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US equity markets closed higher and near the peak levels of the
day, while APAC and European markets were mixed. iTraxx and CDX
high yield credit indices continued to come under pressure in both
Europe and the US, while IG indices closed almost flat. Benchmark
European government bonds closed mixed, while US bonds and the
dollar were both modestly higher. Gold, silver, and WTI/Brent were
all lower on the day.
Americas
US equity markets closed higher on the day; Nasdaq +2.3%,
S&P 500/Russell 2000 +1.6%, and DJIA +1.3%. The S&P ended
the week -0.6% vs last Friday's close, which is its fourth
consecutive week of losses.
10yr US govt bonds closed -1bp/0.66% yield and 30yr bonds
-1bp/1.40% yield.
CDX-NAIG closed +1bp/59bps and CDX-NAHY +7bps/399bps.
DXY US dollar index closed +0.2%/94.58.
Gold closed -0.6%/$1,855 per ounce and silver closed
-0.5%/$23.09 per ounce.
Crude oil closed -0.1%/$40.25 per barrel.
California is seeing early signs of rising virus case counts
and emergency-room visits after several weeks of improvement, with
forecasts showing that hospitalizations may jump 89% in a month,
according to a top health official. Some of the uptick may be tied
to an increase in infections over Labor Day weekend, Mark Ghaly,
California's health and human services secretary, said at a
briefing Friday. (Bloomberg)
US manufacturers' orders for durable goods rose only 0.4% in
August following large gains over the prior three months that
reversed most of the precipitous spring decline. Orders and
shipments of core capital goods were both robust, and inventories
declined less than we assumed. (IHS Markit Economists Ben Herzon
and Lawrence Nelson)
In response to the details in this report that inform our GDP
tracking, we raised our estimate of third-quarter GDP growth by 0.5
percentage point to a 30.1% annualized rate of increase.
Both orders and shipments of durable goods in August were close
to their pre-pandemic trends, with orders only 3.5% below the
six-month average in February and shipments only 0.8% below the
six-month average in February.
Orders and shipments of core capital goods, key drivers in our
estimates of equipment spending in the National Accounts, have both
risen above their pre-pandemic trends. This suggests that equipment
investment plans may have been delayed by the pandemic rather than
canceled. A few more months of data will clarify this point.
In response to unexpected strength in core orders and
shipments, we raised our estimate of growth of equipment spending
in the third quarter by almost 8 percentage points to 59.0% (annual
rate). This would essentially reverse the second-quarter
decline.
Inventories of durable goods declined 0.1% in August, less of a
decline than we had assumed based on our estimates of how fast
inventories will need to be pared in the near term for businesses
to maintain a desirable ratio of inventories to sales. The
unexpected strength in manufacturers' durable inventories raises a
risk that our assumptions for inventories in other sectors are also
too weak. We will find out next Tuesday!
Electric vehicle (EV) charging network ChargePoint is planning
to go public through a transaction with special-purpose acquisition
company Switchback. According to an Automotive News report, the
acquisition deal values ChargePoint at USD2.4 billion and the deal
is expected to be closed at the end of 2020. Under the deal, the
new company is to be named ChargePoint Holdings and its shares are
to be traded on the New York Stock Exchange. Switchback CEO Scott
McNeill is reported as saying, "The EV charging industry is
accelerating and it is expected that charging infrastructure
investment will be $190 billion by 2030. We believe (ChargePoint)
will continue to grow its strong market position as the EV industry
evolves." The deal will reportedly raise about USD493 million in
proceeds, which ChargePoint will use to expand in North America and
Europe. The USD493 million includes USD225 million from other
institutional investors. Following the acquisition, current
ChargePoint CEO Pasquale Romano will continue in that role. Romano
is reported as saying, "Being ready to be public means that you're
investing in scaling the platforms you already have because this
addressable market is very, very large." ChargePoint reportedly
operates more than 115,000 charging ports globally and has said
previously that it is looking to reach 2.5 million charging points
by 2025. As automakers continue to introduce new EVs, there is
expected to be a growing need for a robust public charging network.
ChargePoint's move to become a publicly traded company suggests
that the investment industry may have an increased interest in such
businesses, which may contribute to the growth of the number of EV
charging stations and help to increase EV demand and use of public
chargers. (IHS Markit AutoIntelligence's Stephanie Brinley)
Overall US food price inflation is now forecast rise more than
expected in 2020 as price increases seen as a result of the
COVID-19 pandemic have been slow to decline, according to the
latest update from USDA's Economic Research Service (ERS). (IHS
Markit Food and Agricultural Policy's Roger Bernard)
US food price inflation in 2020 is now seen at 2.5% to 3.5%, up
from 2% to 3% ERS forecast one month ago.
Food away from home (restaurant) prices are now seen rising
from 2% to 3%, up from a level of 1.5% to 2.5% that they saw in
August. "Prices have been relatively slow to retreat from the highs
reached as a result of the pandemic, so some forecasts have been
revised upward this month," ERS said.
However, despite food price forecasts for individual
commodities being adjusted upward this month, USDA did not change
their grocery store price forecast from the current 2.5% to 3.5%
level.
So far in 2020, USDA said that grocery store prices have risen
3.3% while restaurant prices are up 2.6% compared to the same
period in 2019.
The overall food price inflation has averaged 3% so far in 2020
compared with 2019.
Of all of the food categories tracked by ERS, beef prices are
up 10.5% while fresh fruit prices have fallen 1.4%.
ERS increased their forecasts for 8 of the 22 CPI categories
for 2020 while the outlook for egg prices has been revised down
from prior forecast levels.
"Meat prices have continued to decline, but the pace at which
they are declining is not fast enough to achieve average 2020
prices below pre-COVID-19 levels," ERS said. They pointed to beef
and veal prices decreasing 8.2% from June to July 2020 and another
4.6% from July to August, but as noted, so far their year they are
up 10.5% from 2019 levels.
Similarly, pork prices are down 1.1% in August compared with
July, but remain 6.1% above year-ago, while poultry prices are
still 5.1% above year ago despite easing 0.2% in August compared
with July."Slaughterhouses have recouped much of the lost slaughter
capacity that occurred as a result of the pandemic, and prices are
expected to continue to decrease through 2020," ERS said.
"However, they will likely decrease at a slower rate than they
did this spring." As for egg prices, USDA now expects those to rise
6% to 7% in 2020, down from their month-ago outlook for an increase
of 7% to 8%. "Egg prices reached a high in April 2020 but have been
trending downward in the months since," USDA observed. "These
declines are influenced at least in part by decreased demand from
foodservice."
USDA has kept its forecasts for food prices in 2021 steady this
month compared with their release in August, forecasting overall
food prices to rise 2% to 3% with increases of 1.5% to 2.5% for
restaurant prices and 1% to 2% for grocery store prices. USDA made
no adjustment to price forecasts within the various commodities
they track relative to food prices.
Mexico's central bank yesterday (24 September) cut the policy
rate from 4.50% to 4.25% in an effort to support the economy as it
is recovering only very slowly. (IHS Markit Economist Rafael Amiel)
The central Bank of Mexico (Banco de México: Banxico) yesterday
(24 September) cut the policy rate by 25 basis points to 4.25%. At
each of its previous five meetings it had cut the rate by 50 basis
points.
By slowing the pace of the rate cuts, Banxico is implicitly
acknowledging that there is not much room for additional reductions
as inflation has increased; as of mid-September it amounted to
4.1%.
This is the 11th rate cut in as many meetings since August 2019
and the sixth during the COVID-19 virus pandemic. At the beginning
of this year the policy rate stood at 7.25%, while inflation was
2.8%.
Deteriorating economic and financial conditions have prompted
further action from Mexico's monetary authority. Back in April,
Banxico announced additional measures to strengthen credit
channels, provide liquidity, and foster an orderly functioning of
financial markets. Combined with measures previously announced, the
monetary stimulus now amounts to MXN750 billion (USD30.7 billion),
or 3.3% of GDP.
In terms of risks, the bank has not changed its view
significantly and points to several upside risks: a further
depreciation of the exchange rate; increases in costs due to the
disruption of supply chains, which may lead to scarcity of some
goods; higher costs related to extraordinary sanitary measures
needed because of the COVID-19 virus outbreak; and persistently
high core inflation.
Banxico also highlights downside risks to inflation: widening
slack of the economy; lower global/external inflationary pressures;
and social-distancing measures, which will further reduce demand
for services.
Data for July on retail sales, construction, and sales of
services show that the pace of the recovery remains slow. Although
all three of these indicators expanded in July compared with June,
they were all still significantly below their July 2019 values, by
at least 10%.
Another 25-basis-point cut would make the real policy rate
(nominal minus inflation) negative; at IHS Markit we assess that
the bank does not want to be in this position. Moreover, the bank
will factor in the possibility of capital outflows due to low
interest rates; this in turn may prompt the depreciation of the
Mexican peso, which may pass through onto domestic prices and fuel
inflation.
The below chart is historical 5yr Mexico CDS spreads from IHS
Markit's Price Viewer portal and indicates that spreads have
widened almost 60bps since 2 Sept.
Audi has launched a subscription program called Audi Luxury
Signature for renting 0-km cars for up to 24 months, reports
Automotive Business. According to the source, the subscription will
include monthly payments of around BRL10,000 (USD1,796.6) which
include Motor Vehicle Property Tax (IPVA), insurance, 24-hour
vehicle assistance, and regular maintenance. Customers will have
the option to purchase the vehicle at the end of the contract along
with a 12% discount on the Fipe table quote (a valuation table of
average vehicle prices announced by sellers in the domestic market,
which serves as a parameter for negotiations on vehicles). The
vehicles can also come with armor (bullet-proofing), for a higher
price. The vehicles can be rented via Audi dealerships, while the
lease will be made by Fleet Solution, a fleet management partner
company. As a part of the pilot signature program, 20 vehicles,
including Q8, A6, A7 and the E-Tron electric sport utility vehicle
(SUV) will be placed on the program until December 2020. Johannes
Roscheck, president of Audi in Brazil said, "It is the first time
we have done this, there is nothing similar to Audi anywhere in the
world. So, we have established a small number of vehicles to start
with. It may seem small, but 20 cars make a big impact for us. With
this we can give more attention to customers and thus learn from
the program. If it works well, we can extend this format to other
Audi cars, including cheaper ones." He added, "After this pilot, we
will also be able to offer other plans, such as 12 or 36 months."
This initiative is aimed at offering flexible payment options to
high-end vehicle buyers. In the conditions of the subscription, if
a customer withdraws from the rental program before 12 months, the
contract provides for a fine equivalent of 50% of the remaining
payments, and if the withdrawal occurs after that, then the fine is
equivalent to 35% of the rent due. (IHS Markit AutoIntelligence's
Tarun Thakur)
Europe/Middle East/Africa
Most European equity markets closed lower except for UK +0.3%;
Italy/Germany -1.1%, France -0.7%, and Spain -0.2%.
10yr European govt bonds closed mixed; UK/Germany -3bps, France
-2bps, Spain flat, and Italy +2bps.
iTraxx-Europe closed flat/62bps and iTraxx-Xover
+4bps/360bps.
Brent crude closed -0.1%/$42.41 per barrel.
Industry's reactions to the UK government's new Job Support
Scheme have been mixed. The most exposed sectors to the COVID-19
virus shock, namely hospitality, events, accommodation, and retail,
want better-targeted assistance to prevent mass redundancies after
the furlough scheme ends. (IHS Markit Economist Raj Badiani)
A new support plan to try to stop mass redundancies has been
announced in the aftermath of the government's introduction of
tighter COVID-19 virus protocols to tackle the rise in COVID-19
cases.
The government has addressed the impact of its Coronavirus Job
Retention Scheme (furlough) ending on 31 October 2020. The furlough
scheme currently entails the government paying 70% of wages up to a
maximum cap of GBP2,187.50 for a furloughed worker per month.
Employers will top up employees' wages to ensure that they receive
80% of their wages (up to GBP2,500 per month).
The furlough scheme is still likely to cover about 3 million
workers by the end of October from a peak of 9.6 million during the
height of the national lockdown. The scheme has cost a
lower-than-expected GBP36 billion in April-August.
Chancellor of the Exchequer Rishi Sunak has announced a new
replacement scheme to subsidize workers who work at least one-third
of their usual hours while demand remains subdued. The scheme will
begin on 1 November 2020 and will run for six months. Details of
the new scheme are as follows:
The government and the employer will each cover one-third of
the lost pay due to hours not worked. The state subsidy will be
capped at GBP697.92 per month. Clearly, the new scheme will reduce
the burden on the taxpayer while asking employers to pay more to
support jobs affected by the COVID-19 virus pandemic.
Employees unable to work any of their normal hours will not be
eligible.
All small and medium-sized enterprises (SMEs) can apply, while
larger businesses can participate if they can demonstrate falling
turnover during the COVID-19 virus crisis.
The scheme will be open to employers across the UK even if they
have not used the furlough scheme.
At the end of the furlough scheme, the level of state subsidy
will be at 60% of wages for people not at work. This will fall to a
maximum of 22% under the new wage subsidy scheme, with Treasury
sources suggesting that the scheme will cost GBP1 billion per month
if 3 million workers join the scheme.
Companies can also claim a GBP1,000 Job Retention Bonus per
worker if they retain workers returning from the furlough scheme
until the end of January 2021.
Restaurants, hotels, and cinemas' reduced VAT from the usual
20% to 5% has been extended by several months to 31 March 2021, at
an estimated cost of GBP835 million.
Industry's reactions to the government's new Job Support Scheme
are mixed. The most exposed sectors to the COVID-19 virus shock,
namely hospitality, events, accommodation, and retail, want
better-targeted assistance.
Some business leaders even argue that the new wages scheme
increases the likelihood of mass redundancies at the end of
October. Worryingly, Rob Paterson, CEO of Best Western Hotels GB,
notes that the hourly rate for workers on the new scheme will
increase by keeping them for 33% of the time and paying them 55% of
their wages.
Passenger car production in the United Kingdom dropped by 44.6%
year on year (y/y) during August, according to the latest data
published by the Society of Motor Manufacturers and Traders (SMMT).
Output dropped from 92,153 units in August 2019 to 51,039 units in
August. Of this total, 43,244 units were designated for exports, a
decline of 41.1% y/y, and 7,795 units were for domestic sale, down
by 58.3% y/y. (IHS Markit AutoIntelligence's Ian Fletcher)
Volumes in the year to date (YTD) were down by 40.2% y/y to
518,092 units, exacerbated by the stoppages caused by the COVID-19
virus pandemic earlier in the year.
According to the SMMT, commercial vehicle production also
dipped during August, declining by 11.5% y/y to 4,915 units. Of
this total, the number of vehicles built for exports dropped by
29.6% y/y to 2,546 units, although those for domestic sale rose by
22.3% y/y to 2,369 units.
Output of vehicles in this category was down by 20% y/y in the
YTD to 36,570 units.
Although the big difference in the data this month relates to a
higher base of comparison in August 2019 owing to maintenance
stoppages earlier in the year to compensate for the threat of a
no-deal Brexit, the SMMT has suggested that the industry is also
seeing a stalled increase in production following the COVID-19
virus stoppages.
IHS Markit currently expects that production in 2020 will fall
by 33.6% y/y to under 867,700 units, although light commercial
vehicle (LCV) production will grow by 16.8% y/y to 65,400 units as
Groupe PSA's Luton site surpasses 2019 output levels.
Portfolio company Fieldwork Robotics is to develop a
cauliflower harvesting robot in collaboration with the giant
vegetable processor Bonduelle. "Bonduelle has a strong commitment
to sustainable and diversified agriculture in all of the
territories where we operate globally," Claudine Lambert, Group
Agronomy Director, Bonduelle Prospective & Development said,
"New technologies can play an important part in meeting that
commitment, so we are delighted to be collaborating with Fieldwork
Robotics and excited by the potential of its agricultural robots".
Fieldwork, a spin-out from the University of Plymouth, will
initially work on the detection and soft robotics technology with a
view to creating an early-stage prototype during the second year of
the collaboration. Bonduelle will provide access to fields and its
expertise in vegetables and knowledge of different growing and
harvesting conditions. Co-founder Dr Martin Stoelen's, lecturer in
robotics at the University of Plymouth and Associate Professor at
the Western Norway University of Applied Science, initially started
working on mechanical cauliflower harvesting within a project
funded by Agri-Tech Cornwall and by the European Regional
Development Fund. This is the second application of Fieldwork's
flexible and patented agricultural robot technology to gain food
industry backing after a raspberry-harvesting robot realized in
collaboration with Hall Hunter Partnership, one of the UK's biggest
soft fruit producers. Fieldwork has raised GBP318,000 (USD347,000)
so far this year to accelerate development and scale up of the
technology. It has also been supported by a GBP547,250 Innovate UK
grant as part of a GBP671,484 project to develop a multi-armed
robot prototype. (IHS Markit Food and Agricultural Commodities'
Cristina Nanni)
Calgon Carbon (Moon Township, Pennsylvania), a subsidiary of
Kuraray, has decided to expand the production of reactivated carbon
at Feluy, Belgium. The company intends to expand the capacity by
11,000 metric tons/year and the operations are due to start in the
second half of 2022. Reactivated carbon is activated carbon that
was previously used, but subsequently reactivated. It is produced
from materials such as bituminous coal and coconut shells. In
recent years, the use of activated carbon has become increasingly
widespread, particularly for applications related to the
environment, including water and air purification. In Europe,
especially, demand for reactivated carbon is growing for industrial
applications, such as gas emission treatment and wastewater
purification, bolstered rising environmental awareness, including
stricter environmental regulations, sustainable use of natural
resources, and reduction of carbon dioxide emissions.
Evonik Industries says it will carve out its baby care
business, which makes superabsorbent polymers for diapers and
hygiene products, and tells CW it is "checking strategic options
for the business including a sale or a partnership." Bernstein
Research (London, UK) expects a deal to be finalized by summer
2021. It says that Evonik may generate €400-450 million ($467-525
million) in proceeds from a sale of the superabsorbents business.
Evonik's superabsorbents business "has a workforce of about 800
employees," the company says. Bernstein notes that Evonik
transferred the business recently from its nutrition and care
division to its performance materials division, where it is
prioritizing efficiency and cash flow. The decision to sell the
baby care business is in line with Evonik's strategy to become a
100% specialty chemicals company, Bernstein says. Evonik took a big
step toward that goal last year when it divested its methacrylates
business to private equity firm Advent International. Evonik
competes with BASF, LG Chem, Nippon Shokubai, and Sanyo Chemical in
the superabsorbents market. Evonik is estimated to be the
third-biggest player. Meanwhile, Shokubai and Sanyo are planning to
merge, but put those plans on hold last April due to COVID-19.
The French and Spanish governments plan to collaborate on the
development of automated and connected driving, reports Europa
Press. The governments of the two countries have signed a
memorandum of understanding (MOU) on automated and connected
driving aimed at strengthening collaboration on the development of
this type of vehicle technology. José Luis Ábalos, Spanish minister
of transport, mobility and urban agenda, said that "automated and
connected driving is a tool that improves mobility, safety and
accessibility". He added that "this memorandum is a great step to
join efforts between Spain and France in achieving greater
interoperability of systems and regulations in areas such as the
development of uses in the field of shared mobility and the
introduction of 5G connectivity in transport". According to the
news source, Spanish Minister of the Interior Fernando Grande
Marlaska provided assurance on co-operation between research
projects and facilitation of cross-border autonomous driving tests.
The MOU on automated and connected driving is aimed at basing the
development of automated and connected driving for the benefit of
citizens, ensuring the accessibility of the technology. Spain has
been at the forefront of mobility development. (IHS Markit
Automotive Mobility's Tarun Thakur)
After stagnating in August, Czechia's economic sentiment
indicator strengthened markedly in September, even as the rise in
new coronavirus disease 2019 (COVID-19) cases triggers new
restrictions. (IHS Markit Economist Sharon Fisher)
Czechia's economic sentiment indicator jumped to a six-month
high in September, boosted by month-on-month (m/m) improvements in
services, construction, consumer, and trade confidence. Only
industrial confidence deteriorated, affected by expectations of a
decline in production over the next three months.
In a year-on-year (y/y) comparison, the economic sentiment
indicator was still down sharply, pulled downwards mainly by
worsening services, consumer, and construction confidence. Only
retail trade confidence has returned to year-earlier levels.
Services have been hit the hardest by the COVID-19 virus
pandemic, and the m/m surge in September was an encouraging sign,
boosted by improvements in the assessment of demand, both currently
and over the next three months. The latest survey also indicates
that Czech consumers' concerns about household finances and
inflation are diminishing.
Although the latest confidence data were broadly encouraging,
the September survey was conducted up until 17 September and
therefore only partially captures the current epidemiological
situation. In recent weeks, the number of daily confirmed cases has
heightened considerably, reaching 1,272 on average from 8-15
September before surging to 2,072 from 16-23 September.
As per IHS Markit's Commodities at Sea, total coal imports into
Pakistan in the first eight months of 2020 is calculated at 10.1mt,
up 7% year on year. Imports from South Africa and Indonesia
marginally declined from previous year levels to 7.3mt and 2mt,
respectively. However, the arrival of coal vessels increased from
Russia from just a handysize vessel to 850kt for the reported
duration. Most of the Russian coal was loaded at the Taman terminal
which is in the Zhelezny Rog Port. Pakistan has domestic gas demand
of around 6-7bcf/day, however domestic supply is of 3-4bcf/day
which leads to shortages to industrial units, power plants as well
as households. There was increased electricity demand in the
country because of higher HDDs during Feb 2020 and then higher CDDs
since April this year. However, increased electricity demand in
absence of enough gas supplies was met by imported coal. During Aug
2020, total electricity generation in Pakistan was 14.6TWh, and out
of which fuel mix of coal, hydro, domestic gas, and RLNG was
17percent (versus 13% a year ago), 37% ( versus 40%), 10% (versus
12%) and 26% (versus 23%), respectively. Apart from power plants,
other big consumers of imported coal are the cement factories in
the country. Due to the COVID-19 pandemic, cement dispatches
underwent a sharp decline during Mar-May 2020; however, in June
2020 there was an increase in dispatches versus previous year
levels. Overall, during the first half of 2020, total cement
dispatches to domestic as well as international market stood at
26.5mt, almost at previous year levels. Pakistan's cement factories
have a total installed capacity of 69mtpa. For 3Q20 total coal
imports into Pakistan are forecasted at 3.7mt at previous year
levels. For 4Q2020, coal imports on the back of increased demand
from power as well as from the cement sector are forecasted at
5.4mt (up 0.5mt y-o-y). For full 2020, total coal imports into
Pakistan is calculated at 16.9mt, up 1.2mt y-o-y. (IHS Markit
Maritime & Trade's Rahul Kapoor and Pranay Shukla)
The Central Bank of the Republic of Turkey (TCMB) has surprised
markets with a 400-basis-point hike to the main policy rate, the
one-week repo rate. The bank has taken this action to stem the
depreciation of the lira, which has lost more than 12% of its value
against the US dollar since the end of July. Coming sooner than
expected, the rate hike may stave off a more aggressive similar
move to the one taken in September 2018. (IHS Markit Economist
Andrew Birch)
At its regularly scheduled meeting on 24 September, TCMB's
monetary policy committee (MPC) raised its main policy rate, the
one-week repo rate, to 10.25%.
In its press release alongside the move, the TCMB admitted that
inflation has been following a "higher-than-envisioned path",
forcing the MPC to significantly tighten monetary policy to combat
inflationary expectations and reduce risks to the outlook. The TCMB
pointed to a faster-than-expected economic recovery, rapid credit
growth, and "financial market developments" as the causes of
elevated inflation.
The TCMB was not expected to take any action at the meeting.
IHS Markit had not included a rate move in September, expecting
that the bank would continue to rely on backdoor monetary policy
tightening to stem the recent slide of the lira.
Since early August, the TCMB has increasingly shifted its
funding of the market from the main policy rate - the one-week repo
rate - to the late liquidity window. Instead of funding the market
primarily at the 8.25% repo rate, the TCMB was pushing out more
funding at the 11.25% late liquidity rate. Thus, the average rate
of funding rose from about 8% as of early August to 10.6% in the
days before the 24 September MPC meeting.
With the higher rate of funding, commercial bank interest rates
across the board have been rising in recent weeks. Previously,
since mid-2019, the funding, policy interest, and commercial bank
rates had fallen precipitously as the TCMB prioritized recovering
economic growth over ensuring lira stability.
As a result, the one-week repo rate had fallen below the
prevailing rate of annual inflation as of January 2020, exposing
the lira to greater volatility. By May, most commercial bank
interest rates were also below the prevailing inflation rate.
At best, this move will stave off further, sharp depreciation
over the next weeks, but we do not believe that it will be enough
to provide stability for a month or more. Even with the rate hike,
the one-week repo rate remains well below the prevailing annual
inflation rate, which was 11.8% as of August.
Immediately after the decision, the lira rallied against the US
dollar, rising back to TRY7.6:USD1.0 from closer to TRY7.7:USD1.0.
However, it is unlikely that this rate hike will be enough to spark
a long rally.
David Satterfield, the US ambassador to Turkey, warned this
week that US pharmaceutical companies could abandon the Turkish
pharmaceutical market if debts owed by the public healthcare system
are not met. According to various Turkish and international news
sources including Reuters, David Satterfield told an online trade
conference that Turkey's state hospitals owe global pharmaceutical
and other medical supplies companies approximately USD2.3 billion
in unpaid, or only partially paid, bills. This reportedly reflects
an increase from debt that stood at USD230 million last year.
Satterfield added that US Commerce Secretary Wilbur Ross had raised
the issue with Turkish President Tayyip Erdogan and other
government officials a year ago, and that despite assurances that
prompt payments would be made, the debts have escalated. Reuters
cites the ambassador, who reportedly warned that, "Companies will
consider departing the Turkish market or will reduce exposure to
Turkish market. This is not a direction which serves the interests
of Turkey." Late payment of debts has become increasingly common in
Turkey since 2018, due to increasing fiscal constraints on the
healthcare system following sharp currency devaluation and Turkey's
widening budget deficit. (IHS Markit Life Sciences' Sacha
Baggili)
On 22 September Zambia's Ministry of Finance announced a
consent solicitation affecting its USD750-million 5.375% 2022
(historical bond price chart below), USD1-billion 8.5% 2025 and
USD1.25-billion 8.97% 2027 notes, requesting debt service
suspension for six months from 14 October and covering coupon
payments due on 14 October 2020, 30 January and 20 March 2021. (IHS
Markit Economist Brian Lawson)
It cited a "very challenging macroeconomic and fiscal
situation" worsened by the COVID-19 virus pandemic as having a
"material impact" on its debt service capacity.
It noted that it previously had applied for relief under the
G20 Debt Service Suspension Initiative and was now seeking similar
debt service suspension from private-sector creditors.
It claimed to be negotiating with the IMF for support
associated with reforms to stabilize its macroeconomic outlook and
fiscal stability. Finally, it claimed that it was seeking a
"consensual and collaborative" approach, with further details
available on 29 September.
Zambia has already obtained Paris Club relief on its official
debt, requested in early June and granted on 14 August, for the
period 1 May-31 December 2020.
It previously stated that debt service to the Paris Club this
year was a modest USD14 million, but USD100 million was due to
individual members.
Asia-Pacific
APAC equity markets closed mixed; Hong Kong -0.3%, Mainland
China -0.1%, South Korea +0.3%, Japan +0.5%, Australia +1.5%, and
India +2.3%.
Without imposing immediate purchase or resale restrictions,
unveiled measures focus more on stabilizing long-term price
expectations of the local housing market. (IHS Markit Economist Lei
Yi)
The municipal government of Changchun city (Jilin Province)
published a notice on 23 September, aiming to cool potential
overheating signs in the local housing market.
Major adjustment fell into the mortgage policy. The notice
required that down payment ratio should be no less than 30% for
first-time home buyers and 40% for purchasing a second home,
raising both by 10 percentage points. Further, the notice
explicitly prohibited the issuance of a third mortgage offer or
more.
The notice marks the second time of tightening personal housing
credit policy in Changchun in the second half of this year.
Effective 1 August, Changchun's Housing Provident Fund Management
Bureau raised mortgage rates by 10% for second housing provident
fund loans.
Chinese electric vehicle (EV) startup Aiways is planning to
launch an initial public offering (IPO) in China. According to a
Reuters report, Fu Qiang, co-founder and president of Aiways, said
that the relative success of IPOs in the United States by its EV
startup peers, XPeng and Li Auto, had helped fuel the company's
ambitions to list its shares on a stock exchange. "An IPO is also
in our plans, and we're planning to push ahead with it," Fu
reportedly said, adding that Aiways's shares would most likely be
listed in China. Aiways began deliveries its first mass-market
model, the U5 electric sport utility vehicle, in the first quarter
of this year and, in April, the startup launched sales of the U5 in
Europe. In May, the company delivered several hundred units of the
U5 to car rental company Filippi Auto in Corsica, according to an
electrive report. Details of its overseas orders were not given by
the company, although such efforts will help it to build a presence
in overseas markets and attract investors. Aiways is not alone in
considering joining the recent IPO drive of EV startups. WM Motor,
another Chinese startup, has recently expressed an interest in
listing its shares on China's NASDAQ-type STAR stock exchange. (IHS
Markit AutoIntelligence's Abby Chun Tu)
Chinese startup Human Horizons unveiled its first mass-market
model, the HiPhi X electric vehicle (EV), in China during a
pre-show event ahead of the Beijing Motor Show 2020, which begins
on 26 September. The HiPhi X is full-size electric sport utility
vehicle based on the automaker's HOA open-source EV platform. Two
trim versions are available for the HiPhi X with a price starts at
CNY680,000 (USD99,760). Due to the application of a new electric
architecture, the HiPhi X features the so-called "No-Touch"
automatic door-opening system, which allows the driver to customize
the vehicle's door-opening modes with up to six different
configurations. Inside the vehicle, most functions and the
infotainment system have been integrated into three digital screens
that run across the dashboard, including the glovebox area in front
of the front passenger. The vehicle also provides two seating
options: a four-seat two-row configuration and a six-seat three-row
configuration. With two 220-kWh electric motors placed on the
front- and rear-axle respectively, the HiPhi X can accelerate from
0 to 100 kilometers (km) per hour in 3.9 seconds. Both versions are
fitted with a 97-kilowatt-hour battery pack that delivers a range
of 550 km. Human Horizons has finally launched its first production
model, after introducing the HiPhi brand in August 2019. However,
the HiPhi X is positioned much higher in the market than most
models introduced by EV startups, making it unlikely to gain the
sales volumes of a mass-market vehicle. The HiPhi X is a model that
will showcase the automaker's smart vehicle technologies and its
in-house capacity to develop an advanced electric architecture and
supporting software for EVs. According to the report, the HiPhi X
will be produced at Dongfeng-Yueda-Kia's plant in China's Jiangsu
province, with deliveries expected to begin in 2021. (IHS Markit
AutoIntelligence's Abby Chun Tu)
Chinese electric vehicle (EV) maker Li Auto signed a strategic
partnership with NVIDIA and Desay SV Automotive, a manufacturer of
automotive electronics, according to Gasgoo. NVIDIA Orin chips will
be used in Li Auto's full-size sport utility vehicle (SUV) to be
launched in 2022. Desay SV will provide the domain controller for
Li Auto, which will complete program design and algorithm logic
setting for its autonomous operation features. The automaker will
provide Level 2+ advanced driving assistance functions (with one
single Orin chip with 200TOPS of computing power), which will be
upgradeable to Level 4 autonomous operation (with two Orin chips
with 400TOPS of computing power). In the future, the integration of
dGPU is expected to increase the computing power to an expected
maximum of 2000TOPS. Nvidia says that the Orin chip has a
processing performance seven times higher than that of the Xavier.
Nvidia plans to start shipping Orin samples in 2021, with the
earliest installation possible in vehicles around the end of 2022.
Orin is capable of supporting Level 2+ to Level 5 fully autonomous
vehicles. The partnership will enable Li Auto to become the first
new energy vehicle (NEV) company in China to develop its own Level
4 autonomous operation system. (IHS Markit Automotive Mobility's
Tarun Thakur)
Hyundai Heavy Industries (HHI), together with American Bureau
of Shipping (ABS), has jointly developed a simulation tool that is
capable of analyzing the carbon footprint of vessels in the design
stage. The simulations allow in-depth evaluation on the impact of a
range of energy-saving options, offering a detailed preview of a
vessel's performance before key investment decisions are made. This
allows shipowners, designers and shipyards to review alternative
technologies at the early design stage. The simulations connect to
a broad range of inputs from many model types such as computational
fluid dynamics models, wave resistance models, and data-validated
engine performance models. A multi-physics model unlocks the
ability to evaluate the performance. Technologies that can be
evaluated in the modeling process include air lubrication systems,
energy-saving devices, voyage speed profiles, and engine fuel
options. The simulations can also reflect the impact of inputs from
a range of data sources and optimization tools allowing
comprehensive analysis of the trade-off between different vessel
configurations. (IHS Markit Upstream Costs and Technology's Jessica
Goh)
Lloyd's Register has granted the Approval in Principal (AIP)
for Sumitomo Heavy Industries' (SHI) ammonia propelled A-Max
tanker. SHI co-developed the ammonia-propelled A-Max tanker with
MISC and Lloyd's Register since July 2019. SHI will develop its own
ammonia fuel supply system and detailed ship designs before
commercializing the tanker in 2024. The International Maritime
Organization (IMO) has adopted mandatory steps to cut emissions of
carbon dioxide from ships by more than 30% by 2025 compared with
2008 and 70% by 2050. (IHS Markit Upstream Costs and Technology's
Jessica Goh)
Posted 25 September 2020 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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