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Global equity markets closed mixed for a second consecutive day,
while US and European benchmark government bonds closed higher on
the day. European iTraxx credit indices closed tighter across IG
and high yield, while CDX-NA was close to flat on the day again.
The US dollar closed lower and gold, silver, and oil were all
higher.
Americas
Most major US equity indices closed higher except for S&P
500 -0.1%; Russell 2000 +0.6%, DJIA +0.3%, and Nasdaq +0.2%.
10yr US govt bonds closed -3bps/0.91% yield and 30yr bonds
-3bps/1.66% yield.
CDX-NAIG closed -1bp/50bps and CDX-NAHY flat/300bps.
DXY US dollar index closed -0.3%/90.70 and is at its lowest
point since April 2018.
Gold closed +0.6%/$1,841 per ounce, silver +0.2%/$24.14 per
ounce, and copper flat/$3.49 per pound.
Crude oil closed +0.8%/$45.64 per barrel.
OPEC and a group of Russia-led oil producers agreed to increase
their collective output by 500,000 barrels a day next month,
signaling the world's biggest producers are betting the worst of a
pandemic-inspired shock to demand is behind them. The deal marks a
compromise after sharp disagreements earlier in the week among a
group of producers that have acted in relative concert for months,
agreeing to cut production deeply to stabilize oil markets.
(WSJ)
In a press release, Chevron Corporation announced a 2021
organic and exploratory capital budget of $14 billion. That
compares with the revised 2020 capital budget of $14 billion,
announced in May 2020. (IHS Markit Upstream Companies and
Transactions' Karan Bhagani)
The company slashed its 2020 capital budget in response to
lower commodity prices and reduced demand resulting from the
COVID-19 pandemic, down about $6 billion (or ~30%) from its
original capital budget of $20 billion, announced in December
2019.
The 2021 budget allocates $11.5 billion to the upstream, with
$5 billion for the US upstream and $6.5 billion for the
international upstream.
The budget allocates $2.1 billion to the downstream, with $1.2
billion for the US downstream and $0.9 billion for the
international downstream.
In the upstream for 2021, $6.5 billion is allocated to
currently producing assets, including about $2 billion for Permian
unconventional development, the company said.
A total of $3.5 billion in the upstream is planned for major
capital projects underway, of which about 75% is associated with
the future growth project and wellhead pressure management project
at the Tengiz field in Kazakhstan.
The remaining $1.5 billion is allocated to exploration, early
stage development projects, and midstream activities. The company
also lowered its longer-term guidance to $14 to $16 billion
annually through 2025, down from its previous guidance of $19 to
$22 billion.
AT&T's Warner Bros will debut its movies online and in
cinemas simultaneously next year, the most dramatic move by a
studio yet as the pandemic forces Hollywood to tear up its
decades-old playbook for releasing blockbusters. In an announcement
that sent shares in cinema chains sharply lower on Thursday, Warner
Bros said it will make movies available on the group's HBO Max
streaming service for one month in the US at the same time as it
releases them in cinemas. (FT)
The seasonally adjusted final IHS Markit US Services PMI
Business Activity Index registered 58.4 in November, up from 56.9
in October. The latest reading was higher than the earlier 'flash'
estimate (57.7) and signaled the sharpest expansion for over
five-and-a-half years. Growth of business activity was often linked
to greater new order inflows and the release of pent-up demand, as
clients became less hesitant to make purchases. (IHS Markit
Economist Chris Williamson)
Contributing to the marked upturn in output was an accelerated
rise in new business at service providers in November. The rate of
growth was the fastest since April 2018.
New export orders increased at only a marginal pace. The latest
expansion in foreign demand was the slowest since July and eased
once again from August's survey-record high. A number of panelists
suggested that ongoing travel restrictions due to the COVID-19
pandemic made international business challenging.
In line with greater client demand, firms increased their
workforce numbers to a greater extent in November. The expansion in
employment was the sharpest since data collection began in October
2009. Some firms stated that employees previously let go due to the
pandemic had been rehired.
Business expectations strengthened in November, as service
providers were boosted by a faster expansion in new business and
hopes of a vaccine. The degree of confidence was the highest since
January 2014 and well above the long-run series average.
California Governor Gavin Newsom warned Thursday that the state
would impose a new shelter-at-home order if hospitals start running
short of intensive-care capacity, a dire possibility that could
happen in some areas as soon as this week. It would take effect
once a region's hospitals had only 15% of their intensive care unit
beds available, a threshold none have crossed so far. If imposed,
the order would last three weeks. (Bloomberg)
US seasonally adjusted (SA) initial claims for unemployment
insurance fell by 75,000 to 712,000 in the week ended 28 November.
While claims are well below the spring high, initial claims remain
at historically high levels—the high during the Great Recession
was 665,000. The not seasonally adjusted (NSA) tally of initial
claims fell by 122,453 to 713,824. (IHS Markit Economist Akshat
Goel)
Seasonally adjusted continuing claims (in regular state
programs), which lag initial claims by a week, fell by 569,000 to
5,520,000 in the week ended 21 November. Prior to seasonal
adjustment, continuing claims fell by 690,170 to 5,240,575. The
insured unemployment rate in the week ended 21 November was down
0.4 percentage point to 3.8%.
There were 288,701 unadjusted initial claims for Pandemic
Unemployment Assistance (PUA) in the week ended 28 November. In the
week ended 14 November, continuing claims for PUA rose by 339,068
to 8,869,502.
Pandemic Emergency Unemployment Compensation (PEUC) claims have
been steadily rising as claimants are exhausting their regular
program benefits. In the week ended 14 November, continuing claims
for PEUC rose by 59,732 to 4,569,016.
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 14 November, the unadjusted total rose by 349,633 to
20,163,477.
The Government Accountability Office claimed that the
Department of Labor's estimates of the number of individuals
receiving benefits are flawed. The inaccuracies largely stem from
inconsistent reporting from states and while the Labor Department
does not anticipate a change in its methodology for counting
claims, it expects to add a clarifying statement in future weekly
news releases.
US employers announced 64,797 planned layoffs in November,
according to Challenger, Gray & Christmas—down 19.7% from
October's 80,666. November's total is the second-lowest of the year
and the lowest since February but is still 45.4% higher than the
number of cuts announced in November 2019. (IHS Markit Economist
Juan Turcios)
November was the ninth month to report job-cut announcements
specifically because of the COVID-19 pandemic, which totaled 5,873
for the month. Employers cited other reasons including
restructuring, market conditions, and a downturn in demand more
frequently than COVID-19 as causes of job-cut announcements in
November.
For the year to date (YTD), 2,227,725 job cuts have been
announced, 298% higher than the same period in 2019. The current
YTD total has already surpassed the record annual total of
1,956,876 announced job cuts in 2001, with one month remaining in
the year (Challenger began tracking job-cut announcements in
January 1993).
Of the total job cuts announced so far this year, 1,105,599
were because of COVID-19, according to employers.
Unsurprisingly, the hardest-hit sector and recipient of the
lion's share of the coronavirus-related cuts this year continues to
be the entertainment/leisure sector, which encompasses bars,
restaurants, hotels, and amusement parks. Year to date, companies
in the entertainment/leisure sector have announced 857,620 cuts, a
whopping 843,231 higher than during the same period in 2019. The
entertainment/leisure sector announced 11,666 cuts in November, the
highest number of announced cuts out of the 30 industries tracked
by Challenger.
Technology companies and transportation companies announced the
second- and third-highest job cuts in November with 11,431 and
10,455, respectively.
Rounding out the top five most adversely affected sectors year
to date were retail (182,307 job cuts), transportation (170,129 job
cuts), services (156,662), and automotive (86,400 job cuts).
Only 4 out of the 30 industries that are tracked by Challenger
have announced fewer job cuts YTD than during the same period last
year: financial, chemical, utility, and pharmaceutical.
Uber Technologies is reportedly in advanced talks to sell its
air taxi business, Uber Elevate, to US-based aerospace startup Joby
Aviation, reports Reuters. Uber's air taxi business was designed as
an "urban aviation ride-sharing product" to reduce traffic
congestion on the ground. Uber is refocusing on its core
businesses, including ride-hailing and food delivery, since the
COVID-19 virus pandemic. Uber laid off 6,700 employees globally in
two phases and has reduced its workforce by 25% since the pandemic
began. Uber is concentrating on achieving probability, which may
include selling off loss-making divisions. Uber is also reportedly
in talks to sell its autonomous vehicle business. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
US-based software-as-a-service (SaaS) solution provider
Ridecell has raised USD45 million in a Series C funding round led
by venture capital firm Fort Ross Ventures, according to a company
statement. New investor Solasta Ventures and existing investors
including Activate Capital, Denso, LG Technology Ventures, and
Initialized Capital also participated in the round. The startup
company will use the capital to automate and digitalize its
platform, support larger customers globally, and accelerate its
international growth. Aarjav Trivedi, CEO of Ridecell, said, "The
leading fleets in the world were already working on digital
transformation. COVID-19 created an urgent need for them to
accelerate digital access to their fleets, reduce risk by enabling
self-service touch-less monetization across B2B and B2C business
models, and reduce costs through automation. For Ridecell, it
created opportunities to help many customers and partners quickly
meet the shifting consumer and enterprise demand for fleet
operations automation and contactless commerce." (IHS Markit
Automotive Mobility)
Braskem Idesa said it is taking immediate steps to shut its
Etileno XXI ethylene-polyethylene petrochemical complex at
Coatzacoalcos, Mexico, after Mexico's state-owned operator of gas
pipelines halted gas supplies. Mexico's National Natural Gas
Control Center (Cenagas) said 30 November that it would not renew a
contract for supply of natural gas and blocked the entry of gas to
the site the following day, Braskem Idesa said in a statement. (IHS
Markit Chemical Advisory)
There are indications that the decision was driven by Mexican
President Andrés Manuel López Obrador ("AMLO"), who announced that
Pemex would no longer supply natural gas to Braskem Idesa,
according to Adrian Calcaneo, senior consultant with IHS
Markit.
According to López Obrador, the supply contract expired and
would not be renewed. This coincides with the lack of agreement on
the renegotiation of the ethane supply contract that Braskem Idesa
has with Mexico's state-owned oil firm Pemex, which the president
has called "leonino" ( or unfair or abusive).
Pemex has struggled to meet ethane supply commitments to the
plant, the largest petrochemical investment in Latin America, as
Mexico's oil and gas production has significantly decreased over
the past few years.
The Braskem Idesa complex, which comprises a 1.05 million
metric ton/year ethylene plant and three polyethylene (PE) units,
had a utilization rate of 84% in the third quarter of 2020,
according to a recent Braskem presentation. The main grades of PE
produced are high-density polyethylene (HDPE) for blow molding and
film, and low-density polyethylene (LDPE) for film. Braskem Idesa
earlier this year started importing ethane from the US to the
plant. Braskem Idesa has spent $4 million on logistics
infrastructure and to be able to import up to 12,800 b/d of ethane,
19% of the volume required by the facility.
Mexico's Instituto Nacional de Estadistica y Geografia (Inegi)
has published brand-level sales data for November 2020, reflecting
total sales 95,485 units. This is a 23.5% year-on-year (y/y)
decline, although ahead of the more than 84,000 units sold in
October 2020. Media reports also point out that this result was the
worst November since 2012, and that the 23.5% decline is the
sharpest decline reported for November sales in 25 years. (IHS
Markit AutoIntelligence's Stephanie Brinley)
It also broke the streak where month-on-month (m/m) declines
eased, as November's decline was higher than the 21.3% y/y decline
reported in October.
The low point in 2020 was in May, with only about 42,000 units
sold. Mexican demand is declining during the global COVID-19 virus
pandemic and from the country's lockdown and social distancing
measures taken in April and May 2020; although lockdown measures
have not been as severe, COVID-19 infections were increasing
throughout November.
Despite the decline in sales, top-three brand rankings remain
relatively consistent.
Nissan maintains its lead in the Mexican market. It sold 18,428
units in November, declining 27.8% (Infiniti sold 71 units, down
39% from November 2019).
Nissan was followed by General Motors (GM) at 14,115 units
(down 30.1% y/y).
Volkswagen (VW) held third place with 10,365 units sold (down
24.3%). Audi is reported separately from VW and fell by a smaller
5.1% y/y to 1,060 units.
Kia has remained ahead of Toyota to claim fourth for the month
again, though it was close. Kia sold 7,819 units sold (down 8.4%
y/y), while Toyota's sales declined 26.2% y/y to 7,757 units.
Mexico's overall light-vehicle sales declined in 2018 and 2019,
and 2020 had started off soft prior to the COVID-19 situation.
Prior to the pandemic, IHS Markit had expected a decline of 2.6%
y/y in 2020, to 1.280 million units. However, the October 2020
forecast round factoring in COVID-19 disruption as well as ongoing
recovery efforts instead puts the country's full-year sales down
29.3% to about 934,498 units, including a drop of about 25% in the
fourth quarter.
Colombia's unemployment rate fell to 14.7% from its COVID-19
peak of 21.4% in May. The recovery has come amid reopening of the
economy (currently in an extended "selective isolation" phase since
1 September) following strict lockdown procedures at the start of
the pandemic, but the rate remains significantly above the October
2019 level of 9.8%. (IHS Markit Economist Lindsay Jagla)
Notably, the number of employed people improved to 21.3 million
from a low of 16.5 million in April, a recovery of 86.7% of the
jobs lost since February. Nevertheless, the number of employed
people in Colombia remains 6.7% below the number employed in
October 2019.
The greatest negative drivers of Colombia's employment numbers
were sales and repairs of auto vehicles, public administration and
defense, education, healthcare services, accommodation, and food
services.
Colombia's gradual economic recovery has continued throughout
the last few months with indicators such as the manufacturing PMI,
retail sales, and industrial production all continuing to show
improvements. Colombia's third-quarter GDP data release also
reflected the economic recovery, with quarterly GDP improving by
8.7% compared with the second quarter.
The Central Bank of Paraguay (Banco Central del Paraguay: BCP)
reports that consumer prices increased by 0.7% month on month (m/m)
and 2.2% year on year (y/y) in November. Citing below-target
inflation and lack of upward pressure, the BCP monetary policy
committee has kept the policy rate at the current level of 0.75%.
(IHS Markit Economist Jeremy Smith)
In year-on-year terms, November was the first month since April
that inflation, which fell to as low as 0.48% y/y in June, exceeded
2%, which is the lower end of the BCP's 4% +/- 2% target
range.
Seasonal increases in food prices, recovering internal and
external demand following the gradual relaxation of containment
measures, and pass-through from depreciation of the guaraní, which
has fallen 11.7% y/y against the dollar, account for much of the
recent upswing.
In addition, the price of healthcare products (especially
pharmaceuticals) continued to rise (3.7% y/y), as did prices of
home repair and construction materials, supported by strength in
the construction sector and more expensive raw materials for
cement.
Meanwhile, the tone and substance of the BCP's November meeting
varied little from recent months, as the bank's monetary policy
committee unanimously opted to hold the policy rate constant for
the fifth consecutive month.
The BCP believes that its expansionary measures will lift
inflation to the 4% target rate within the scope of the monetary
policy horizon, which it defines as 18 to 24 months. This is
consistent with IHS Markit's view of a gradual increase in annual
inflation, forecast at just 1.7% for this year, arriving at the
target in 2023.
The consumer confidence subindex for confidence in the current
economic situation came in at 23.9 in October, far below the
neutral level of 50, and it has hardly moved since plummeting in
April. Nonetheless, the subindex for expectations over 2021 is at
63.9, which is perhaps suggestive of deferred expenditures,
particularly on durable goods.
China has strengthened its position as the biggest buyer of
beef from Argentina and Chile and now absorbs more than 80% of
total shipments from the two countries. Newly released figures show
that Argentina shipped 59,252 tons of unprocessed beef in October -
down 9.2% y/y. The share of this going to mainland China rose to
82% from 76% in the same month last year. Chile is the second most
important buyer of Argentine beef but its share of total volumes
stands at just 4%. Cumulative exports of Argentine beef reached
almost 500,000 tons worth USD2.25 billion in the January-October
period. In volume terms, this was 12% higher y/y but export
earnings were down 6% y/y as a result of sharply lower average
export prices for bone-in beef. A small decline in shipments of
chilled beef has been more than offset by higher volumes of frozen
product, which rose by 15% y/y in the Jan-October period. Within
the frozen segment, shipments of bone-in beef have risen sharply
thanks to strong demand from China. In October alone, exports of
frozen bone-in beef were close to double year-ago levels, with
almost all of this going to mainland China. (IHS Markit Food and
Agricultural Commodities' Ana Andrade and Max Green)
Europe/Middle East/Africa
European equity markets closed mixed; UK +0.4%, Italy +0.2%,
France/Spain -0.2%, and Germany -0.5%
10yr European govt bonds closed higher across the region;
Italy/Germany -4bps and Spain/France/UK -3bps.
iTraxx-Europe closed -1bp/46bps and iTraxx-Xover
-8bps/243bps.
Brent crude closed +1.0%/$48.71 per barrel, which is its
highest closing price since 5 March.
The planned mass rollout of an approved COVID-19 vaccine is
positive news for the UK economy and should fuel stronger GDP
growth from mid-2021. The main fillip to activity from mid-2021
should be less draconian social-distancing measures to allow
consumer-facing services to operate under normal trading
conditions. In addition, returning office workers will repopulate
city centers and increase footfall for the hospitality sector and
high-street retailers. (IHS Markit Economist Raj Badiani)
The United Kingdom has approved the Pfizer/BioNTech COVID-19
vaccine at an accelerated and unprecedented pace, and it is the
first country to sanction a mass vaccination program. The
Pfizer/BioNTech vaccine is still waiting for approval from the
United States and the European Union.
The UK has ordered 40 million doses, which is enough to
vaccinate 20 million people, with each person receiving two doses
21 days apart.
The government will reach out first to the most vulnerable
groups, including healthcare workers. Health Secretary Matt Hancock
has announced that hospitals, mass vaccination centers, and GP
surgeries are to administer the vaccine to those most in need.
The rollout of the vaccine could provide further encouragement
for the UK government to ease gradually its COVID-19 virus-related
regional restrictions from March or April 2021, with a clearer
route to economic normality emerging (see United Kingdom: 24
November 2020: UK government announces new three-tier system to
replace the temporary lockdown in England from 2 December). The
government hopes that the majority of older people, care-home
residents, and those with severe conditions will have their jabs by
early 2021.
The planned vaccination program is welcome news after the
latest tightening of COVID-19 virus-related containment measures,
which will trigger renewed UK GDP losses in the final quarter of
2020. The impact of the shutdown is that the economy is likely to
contract by around 10% month on month (m/m) during November,
followed by an immediate rebound in December, implying a drop of
around 4.0% quarter on quarter (q/q) in the fourth quarter as a
whole.
However, we acknowledge some challenges during the next few
months. First, the UK could require stricter restrictions in
January or possibly February should new infections rise in the
aftermath of less draconian regional lockdowns during the Christmas
period. Second, the mass vaccination program in the UK is
unprecedented, and some work will be required to persuade everyone
to take the vaccine.
We assume that the European Union and the UK will avoid a
disorderly Brexit, reaching a trade agreement or arrangement from 1
January 2021. The rising number of COVID-19 cases in the UK and the
rest of Europe will focus the minds of the two negotiating parties
to reach an agreement, and to accept collective responsibility to
avoid a further economic shock for the region that would arise from
failed EU-UK trade negotiations.
Nevertheless, Brexit costs underpin our cautious assessment of
UK growth for 2021 when compared with most other advanced
economies. We fear that the likely new EU-UK trading arrangements
could be a slimmed-down version, representing a trade shock to the
UK economy. First, UK manufacturers could encounter new non-tariff
barriers in the face of some regulatory divergence between the UK
and the EU, implying new checks and delays to verify compliance
with EU rules. Furthermore, some types of UK services will find it
more challenging to export to the EU from next January when the UK
leaves the Single Market, triggering a raft of new non-tariff
barriers.
October's strong Eurozone overall month-on-month (m/m) rise in
retail sales masks divergence in sales by type of product, while
containment measures will have hit activity hard in November. (IHS
Markit Economist Ken Wattret)
Eurozone retail sales volumes rose by 1.5% m/m in October,
double the market consensus expectation (of 0.8% m/m, according to
Reuters' survey). The 4.3% year-on-year (y/y) increase also
surpassed consensus expectations (of 2.7% y/y).
In level terms, retail sales volumes are now more than 3%
higher than back in February, prior to the impact of the COVID-19
shock, which saw sales collapse in March and April.
Although this is an encouraging start to the fourth quarter,
there are reasons for caution:
First, October's increases came ahead of the implementation of
more stringent COVID-19 virus-related containment measures across
member states, which will have hindered sales in some areas in
November.
Second, the rebound in retail spending on some items is a
substitution for expenditure on services, which are being disrupted
by the pandemic. For many member states, retail sales account for
less than half of overall consumer expenditure.
Third, October's breakdown of sales by type of product shows a
mixed picture:
Mail order and internet sales, which have unsurprisingly
outperformed during the pandemic, rebounded strongly in October
(6.1% m/m) and are up by more than 22% compared with their February
level.
Sales of electrical and household goods are over 8% above their
February level.
In contrast, sales of textiles, clothing, and footwear fell
sharply in October (-2.8% m/m) for the second straight month and
are over 9% below their February level (see first chart below)
despite a strong rebound between May and July.
With the introduction of a vaccine against COVID-19 now on the
horizon, consumer spending prospects for later in 2021 are looking
more positive, particularly given the surge in household savings
rates since the pandemic struck.
However, near-term prospects for consumer spending will be
hindered by more stringent containment measures, with consumer
sentiment having weakened markedly already, indicative of a
correction in retail sales growth
Porsche has signed a development joint venture (JV) with
Siemens Energy and a number of other partners to build the world's
first integrated, commercial, industrial-scale plant for making
synthetic climate-neutral fuels (e-fuels), according to a company
statement. The project will be based in Chile and in its pilot
phase, around 130,000 liters of e-fuels will be produced as early
as 2022. In two further phases, capacity is then to be increased to
about 55 million liters of e-fuels a year by 2024, and around 550
million liters of e-fuels by 2026. Porsche will be the primary
customer for the green fuel. Other partners in the project are the
energy firm AME and the petroleum company ENAP from Chile and
Italian energy company Enel. Porsche CEO Oliver Blume said,
"Electromobility is a top priority at Porsche. E-fuels for cars are
a worthwhile complement to that - if they're produced in parts of
the world where a surplus of sustainable energy is available. They
are an additional element on the road to decarbonization. Their
advantages lie in their ease of application: e-fuels can be used in
combustion engines and plug-in hybrids, and can make use of the
existing network of filling stations. By using them, we can make a
further contribution toward protecting the climate." This is an
exciting development; if the consortium can find a way to
manufacture e-fuels that are climate-neutral on an industrial
scale, such a technology has the potential to be a long-term
disruptor to the electrification of the industry, especially in the
case with high-performance cars, supercars and hypercars. Despite
the plethora of electric hypercars that are being developed such as
the Lotus Evija and the Rimac C_Two, these cars have one
potentially glaring drawback. If the driver regularly accesses the
potential performance and drives the car hard on track or on the
road, the range will shrink rapidly, as battery power decreases
exponentially the higher the load. So the harder these cars are
driven, the shorter the range will be. This is also the case with
conventional ICE cars, but not to the same extent. (IHS Markit
AutoIntelligence's Tim Urquhart)
MAN Energy Solutions and Aker Carbon Capture have signed a
technology-cooperation agreement to develop energy-efficient
compression solutions for carbon capture and storage (CCS)
applications with heat recovery. The agreement supports the
companies' joint target to reduce the cost of removing CO2
emissions from industrial plants. The cooperation builds on MAN
Energy Solutions' experience in compressor technology, the
integration of system components and their design and delivery, as
well as Aker Carbon Capture's proprietary amine technology and
efficient carbon-capture process design. With CCS, captured CO2 is
compressed before being liquefied and transported to a
permanent-storage location. The two companies aim to develop carbon
capture solutions that require less energy. The transfer of heat is
key for CO2-capture plants' improved, overall power-consumption
with MAN Energy Solutions able to recover heat from its compression
systems. Hence, the steam generated will cover nearly 50% of the
power demand for Aker Carbon Capture's capture plant. The
technology-cooperation agreement will run for seven years and forms
the basis for project deliveries to carbon-capture plants.
Solutions will be applicable for large facilities, such as the
Heidelberg Cement Norcem cement plant in Brevik, Norway where Aker
Carbon Capture will deliver a carbon-capture plant using its
patented and HSE-friendly CCS technology. The project is subject to
parliamentary approval of the funding. (IHS Markit Upstream Costs
and Technology's Kamila Langklep)
The RABus project will operate autonomous buses in regular
urban road traffic in the German state of Baden-Württemberg,
reports Intelligent Transport. The project, which has received EUR7
million (USD8.5 million) from the State Ministry of Transport, will
test these vehicles in public passenger transit in the cities of
Mannheim and Friedrichshafen. RABus is a consortium with members
including the Research Institute of Automotive Engineering and
Vehicle Engines Stuttgart (FKFS), Karlsruhe Institute of Technology
(KIT), Rhein-Neckar-Verkehr GmbH, Stadtverkehr Friedrichshafen GmbH
with DB ZugBus Regionalverkehr Alb-Bodensee GmbH, and ZF
Friedrichshafen AG. The buses are manufactured by 2getthere, a
subsidiary of ZF Friedrichshafen AG, and can accommodate up to 22
people and have compact dimensions of 6 × 2.1 × 2.8 m. In Mannheim,
the focus of testing will be on mixed inner-city traffic in a new
urban quarter, while that in Friedrichshafen will focus on
interurban operation. In both cities, a public transport system
with electrified and automated vehicles is expected to be
established by the end of 2023. These trials will support Germany's
efforts to put cars with partial autonomy on roads from 2022. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
France's Agriculture Minister Julien Denormandie said the
country's dependency on protein imports is "too high" and the
10-year strategy is needed to develop alternatives. "It is
imperative that we regain agri-food sovereignty, and this cannot be
done without the development of a French production of plant
proteins," he said. (IHS Markit Food and Agricultural Policy's
Steve Gillman)
France is one of the EU's largest agri-food exporters, but the
country still imports a lot of plant proteins for both animal and
human consumption. According to the government, the nation produces
only half of the protein-rich materials needed to feed its animals,
such as soybeans and rapeseed.
Over €100 million will be dedicated to the protein plan to help
address France's import dependency. The money will be spent across
three main objectives - reducing environmental impact, increasing
self-sufficiency and creating new market opportunities.
The ministry's rationale is that the country's imports of
soybeans from third countries may be responsible for deforestation
while domestic plant protein production could reduce French
farmers' environmental footprint and increase the livestock
sector's sustainability. The strategy also wants farmers to grow
more legumes because it could capture more nitrogen in the ground
and enrich soils, making them more productive.
The French government believes this approach will also create
new opportunities for its farmers and enable them to respond to new
markets, such as the growing demand for plant-based alternatives,
while reducing food producers' exposure to fluctuating world
soybean prices.
There is also a 2030 target to reduce fertilizer use by 20%
across the bloc. The Commission hopes to see more rotational crops,
such as legumes, grown in member states because it can support this
F2F target by preventing excess nutrients, like nitrogen, from
polluting the environment.
Portuguese passenger car registrations suffered a further fall
during November. According to data published by the Automobile
Trade Association of Portugal (Associação do Comércio Automóvel de
Portugal: ACAP), passenger car registrations decreased by 27.9%
year on year (y/y) to 11,826 units last month. Passenger car
registrations in the year to date (YTD) are down by 36.4% y/y at
131,165 units. The ACAP added that light commercial vehicle (LCV)
registrations dipped by 1.4% y/y to 2,801 units in November, with
the YTD figure at 23,905 units, down 29.5% y/y. Medium and heavy
commercial vehicle (MHCV) registrations dropped by 17.5% y/y to 342
units in November, with the YTD figure at 3,632 units, down 29.4%
y/y. Although the Portuguese light-vehicle market had been expected
to retreat during 2020 following a period of strong growth, the
impact of the COVID-19 virus pandemic and the measures designed to
prevent its spread were hugely detrimental to the market in the
first half of the year. Furthermore, the market remains sluggish in
the second half. The ACAP has previously said that the situation is
not being helped by the Portuguese government's decision not to
include support measures in the 2021 budget proposals. (IHS Markit
AutoIntelligence's Ian Fletcher)
As expected, the National Bank of Poland's (NBP)'s monetary
policy council kept the policy interest rate unchanged at a
historical low of 0.1% during its session on 2 December, amid a
rebound in third-quarter economic growth and a moderation of
inflation. Although the government had hoped to rebuild the economy
through investment rather than consumption, household demand
rebounded sharply in the third quarter, while fixed investment
remained far below year-earlier levels. (IHS Markit Economist
Sharon Fisher)
The increase in consumption was also apparent in the real
estate market. Although growth in housing loans decelerated to 6.0%
year on year (y/y) in the third quarter, residential real estate
prices surged by 14.0% y/y, according to Poland's Central
Statistical Office.
Despite low interest rates, short-term risks to both
consumption and investment are heightening owing to the second-wave
COVID-19 restrictions in Poland and elsewhere in Europe. Services
will be hit especially hard, triggering another quarter-on-quarter
(q/q) contraction in GDP during the fourth quarter, despite fiscal
and monetary measures aimed at boosting the economy.
According to the NBP, the pace of the recovery may also be
reduced by the lack of a more visible and durable exchange-rate
adjustment of the zloty. In November, the monthly average exchange
rate appreciated to PLN4.50/EUR1.00 but was 4.9% weaker than the
year-earlier level.
The IHS Markit purchasing managers' index (PMI) for
manufacturing remained stable at 50.8 points in November; however,
the output and new orders indices stood in contractionary
territory, with negative implications for short-term growth in
industrial production and exports.
On the inflation front, consumer prices rose a preliminary 3.0%
y/y in November (slightly below the October figure), with flat
month-on-month (m/m) growth. Food prices fell by 0.1% m/m, while
utility and fuel costs increased by 0.1% and 0.2% m/m,
respectively.
Inflation is projected to slow into 2021, although a potential
revival of global commodity prices, strengthening economic
activity, a weaker zloty, and rising administrative prices present
upside risks. A capacity fee will be added to household electricity
bills from the start of 2021.
The International Monetary Fund (IMF)'s first review of
Somalia's three-year staff-monitored program in November suggests
debt relief advancements, while natural disasters and the COVID-19
pandemic contributed to an economic shock in 2020. (IHS Markit
Economist Alisa Strobel)
The IMF on 30 November announced its approval of an immediate
disbursement of USD10 million as part of the Extended Credit
Facility (ECF) arrangement with Somalia, following a first review.
Following the achievement of the Heavily Indebted Poor Countries
(HIPC) initiative decision point, representatives of the Paris Club
creditor countries and the government of Somalia agreed to
restructure Somalia's external public debt.
The IMF stated that Somalia's performance under the ECF
arrangement has been broadly satisfactory despite the significant
challenges the economy faced in 2020. The IMF's official statement
highlights that prompt action by the Somalian government and
support from the international community has helped mitigate the
impact of the latest natural-disaster events and the COVID-19
pandemic. Nevertheless, these shocks have had a significant impact
on Somalia's economic activity, exports, and domestic fiscal
revenues, leading to a contraction in real GDP.
IHS Markit projects Somalia's economy to grow at an average
2.8% annually in the near term (2021-23) given the prevailing
headwinds, after contracting 2% in 2020. Drought conditions and
security concerns have added to the economic and humanitarian
hardships in Somalia in the past year and they are expected to
continue to hinder growth prospects in the remainder of 2020 and
into 2021.
Furthermore, the COVID-19 pandemic is expected to have impacted
Somalia's fiscal revenues negatively, in tandem with a drop in
international travel dragging on the transportation sector's
revenues, as well as delays in implementing the new licensing and
regulatory framework for the telecommunications sector.
We expect that Somalia's government will strive to align with
IMF requirements to strengthen domestic revenue mobilization to
create fiscal space for priority spending under the ninth National
Development Plan. Fiscal consolidation improved prior to the global
outbreak of the COVID-19 virus. Domestic revenue in 2019 reached
USD230 million, up from USD183 million in 2018.
Asia-Pacific
APAC equity markets closed mixed; South Korea +0.8%, Hong Kong
+0.7%, Australia +0.4%, India/Japan flat, and Mainland China
-0.2%.
US Customs and Border Patrol at all US points of entry will
detail shipments of cotton and cotton products originating from the
Xinjian Production and Construction Corps (XPCC) via a Withhold
Release Order (WRO) based on information that "reasonably indicates
the use of forced labor, including convict labor," according to a
statement from the Department of Homeland Security (DHS). (IHS
Markit Food and Agricultural Policy's Roger Bernard)
The agency said the order applies to "all cotton and cotton
products produced by the XPCC and its subordinate and affiliated
entities as well as any products that are made in whole or in part
with or derived from that cotton, such as apparel, garments, and
textiles." This marks the sixth action taken by the Trump
administration's CBP relative to goods made by forced labor in the
Xinjiang Uyghur Autonomous Region, DHS said.
DHS Acting Deputy Secretary ken Cuccinelli said, the action was
to make sure that those who are abuse human rights "are not allowed
to manipulate our system in order to profit from slave labor. 'Made
in China' is not just a country of origin it is a warning label."
He also said that the action could affect "billions of dollars" of
imports when the action scales up.
The administration in early July announced issued a Xinjiang
Supply Chain Business Advisory and the Department of Treasury July
11 announced that it had sanctioned XPCC and prohibited doing
business directly with XPCC.
China's Xinjiang produces 85% of China's cotton and DHS said
that the actions thus far are not a region-wide blockade on cotton
products from Xinjiang. But Cuccinelli said that XPCC is so
prevalent in the region's economy that blocking products from the
firm will be similar to a region-wide ban. "It is so massive that
even though it appears that it's a single company, from our
perspective it is equivalent to a regional WRO," Cuccinelli
said.
XPCC employs 12% of the Xinjian population and produces 17% of
its cotton products. This is potentially one of the additional
actions on China that the administration signaled were being looked
at and could be announced yet before the administration leaves
office.
AutoX has started fully driverless vehicle testing in Shenzen,
China, reports TechCrunch. The company claims to be the first in
the country to conduct autonomous car testing without safety
drivers or remote operators on public roads and has deployed a
fleet of 25 unmanned vehicles in the city. An unidentified
spokesperson of AutoX said, "We have obtained support from the
local government. Shenzhen is making a lot of rapid progress on
legislation for self-driving cars." AutoX has also received permit
to test its autonomous cars without a human safety driver in
California. The company recently launched a robotaxi service for
the public in Shanghai after conducting trials with signed-up
users. It has also set up an 80,000-square-foot facility for
autonomous vehicle operations in Shanghai and has partnered with
electric vehicle manufacturer NEVS to conduct a large-scale trial
of robotaxis in Europe by the end of 2020. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
According to statistics from financial statements for the third
quarter of 2020, released on 1 December, sales for all of Japan's
industrial sectors, excluding finance and insurance, rose by 3.8%
quarter on quarter (q/q) for the first increase in five quarters,
and the year-on-year (y/y) contraction narrowed to 11.5%. (IHS
Markit Economist Harumi Taguchi)
Sales of real estate and the production, transmission, and
distribution of electricity turned positive y/y and decreases of
sales in the majority of industry groups softened thanks to the
resumption of economic activity.
Double-digit contractions continued for a broad range of
industry groupings, particularly for petroleum and coal products,
iron and steel, production and business machinery, and
services.
Ordinary profits also rose by 33.7% q/q and the y/y contraction
narrowed to 28.4% from 46.6% y/y in the previous quarter. The
softer y/y decline in ordinary profits reflected increases in
profits for petroleum and coal products, metal products, real
estate, and the production, transmission, and distribution of
electricity. However, overall ordinary profits remained sluggish,
particularly for transport and postal services, services, and iron
and steel.
While lower sales were the major reason for a sharp drop in
ordinary profits, the weakness was partially offset by lower
payroll costs, which declined by 5.0% y/y, although the contraction
in the number of employees softened to 2.9% y/y from 6.6% y/y in
the previous quarter.
Investment in plant and equipment (including software) fell by
1.2% q/q and 10.6% y/y under the continued difficult business
conditions. Although investment continued to increase in the
information and communication equipment, construction, and
petroleum and coal groupings, eroded cash flows led to continued
declines in fixed investment for a broader range of industry
groupings, particularly for metal products, general-purpose
machinery, electric machinery, and goods leasing.
The September results suggest that upside for sales and
ordinary profits from the resumption of economic activity has
bottomed, and that broad areas of the industry continue to struggle
with weak demand. The 1.2% q/q drop in investment in plant and
equipment signals a slight upward revision of private capital
investment in the third quarter (which will be released on 8
December).
Sluggish cash flows could weigh on the recovery in fixed
investment, even though a rebound in manufacturers' shipment in
capital goods in October pointed to stronger fixed investment.
Southeast Asia's ride-hailing companies Grab and Gojek are
reportedly in advanced talks on a deal to combine their businesses.
The report by Bloomberg cites that the final details of the deal
are being worked out among the most senior leaders of both the
companies with the participation of Masayoshi Son of SoftBank, a
major investor in Grab. The merger would result in Anthony Tan,
co-founder of Grab, becoming CEO of the combined company, with
Gojek executives handling the combined business in Indonesia.
According to the report, the brands may be run separately for an
undetermined amount of time and the aim of this merger is at
becoming a publicly listed company. The talks are still ongoing and
may not result in a transaction as the deal needs to get regulatory
approval and address antitrust concerns. The companies have been in
a fierce battle for dominance in Southeast Asia for several years.
Grab, which is present in eight countries, was valued at more than
USD14 billion, while Gojek has a presence in five countries and was
valued at USD10 billion. They began initial discussions about a
merger in February as investors have been pushing them to join
forces in order to reduce cash burn. The merger deal is expected to
significantly accelerate both the companies' paths to
profitability, as ride-hailing demand has been battered by the
COVID-19 virus pandemic. (IHS Markit Automotive Mobility)
The Australian economy expanded 3.3% in seasonally adjusted
quarter-on-quarter (q/q) terms during the September (third) quarter
thanks to consumers and government stimulus spending, while exports
were a drag on growth. The day prior to the GDP release, the
Reserve Bank of Australia announced that it would keep its
expansionary monetary policy settings unchanged. (IHS Markit
Economist Bree Neff)
The September-quarter expansion was stronger than market
expectations, given that the country's second largest state economy
- Victoria - was under lockdown for the entirety of the quarter.
But consumers in other states came out of their COVID-19-related
lockdown/containment measures with significant pent up demand,
which explains why private consumption expanded in real,
inflation-adjusted terms at the fastest pace on record and
contributed 4.0 percentage points to quarterly GDP during the
quarter, according to the Australian Bureau of Statistics
(ABS).
The increases in private consumption spending were broad-based
and often achieved double-digit growth in real q/q terms, with
consumers only reining in their spending on three categories:
cigarettes and tobacco (down 0.9% q/q), alcoholic beverages (down
0.5% q/q), and household furnishings (down 0.9% q/q), with both
alcoholic beverages and household furnishing recording robust
growth in the June quarter.
Meanwhile, the increase in public consumption spending arose
primarily from the national government's non-defense spending,
largely tied to fiscal support measures such as the Jobkeeper
program and support for small and medium-sized enterprises (SMEs).
Government fixed capital formation spending made no significant
contribution to growth during the quarter, because increased
investment in national defense and by public corporations were
offset by reduced investment spending by state and local
governments.
Private-sector fixed capital formation spending also had little
impact on growth during the September quarter. There was a 5.1% q/q
surge in dwelling alterations and additions, which pushed dwelling
construction up 0.6% q/q - the first quarterly expansion in two
years. However, the non-dwelling construction slump worsened, as
investment in this category fell by another 4.9% q/q after falling
2.4% during the June quarter. Investment into machinery and
equipment also fell for a second consecutive quarter - this time by
3.7% q/q - marking an improvement from the June quarter's 8.2% q/q
plunge.
The net export position was the primary source of drag on the
Australian economy in the September quarter, detracting 1.9
percentage points from growth as imports recovered and exports
slumped. According to the ABS's balance-of-payments publication,
the recovery in real imports was led by consumer goods, including a
48% q/q surge in motor vehicle imports, and double-digit increases
for household electrics, toys, and leisure goods, as well as
textiles and apparel. Services imports also rose 4.4% q/q in real
terms, with indications that some of this was driven by financial
services.
The unwinding of the Victoria state lockdown measures in
October will provide some uplift to the current quarter's expansion
- as will data indicating continued growth in single-family
dwelling building approvals, which according to the ABS reached a
20-year high in October. On the downside, some of this could be
mitigated by ongoing tensions between China and Australia that are
causing disruptions to Australian exports to its top export market.
In any case, the September-quarter result was stronger than IHS
Markit's expectations, and we will be upgrading the country's GDP
forecast for 2020 closer to the low -3% range from -4.0% previously
as part of our December forecast update.
Posted 03 December 2020 by Chris Fenske, Head of Fixed Income Research, Americas, IHS Markit
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