurality of votes
in the 21 September general election. The new center-left coalition
has pledged support for the existing offshore exploration
framework, which is likely to ensure oil policy continuity over the
near-to-medium term. The formation of a minority center-left
coalition should reduce the risk of major upstream policy shifts,
despite the need for ad-hoc parliamentary support from opposition
parties to advance legislation. According to the Hurdal Platform
(the governing program of the Labour and Centre Parties), the new
government plans to continue to develop the hydrocarbon industry as
a key contributor to Norway's economy. The center-left government
has ruled out any plans to phase out oil and gas production on the
Norwegian Continental Shelf (NCS) and is likely to pursue generally
favorable policies in line with the Energy White Paper that was
proposed by the previous Conservative-led coalition. To ensure a
stable oil policy framework, the ruling coalition is likely to
negotiate its legislative proposals with the opposition parties, as
the Labour and Centre Parties are nine seats short of a majority
(85 seats) in parliament. With smaller left-leaning and centrist
parties favoring a more restrictive approach to the upstream
sector, the center-left coalition is likely to seek support from
the Conservative Party, which remains a strong proponent of E&P
activity on the NCS. (IHS Markit E&P Terms and Above-Ground
Risk's Aliaksandr Chyzh)
The Central Bank of the Republic of Turkey (TCMB) cut its main
policy rate, the one-week repo rate, by 200 basis points, to 16.0%,
at its regularly scheduled, 21 October meeting of the Monetary
Policy Committee. The cut was the second consecutive move following
a 100-basis-point reduction at the September meeting. (IHS Markit
Economist Andrew
Birch and Banking Risk's Alyssa
Grzelak)
The TCMB took action despite annual consumer price inflation
that stood at 19.6% as of September 2021 and likely further
accelerated in October. With this rate cut, the main policy rate is
now 360 basis points below the prevailing headline inflation rate.
In September, TCMB Governor Sahap Kavcioǧlu shifted the guidance of
its future cuts from the headline inflation rate to the lower, core
inflation rate. However, the main policy rate is now 100 basis
points below even the prevailing annual core inflation rate, which
stood at 17.0% as of September.
It was clear that the TCMB would be cutting rates once again at
the October meeting - particularly after President Recep Tayyip
Erdoǧan removed three Monetary Policy Committee members that had
resisted further rate cuts. However, the size of the cut was
surprising given the core inflation rate. IHS Markit had forecast a
50-point cut while many other observers had expected a 100-point
cut, a move that would have put the repo rate right at the
prevailing rate of core annual inflation.
Turkey's grey-listing and its now lower interest rates will
decimate inflows of foreign capital, destabilizing the lira and
thus, enflaming consumer price inflation. After peaking at over
USD3 billion in June, the net inflow of portfolio investment
trailed off significantly in July (USD1.9 billion) and August
(USD1.3 billion). Judging by exchange-rate fluctuations in
September and October, portfolio investment flows either further
deteriorated or even turned outward on a net basis during those two
months. In our view, the October rate cut and Turkey's being added
to the FATF's grey list will trigger net portfolio outflows in
November and December - potentially totaling USD2 billion or more
each month, based on previous shocks - with net losses likely to
continue into early 2022.
Acino (Switzerland) and Aspen Pharmacare and its subsidiaries
(Aspen, South Africa) have signed an agreement for the Swiss firm
to acquire six selected prescription medicine brands from Aspen for
over EUR105 million (USD123 million). The portfolio to be acquired
includes medicines for the treatment of gastroenterology, erectile
dysfunction, and cardiovascular conditions; the brands encompassed
by the deal are Trustan (esomeprazole), Altosec (omeprazole),
Zuvamor (rosuvastatin), Ciavor (tadalafil), Grantryl (granisetron),
and Aspen Granisetron (granisetron). The parties have also signed a
manufacturing and supply agreement "in terms of which Aspen will
supply the Aspen manufactured products to Acino for a period of
seven years", according to a press release. The acquisition of
these brands will strengthen Acino's footprint in the South Africa
market by expanding the company's product offering in these
therapeutic segments, and it underscores the Swiss firm's long-term
expansion strategy in South Africa. For Aspen, the deal reflects
the company's strategy of refining its product portfolio in the
domestic market, and it is in line with previous measures taken in
the past two years to reduce its debt. (IHS Markit Life Sciences'
Sacha
Baggili)
Asia-Pacific
Major APAC equity indices closed mixed; Hong Kong +0.4%, Japan
+0.3%, Australia/South Korea flat, India -0.2%, and Mainland China
-0.3%.
The power crunch and real estate moderation, which were two
major drivers for Mainland China's economic deceleration in the
third quarter, marginally eased in the short term due to the
government's interventions; while those are expected to remain
headwinds for economic recovery in the fourth quarter. (IHS Markit
Economist Yating
Xu)
The average mortgage rates in 90 major cities for first-home
and second-home purchases in October were both 1 basis point down
from the previous month, reports Caixin citing BeiKe Research
Institute. It was the first monthly drop since the beginning of the
year. The mortgage rate decline was sharper in the tier-one cities
of Guangzhou and Shenzhen in the southern Guangdong province.
Mainland China's coal stockpiles at key power plants rose by
more than 10 million tonnes from September, according to data from
the National Development and Reform Commission (NDRC). Meanwhile,
the NDRC is reviewing measures to tamp down high prices that are
threatening energy security and economic growth.
China's cybersecurity regulator has reportedly suggested that
ride-hailing firm Didi Global Inc. (DiDi) and two other US-listed
tech companies should explore listings in Hong Kong SAR. The
Cyberspace Administration of China (CAC) introduced this proposal
in recent conversations with executives from DiDi, logistics
platform Full Truck Alliance, and online recruitment firm Kanzhun
Ltd, reports Reuters. The three firms, which went public in June,
were being investigated by the CAC as China is tightening scrutiny
of technology firms on a range of issues, including data security,
customer privacy, and anti-competitive practices. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Hai Long Offshore Wind Power has appointed Offshore Wind
Consultants (OWC) as one of the owner's engineers (OE) to provide
technical advisory and coordination services for the 1,044 MW Hai
Long 2 and 3 offshore wind farm (OWF) projects in Taiwan. OWC's
services will work throughout the development and construction
phases of the wind farm projects. OWC set up an office in Taiwan to
support the offshore wind sector in 2018, followed by added offices
in Japan and South Korea. The Hai Long OWF project is jointly
developed by Northland Power, Yushan Energy, and Mitsui. It has
three separate grid allocations comprising Hai Long 2A (300 MW),
Hai Long 2B (232 MW), and Hai Long 3 (512 MW) wind farms. Financial
close for Hai Long is expected in 2022 and project construction is
due to be completed by 2026. (IHS Markit Upstream Costs and
Technology's Jie Sheng Aw)
Japan's CPI rose by 0.4% month on month (m/m) on a seasonally
adjusted basis and by 0.2% year on year (y/y) in September. The
CPI, excluding fresh food (core-CPI), notched up by 0.1% m/m and
0.1% y/y in September. The CPI, excluding food and energy
(core-core CPI), held at the August level in September, but
deflation continued at a 0.5% y/y drop. (IHS Markit Economist Harumi
Taguchi)
The first y/y increase since August 2020 largely reflected a
2.2% y/y rise in fresh food prices due to bad harvests caused by
unusually heavy rainfall in August 2021. Faster rises in electric
and gas charges also contributed to lift the CPI. However, those
increases were largely offset by declines in mobile-phone
charges.
The September results were in line with IHS Markit's
expectations. Although fresh food prices are expected to stabilize
in the coming months, energy prices are likely to lift Japan's CPI
inflation at a faster pace than expected, reflecting surging crude
oil prices and yen weakening. However, inflation will probably
remain moderate over the short term. Inflationary pressures from
higher energy prices and the weak yen will be largely offset by the
negative effects of lower mobile-phone charges (through March 2022)
and the expected reintroduction of travel subsidies.
The Japanese transport ministry has amended the country's
automatic braking system safety provisions to include protection
for bicycle riders from July 2024, according to the Asahi Shimbun.
While automatic emergency braking (AEB) systems are currently only
required to prevent collisions with vehicles and pedestrians, the
new provisions will require the systems to stop a car running at 38
kmph from colliding with a bicycle crossing the road at 15 kmph.
They will also be required to sound an alarm before the brakes are
applied. The amended provisions will be applicable to all new
passenger car models with a seating capacity of up to nine people
and truck models with a deadweight of 3.5 tons or less made after
July 2024. Additionally, existing car models that remain in
production in 2024 will be required to be upgraded to meet the
standard by July 2026. (IHS Markit AutoIntelligence's Jamal
Amir)
Stellantis and Samsung SDI have announced a memorandum of
understanding (MoU) for battery production in North America,
targeted to start production in 2025. According to a statement
emailed to IHS Markit, the plant is expected to start with capacity
for 23 gigawatt hours, with the ability to increase to 40 gigawatt
hours "in the future." In combination with a similar deal announced
with LG Energy Solutions (LGES) on 18 October, Stellantis says it
is now "well advanced" in the process of securing annual production
capacity for electric vehicle (EV) batteries. The plants coming
through both the Samsung SDI and LGES will meet the needs for
Stellantis plants in the US, Canada and Mexico, the company says.
This is part of the company's earlier announcement of investment of
EUR30 billion through 2025 into electrification and software
development. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Reliance Industries says that EBITDA grew 43.9% year on year
(YOY) in its oil-to-chemicals (O2C) business, to 127.2 billion
Indian rupees ($1.6 billion), in its fiscal second quarter ended 30
September. Quarterly sales for the sector were Rs1.2 trillion, up
58.1% YOY on the back of higher crude prices and increased volumes.
(IHS Markit Chemical Advisory)
In the polymers business, the company says that domestic
polymer demand rebounded during the quarter as COVID-19 related
restrictions eased. Overall polymer demand grew 14% on quarter on
quarter [QOQ] and 7% YOY. Polypropylene (PP), polyethylene (PE) and
polyvinyl chloride (PVC) prices increased YOY by 30%, 26% and 54%
respectively.
The company says PVC prices rose at the end of the quarter amid
availability issues due to tropical storm Ida in the US and
production restrictions on coal-based capacities in China due to
energy shortage. PVC margins over naphtha and ethylene dichloride
rose 3% YOY ($565/metric ton). PE margins over naphtha weakened by
11% ($426/metric ton). PP margins over naphtha remained stable
($532/metric ton). "However, margins were hurt quarter on quarter
due to strong feedstock prices and restart of US supply post arctic
freeze," the company says.
In intermediates, the company says markets witnessed healthy
recovery during the second quarter YOY and strong energy prices
supported growth. Para-xylene (p-xylene) prices grew by 72% YOY in
line with higher crude price. Prices of purified terephthalic acid
(PTA) increased by 78% YOY, in-line with firm p-xylene prices.
Monoethylene glycol (MEG) prices increased 52% YOY in line with
higher feedstock prices, and margins improved 27% YOY to
$238/metric tons due to firm polyester demand.
In the polyesters business, the company says that domestic
markets revived after the second COVID-19 wave in the first quarter
of this year in trend with the rise in manufacturing activities
across the country. Domestic polyester demand surged 41% QOQ and
39% YOY driven by firm retail demand and increased downstream
operating rates, it adds. Polyethylene terephthalate (PET) prices
increased by 47%, while margins declined by 36% YOY and 33% QOQ to
$101/metric tons with higher feedstock prices. Prices of polyester
fiber (PSF) increased by 38%, while margins declined by 78% YOY and
36% QOQ to $34/metric tons due to higher feedstock prices. It adds
that prices of polyester filament yarn (PFY) increased by 51% in
line with higher PTA and MEG prices, while margin declined by 5%
YOY and 15% QOQ to $191/metric tons.
The latest IHS Markit Flash Australia Composite PMI showed that
private sector output returned to expansion in October with the PMI
printing 52.2, up from September's final reading of 46.0. This was
the first expansion since June 2021, prior to when the Australian
economy was hard-hit by the latest COVID-19 Delta wave. (IHS Markit
Economist Jingyi Pan)
Input price inflation notably accelerated to the fastest on
record, supported by higher rates of price increases across both
manufacturing and service sectors in October. Higher input costs
were often associated with supply delays, as reflected in the
continued lengthening of suppliers' delivery times in the
manufacturing sector, which does not come as a surprise amid recent
reports of supply issues across the globe. As such, firms were
seeing both longer lead times and higher delivery costs which,
alongside issues of input shortages and higher wages, offered no
reprieve for the inflation situation in October.
Concurrently, output price inflation picked up from September
and printed the third-highest rate of inflation in the survey
history. The wider expectation remains one of transitory inflation
even as the June quarter saw inflation rising above the upper bank
of the RBA's 2.0%-3.0% target in Australia. That said, the first Q4
indication of prices once again spiking warrants further scrutiny
on where prices are headed for the Australia economy.
Posted 22 October 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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