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Major US equity indices closed higher after being lower for the
first half of the session, while European and APAC markets closed
mixed. US government bonds closed lower and most benchmark European
bonds were higher. European iTraxx and CDX-NA credit indices were
almost unchanged across IG and high yield. The US dollar and
natural gas closed higher, while oil, gold, silver, and copper were
lower.
Americas
Major US equity indices closed higher after being lower for
most of the day; Russell 2000 +2.3%, DJIA +0.6%, S&P 500 +0.5%,
and Nasdaq +0.1%.
10yr US govt bonds closed +1bp/1.63% yield and 30yr bonds
+4bps/2.35% yield.
CDX-NAIG closed flat/58bps and CDX-NAHY -3bps/302bps.
IHS Markit's AAA Tax-Exempt Municipal Analytics Curve (MAC)
yields improved by 1-2bps across the curve today, with maturities
three-years and shorter 6bps better week-over-week.
DXY US dollar index closed +0.3%/92.81.
Gold closed -0.5%/$1,725 per troy oz, silver -0.7%/$25.05 per
troy oz, and copper -2.1%/$3.98 per pound.
Crude oil closed -4.3%/$58.56 per barrel and natural gas closed
+1.9%/$2.62 per mmbtu.
Consumption of gasoline turned up last week, according to the
Energy Information Administration, but remained below what we
estimate to be a normal range, an indication of ongoing reduced
internal mobility. Meanwhile, passenger throughput at US airports
has continued to firm in recent days. Averaged over the last week,
and after seasonal adjustment, passenger throughput at US airports
was 66.1% of the January 2020 level. The recovery in air travel has
come a long way but has a long way yet to go. (IHS Markit
Economists Ben Herzon and Joel Prakken)
US seasonally adjusted (SA) initial claims for unemployment
insurance fell by 97,000 to 684,000 in the week ended 20 March, its
lowest tally since the pandemic first forced millions out of jobs
last March. The president signed the American Rescue Plan (ARP) Act
in March, which provides enhanced benefits of up to $300 per week
through 6 September 2021 and exempts the first $10,400 of benefits
from 2020 income taxes. (IHS Markit Economist Akshat Goel)
Seasonally adjusted continuing claims (in regular state
programs), which lag initial claims by a week, fell by 264,000 to
3,870,000 in the week ended 13 March. The insured unemployment rate
fell 0.2 percentage point to 2.7%.
In the week ended 6 March, continuing claims for Pandemic
Emergency Unemployment Compensation (PEUC) rose by 734,692 to
5,551,215. Even as continuing claims under regular state programs
continue to decline, continuing claims under PEUC have been on an
upward trajectory.
There were 241,745 unadjusted initial claims for Pandemic
Unemployment Assistance (PUA) in the week ended 20 March. In the
week ended 6 March, continuing claims for PUA rose by 118,898 to
7,735,491.
The Department of Labor provides the total number of claims for
benefits under all its programs with a two-week lag. In the week
ended 6 March, the unadjusted total rose by 733,862 to
18,952,795.
The Canadian Pest Management Regulatory Agency (PMRA) has
granted registration to the herbicide active ingredient, imazypyr,
and the end-use product, Habitat Aqua, for the control of certain
invasive plants that grow in and around aquatic sites. The
registration was proposed in December last year. The decision is
based on an evaluation of the information submitted in support of
registering the ai and the derived formulation, with the PMRA
stating that the health and environmental risks posed by the
products were found to be "acceptable". Imazapyr is already
registered in the country for control of weeds in non-cropland
sites, and in imazapyr-tolerant canola and lentil crops. (IHS
Markit Crop Science's Akashpratim Mukhopadhyay)
The Supreme Court of Canada ruled 25 March that the
government's pollution pricing regime, which includes a national
carbon tax, is constitutional. In a 6-3 decision, the court upheld
the carbon tax, saying the government has the right to set minimum
standards for GHG emissions, and it can set a floor price for
emissions to ensure those standards are met. As part of Canada's
commitment to the Paris Agreement, Prime Minister Justin Trudeau
set a 2030 target of cutting emissions to 30% below 2005 levels
ahead of reaching net zero in 2050. The carbon tax is a critical
component of that plan. It was introduced through the Greenhouse
Gas Pollution Pricing Act, which passed in June 2018. The tax on
fuels is set at C$30 (US$24) per ton of carbon dioxide equivalent
(CO2e), and set to rise annually to C$170 (US$135) in 2030. (IHS
Markit Climate and Sustainability News' Kevin Adler)
IHS Markit analyses the main banking indicators for Argentina,
Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and
Uruguay - the Dominican Republic and Panama were also added, given
their tight relationship with the region. Our key findings
highlight that credit growth has been contained; however, the sharp
decline in economic activity has affected profitability, and very
likely asset quality. (IHS Markit Banking Risk's Alejandro
Duran-Carrete)
Credit increased in 2020, aided by stimulus measures; although
growth was contained compared with previous years. In 2020, the
average credit growth in the region stood at 6.5% year on year
(y/y). The sharp economic decline of all these countries did not
lead to a credit contraction in most of the region because of the
lending incentives enacted by the regulations - such as lower
reserve requirements and open market operations.
Non-performing loans (NPLs) stayed very close to 2019 levels,
but these are likely to increase as forbearance measures are
retracted. NPLs stayed at an average 2.7% of total loans. Most of
these are at similar levels to those of 2019 due to the forbearance
measures instituted in these sectors.
Provisioning rose, affecting profitability. The coverage ratio
grew in all countries, going from an average of 154% of total NPLs
in 2019 to 185% in 2020. This was contributed to by banks' large
accumulation of reserves, given that they expect a rise in
impairment through 2021.
The sector's liquidity profile benefited from a surge in
deposits. The average deposit growth stood at 22.1% in 2020, up by
12.6 percentage points from 2019. This allowed the sector to
improve its liquidity figures, not only from the reduction of the
loan-to-deposit ratio (LDR) from an average of 91.8% in end-2019 to
81.3% in end-2020, which has historically been one of the main
warning indicators of the region (Argentina and Uruguay excluded),
but also by the significant accumulation in liquid assets.
Banks have been able to withstand a rapid contraction in
foreign liabilities, displaying resilience in their liability
profile, however, it is likely that this funding will return in
2021. During the second quarter of 2020 the region experienced a
significant withdrawal of foreign funds. Banks were able to cope
with these, aided by the small proportion that foreign funds
represented in their liabilities balance sheet.
Capital ratios remain high for most of the region and are
likely to remain robust over the short term. With an average
capital adequacy ratio (CAR) of 18.5% and an average Tier 1 ratio
of 17.8% as of end-2020, the region remains well capitalized.
Colombia's seasonally adjusted monthly economic activity index
contracted by 4.55% y/y in January. In addition to remaining well
below pre-COVID-19-virus pandemic levels, Colombia's economic
activity in January declined in monthly terms for the first time
since August 2020: -1.53% month on month (m/m). (IHS Markit
Economist Lindsay Jagla)
Agricultural activities and mining and quarrying (primary
activities) drove the annual contraction, declining by -7.83%. The
decline in manufacturing and construction (secondary activities)
followed closely at -7.09%.
Tertiary activities, which include a variety of activities such
as utilities management, retail, and hospitality services,
contracted slightly less at -2.79% y/y.
Nissan has announced the temporary suspension of operations at
its factory in Resende, Rio de Janeiro state, Brazil, for two weeks
between 26 March and 9 April because of the worsening of the
COVID-19 virus pandemic in the country, reports Automotive
Business. The automaker is to grant collective vacations to
employees at the plant for the period of the suspension of
operations, before resuming production on 12 April. (IHS Markit
AutoIntelligence Tarun Thakur)
Europe/Middle East/Africa
European equity markets closed mixed; France/Germany +0.1%,
Italy flat, Spain -0.4%, and UK -0.6%.
Most 10yr European govt bonds closed higher; Germany -3bps,
France/UK -2bps, Italy -1bp, and Spain flat.
iTraxx-Europe closed +1bp/55bps and iTraxx-Xover
+2bps/271bps.
Brent crude closed -3.8%/$61.80 per barrel.
RWE has made the financial investment decision to proceed with
the 1.4 GW Sofia offshore wind farm project. The project, situated
in the Dogger Bank area 195 kilometers from the North East cost of
the United Kingdom, is fully owned by RWE with a total investment
of approximately GBP 3 billion (USD4.1 billion). Construction is
due to start in 2023 with completion targeted for Q4 2026. The
project has been awarded a Contract for Difference (CfD) in 2019,
with strike price of GBP 39.65 per MWh. Contracts with preferred
suppliers are expected to be finalized shortly with the following
companies (IHS Markit Upstream Costs and Technology's Melvin
Leong):
Offshore converter stations: Consortium of Sembcorp Marine and
GE Renewable Energy's Grid Solutions, two HVDC converter
stations.
EPCI, Monopile foundations, array cables, logistics hub: Van
Oord
High voltage cables: Prysmian Group, includes both submarine
and land export cables. Installation by Prysmian with installation
vessel Leonardo da Vinci.
Dairy product exports from the UK to the EU saw a 96% decline
y/y, as businesses rushed to complete deals earlier to avoid
shipping issues anticipated in January, according to AHDB. January
2021 exports of milk products totaled 2,000 tons, compared to
103,000 tons exported in the same month last year. The largest drop
in exports was seen in the fermented product (buttermilk and
yogurt) and whey categories, which fell by 89% and 98%
respectively. The drop is partly the result of added difficulties
and costs associated with trading with the EU, particularly for
fresh milk and cream. However, lower demand due to the pandemic,
combined with issues around availability of shipping containers,
has been the main reason for lower shipments. This can be seen in
the drop off in exports to non-EU markets, which were down 27% over
the same 4-month period. (IHS Markit Food and Agricultural
Commodities' Jana Sutenko)
Mercedes-Benz Trucks has outlined details of the field testing
program for its eActros battery electric vehicle (BEV). It
undertook a joint testing program with longstanding customer
Logistik Schmitt in the Northern Black Forest since 2019. During
this period the 25-tonne prototype eActros has completed 50,000 km
of purely battery-electric operation to date - over 5,000 trips. As
a result of the successful testing program Mercedes-Benz Trucks
will deliver enhanced near-series production eActros to Logistik
Schmitt in the next few months for further testing. (IHS Markit
AutoIntelligence's Tim Urquhart)
Welcon has clinched a deal to supply 140 offshore wind turbine
towers to Siemens Gamesa Renewable Energy (SGRE). The towers to be
supplied will be for the Hollandse Kust Zuid project in the
Netherlands (78 towers), Kaskasi in Germany (38), and Neart na
Gaoithe in the United Kingdom (24). The earliest delivery will be
at the end of 2021 for the former, with the rest of the towers in
2022 for the later projects. The order will drive Welcon to expand
capacity and capability for tower production at its facility in
Give, Denmark. (IHS Markit Upstream Costs and Technology's Melvin
Leong)
France's business sentiment index based on the INSEE survey has
gained by 7 points to 97 in March, approaching its long-term
average of 100 and reaching its highest level since February 2020
(then 105; see chart below). The index is quite sensitive to
changes in COVID-19 virus-related restrictions, suggesting that the
announcement on 18 March of an upcoming tightening of rules will
have a negative impact next month (the latest survey responses were
collected between 26 February and 22 March). (IHS Markit Economist
Timo Klein)
Baker Hughes and Horisont Energi have signed a MoU for the
Polaris carbon storage project off the northern coast of Norway.
Under the agreement, the two companies will explore the development
and integration of technologies to minimize the carbon footprint,
cost and delivery time of carbon capture, transport and storage
(CCTS). Horisont Energi's Polaris offshore carbon storage facility
is part of its Barents Blue project, which is the first global and
full-scale carbon neutral ammonia production plant. The Polaris
project is expected to have a total carbon storage capacity in
excess of 100 million tons, which is equivalent to twice Norway's
annual greenhouse gas emissions. Horisont Energi's Polaris offshore
carbon storage facility is part of its Barents Blue project, which
is the first global and full-scale carbon neutral ammonia
production plant. (IHS Markit Upstream Costs and Technology's Helge
Qvam)
Finland's consolidated general government (comprising of the
central and local governments and the social security funds)
revenues in the fourth quarter of 2020 decreased by a slightly
decelerated rate of 2.2% year on year (y/y), while the sharper fall
in the second quarter left the contraction for the year as a whole
at 3.1%. Meanwhile, expenditure growth in the final quarter
re-accelerated to 6.6% y/y, increasing the 2020 spending to 5.2%.
(IHS Markit Economist Venla Sipilä)
South Africa's headline inflation rate slowed to 2.9% in
February, from 3.2% in the previous month, the South African
statistical service, Statistics SA, has reported. This leaves South
Africa's headline inflation rate below the central bank's inflation
target range of 3-6%. A modest uptick in medical fund premiums
compared to previous years was mostly responsible for the favorable
headline inflation outcome during February. Large private-sector
medical funds reported a strong improvement in operating surpluses
during 2020 as members avoided doctors' appointments and
less-urgent operations during the first COVID-19 lockdown period.
The stronger cash position will allow medical funds to contain
premium increases during the first half of 2021. (IHS Markit
Economist Thea Fourie)
Asia-Pacific
Most APAC equity markets closed mixed; Japan +1.1%, South Korea
+0.4%, Australia +0.2%, Hong Kong/Mainland China -0.1%, and India
-1.5%.
China's ride-hailing giant Didi Chuxing (DiDi) is reportedly
inclined towards picking New York (US) over Hong Kong SAR for its
initial public offering (IPO). DiDi has concerns that the its IPO
application in Hong Kong SAR could meet with tighter regulatory
inspection, especially in the context of using unlicensed vehicles
and part-time drivers, reports Reuters. It sees a New York IPO as a
more predictable listing place, and it offers a deeper pool of
capital. According to the report, If DiDi selects New York, it may
still go for a second listing in Hong Kong SAR. DiDi is seeking at
least a USD100-billion valuation; given the high valuation target,
it is expected to opt for a traditional IPO rather than listing
through a special purpose acquisition company (SPAC). (IHS Markit
Automotive Mobility's Surabhi Rajpal)
China's Hesai technology will supply its LiDAR sensors to
autonomous truck startup Kodiak Robotics, reports Reuters. LiDAR
sensors are necessary for the operation of autonomous vehicles
(AVs) as they measure distance via pulses of laser light and
generate 3D maps of the world around them. Kodiak will integrate
Hesai's LiDAR sensors on each side of its trucks and will use one
forward-facing LiDAR by Luminar. Kodiak Robotics focuses on
developing AV technology for long-haul trucking. In August 2019, it
received USD40 million in funding and began its first commercial
deliveries in Texas (United States). (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Tesla raised the price of the Model Y in China on 24 March. The
price for the Model Y Long Range All-Wheel Drive has increased by
CNY8,000 (USD1,224) to CNY347,900 while the Performance variant is
priced at CNY377,900, compared to CNY369,900 before the adjustment.
(IHS Markit AutoIntelligence's Abby Chun Tu)
Vitesco Technologies, recently spun off from Continental, has
announced an order from Hyundai Motor Group for an 800-volt
inverter with silicon carbide technology for the automaker's
upcoming E-GMP platform. The announcement does not indicate whether
Vitesco is the sole supplier for the platform, although at this
point no other supplier has been named. Of interest as well is the
selection of 800-volt and silicon carbide technology by Hyundai;
the more advanced technology charges faster than 400 volts but is
also more expensive in the vehicle as well as at charging stations
(supporting distribution of electricity to take advantage of the
800v capacity requires more robust charging stations and faster
electricity throughput) and, depending on application, can see
lower range. (IHS Markit AutoIntelligence's Stephanie Brinley)
HHI Holdings has signed a deal with Korea Investment Corp.
(KIC), South Korea's sovereign wealth fund, to jointly invest
USD900 million (KRW1.0 trillion) towards mergers and acquisitions
of global companies to strengthen the Group's competitiveness.
Under the deal, HHI Holdings will seek acquisitions of companies in
areas of AI, robots, remote autonomous ships, and hydrogen fuel
cells. HHI is currently pushing to close the merger with DSME. (IHS
Markit Upstream Costs and Technology's Jessica Goh)
Shareholders of LG Electronics approved the spin-off of an
electric vehicle (EV) powertrain unit to set up a joint venture
(JV) with Canadian auto component supplier Magna International,
reports Korea JoongAng Daily. LG's EV powertrain business will be
spun off from the vehicle component division as a wholly owned
subsidiary. Magna will eventually buy a 49% stake, while LG will
own the remaining 51% stake. The JV will tentatively be named LG
Magna e-Powertrain and is slated to be launched in July. It will be
headquartered in Incheon, Gyeonggi, South Korea, with more than
1,000 workers now working for LG. (IHS Markit AutoIntelligence's
Jamal Amir)
Vietnamese automaker VinFast has started accepting orders for
its first electric vehicle (EV), the VF e34, at a price of VND690
million (USD29,802), according to a company press release.
Customers who order the vehicle from now until 30 June can buy it
at a reduced price of VND590 million, in addition to receiving one
year's free battery subscription. The VF e34 was introduced in
January as the VF31, alongside the larger VF32 and VF33, which have
been confirmed for export sale. (IHS Markit AutoIntelligence's
Jamal Amir)
Australia saw 7 GW of renewable energy capacity additions in
2020, the country's highest single year of additions, according to
a report released by the country's Clean Energy Regulator earlier
in March. The 7 GW was nearly 40% higher than 2019's total, as well
as exceeding the regulator's projection of 6.3 GW for the year. The
jump was driven in part by an increase in rooftop solar
installations and partially by several utility-scale solar and wind
projects coming online at the end of 2020, ahead of their scheduled
start-up dates in early 2021, said David Parker, chair of the Clean
Energy Regulator. (IHS Markit Climate and Sustainability News'
Bernadette Lee)
Posted 25 March 2021 by Chris Fenske, Head of Fixed Income Research, Americas
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