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All major US and most European equity indices closed higher,
while APAC mas mixed. US government bonds closed lower and
benchmark European bonds closed mixed. European iTraxx closed
slightly tighter across IG and high yield, CDX-NAHY was sharply
tighter, and CDX-NAIG was unchanged on the day. Oil and copper
closed higher, the US dollar was flat, and gold, silver, and
natural gas were lower on the day. All eyes will be on tomorrow's
US non-farm payroll report at 8:30am ET.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our newly launched Experts
by IHS Markit platform.
Americas
All major US equity indices closed higher; Russell 2000 +1.8%,
DJIA/Nasdaq +0.8%, and S&P 500 +0.6%.
10yr US govt bonds closed +4bps/1.22% yield and 30yr bonds
+3bps/1.87% yield.
CDX-NAIG closed flat/50bps and CDX-NAHY -7bps/289bps.
DXY US dollar index closed flat/92.24.
Gold closed -0.3%/$1,809 per troy oz, silver -0.7%/$25.29 per
troy oz, and copper +0.3%/$4.35 per pound.
Crude oil closed +1.4%/$69.09 per barrel and natural gas closed
-0.4%/$4.14 per mmbtu.
The shortage of truck drivers across the US has become so acute
that logistic operators are trying to recruit foreign drivers,
according to the American Journal of Transportation. Filling
stations are facing fuel outages and airports are short on jet
fuel. The country was short of about 60,000 drivers in 2019,
according to the American Trucking Associations. This number is
expected to rise to 100,000 by 2023. There are several contributing
factors to the situation. Demand for shipped goods is soaring while
early retirement surged during the pandemic. Lockdowns have also
made it harder for new drivers to access commercial-trucking
schools and get licensed. Carrier rates are continuing to rise,
incentivizing drivers to accept local loads and forgo the necessary
national moves to get fresh produce to the destination. This has
impacted the distribution of fresh fruits and vegetables grown in
different parts of the country. Demand for Visa Solutions' services
from the trucking industry has more than doubled since the pandemic
started. "This is 100% because of the driver shortage," according
to Jose Gomez-Urquiza, the chief executive officer of Visa
Solutions. The industry is seeking to lower the minimum age to 18
from 21 for interstate drivers and adding trucking to the list of
industries that can bypass some of the US Department of Labor's
immigration certification process. Some companies are increasingly
turning to drivers from South Africa and Canada. Companies have
also offered higher wages, signing bonuses and increased benefits
to attract and retain drivers. However, more efforts need to be
made to attract domestic workers to the industry. (IHS Markit Food
and Agricultural Commodities' Hope
Lee)
Consumption of gasoline rose last week and is within a range
consistent with normal internal mobility. Meanwhile, averaged over
the last week, passenger throughput at US airports (after seasonal
adjustment) was about 93% of the January 2020 level. This is close
to readings dating back several weeks, indicating nearly a full
recovery in air travel. (IHS Markit Economists Ben
Herzon and Joel
Prakken)
US seasonally adjusted (SA) initial claims for unemployment
insurance fell by 14,000 to 385,000 in the week ended 31 July.
While the level of initial claims is trending down and is far below
the pandemic-era high, the last time initial claims were
consistently above the current level was in late 2011 when the
economy was still limping out of the Great Recession. Initial
claims closer to 200,000 would suggest a normal level of "churn"
for an economy in its prime. (IHS Markit Economist Akshat Goel)
Seasonally adjusted continuing claims (in regular state
programs) fell by 366,000 to 2,930,000 in the week ended 24 July,
hitting its lowest since 14 March 2020. The insured unemployment
rate decreased by 0.3 percentage point to 2.1%.
In the week ended 17 July, continuing claims for Pandemic
Emergency Unemployment Compensation (PEUC) rose by 12,324 to
4,246,207.
In the week ended 17 July, continuing claims for Pandemic
Unemployment Assistance (PUA) fell by 89,180 to 5,156,982.
In the week ended 17 July, the unadjusted total of continuing
claims for benefits in all programs fell by 181,251 to
12,975,015.
Despite only 26 states still accepting claims for
pandemic-related federal unemployment benefits, the share of these
benefits in all programs remains high; continuing claims under PUA
and PEUC accounted for 72% of the claims under all programs.
US employers announced 18,942 planned layoffs in July 2021,
according to Challenger, Gray & Christmas—down 7.5% from
June's 20,476. July's total is the lowest monthly reading since
June 2000 and is 93% lower than the July 2020 reading, when the
pandemic was still the main factor influencing job-cut decisions.
(IHS Markit Economist Juan
Turcios)
For the year to date (YTD), 231,603 job cuts have been
announced, down 87% from the 1,847,696 job cuts announced over the
same period in 2020 and the lowest January-July total on record
(Challenger began tracking job-cut announcements in January
1993).
According to Andrew Challenger, Senior Vice President of
Challenger, Gray & Christmas, "In a healthy economy, there's a
good amount of churn. Right now, things appear to be stalling.
There are over 9.2 million job openings and 9.5 million unemployed.
The positions and workers are not connecting."
So far this year, employers have cited COVID-19 as a reason for
7,950 planned job cuts. Employers have cited other reasons
including market conditions (48,047), demand downturn (44,033),
restructuring (40,864), closing (39,689), and acquisition/merger
(10,252) more frequently than COVID-19 as causes of job-cut
announcements this year.
Last year, 2,304,755 job cuts were announced, the highest
yearly total on record. COVID-19 was the leading reason cited for
job-cut announcements last year but was cited less frequently
toward the end of the year. As of July, COVID-19 is the
eighth-leading reason for job-cut announcements in 2021 and has
been trending downward. The recent surge in cases due to the Delta
variant could make COVID-19 a bigger factor in job-cut decisions
going forward but the July announcements do not yet show an
effect.
In nominal dollars, the following set record highs in June: the
trade deficit, the goods deficit, the nonpetroleum deficit,
exports, goods exports, imports, and goods imports. The real goods
deficit widened to its second-highest level on record. (IHS Markit
Economist Patrick
Newport)
Real goods import growth slowed to a 3.4% annual rate in the
second quarter following three quarters of double-digit growth. At
the end of the quarter, real auto and consumer goods imports were
dropping, and capital goods imports were leveling. Real imports
were 9% higher than in the fourth quarter of 2019, the last
pre-pandemic quarter.
Real goods exports—nearly back to pre-pandemic
levels—increased at a 5.8% annual rate in the second quarter on
strong gains from consumer and capital goods.
The petroleum deficit, which has been bouncing about the zero
line since February, turned positive in June as nominal petroleum
exports—benefiting from higher oil prices—set a record
high.
The surplus in services has dwindled from $22.4 billion in
January 2020 to $17.4 billion in June 2021. Imports and exports of
travel and transport collapsed last year when the pandemic struck;
these categories remain in a deep hole.
The goods deficit was about $1.0 billion higher than reported
in the advance report trade report that came out last week; imports
were higher and goods exports were lower.
Offshore wind installation vessel market entrant Eneti has
announced that it will acquire wind turbine installation vessel
(WTIV) contractor Seajacks from its shareholders: Marubeni, INCJ
and Mitsui OSK Lines. Eneti will acquire 100% of Atlantis
Investorco Limited, the parent of Seajacks International Limited,
for consideration of approximately 8.13 million shares, USD299
million of assumed net debt, USD74 million of newly-issued
redeemable notes, and USD12 million of cash. The transaction has
been approved by the boards of directors of Eneti and Seajacks'
selling shareholders, and is expected to close by the middle of the
third quarter of 2021. Upon closing, existing Eneti shareholders
will own 58% of Eneti; Marubeni, INCJ and Mitsui OSK Lines will own
42%. As a result of the transaction, Mr. Hiroshi Tachigami of
Marubeni and Mr. Peter Niklai of INCJ will join the Eneti Board of
Directors. Seajacks was founded in 2006 and is based in Great
Yarmouth, UK. It owns five self-propelled jackups, and has a track
record of installing wind turbines and foundations dating back to
2009. Its flagship, NG14000X design Seajacks Scylla, was delivered
from Samsung Heavy Industries in 2015, and it is currently employed
in the Asia Pacific market. NG5500C design Seajacks Zaratan is
currently operating in the Japanese market under the Japanese flag.
Three NG2500X specification jackups are employed in the North Sea
market. The acquisition will give Eneti a strong foothold in the
Asia Pacific and North Sea offshore wind markets, and allow the
company to quickly develop its track record as a wind farm
installation contractor. (IHS Markit Upstream Costs and
Technology's Genevieve Wheeler Melvin)
Uber recorded a quarterly net income for the first time as a
public company in the second quarter of 2021. Net income of USD1.1
billion during the period was largely driven by unrealized gains
from the revaluation of Uber's equity investments in Chinese
ride-hailing firm Didi Chuxing and autonomous technology startup
Aurora. (IHS Markit Automotive Mobility's Surabhi Rajpal)
The company's revenue rose to USD3.9 billion in the second
quarter, an increase of 105% year on year (y/y).
The rise in revenues was the result of growth in the number of
monthly active users across rides, bike shares, and food
deliveries, to 101 million, up from 55 million a year earlier.
Gross bookings, a number used to track customer demand,
increased 114% y/y to USD21.9 billion.
Uber's core business, ride hailing, posted an increase in its
revenues of 106% y/y to USD1.6 billion during the quarter.
Meanwhile, revenues at its delivery business rose 122% y/y to
USD1.9 billion. Uber's freight revenue during the period was USD348
million, up 65% y/y.
Automotive LiDAR startup Cepton Technologies is reportedly
planning to go public via a reverse merger deal with Growth Capital
Acquisition Corporation, a special-purpose acquisition company
(SPAC). The deal is expected to value the combined entity at USD1.5
billion, reports Bloomberg. However, a final agreement has not been
reached. (IHS Markit Automotive Mobility's Surabhi Rajpal)
Canada's June merchandise trade balance returned to a surplus
of $3.2 billion, the largest monthly surplus since September 2008.
(IHS Markit Economist Evan Andrade)
In nominal terms, exports advanced 8.7% month on month (m/m) to
$53.8 billion—the largest monthly increase on record excluding
pandemic distortions in 2020—while imports fell 1.0% m/m to
$50.5 billion.
Exports were strong in volume terms as well, rising 6.5% m/m,
while import volumes fell 2.2% m/m.
The service trade deficit widened to $740 million, driven by a
higher import of commercial and travel services.
Colombia's Ministry of Finance announced on 27 July its
framework for planned Green Bond issuance. (IHS Markit Economist Brian
Lawson)
It has identified 27 projects eligible to be financed from
future issuance, which span water resources, transportation,
ecosystems and biodiversity, renewable energy, the circular
economy, and sustainable agriculture.
The program has enjoyed technical support from IADB and the
World Bank.
César Arias, Director of Public Credit, flagged that the
planned issuance, projected in the third quarter, would be the
first sovereign Green Bond issuance in the region denominated in
local currency (and the second overall behind Chile). He claimed
the process should strengthen Colombia's domestic capital market.
Treasury Minister José Manuel Restrepo described the deal as
establishing "a new alternative to finance investment
projects".
The deal comes against a background of deterioration in
Colombia's credit ratings to junk levels and a widening in its
dollar spreads: its EMBI+ index reached 293 basis points over
comparable US Treasury bonds 0n 28 July, its widest level in the
last year, reflecting the ongoing difficulties in agreeing measures
to trim the country's growing debt burdens.
Europe/Middle East/Africa
Most major European equity indices closed higher except UK
-0.1%; Italy +0.7%, France +0.5%, Spain +0.5%, and Germany
+0.3%.
10yr European govt bonds closed mixed; Spain -4bps, Italy
-3bps, France -1bp, Germany flat, and UK +1bp.
iTraxx-Europe closed -1bp/46bps and iTraxx-Xover
-2bps/234bps.
Brent crude closed +1.3%/$71.29 per barrel.
Hyundai Motor UK has launched an all-in-one monthly
subscription service called Mocean for its line-up of hybrid,
plug-in hybrid, and fully electric models, according to a company
statement. A subscription to Mocean starts from GBP339 (USD472) per
month, which covers nearly all major motoring costs including
insurance, roadside assistance, road tax, and maintenance and
repairs at authorized Hyundai dealers. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Hyundai will invest in Germany's hydrogen fueling station
operator H2 Mobility through its German unit, reports Reuters. A
partner in the project since 2017, Hyundai's German subsidiary will
become a seventh shareholder shortly, it said, having received
approval from Germany's cartel office. Other investors include
France's Total SA, Royal Dutch Shell, OMV, Linde, Air Liquide and
Daimler. Hyundai did not disclose financial details. "In Germany, a
lot of money is flowing into the topic of hydrogen through the
European Union Green Deal and national funding, and we believe that
we are at the forefront," said Ronald Grasman, vice-president of
fuel cell business development at Hyundai. (IHS Markit
AutoIntelligence's Jamal Amir)
Daimler's Mercedes-Benz has stated that it will increase its
co-operation with German company Grob-Werke in the area of battery
cell manufacturing technology, according to a company statement.
Mercedes-Benz is planning to ramp up its own cell production
capabilities massively in the coming years to achieve its plan to
become an all-battery electric vehicle (BEV) manufacturer by 2030,
while reducing its dependence on complex international supply
chains. Grob-Werke is a world market leader in highly innovative
battery production and automation systems and has been a
long-standing partner of Mercedes-Benz. (IHS Markit
AutoIntelligence's Tim Urquhart)
Siemens Gamesa has assembled its first offshore wind turbine
nacelle outside Europe at its Taichung facility in Taiwan. The
nacelles are for Ørsted's 900 MW Greater Changhua 1 and 2a
projects. Construction of the nacelle assembly facility was started
in March 2020 over a land area of over 30,000 square meters. The
factory has officially started production by strengthening its
manufacturers local footprint in the fast-growing Asia-Pacific
market. The first large-scale and far-shore offshore wind farms in
Taiwan―Greater Changhua 1 and 2a are located 35 to 50 kilometers
off the coast of Changhua County. With a combined capacity of 900
MW, the two projects will feature a total of 111 SG 8.0-167 DD
turbines installed on jacket foundations. The offshore construction
at these sites will be carried out during 2021 and 2022, with the
project expected to be finalized in 2022. The wind turbine
installation is slated for 2022. Other projects in the region that
Siemens Gamesa have secured turbine deals for include the two
further phases of the 1,044 MW Hai Long offshore wind farm, and the
Hai Long 2B (232 MW) and Hai Long 3 (512MW) projects. (IHS Markit
Upstream Costs and Technology's Monish Thakkar)
The national statistical office (INE) reports that Spain's
EU-harmonised rate of consumer price inflation rose for the fifth
consecutive month to reach a 71-month high of 2.9% in July.
Meanwhile, according to the national definition, the inflation rate
was also 2.9% in July. (IHS Markit Economist Raj
Badiani)
This is a "flash" estimate of just the headline rate, with no
additional information on the goods and services in the CPI
basket.
The main lever appeared to be the impact of higher global crude
oil prices, which increased by 73.3% year on year (y/y) to average
USD74.9 per barrel in July. Therefore, we expect transport and
housing and utility prices rose notably when compared to a year
ago.
Underlying inflation (all items excluding energy and
unprocessed food and the national definition) increased from 0.2%
in June to 0.6% in July.
Asia-Pacific
Major APAC equity markets closed mixed; Japan +0.5%, India
+0.2%, Australia +0.1%, South Korea -0.1%, Mainland China -0.3%,
and Hong Kong -0.8%.
Preliminary Hong Kong SAR data show that real GDP climbed 7.5%
year on year (y/y) in the second quarter of 2021, after jumping
8.0% y/y in the first quarter, which marked the fastest expansion
since the first quarter of 2006. For the first half of 2021, real
GDP climbed 7.8% y/y, following six straight quarters of
contractions that began in mid-2019. (IHS Markit Economist Ling-Wei
Chung)
In seasonally adjusted quarter-on-quarter (q/q) terms, the
economy contracted 1% from the previous quarter, reversing a strong
5.5% expansion posted in the first quarter. It followed three
quarters of q/q expansions.
Domestic demand continued to improve as the stabilized local
outbreak has enabled the government to gradually relax social
distancing measures since mid-February. Domestic demand contributed
10.5 percentage points to second-quarter growth as private
consumption added 4.5 percentage points and fixed investment
contributed 3.9 percentage points. On the other hand, net exports
turned negative in the second quarter as the pickup in domestic
demand bolstered import growth, which outpaced export
expansions.
Although merchandise exports remained strong, the rate of gains
moderated in the second quarter. Exports of goods jumped 20.3% y/y,
albeit decelerating from a sharp 30.1% y/y surge in the first
quarter. Exports to all major markets continued to surge at the
double-digit pace in the second quarter, except Japan. In June,
merchandise exports soared 33% y/y, after expanding at 24% y/y in
April-May.
Accounting for around 60% of total exports, a 36.6% y/y surge
in shipments to mainland China continued to drive the rebound in
Hong Kong's export demand in June. The revivals in the regional
economies also provided strong support, led by a 64.1% y/y surge in
exports to South Korea and a 46.1% y/y jump in shipments to Taiwan.
Shipments to the US climbed 19.2% y/y. Shipments to Europe also
turned stronger, led by a 87.9% y/y surge in those to the UK.
Exports of services resumed growth for the first time in two
years, rising 2.6% y/y in the second quarter, reversing a 7.3% y/y
drop in the first quarter and after slumping 36.1% in 2020 as a
whole. Despite the pickup in the second quarter of 2021, it came
mainly on the back of a very-low comparison base as the tourism
sector has remained at a standstill. Prolonged travel restrictions
have continued to disrupt inbound tourism and resulted in prolonged
doldrums in exports of travel services.
Total tourist arrivals have remained below 7,000 per month,
compared with 3-6 million every month before the pandemic. Caused
by fears over the spread of the virus and the resulting tightening
social distancing measures and travel restrictions, tourist
arrivals started to plunge in February 2020 by more than 96% y/y
since then. Visitor arrivals dropped again in May by 34.8% y/y and
further by 57.6% y/y in June, after resuming growth in April for
the first time since June 2019, up 38.3% y/y, although the gain was
mainly on the back of a low comparison base.
Nissan has teamed up with Chinese battery manufacturer Envision
AESC to set up a battery plant in Japan, reports Electrive.
According to the report, the new plant is to be built in Ibaraki
prefecture north of Tokyo and involve an investment of JPY50
billion (USD456 million). Reportedly, the plant is to have an
annual production capacity of six gigawatt-hours in 2023. The new
battery-manufacturing plant in Japan will be the second facility
set up by Envision to supply batteries to Nissan for electric
vehicle (EV) models. Last week, Envision AESC submitted plans for
an EV battery plant to supply Nissan's Sunderland (United Kingdom)
facility. (IHS Markit AutoIntelligence's Nitin Budhiraja)
Japanese automakers Nissan and Honda have reported double-digit
percentage declines in Chinese sales during July. According to a
company press statement, Nissan witnessed a 20.8% year-on-year
(y/y) decline in sales to 95,783 units in China during July. In the
year to date (YTD), Nissan posted a sales increase of 11.8% y/y to
802,133 units. Sales of Nissan's passenger vehicle joint venture
(JV) with Dongfeng, which includes the Nissan and Venucia brands,
decreased 20.3% y/y to 79,328 units in July and increased 11.3% y/y
to 648,747 units in the YTD. Sales of Nissan's light commercial
vehicles (LCVs), including those of Dongfeng Automobile Co Ltd
(DFAC) and Zhengzhou Nissan Automobile (ZNA), dropped 17.7% y/y to
15,364 units in July and rose 22.6% y/y to 146,073 units in the
YTD. Sales in the Chinese market were impacted by the floods in
several parts of the country, along with a shortage of
semiconductor chips. For Nissan, the major drivers of sales were
the Qashqai sport utility vehicle (SUV; 11,839 units), the Sylphy
series (40,124 units), and the Altima sedan (11,044 units).
Meanwhile, Honda's sales were driven by the Civic, Accord, Breeze,
Vezel, and XR-V. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
LiDAR startup Innoviz Technologies has partnered with
autonomous mobility firm SpringCloud to expand its presence in
South Korea. Under this partnership, SpringCloud is allowed to
distribute Innoviz products in South Korea across multiple sectors
and industrial applications. This partnership builds on Innoviz's
strong associations in South Korea with Naver, Samsung, and SK as
its investors. Innoviz, which recently went public via a
special-purpose acquisition company (SPAC) merger deal, offers a
range of hardware products including InnovizOne, a solid-state
LiDAR sensor specifically designed for automakers and robotaxis.
(IHS Markit Automotive Mobility's Surabhi Rajpal)
Indian car rental firm Zoomcar has announced the launch of
operations in international markets as it expands to Southeast Asia
and the Middle East. In addition, Zoomcar has announced the
appointment of Hany Olama and Gene Angelo Ferrer as country heads
in Egypt and the Philippines, respectively, to help the company
scale up its business. Zoomcar introduced car-sharing services in
India in 2013 and currently has over 10,000 cars in its fleet, with
around 4.8 million users. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
New Zealand's seasonally adjusted unemployment rate was 4.0%
for the June quarter of 2021, according to Statistics New Zealand
(SNZ), dropping 0.6 percentage point quarter on quarter (q/q), with
the total number of unemployed people falling by 12.4% - the
largest quarterly drop on record. This continued fall from the peak
recorded during the September 2020 quarter has brought the
unemployment rate back to roughly pre-pandemic levels for the first
time in almost a year and a half. (IHS Economist Andrew Vogel)
The sharp improvement in the unemployment rate was supported by
further growth in employment (up 0.5% q/q) on top of last quarter's
gains - helped by the low working-age population growth caused by
reduced inward migration since the start of the pandemic, although
the total number of filled jobs has also improved by 2.4% year on
year (y/y). The total number of people employed increased 1.7% y/y,
helped by large growth in part-time and temporary employment (up
4.0% and 21.5%, respectively).
The labor-force participation rate registered another slight
improvement, increasing by 0.1 percentage point to 70.5%. Perhaps
more importantly, labor underutilization (defined by SNZ as "those
who work less than 30 hours a week, but would like to work more
hours and have the availability to do so"; or all underemployed,
unemployed, and unavailable and potential jobseekers) fell sharply
to 10.5% - down an almost unprecedented 1.6 percentage points q/q -
while the total number of underutilized people fell a record 13.3%
q/q.
Wage growth rose to 2.1% y/y, improving over the previous
quarter and marking the second straight quarter that annual wage
inflation has increased. However, this is still lower than the 3.3%
annual rise in consumer price inflation (CPI) in the same period.
That said, average weekly earnings saw dramatic improvement of 9.2%
y/y, driven by both the increase in hourly wages and an even larger
jump in paid hours (up 7.8% y/y, the largest increase on
record).
Posted 05 August 2021 by Ana Moreno, Director, Product Development, IHS Markit and
Chris Fenske, Head of Fixed Income Research, Americas
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