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Daily Global Market Summary - 8 December 2020

08 December 2020 Chris Fenske

US equity markets closed higher with the S&P 500 and Nasdaq reaching new record high closes, while APAC and European markets were mixed. The US dollar and benchmark US/European government bonds closed higher on the day. Investment grade credit indices were flat across iTraxx and CDX-NA, while Xover closed tighter and CDX-NAHY wider. Gold and Brent crude closed higher, while WTI, silver, and copper all closed lower.


  1. US equity markets closed higher, and the S&P 500 and Nasdaq closed at a new record high; Russell 2000 +1.4%, Nasdaq +0.5%, DJIA +0.4%, and S&P 500 +0.3%.
  2. 10yr US govt bonds closed -1bp/0.92% yield and 30yr bonds -2bps/1.66% yield.
  3. CDX-NAIG closed flat/51bps and CDX-NAHY +4bps/292bps.
  4. DXY US dollar index closed +0.2%/90.96.
  5. Gold closed +0.5%/$1,875 per ounce, silver -0.2%/$24.74 per ounce, and copper -0.6%/$3.50 per pound.
  6. Crude oil closed -0.3%/$45.60 per barrel.
  7. Amid disruptions stemming from COVID-19, US productivity (output per hour) and compensation per hour in the nonfarm business sector each rose sharply during the second quarter, but they diverged in the third quarter. (IHS Markit Economist Ken Matheny and Lawrence Nelson)
    • Productivity rose at a 4.6% annual rate in the third quarter, revised down 0.3 percentage point and following an unrevised 10.6% increase in the second quarter. Hours worked rose 37.1% in the third quarter, revised up 0.3 percentage point, following a 42.9% decline in the second quarter.
    • Compensation per hour declined at a 2.3% rate in the third quarter after rising 24.3% in the second. The third-quarter change was revised up 2.1 percentage points, while the second-quarter change was revised up 4.3 percentage points.
    • Productivity rose by less than we expected in the third quarter while compensation per hour declined by more than expected. Unit labor costs declined at a 6.6% pace in the third quarter, nearly matching our expectation.
    • Data on productivity and costs have been severely impacted by fallout from the COVID-19 pandemic, so the implications of recent quarterly data for longer-run trends are unclear. Output and hours worked each fell sharply in the second quarter following smaller declines in the first quarter. Both rebounded sharply in the third quarter. However, over the first two quarters of 2020, hours fell further than output and hours rebounded by less than output in the third quarter, resulting in a higher path for productivity. On balance over the first three quarters of the year, compensation per hour rose by even more than productivity, as employment in lower-wage sectors was more severely impacted than employment in higher-wage sectors. Unit labor costs rose at a 4.8% annual rate over the first three quarters of 2020.
    • As COVID-19-related distortions begin to reverse, we expect productivity to reverse a portion of its recent surge, while compensation per hour will rise much more slowly, on average, resulting in a dip in unit labor costs followed by modest increases.
  8. US job postings during the week ending 27 November improved somewhat, according to the Opportunity Insights Economic Tracker. Still, at 17% below the January average, job postings remained weak, indicative of slow recovery in labor markets. Meanwhile, the Weekly Economic Index (WEI), from researchers affiliated with the New York Fed, stood at -2.1 last week, a reading that, when combined with readings from earlier in the fourth quarter, points to roughly a 2.8% decline in real GDP over the four quarters of 2020. This is more of a decline than we currently forecast (we look for a 2.2% decline) but is nevertheless consistent with our forecast, given the statistical uncertainty of the WEI. (IHS Markit Economists Ben Herzon and Joel Prakken)
  9. A vaccine from the University of Oxford and AstraZeneca Plc shows only a limited ability to stop transmission of the coronavirus despite preventing Covid-19 illness in a majority of those who are infected. Oxford and Astra are the first vaccine developers to unveil data on asymptomatic infection rates in people who received their shot. Overall, it reduced such transmissions by 27% in a large study, according to peer-reviewed results published in the Lancet medical journal on Tuesday. Researchers tested more than 6,000 study participants in the U.K. for Covid-19 infections on a weekly basis and found 29 asymptomatic infections in the vaccinated group. That compared with 40 cases in the control group, which was roughly the same size. (Bloomberg)
  10. Ford and partner Argo AI have announced a short-term pilot program of food deliveries using autonomous vehicles (AVs) in the Miami area of Florida, United States, in conjunction with a local non-profit organization. The non-profit organization is called The Education Fund and the pilot program is scheduled to run for eight weeks. Under the program, Ford and Argo AI will use Ford Fusion Hybrid self-driving test vehicles to deliver fresh bags of produce from the schools where the produce is grown to about 50 students and their families. In a blog post, Navin Kumar, Ford AV LLC's director of AV business, describes the program, saying the vehicles will be loaded with the food when they arrive at the schools and then continue on a daily delivery route. There will be two Argo AI specialists in each vehicle to monitor the test vehicle and, at the drop-off location, one of the Argo AI specialists will make a contactless delivery. Kumar says that the success of this program is leading Ford to plan to expand it and introduce similar pilots in 2021, although the company has given no further details. Ford has delayed plans to launch a self-driving vehicle service until 2022, largely on the COVID-19 pandemic as well as technology development, but its work has not abated. Ford has been testing goods-delivery services in Miami, Austin (Texas), and Washington DC, with the company believing that, in future, goods deliveries will be a key AV service. (IHS Markit AutoIntelligence's Stephanie Brinley)
  11. Aurora has announced a deal to acquire Uber's Advanced Technologies Group (ATG), which will value the combined entity at USD10 billion. Uber will also invest USD400 million in Aurora as part of a strategic partnership. Closure of the deal is due in the first quarter of 2021 and it will see Uber CEO Dara Khosrowshahi take a seat on Aurora's board. Uber is refocusing on its core businesses, including ride-hailing and food delivery, since the COVID-19 virus pandemic, and scaling back some future technology projects. The sale of ATG will support Uber's aim to achieve profitability on an adjusted basis by the end of 2021. Although autonomous vehicles continue to show promise, with investment and development not letting up, their deployment commercially and at scale remains several years away. (IHS Markit Automotive Mobility's Stephanie Brinley and Surabhi Rajpal)
  12. The premier of Canada's Ontario province is quoted as saying there is no consideration of reviving a previous electric vehicle (EV) incentive program, which had been cancelled in September 2018. Automotive News quotes a spokesperson for the premier, Doug Ford, as saying, "We will continue to put forward sensible solutions that encourages all Ontarians to take meaningful action to protect and preserve our environment while making sure that taxpayers' money isn't being used to help those who don't need it." This comes after the province committed CAD295 million to supporting Ford's transition of its Oakville assembly plant from traditional ICE engines to EVs. Although the Canadian federal government is pushing for 10% of Canada's annual sales to be EVs in 2025, the country's transport agency, Transport Canada, recently said that its current trajectory would put EV sales in Canada at only 5-6% of the market at that point. Although Canada's Liberal party pushes for more incentives as a method for increasing demand and reaching national and provincial targets, the Conservative party takes the view that incentives are essentially subsidizing purchases for those who could afford expensive vehicles at full price, and do not increase actual demand. However, the Automotive News report also notes that as EV subsidies were pulled back in Ontario and British Columbia, EV sales immediately slumped. The question of government-supported incentives as a tool for helping to develop sustainable demand is ongoing in many markets. (IHS Markit AutoIntelligence's Stephanie Brinley)
  13. Light-vehicle (LV) registrations in Brazil decreased 7.4% year on year (y/y) in November, according to data from the National Association of Motor Vehicle Manufacturers (Associação Nacional dos Fabricantes de Veículos Automotores: Anfavea). Brazil's LV exports increased 41.5 y/y in November, while LV production increased 3.9% y/y. Brazilian LV sales topped 2.66 million units in 2019, roughly 8% higher than in 2018. Brazil's LV sales were driven by increased availability of credit, and the sales increased last year despite a somewhat sluggish economy, which grew at 1.1% in 2019. However, Brazil's real GDP is expected to drop by 5.9% in 2020, and we expect a sharp drop in LV sales in Brazil to less than 1.9 million units this year, owing to the impact of the COVID-19 virus pandemic. Along with announcing last month's results, Luiz Carlos Moraes, president of Anfavea, said, "We still don't know if we are dealing with impounded sales in the months when people were unable to buy or if this demand is here to stay. There are also at least three factors that put recovery at risk: increased costs and prices, production stops due to a lack of inputs and because of Covid itself, which is growing again." He added, "The fall in production at the height of the pandemic was very strong and it will take some time to fix this disorganization caused in the sector's production chain. The lack of components and inputs is likely to continue for the first quarter of 2021, before we return to normality." The outlook for the Brazilian LV market is gloomy as the spread of the COVID-19 virus is likely to affect sales in December, followed by a weak recovery phase until 2025. Brazil's LV sales were 2.66 million units in 2019 and are forecasted to decrease 28.3% to 1.91 million units in 2020. Brazil's LV exports witnessed a massive increase due to increased demand from countries such as Argentina, Chile, Colombia, and Mexico, because of a need to replenish their low stocks. IHS Markit forecasts Brazil's LV production will reach 3 million units in 2024. (IHS Markit AutoIntelligence's Tarun Thakur)

Europe/Middle East/Africa

  1. European equity markets closed mixed; Spain -0.6%, Italy/France -0.2%, and Germany/UK +0.1%.
  2. 10yr European govt bonds closed higher across the region; Germany/France -3bps and Italy/Spain/UK -2bps.
  3. iTraxx-Europe closed flat/47bps and iTraxx-Xover -3bps/241bps.
  4. Brent crude closed +0.1%/$48.84 per barrel.
  5. Failed EU-UK trade negotiations would subject UK companies to new tariffs when trading with the European Union, threaten their supply chains, and make their products and services more expensive at a time when the United Kingdom is facing further acute GDP losses in late 2020. (IHS Markit Economist Raj Badiani)
    • The EU and the UK are still struggling to conclude a Free Trade Agreement (FTA), which would be in place after the UK leaves the EU Customs Union and single market on 31 December 2020, the end of the transition period.
    • The negotiating obstacle remains the conflicting interpretations of the guiding principles of the trade talks spelled out in the Political Declaration that accompanied the Withdrawal Agreement signed on 24 January 2020. It states that both sides are committed to a "comprehensive and balanced Free Trade Agreement" with "zero tariffs, fees, charges or quantitative restrictions". However, it also pledges that the parties will "retain their autonomy and the ability to regulate economic activity according to the levels of protection each deems appropriate in order to achieve legitimate public policy objectives" .
    • The two sides remain at loggerheads on two key issues, both based on the UK insisting it is entitled to full sovereignty in any future trade deal
    • The EU insists that it will only allow the UK "zero tariff, zero quota" access to the EU single market if the UK commits legally to a set of "level playing field" principles that minimize the risk that it will undercut the EU on environmental regulation, workers' rights, and state aid to businesses. The two sides also disagree on how any future trading or regulatory disputes should be resolved.
    • On fishing, the EU argues that UK fishermen will only have special access to EU markets to sell their catch if EU trawlers can access UK territorial waters. However, the UK's position remains steadfast, arguing that its coastal waters should be under its complete control as a sovereign nation.
    • UK Prime Minister Boris Johnson continues to insist that any trade agreement with the EU has to respect the country's sovereignty and its freedom to secure FTAs with the rest of the world. Johnson has advocated a Canada-style FTA with the EU whereby the UK leaves its Customs Union and single market and attains regulatory autonomy, implying a relatively hard Brexit.
    • However, European Commission President Ursula von der Leyen has warned, "Without a level playing field on environment, labor, taxation and state aid, you cannot have the highest quality access to the world's largest single market." The EU will expect the UK to adhere to stricter rules than those underpinning recent EU trade agreements with China or Japan to reflect the UK's "geographical proximity".
    • The probability that the EU and the UK will fail to reach a trade agreement is more elevated after the latest round of intense talks failed to produce a breakthrough. The narrative from both sides remains that "significant differences" exist between them.
    • However, there are some hopeful developments:
      • Johnson has raised hopes of the prospect of a last-minute breakthrough by agreeing to meet von der Leyen in Brussels in the coming days. He hopes the "power of sweet reason" will allow the UK and the EU to reach a post-Brexit trade deal this week. Some political observers note that Johnson returned with the Withdrawal Agreement when he last visited Brussels.
      • Also, Johnson's 86-seat majority in the UK parliament will limit the influence of the ruling party's more extreme Brexiters and give Johnson some wriggle room when meeting the Commission's president. In addition, the main opposition party in parliament is likely to vote for any trade deal out of the national interest.
      • Both Johnson and von der Leyen have asked the chief negotiators and their teams to prepare "an overview of the remaining differences to be discussed in a physical meeting in Brussels in the coming days".
      • Before the meeting takes place, the UK government has agreed to remove parts of the Internal Market Bill (see above) that would have seen the UK break international law, after reaching an "agreement in principle" on Brexit divorce issues.
    • 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.
  6. A new electric vehicle (EV) charging forecourt has opened in Braintree (UK). In a statement GRIDSERVE, which has built the site just off the A131 road, has said that it can charge 36 EVs simultaneously via chargers that can deliver up to 350kW of power. It has highlighted that the electricity to charge vehicles is generated from solar panels on canopies above the chargers as well as a from a solar farm in Clay Hill (UK) which delivers the electricity through the National Grid. It also has a 6 MWh battery onsite in order to stabilize the local energy grid. The location also has a range of facilities for customer needs, including a comprehensive retail space that includes a coffee shop and post office, a waiting lounge with wireless internet, children's area, wellbeing area, business meeting rooms and washrooms. Separately, the Department for Transport has announced that green numberplates are to come into circulation for battery electric vehicles (BEVs) from today (8 December). According to a statement, "It will raise awareness of the growing number of zero-emission vehicles, as well as helping motorists benefit from local initiatives such as cheaper parking and cost-free entry into zero-emission zones." The new numberplates have a green flash on the left-hand side of the plate and can be combined with the Union flag and national identifiers permitted by existing regulations. Owners will be able to retrofit the plates to existing cars, vans, buses, medium and heavy commercial vehicles, taxis, and motorcycles, as long as they emit no tailpipe CO2 emissions. (IHS Markit AutoIntelligence's Ian Fletcher)
  7. A new collaboration involving farmers, processors and retailers has been launched to drive standards and sustainability in the British beef supply chain. The UK Cattle Sustainability Platform (UKCSP) brings together more than 26 organizations, including the National Farmers' Union (NFU), the British Meat Processors' Association (BMPA), Sainsburys, Tesco and McDonald's. The platform has already been formally recognized by the European Roundtable for Beef Sustainability (ERBS) and is linked to other international bodies such as the Global Roundtable for Sustainable Beef (GRSB). The UK platform will follow the ERBS framework by focusing on four target areas; the environment, animal medicines, animal health and welfare and farm management. Specific outcome targets include an intensity reduction of 15% in greenhouse gas emissions by 2025, and a 50% reduction in the use of 'last resort' antibiotics (HP-CIAs) by 2023. On the health and welfare side, it aims to ensure all animals have access to loose housing (when housed) by 2030 and that pain relief is always given for procedures such as castration and dehorning. The UK platform has agreed to go beyond ERBS targets in two areas: a net zero ambition for the UK and to adopt targets announced by Responsible Use of Medicines in Agriculture (RUMA) Alliance in November 2020. (IHS Markit Food and Agricultural Commodities' Max Green)
  8. Based on Eurostat's third estimate, eurozone GDP rebounded at a record 12.5% q/q pace in the third quarter of 2020, marginally down on the initial 12.7% estimate (which was well above market expectations). (IHS Markit Economist Ken Wattret)
    • On a y/y basis, eurozone GDP fell by 4.3% in the third quarter of 2020, unrevised from the prior estimate and an improvement of over 10 percentage points compared to the second quarter's rate of contraction (-14.7%).
    • Despite the third quarter's record q/q increase, eurozone GDP remained over 4% below its pre-pandemic level in the fourth quarter of 2019, reflecting the exceptionally large declines over the first half of the year.
    • As expected, the largest contribution to the third quarter's q/q rebound came from private consumption. It rose by 14% q/q, again a record rise by a huge margin, contributing over seven percentage points to the q/q growth rate in GDP. Despite the rebound, however, private consumption remained almost 5% below its fourth-quarter 2019 level.
    • Similar patterns were evident across other categories of expenditure. Investment and exports rose by over 13% and 17% q/q, respectively, with the former contributing almost three percentage points to q/q GDP growth. Still, despite their vigorous rebounds in the third quarter, they remained around 10% and 9% down on their fourth-quarter 2019 levels, respectively.
    • With imports rebounding less markedly in the third quarter (12.3% q/q), net trade contributed two and a half percentage points to the third quarter's q/q GDP growth rate, while inventories subtracted around half as much (again see first chart below).
    • Across the eurozone's member states, net GDP losses since the fourth quarter of 2019 have shown considerable divergence (see second chart below) and we expect more of the same in the fourth quarter. This reflects variations in a range of factors including COVID-19 containment measures, economic structure and policy support.
    • Looking at the largest 11 member states, the biggest net decline in GDP over the three quarters of 2020 was in Greece (-12.1%). While its contraction over the first half of 2020 was not as deep as in many other member states, its rebound in the third quarter was relatively modest .
    • In contrast, some other member states, including France, experienced comparatively large declines in GDP over the first half of the year but improved their relative performance via strong GDP rebounds in the third quarter (see second chart below).
    • The best performer over the first three quarters of 2021 was Ireland, with GDP in the third quarter actually up by 3.7% on its pre-pandemic level in the fourth quarter of 2019.
    • In line with the tightening of COVID-19-related restrictions evident in our containment indices, plus November's plunge in the composite PMI, we continue to forecast another sizeable q/q contraction in eurozone GDP in the fourth quarter of 2020; of -2.4% in November's baseline forecast.
    • While "hard" activity data for the fourth quarter of 2020 is limited at this point, the figures currently available suggest the risk to our estimate is tilted towards a somewhat smaller decline. A key reason for this is the recent strength in the manufacturing sector.
  9. The European Commission says it has approved, under EU merger regulation, the proposed acquisition of BASF's worldwide pigments business, BASF Colors & Effects, by DIC Corp. (Tokyo, Japan). To address the Commission's competition concerns, DIC offered to divest a pigment manufacturing facility operated by its wholly owned subsidiary Sun Chemical at Bushy Park, South Carolina. The approval is conditional on full compliance with a commitments package offered by DIC, including the Bushy Park divestment, the Commission says. (IHS Markit Chemical Advisory)
    • The Commission says it had concerns that the proposed transaction, as originally notified, would have reduced competition on the market for the supply of perylene and quinacridone pigments. DIC's commitment to divest the Bushy Park facility, which manufactures a large majority of the company's perylene and quinacridone pigments, removes almost entirely the overlap between DIC's and BASF's activities in the relevant pigments, the Commission says.
    • The commitments ensure that the same number of suppliers will remain active on these markets and that customers retain the same level of choice, the Commission says. DIC's divestment commitment includes the full transfer of the Bushy Park plant, including technology, brands, manufacturing equipment, and other intangible assets, to a manufacturer with proven expertise in pigment production, according to the Commission.
    • BASF Colors & Effects and DIC are market leaders in the production and sale of pigments and other colorants, and the two main suppliers of perylenes and quinacridone pigments worldwide, the Commission says. DIC is mainly active in pigments and colorants through Sun Chemical, the Commission says.
  10. France's trade deficit narrowed in October, according to seasonally adjusted figures released by the Customs Office. The shortfall declined from EUR5.587 billion (USD6.772 billion) in September to EUR4.845 billion. (IHS Markit Economist Diego Iscaro)
    • Collapsing export had driven a substantial deterioration in the trade balance, with the deficit reaching its maximum in at least 20 years in June. The deficit has narrowed for a fourth consecutive month in October, and stood only slightly above its 2019 average.
    • Exports continued to recover in October, rising by 3.3% month on month (m/m). Exports had increased by 5.4% m/m in September, and now stand 7.6% below their pre-pandemic level.
    • Exports of transport materials, which account for around 20% of total merchandise exports, were particularly strong in October (+11% m/m), although they remain almost 10% below their pre-pandemic level in February. Exports of electrical machinery, which account for a similar percentage of exports, rose at 3.3% m/m.
    • The geographical breakdown shows sales to Italy (+5.8% m/m), Switzerland (+5.4% m/m) and Poland (+4.4% m/m) rising by above average in October. On the other hand, exports to Belgium, which had risen by 14.1% m/m in September, declined by 8.1% m/m in October. Exports to Asia increased by 3.7% m/m, following a rise of 11.2% m/m in September.
    • Meanwhile, merchandise imports increased by just 1.2% m/m in October. Imports now stand 6.7% below February's level.
  11. The light-vehicle (LV) market in Russia rose 5.9% year on year (y/y) to 157,580 units, according to a release by the Association of European Businesses (AEB). This result followed on from the strong 7.0% y/y rise in October. The improvement in the last two months helped the year-to-date (YTD) decline moderate slightly, to a fall of 10.3% y/y to 1,346,351 units. This decline in the first 11 months of the year is much smaller than in many markets in Western Europe, despite the Russian market being subject to the same COVID-19 virus pandemic-related lockdown conditions that affected vehicle production in the country, led to the temporary closure of dealerships and hit consumer confidence hard. However, this is more evidence of the low base that the Russian market has been operating on over the last few years. There was evidence that strong offers and incentives from foreign OEMs and the weak rouble have also been key factors in the positive sales growth recorded in October and November. he low base level that has been a feature of the Russian market of the past few years has ensured that it is on target for a lower overall y/y decline than other major global markets in 2020 as a result of the COVID-19 virus pandemic. But this will be small comfort to the OEMs that are struggling to generate profitable sales in a market that is still an extremely tough environment for carmakers. It speaks volumes that one of the main catalysts for private buyers making car purchases at the moment is the weak state of the Russian currency, which has not been helped by the significant plunges in oil prices this year as a result of the pandemic. The collapse in hydrocarbon exports, the 23% reduction in crude oil production agreed with OPEC, and a deep fall in domestic demand will lead to a significant fall in the overall economic activity. After a 1.3% y/y gain in 2019, it will shrink by 4.3% y/y in 2020, rebounding by 1.9% y/y in 2021. Russian authorities have pledged over USD40 billion for financial rescue measures to help to support businesses and households. However, at only 2.8% of GDP, the bailout is insufficient to protect especially small and medium-sized businesses. (IHS Markit AutoIntelligence's Tim Urquhart)
  12. Conforming to IHS Markit's expectations, Kazakhstan's export performance remained weak in the third quarter, as it was hit by low oil prices, oil production cuts, and overall tepid external demand amid the resurgence of the COVID-19-virus pandemic. The recent weakness of the tenge exchange rate and muted domestic demand should strengthen the trade balance in the short term, and consistent quarterly trade surpluses are expected to return, with external demand gradually recovering in 2021. (IHS Markit Economist Venla Sipilä)
    • According to the latest customs-based trade results published by the State Statistics Committee, exports from Kazakhstan fell by an accelerated rate of 34% year on year (y/y) in the third quarter, which is more than a 17% y/y decrease for January-September. Meanwhile, imports returned to growth, expanding by 3.7% y/y, thus leaving the January-September cumulative contraction at a modest 0.5% y/y.
    • The trade balance showed a deficit in June, the first negative goods trade balance for Kazakhstan since November 2010, and shortfalls persisted until the end of the third quarter. As a result, the trade gap for July-September totalled USD1.7 billion, unlike the USD3.6-billion surplus Kazakhstan registered for the same period last year. In cumulative terms, however, the trade surplus held, even if the total of USD7.8 billion for January-September marks a narrowing above 50% y/y.
    • Kazakhstan's exports to other Commonwealth of Independent States (CIS) countries were relatively weak during the second quarter; however, non-CIS exports in the third quarter contracted faster than the y/y average. Meanwhile, rising non-CIS imports account for the overall recovery of imports.
    • After taking over as the leading export market in the second quarter, China further increased its share to nearly 20% in January-September, whereas Italy's share continued to fall, now reaching 14.3%. Russia and the Netherlands followed with exports shares of 9.6% and 6.5%, respectively.
    • The share of mineral sector products of total exports continued to fall in the third quarter, and the 68.2% share for January-September compares with 72.5% in the first half. Concurrently, the share of metals and metal products rose further to 15.7% in the same period following 14% in the first half.
    • Russia retained its uncontested position as the leading imports supplier, with a share of nearly 34%. Machinery and equipment, and transport equipment accounted for an increased share of nearly 46% of goods imports.
    • Kazakhstan's weak trade performance, as shown in the latest data, does not come as a surprise, given declining oil prices. The Brent oil price in the third quarter averaged USD42.82 per barrel, compared with USD61.84 in the third quarter of 2019.
    • In addition, Kazakhstan restricted its oil output to comply with its OPEC+ commitments, after having failed to fully do so earlier this year. Moreover, external demand from key European markets such as Italy and the Netherlands remains muted.


  1. APAC equity markets closed mixed; South Korea -1.6%, Hong Kong -0.8%, Japan -0.3%, Mainland China -0.2%, Australia +0.2%, and India +0.4%.
  2. Baidu has received a permit to deploy autonomous cars without safety drivers in Beijing, China. The company has been granted the permit by Beijing transportation authorities for five of its vehicles to conduct fully driverless road tests. The vehicles are being tested for Baidu's commercial robotaxi service, "Apollo Go", reports Pandaily. Beijing has safety requirements for companies seeking driverless testing permission, which includes obtaining T3 or higher testing ability, completing more than 300,000 km of safe test driving on open roads and passing an evaluation on a closed track. Baidu said it has cleared each of these requirements and has also developed its 5G "Remote Driving Service", which instantaneously provides immediate assistance from a remote human operator, to enhance safety. This permit will support Baidu in gradually reducing human involvement on test vehicles and eventually remove in-car safety drivers from its autonomous vehicle road tests. Recently, Baidu demonstrated its Apollo robotaxis operating without human safety drivers at Beijing's Shougang Park during its annual Baidu World 2020 conference. (IHS Markit Automotive Mobility's Surabhi Rajpal)
  3. Sinopec's board has approved plans to build a 1.2-million metric tons/year (MMt/y) ethylene plant and downstream units in the Nangang area of the port of Tianjin, China, according to an announcement posted on 4 December. Sinopec estimates the cost of the project at 28.8 billion renminbi ($4.4 billion). Sinopec announced in November that it had signed a framework agreement with the Tianjin authorities to invest about 70 billion renminbi at Nangang in 2021-25 to build capacity for petrochemicals and other products. Sinopec operates a 1-MMt/y ethylene plant and downstream complex in the Dagang district of Tianjin in a 50/50 joint venture (JV) with Sabic called Sinopec Sabic Tianjin Petrochemical. The JV announced in 2019 that it would invest 1.5 billion renminbi to expand ethylene capacity by 300,000 metric tons/year for completion in 2021. Sinopec also has a wholly-owned 240,000-metric tons/year ethylene plant at Dagang, operated by its Sinopec Tianjin Co. subsidiary. Nangang and Dagang are both in Tianjin's Binhai New Area development zone. China's ethylene self-sufficiency is low at about 61%, according to IHS Markit's World Analysis 2021: Ethylene, but an aggressive construction program is expected to improve that to just over 70% by 2025. (IHS Markit Chemical Advisory)
  4. Toyota has announced that it is preparing to preview a new mid-size battery-electric sport utility vehicle (SUV). According to a statement, this will be based on the upcoming e-TNGA architecture and will form part of its "European Battery Electric line-up". The automaker has also released a line-up sketch of the side view, which shows a vehicle with SUV design traits with such as large wheels and high window line and bonnet, but with relatively rakish windscreen and rear window. The company added that manufacturing will take place at Toyota's ZEV Factory in Japan. Toyota announced last year that it was launching what it refers to as the e-TNGA platform for future battery electric vehicle (BEV) models. This yet to be named vehicle is referred to as 'C-SUV EV' in IHS Markit forecasts, underpinned by the 'GA-E' architecture. Production will take place at the automaker's Motomachi (Japan) facility initially from 2022, although we also expect production later on at two sites in China and one in Thailand. IHS Markit forecasts that sales in West and Central Europe will begin in 2022, and in its first full year of 2023, it will sell around 7,500 units. (IHS Markit AutoIntelligence's Ian Fletcher)
  5. Toyota and Hino, together with three convenience store companies, 7-Eleven, FamilyMart, and Lawson, have announced a joint project to introduce light-duty fuel-cell electric trucks, according to a statement from Toyota. Under the plans, the three convenience store companies will trial the light-duty fuel-cell electric trucks with a maximum payload of 3 tons, jointly developed by Toyota and Hino, next year to study their rollout plan. The companies will test the vehicles in logistics between multiple distribution centers and stores. Following this, in 2022 and beyond, the companies will collaborate to finalize the positioning of hydrogen stations, hydrogen supply, filling capability, and operating hours, as well as the purchase of vehicles and the cost of hydrogen fuel. The cruising range for the trucks developed by Toyota and Hino will be set at approximately 400 km. Toyota and Hino have positioned hydrogen as an important energy source for the future and have worked together on developing technologies and innovating fuel-cell vehicles for over 15 years since their joint demonstration trials of a fuel-cell bus in 2003. Toyota has been working on the development of fuel-cell electric trucks for several years, which includes carrying out tests using a truck from the PACCAR Kenworth brand as a base vehicle. The latest collaboration between the five companies is directed towards the future widespread introduction of fuel-cell electric trucks as well as reduced CO2 emissions. Earlier this year, Hino and Toyota agreed to jointly develop a heavy-duty fuel-cell electric trucks. The joint development initiative is part of CO2 emission reduction goals set by both automakers through to 2050. (IHS Markit AutoIntelligence's Isha Sharma)
  6. Lexus has shared a video detailing the new DIRECT4 electric all-wheel drivetrain technology, which will make its way in its future battery electric and hybrid electric models. The new DIRECT4 system is designed to deliver precise control using electric motors and braking force to direct torque between the axles and between the wheels. "By automatically adjusting the balance of front and rear-wheel drive, the system adapts the driving conditions to the driver's intentions, changing the driving feel and giving the car the best driving posture. The system uses a front and rear e-axle, each featuring a high-torque electric motor and transaxle, focusing on optimum drive force distribution. As the motor is directly connected to the wheels by a single driveshaft, it operates without delay," the automaker stated in its release. The video also included a teaser of Lexus' future design, revealing sketches and images of a new concept car to be revealed in the first quarter of 2021. The new DIRECT4 is part of the Lexus new strategy, called 'Lexus Electrified', signifying a leap in advanced electric technologies. (IHS Markit AutoIntelligence's Isha Sharma)

Posted 08 December 2020 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence

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