Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Most major European equity indices closed higher, while US and
APAC markets were mixed. US and most benchmark European government
bonds closed higher. European iTraxx and CDX-NA closed almost flat
on the day across IG and high yield. The US dollar, gold, and
copper closed higher, while silver, natural gas, and oil closed
lower on the day.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our newly launched Experts
by IHS Markit platform.
Americas
US equity indices closed mixed; S&P 500 +0.3%, DJIA +0.3%,
Nasdaq flat, and Russell 2000 -1.0%.
10yr US govt bonds closed -3bps/1.32% yield and 30yr bonds
-4bps/1.94% yield.
CDX-NAIG closed flat/48bps and CDX-NAHY +2bps/275bps.
DXY US dollar index closed +0.1%/92.64.
Gold closed +0.4%/$1,802 per troy oz, silver -0.2%/$26.13 per
troy oz, and copper +1.7%/$4.32 per pound.
Crude oil closed -1.6%/$72.20 per barrel and natural gas closed
-1.1%/$3.60 per mmbtu.
The minutes of the meeting of the Federal Open Market Committee
(FOMC) held on 15 and 16 June were released this afternoon. At that
meeting, the Committee maintained the stance of monetary policy,
with unanimous support among the voting members. The target for the
federal funds was kept at a range of 0.00-0.25%, large-scale asset
purchases were continued at the rate of approximately $120 billion
per month, and the Committee repeated forward guidance for both
interest-rate and balance sheet policies. As Chair Jerome Powell
noted on 16 June, the Committee took the first step toward
adjusting balance sheet policy, as it "talked about talking about"
an eventual taper of its asset purchases. The early discussion at
this meeting revealed splits in policymakers' views on tapering
asset purchases: first, in terms of an earlier or later start to
the taper; and, second, whether the Federal Reserve's purchases of
mortgage-backed securities (MBS) should be curtailed more quickly
than its purchases of Treasury securities. In "coming meetings" the
FOMC will continue to assess progress toward economic goals and
begin to discuss plans for the taper, setting up the possibility
that this fall it will announce its plans. The actual timing of
that announcement will depend importantly on the pace of recovery
in labor markets. (IHS Markit Economists Ken
Matheny and Chris
Varvares)
The latest US Job Openings and Labor Turnover Survey (JOLTS)
report points to a strong May for the labor market. With almost 50%
of the total population fully vaccinated and a low tally of new
daily infections, most states have eliminated all pandemic-related
restrictions, giving a boost to the labor market, which is evident
in this release. (IHS Markit Economist Akshat Goel)
Job openings remained at a series high of 9.2 million in May.
The number of hires edged down to 5.9 million.
Job separations fell to 5.3 million in May with layoffs and
discharges falling to 1.4 million.
The quits rate, a valuable indicator of the general health of
the labor market, fell from a series high of 2.8% to 2.5%.
Over the 12 months ending in May, there was a net employment
gain of 8.2 million.
There was one worker competing for every job opening in May.
This is the first time since the start of the pandemic that the
number of workers has not exceeded the number of job openings.
Media reports indicate that Volkswagen (VW) Group is looking to
sell its stake in electric vehicle (EV) charging network Electrify
America; no comments directly from VW or Electrify America have
been reported at the time of writing. Reuters cites unnamed sources
as saying that VW is working with the bank Citi to find a
co-investor in Electrify America that is prepared to inject about
USD1 billion into the division. Reuters reports that VW is planning
to present a new strategy on 13 July, and that it is looking to
consolidate its charging efforts under a new Charging & Energy
business area. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Nestlé USA has unveiled plans to invest USD100 million to
expand its frozen foods factory in Gaffney, South Carolina, by
adding a new production line and expanding an existing one, local
press reported. The facility prepares frozen food entrées for
brands like Stouffer's and Lean Cuisine. "The frozen food category
has been growing for the last few years, and the pandemic has only
increased that trend. As people spend more time at home, they
rediscovered the convenience, value and great taste of frozen
foods," Nicole Caldwell, factory manager at Nestle's Gaffney
location, said in a statement. (IHS Markit Food and Agricultural
Commodities' Cristina Nanni)
Making up for most of the loss since March, Canada's Ivey
Purchasing Managers' Index (PMI) rose 7.2 points to 71.9 in June.
Purchasing managers' spending activity in June was significantly
strong as regional lockdowns have eased since the end of May and
Ontario's early June reopening. (IHS Markit Economist Chul-Woo
Hong)
The employment index climbed for the second successive month,
up 2.6 points, supporting the strong net job gain forecast in
June.
After decreasing for two months, the supplier deliveries index
rebounded 3.1 points, still staying at a low level with ongoing
supply-chain pressures.
The inventories index edged up 0.1 points to 65.4, reflecting
robust spending activities on inventories accumulation. The prices
index inched up 0.8 to 79.4, mainly owing to strong commodity price
inflation.
All subindexes increased modestly in the month. Building on
previous gains, the employment index hit a record high of
69.6.
Real GDP output will solidly rebound in June, and strong growth
momentum will continue in the second half of 2021.
Europe/Middle East/Africa
Most major European equity indices closed higher except for
Spain -0.1%; Germany +1.2%, UK +0.7%, France +0.3%, and Italy
+0.2%.
Most 10yr European govt bonds closed higher except for Italy
flat; UK/Germany -3bps and France/Spain -2bps.
iTraxx-Europe closed -1bp/46bps and iTraxx-Xover
-1bp/231bps.
Stellantis has announced that the future of the Ellesmere Port
(UK) facility has been secured thanks to investment to manufacture
battery electric vehicles (BEVs) at the site from 2022. According
to a statement, Stellantis will spend GBP100 million to transition
from the Opel and Vauxhall Astra to the OEM's range of compact
light commercial vehicle (LCV) in electric-only guise. This will
comprise the commercial Vauxhall Combo-e, Opel Combo-e, Peugeot
e-Partner and Citroën e-Berlingo, alongside the passenger carrying
variants, namely the Vauxhall Combo-e Life, Opel Combo-e Life,
Peugeot e-Rifter and Citroën e-Berlingo. It added that these will
be built for both domestic sale and export, and the investment will
benefit from financial support from the UK government. (IHS Markit
AutoIntelligence's Ian Fletcher)
Seasonally and calendar-adjusted German industrial production
excluding construction declined by 0.7% month on month (m/m) in
May, following stagnation in April. The interim cyclical high
reached in December 2020 after the initial recovery from the
pandemic shock has therefore not yet been regained. (IHS Markit
Economist Timo
Klein)
Total production including construction posted a slightly more
friendly decline of 0.3% m/m in May due to rebounding construction
(1.3% m/m). An even better result was prevented by a setback to
energy output (-2.1%).
The split by type of good reveals that investment goods output
was the key depressing force, whereas intermediate goods continued
their slow but steady rise and consumer goods - helped by a
staggered loosening of COVID-19-related restrictions during May -
increased quite sharply. This is also reflected by a breakdown by
industrial branch, where motor vehicles stand out negatively (-7.2%
m/m), followed by machinery and equipment (-1.7% m/m). This
contrasts with strong increases for food/beverages/tobacco (3.0%)
and chemicals/pharmaceuticals (4.9%), the latter thus supporting
intermediate goods output.
In the case of motor vehicles, the ongoing shortage of computer
chips has led to a downward trend since January, with May's output
level lower even than in June 2020 and effectively resuming the
longer-term downward trend that began in mid-2018.
Meanwhile, manufacturing orders even declined markedly in May
(-3.7% m/m), erasing gains made during March-April. The same
monthly decline was observed upon exclusion of big-ticket items.
Unlike in March-April, however, a major drop in foreign orders
(-6.7% m/m) caused May's weakness, whereas domestic orders posted a
moderate recovery (+0.9%).
May's orders breakdown by industrial branch reveals a similar
pattern as its production equivalent, and even more pronounced with
respect to the automotive sector given the ongoing semiconductor
shortage. Demand for vehicles fell 9.6% m/m, followed by orders in
the metal producing industry (-6.8%). Demand for
machinery/equipment was surprisingly resilient (up 0.8% m/m), but
this might be because lead times are quite long in this sector.
Meanwhile, May's orders for chemicals/pharmaceuticals were broadly
steady too (up 0.7% m/m), but this seeming resilience is qualified
by April's plunge of 5.1% m/m.
France's current-account deficit widened from EUR2.0 billion
(USD2.4 billion) in April to EUR2.3 billion in May, according to
seasonally adjusted figures released by the Bank of France. The
deficit totaled EUR9.6 billion during the first five months of the
year, below a shortfall of EUR18.4 billion during the same period
in 2020. (IHS Markit Economist Diego
Iscaro)
The increase in the overall deficit in May resulted from a
lower surplus on the services account, which more than offset a
narrowing of the deficit on the goods account. The surplus on
services declined from EUR2.4 billion to EUR1.6 billion, as an
improving transport balance was not enough to offset a
deterioration in the travel account.
Meanwhile, the shortfall on the merchandise account eased from
EUR4.2 billion to EUR3.9 billion. The deficit remains below an
average of EUR4.9 billion in 2020.
Exports of goods, which had risen by 0.3% month on month (m/m)
in April, stagnated in May. Merchandise exports remain 7.4% below
their level in February 2020.
Merchandise trade data released by the Customs Office, which
uses a different methodology, show exports to China, which had
risen by a quarter in April, falling by 8.4% m/m in May. Meanwhile,
exports to the eurozone rose by 0.4% m/m, boosted by a 3.0% m/m
rise in sales to Germany.
On the product side, exports of transport equipment, which had
rebounded by 10.1% m/m in April, fell by 14.3% m/m in May. The
three-month moving average shows exports of transport equipment in
May still 28.5% below their level during the three months to
February 2020.
On the other hand, exports of machinery/electrical equipment
and chemical products rose by 1.6% m/m and 2.8% m/m,
respectively.
Meanwhile, merchandise imports declined for the second
successive month (-0.5% m/m, following a decline of 0.4% m/m in
April).
The combined deficit of the primary and secondary accounts
eased from EUR300 million to EUR100 million.
Renault Group has revealed further details of its Hyvia
hydrogen commercial vehicle joint venture (JV) with US-based Plug
Power. In a press statement, Renault says that Hyvia will offer
hydrogen production, mobile storage stations, and, by late 2021,
hydrogen refueling stations assembled in Flins (France). There will
be an option to rent or purchase the hydrogen refueling stations.
The JV will provide three fuel-cell-powered light commercial
vehicles (LCVs) by the end of this year, including a Master large
van for transportation of goods with a range of 500 km and cargo
volume of 12 cubic meters; a master chassis cab with 19 cubic
meters of cargo-carrying capacity and a range of 250 km; and a
Master Citybus with a range of 300 km and the capacity to carry 15
passengers. These vehicles are based on Dual Power architecture and
are powered by a 33-kWh battery, a 30-kW fuel cell, and tanks
containing between 3 kg and 7 kg of hydrogen, depending on the
version. The maximum range of 500 km in the Master large van
includes 100 km from electrical power, with the rest from hydrogen.
(IHS Markit AutoIntelligence's Nitin Budhiraja)
On 6 July, the Hungarian National Bank (Magyar Nemzeti Bank:
MNB) announced the Green Monetary Policy Toolkit Strategy. As part
of the strategy, the MNB will launch two new schemes, the Green
Mortgage Bond Purchase Programme and the Green Home Programme. The
Green Mortgage Bond Purchase Programme, with an initial target of
HUF200 billion, is set "to contribute to the development of the
domestic green mortgage bond market through targeted purchases".
Under the Green Home Programme, the central bank will provide 0%
interest loans to banks, which will be lent to residential
borrowers at a maximum rate of 2.5%. The program, part of the
Funding for Growth Scheme (FGS, a market-based lending scheme),
will be launched in October 2021 with a total limit of HUF200
billion. (IHS Markit Banking Risk's Greta
Butaviciute)
Turkey's annual consumer prices marched upwards in June 2021,
raising pressure for the central bank to increase the main policy
rate at their next meeting on 14 July. However, signals from
central bank leadership suggest that interest rates will be kept on
hold. Further acceleration of inflation in late 2021 is
increasingly likely due to surging producer price inflation and
drought conditions. The central bank may need to act more
aggressively at that time. (IHS Markit Economist Andrew
Birch)
Annual consumer price inflation rose to 17.5% as of June 2021
according to the latest data from the Turkish Statistical Institute
(TurkStat). A weak lira, high global commodity prices, and rising
domestic demand as anti-pandemic restrictions fall have fuelled an
acceleration of inflation since October 2020.
Primary among the causes for higher inflation was a 20.0%
annual increase in the prices on food and non-alcoholic beverages.
Global agricultural prices have contributed to the rise of domestic
prices.
Rising global energy prices also fed the rise of both
transportation and utility prices as well, with annual price
inflation on these categories reaching 26.3% and 25.7%,
respectively, in June 2021.
The Bank of Central African States (Banque des États de
l'Afrique Centrale: BEAC) kept its key policy rate at 3.25% during
its latest monetary policy committee (MPC) meeting on 28 June.
Central bank authorities also expect the economic recovery to be
weak, reflecting uncertainties related to the coronavirus disease
2019 (COVID-19) virus pandemic and slow vaccine rollout efforts.
(IHS Markit Economist Archbold
Macheka)
The BEAC also held the marginal lending rate at 5.0% and the
marginal deposit rate at 0.0%, while it maintained the reserve
requirement ratio at 7.0% and 4.5% on demand and forward
liabilities, respectively.
However, some measures implemented since March 2020 to support
the economy in the wake of the pandemic have been suspended, while
new ones have been implemented. The suspended measure relates to
the adjustments to conditions for the eligibility of guarantees for
the refinancing operations of the BEAC. The new measure concerns
the reactivation of liquidity recoveries via long maturity
operations (one month) targeting credit institutions in excess of
liquidity and wishing to make investments at the BEAC.
Annual inflation in the Economic and Monetary Community of
Central Africa (Communauté Économique et Monétaire de l'Afrique
Centrale: CEMAC) region is expected to accelerate to an average of
2.7% in 2021, from an average of 2.4% in 2020, as both food and
non-food prices are forecast to tick up. The MPC members further
downgraded regional GDP growth projection for 2021 to 1.3% from an
earlier forecast of 1.9%. The downward revision was driven by
significant uncertainties related to the COVID-19 virus pandemic
and slow vaccine rollout efforts.
The CEMAC region's current account (including official grants)
is forecast to register a deficit of 4.8% of GDP in 2021, thanks to
recovering external demand and global oil prices. The budget
deficit (commitment basis including grants) is expected to narrow
to 2.9% of GDP in 2021, from a revised deficit of 3.1% of GDP in
2020.
Foreign-exchange reserves are projected to remain above the
three-month threshold for imports of goods and services, while the
rate of external coverage of the regional currency is expected to
marginally improve to 66.8% in 2021, from 63.6% in 2020.
The slide in Chinese apple juice concentrate (AJC) exports to
the US, partly due to China's reduced production this season and
partly due to the present freight crisis, is demonstrated by the
latest export data. For years, the US has been China's biggest
customer for its AJC, but in May this year the US imported just
5,100 tons of product, compared with over 9,000 tons in May 2020.
South Africa leapfrogged the US to take nearly 7,700 tons of AJC,
up from just 1,610 tons last year. This follows another leap in
South African purchases of Chinese juice in April: 6,600 tons,
compared with 2,100 tons in April 2020. Generally, South Africa
buys between 2,000-3,000 tons per month from China; occasionally
between 4,000-5,000 tons. However, the season-to-date data, from
July through May, shows that South African uptake has remained
virtually unchanged at 41,615 tons this season and 41,400 tons
last. The 2017/18 season shows 40,370 tons and that leaves an
unexplained dip in 2018/19 to 22,700 tons. (IHS Markit Food and
Agricultural Commodities' Neil Murray)
Asia-Pacific
APAC equity markets closed mixed; Australia +0.9%, Mainland
China +0.7%, India +0.4%, Hong Kong -0.4%, South Korea -0.6%, and
Japan -1.0%.
MINIEYE, a perception solution provider for autonomous vehicles
(AVs), has completed a Series D1 funding round for an undisclosed
amount from lead investors CICC Alpha and Dongfeng Asset
Management. Existing investors including Harvest Fund and Vision
Plus Capital also participated in the financing round, reports
Gasgoo. The company plans to use the capital to strengthen its
capabilities of technology development, volume production and cost
control. MINIEYE, which was founded in 2014, has developed its
Level 1 to Level 2+ autonomous solutions. The company uses
artificial intelligence (AI)-based sensing solutions in developing
ADAS (advanced driver assistance system) for serving customers
including Dongfeng, Geely, SAIC, and BYD. MINIEYE claims that it
has delivered around 230,000 units of ADAS in the first half of
2021, up 245% y/y. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
AutoX has launched its fifth-generation fully driverless
system, AutoX Gen5, for robotaxis. It features 50 sensors and a
vehicle control unit of 2200 TOPS (trillion operations per second)
computing power. The AutoX Gen5 system has 28 cameras, six
high-resolution LiDARs, and 4D RADAR with 0.9-degree resolution
that provides 360-degree coverage around the vehicle. The AutoX
LiDAR stack generates 15 million points every second. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
South Korea reported 1,275 Covid-19 cases, a record daily tally
surpassing infections during the peak of country's last major surge
in December. The latest rise comes as Korea eased social distancing
measures including wearing masks outdoors for those fully
vaccinated and extending business hours. The measures were
initially eased as the Asian nation stepped up vaccinations with
about 30% of the population having had at least one shot.
(Bloomberg)
The South Korean Ministry of Industry, Trade and Energy has
launched an electric vehicle (EV) standardization forum to
establish ground rules for five industries based on future
technology, including wireless charging and liquid-cooled rapid
chargers, reports the Korea Herald. The industry-academia-research
co-operation platform, formed by the Korean Agency for Technology
and Standards under the Industry Ministry, will also lead
standardization efforts in vehicle-to-grid (V2G) technology,
electric motorcycles, and solid-state batteries. (IHS Markit
AutoIntelligence's Jamal Amir)
The Korea Advanced Institute of Science and Technology will
lead the standardization of wireless charging technology, which can
charge a vehicle while driving. South Korea has already proposed
standards to the International Electrotechnical Commission for
three core technologies for wireless charging, with the aim of
achieving the international standardization of next-generation
charging technology by 2024.
The Korea Smart Grid Association will meanwhile spearhead the
development of new technology and safety standards for
liquid-cooled rapid chargers. For future ultra-fast chargers with
power ranges of 400 kilowatts or higher, liquid-cooling systems are
more suitable than the existing air-cooling systems, highlights the
report. The Korea Smart Grid Association will also be responsible
for developing standards for V2G technology.
The Korea Smart E-Mobility Association will be responsible for
the standardization of electric motorcycles. It will lead the
development of standards for the shape and voltage of electric
motorcycle batteries, which are detachable.
The Korea Battery Industry Association will draw up standards
for the safety and performance of solid-state batteries, which will
replace lithium-ion batteries, and will take the initiative in
international standardization efforts.
After signaling over the past two months that July's meeting of
the monetary policy board would include decisions on the bank's
next steps for monetary policy, the Reserve Bank of Australia (RBA)
board delivered incremental adjustments, as expected. The official
cash rate target will remain unchanged at 0.10%. RBA governor
Philip Lowe indicates that the policy rate will not move until
headline inflation is sustainably within the 2-3% target range,
which the bank's baseline scenario predicts will not arise before
2024. (IHS Markit Economist Bree
Neff)
The most significant change to the RBA's policy settings is
that the bond buying program will slow to AUD4 billion (USD3.01
billion) per week starting in September, down from the current AUD5
billion. The split between Australian Government Securities (AGS)
and state and territorial securities will remain 80-20. These
settings will hold through mid-November, when the RBA has pledged
to review its policy settings again, and make further adjustments
based on economic conditions.
For the other major decision this month, the RBA decided to not
extend the yield-targeting program to the next maturity - the
November 2024 bond - because it now believes that the need to
maintain low interest rates that far into the future is less
critical. That said, the RBA decided to maintain the yield target
at 0.10% to keep bank funding costs low and interest rates low at
the short-end of the yield curve. As a reminder, the RBA halted new
drawdowns from the Term Funding Facility on 30 June 2021, but the
facility will continue to offer low-cost fixed rate funding for
three years for the funds drawn from the facility.
On the inflation front, the RBA's baseline scenario calls for
underlying (core) inflation to come in at 1.5% for 2021 and reach
2% y/y by mid-2023. Lowe highlighted that upcoming headline
inflation data will have some policy-related spikes, but without
the support from wage growth, headline inflation is unlikely to
stay above the lower band of the inflation target sustainably and
consistently.
Lowe acknowledged that the unemployment rate fell further to a
seasonally adjusted 5.1% in May, with the labor force participation
rate hovering near record highs and firms reporting labor shortages
in sectors that rely on workers migrating from abroad. But the
RBA's view remains that the unemployment rate will need to come
down closer to the low-4% range before it generates the necessary
wage inflation.
Posted 07 July 2021 by Chris Fenske, Head of Fixed Income Research, Americas
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
