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All major US and European equity indices closed higher, while
APAC markets were mixed. US and most benchmark European government
bonds closed lower, with the former selling off sharply. European
iTraxx and CDX-NA closed tighter across IG and high yield. The US
dollar and natural gas closed lower, while oil, copper, silver, and
gold were higher 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
All major US equity indices closed higher, with the DJIA +1.3%,
S&P 500 +1.1%, and Nasdaq +1.0% all closing at new record
highs; Russell 2000 +2.1%.
10yr US government bonds closed +6bps/1.36% yield and 30yr
bonds +7bps/1.99% yield.
CDX-NAIG closed -1bp/48bps and CDX-NAHY -6bps/276bps, which is
+1bp and +7bps week-over-week, respectively.
DXY US dollar index closed -0.3%/92.13.
Gold closed +0.6%/$1,811 per troy oz, silver +1.0%/$26.23 per
troy oz, and copper +1.9%/$4.35 per pound.
Crude oil closed +2.2%/$74.56 per barrel and natural gas closed
-0.4%/$3.67 per mmbtu.
An executive order will be signed by President Joe Biden later
today (July 9) that will provide more detail on several topics
regarding competition in several sectors including agriculture. A
fact sheet released by the White House does provide some initial
general actions/issues that will be covered in the order. (IHS
Markit Food and Agricultural Policy's Roger Bernard)
Calls on the leading antitrust agencies, the Department of
Justice (DOJ) and Federal Trade Commission (FTC), to enforce the
antitrust laws vigorously and recognizes that the law allows them
to challenge prior bad mergers that past Administrations did not
previously challenge.
Announces a policy that enforcement should focus in particular
on labor markets, agricultural markets, healthcare markets (which
includes prescription drugs, hospital consolidation, and
insurance), and the tech sector.
Establishes a White House Competition Council, led by the
Director of the National Economic Council, to monitor progress on
finalizing the initiatives in the Order and to coordinate the
federal government's response to the rising power of large
corporations in the economy.
Directs USDA to consider issuing new rules under the Packers
and Stockyards Act making it easier for farmers to bring and win
claims, stopping chicken processors from exploiting and underpaying
chicken farmers, and adopting anti-retaliation protections for
farmers who speak out about bad practices.
Directs USDA to consider issuing new rules defining when meat
can bear "Product of USA" labels, so that consumers have accurate,
transparent labels that enable them to choose products made
here.
Directs USDA to develop a plan to increase opportunities for
farmers to access markets and receive a fair return, including
supporting alternative food distribution systems like farmers
markets and developing standards and labels so that consumers can
choose to buy products that treat farmers fairly.
Encourages the FTC to limit powerful equipment manufacturers
from restricting people's ability to use independent repair shops
or do DIY repairs—such as when tractor companies block farmers
from repairing their own tractors, as well as ban or limit
non-compete agreements and unnecessary occupational licensing
restrictions that impede economic mobility.
Revenues at US hotels (seasonally adjusted) last week were
101.4% of the mid-January 2020 level, according to our estimate
based on weekly data from STR. Combined with robust readings on
airport passenger traffic from the Transportation Security
Administration (TSA) in recent weeks, this is consistent with full
recovery in the travel sector. Meanwhile, job openings last week
were 9.4% above the January 2020 level, according to the
Opportunity Insights Economic Tracker. This is close to readings
over the prior two weeks and below averages in the spring,
suggesting healthy albeit cooling labor demand. Averaged over the
last seven days, about 271,000 people per day received a first (or
only) dose of a COVID-19 vaccination, down sharply from an average
daily rate of about 430,000 per day over the prior week. The
slowdown could reflect reduced demand because of the holiday
weekend. As of yesterday, 183.2 million US residents, or about 56%
of the population, were at least partially vaccinated against
COVID-19. At the current rate, the US would achieve widespread
vaccination (70-80%) by early next year. (IHS Markit Economists Ben
Herzon and Joel
Prakken)
Halo has launched a remotely operated electric car service
using the T-Mobile 5G network in Las Vegas (United States). Halo
has deployed its RemotePilot technology, which enables remote
drivers to control the vehicles. A vehicle can be booked through a
mobile app and will be delivered to a waiting customer by a remote
operator. Once the car has been delivered, the user may get behind
the wheel to operate it, and after completing the trip the remote
operator takes control to drive the vehicle to the next customer in
line. Halo has also developed Advanced Safe Stop technology, which
allows the car to come to a complete stop if a potential safety
hazard or system anomaly is detected. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
Coming in a bit below the IHS Markit above-consensus call,
Canada's net employment advanced by 230,700 positions in June.
Part-time positions surged by 263,900, retracing most of the
previous two months of losses. Full-time positions were lowered by
33,200. (IHS Markit Economist Arlene
Kish)
The labor force participation rate climbed to 65.2% and the
unemployment rate fell 0.4 percentage point to 7.8%.
Total average hourly wages were down 0.8% from the previous
month given the boost in part-time positions.
Total hours worked dipped 0.2% from the previous month with
hefty losses in goods-producing industries, excluding
manufacturing.
If Canada can avoid a fourth wave, solid job creation is
anticipated, easing any downside risks for the Bank of Canada.
Europe/Middle East/Africa
All major European equity indices closed higher; France +2.1%,
Germany/Italy +1.7%, Spain +1.5%, and UK +1.3%.
Most 10yr European govt bonds closed lower except for Italy
flat; UK +5bps and Germany/France/Spain +2bps.
iTraxx-Europe closed -1bp/47bps and iTraxx-Xover -5bps/233bps,
which is +1bp and +6bps week-over-week, respectively.
Brent crude closed +1.9%/$75.55 per barrel.
The UK's Office for National Statistics (ONS) reports that the
UK economy grew by 0.8% month on month (m/m) in May, after gains of
2.0% m/m in April and 2.4% m/m in March. GDP was still 3.1% below
the level before the first COVID-19-related lockdown in February
2020. (IHS Markit Economist Raj
Badiani)
GDP shrank by 1.6% quarter on quarter (q/q) in the first three
months of 2021.
The figure for May this year was below the market consensus,
which had predicted a 1.5% m/m gain during the month.
A breakdown by type of output reveals that the services sector
increased by 0.9% m/m in May but was still 3.4% lower than the
February 2020 level
The UK's fiscal watchdog believes the UK government can pay for
the net-zero transition with less than it borrowed to recover from
the COVID-19 pandemic—but only if it acts now. In total, £42
billion a year is required to decarbonize sectors like household
heating, manufacturing, construction, and vehicles, according to
the Climate Change Committee (CCC), which oversees the UK's
compliance with emissions budgets. If it doesn't pay this amount in
the next 10 years, the cost will double, according to the UK
Treasury-funded arm's length body, the Office for Budget
Responsibility (OBR). The watchdog forecast the net public sector
debt under various net-zero-related scenarios in its 2021 Fiscal
Risks Report. It said "unmitigated global warming" would cost the
UK 289% of GDP by the end of the century due to the cost of dealing
with and adapting to ever-hotter weather and economic shocks caused
by mass migration and conflict. This would also create cyclical
debt as certain economic shocks like weather events, on the rise
globally since the 1980s, become more severe and frequent, leaving
less time to pay back the deficit they create. (IHS Markit Climate
and Sustainability News' Cristina Brooks)
The European Central Bank's (ECB) current inflation target will
be replaced by a symmetrical target of a 2% inflation rate over the
medium term, but monetary policy is unlikely to be substantially
different as a result. (IHS Markit Economist Diego
Iscaro)
Background: In January 2020, the ECB started undertaking the
first review of its monetary policy strategy since 2003. This was
initially scheduled to conclude before the end of 2020 but the
timetable was delayed by the coronavirus disease 2019 (COVID-19)
shock (see Eurozone: 15 October 2020: Follow the leader: Will the
ECB adopt the Fed's new approach to inflation targeting?).
The strategic review sets a new definition of what constitutes
price stability. The current definition of a year-on-year increase
in the Harmonised Index of Consumer Prices (HICP) "below, but close
to, 2% over the medium term" will be replaced by a symmetrical
target of a 2% inflation rate over the medium term.
Under the new definition, a 2% inflation rate is not a ceiling.
This means that the ECB will deem negative and positive deviations
in the inflation rate as equally undesirable.
As the ECB's press release explains, monetary policy will have
to be particularly forceful on occasions, such as currently, when
the economy is operating close to the lower bound on nominal
interest rates. As a result, this would imply transitory periods
when inflation is above the 2% target.
Although the review concluded that the HICP remains the
appropriate measure of price stability, it recommended the
inclusion of costs related to owner-occupied housing. These costs
are already included in the inflation measures in other major
developed economies such as the United States, Japan, and
Switzerland. The current HICP includes actual rents but not all
housing costs.
The inclusion of housing costs in the HICP is a multi-year
project. In the meantime, the current HICP will continue to be used
as a reference, but temporary measures of housing costs will be
taken into account to conduct monetary policy.
What has not changed: Interest rates - the rate on the main
refinancing operations, the deposit facility rate, and the marginal
lending rate - will remain the ECB's primary monetary policy
instrument. Moreover, the Governing Council has also confirmed that
other monetary policy instruments - such as forward guidance, asset
purchases, and longer-term refinancing operations, which have all
been increasingly important over the last decade - will continue to
be an integral part of the ECB's toolkit.
The new strategy will be in place from the next regular
monetary policy meeting of the Governing Council on 22 July. The
next assessment of the ECB's monetary policy strategy is expected
to be held in 2025.
In the first half of 2021, the number of combined in-and
out-bound Sino-Euro trains reached 9,100, according to New Silkroad
Discovery, a local Belt and Road media outlet. Given the congestion
at sea ports and high sea freight rates, the railway route is
growing fast. (IHS Markit Food and Agricultural Commodities' Hope Lee)
There are five Chinese land boarder ports for the Sino-Euro
railway: Alashankou, Horgos, Erlianhot, Manshouli and Suifenhe.
About 40 Chinese and 90 foreign cities have connected to the
route.
China's Horgos Custom, which was expanded and restructured at
the end of last year, has the largest number of trains passing,
with 18 Sino-European trains passing daily in H1. At Horgos,
imported goods include household appliances, raw material for
textiles and foods.
Manzhouli, connecting to Russia, is currently being expanded
and goods include agriculture commodities such as fertilizers,
grains and general foodstuff.
In H1, there were 3,033 trains at Alashankou Port, with a cargo
volume of 2,280,700 tons, an increase of 41% year-on-year and 56%
y/o/y, a record high.
The Erlianhot Port, connecting to Mongolia, managed 1,241
trains in and out of China and Europe in H1. Mongolia exports meat
and foods to China.
The Suifenhe Port, connecting to Russia, managed 214 trains, a
168% increase y/o/y. The key destinations are Poland, Germany and
Belgium. Goods imported include grains, confectionery, alcoholic
beverages etc.
Stellantis held its first EV Day on 8 July, providing an
overview of platform and battery technology plans, as well as
highlighting changes for key brands. Stellantis promises its
electric vehicle (EV) range will fit the needs of 80% of customers
in the small-car segment, 90% of compact and mid-size car segments,
and 100% of the needs of light commercial vehicle (LCV) customers
and is spending EUR30 billion through 2025 on EVs and EV-related
software (CEO Carlos Tavares clarified that non-EV software
development will be drawn from other capex spending), which will
include equity investments made in joint ventures (JVs) to fund
their activities. In addition, Stellantis expects that from 2026,
the total cost of EV ownership will be equal to internal combustion
engine (ICE) products; a statement that includes costs from
maintenance to insurances, as well as vehicle price. While some
competitors are looking at only one or two BEV platforms to meet
their customer needs, Stellantis's approach recognizes its broad
consumer base around the world. It also anticipates the tightening
emissions regulations facing the automotive industry during the
next decade. For example, the European Commission is expected to
set out its proposed changes to emissions targets in the next week,
which are expected to be far stiffer than the current 37.5% fleet
reduction in CO2 by 2030. (IHS Markit AutoIntelligence's Stephanie
Brinley and Ian Fletcher)
During its session on 8 July, the National Bank of Poland's
(NBP) Monetary Policy Council (MPC) kept the base interest rate
stable at a record low of 0.1% while vowing to continue with its
unconventional monetary policy measures. (IHS Markit Economist Sharon
Fisher)
The 'flash' estimate for June put inflation at 4.4% year on
year (y/y), an improvement over the May peak but still well above
the upper band of the NBP's 1.5-3.5% target. Meanwhile, core
inflation (excluding food and energy prices) is estimated to have
fallen to the lowest level in more than a year.
Inflation has been boosted in recent months by higher commodity
prices and supply-chain disruptions, which the NBP believes will
keep inflation above target during the coming months. Nevertheless,
the NBP views the upswing in inflation as temporary and beyond its
control.
Polestar is said to be moving forward with discussions over a
possible merger with a special purpose acquisition company (SPAC).
Sources with knowledge of the matter have told Bloomberg News that
talks are taking place in relation to a merger with Gores
Guggenheim that could value the combined business at around USD25
billion. The sources added that no deal has yet been reached and it
is possible that talks could fall apart. Representatives for Gores
Guggenheim and Polestar declined to comment. (IHS Markit
AutoIntelligence's Ian Fletcher)
FEV Turkey has developed Level 4 autonomous TRAGGER vehicles, a
new generation of battery electric utility vehicles. The vehicles
are designed to move freight and people in a variety of commercial
and industrial environments and their production will take place at
TRAGGER's facility in Bursa (Turkey). The vehicles feature seven
LiDAR sensors, one radar device, and one camera and this enables it
to detect a 360-degree surrounding environment. They also employ a
high-resolution camera and artificial intelligence (AI)-based
image-processing algorithms, which allow the vehicles to operate
more safely in heavy traffic environments as they can recognize
features such as lanes, pedestrians, and obstacles. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Egypt's annual headline inflation has gone up to 4.9% in June,
marginally higher than May's 4.8% and up from 4.1% in April, while
the overall rate in urban and rural areas rose more sharply to 5.7%
in June compared to 4.9% in May and 4.4% in April, according to the
official statistics agency CAPMAS. June's inflation reading is the
highest this year, with the acceleration being the fastest since it
attained 5.4% in December 2020, yet the urban figures are still
more muted than policymakers had penciled in. (IHS Markit Economist
Yasmine Ghozzi)
Inflation continues to slow down even further month on month
(m/m) with urban prices rising only 0.2% in June compared to 0.7%
in May and 0.9% during April.
As far as urban Egypt is concerned, an annual price increase of
20% took place in the education sector, whereas annual inflation in
the recreation and culture segment increased by 7.1%. Similarly,
the transport sector registered an annual hike in prices by 6.5%,
whereas the food and beverages segment had an annual change of
3.4%.
In rural Egypt, the annual surge in the cost of education was
recorded at 44.2%, 9.4% in transport, 10% in miscellaneous goods
and services, 5.6% in housing, water, electricity, and gas, and
5.5% in health. The food and beverages component in the consumer
price index (CPI) registered an annual surge of 3.1% in June, with
a m/m increase of 1.1%.
Asia-Pacific
APAC equity markets closed mixed; Hong Kong +0.7%, Mainland
China 0%, India -0.4%, Japan -0.6%, Australia -0.9%, and South
Korea -1.1%.
Mainland China's Consumer Price Index (CPI) increased by 1.1%
year on year (y/y) in June, down by 0.2 percentage point from the
previous month, according to the National Bureau of Statistics
(NBS). Month-on-month (m/m) CPI deflation widened to 0.4% in June,
0.2 percentage point lower than the May reading. (IHS Markit
Economist Lei Yi)
The weakening of consumer price inflation largely resulted from
falling food prices, which declined 1.7% y/y in June. In
particular, pork prices plunged by 36.5% y/y, owing to the mismatch
between relatively strong supply restoration and seasonally weak
consumer demand. Services prices, although recording a larger
year-on-year inflation of 1.0% in June, declined 0.1% in
month-on-month terms.
With June being a relatively slack season for travel in
addition to the COVID-19 Delta variant outbreak in Guangdong,
prices of tourism-related services like air tickets and hotel
accommodation all registered month-on-month declines. Excluding the
volatile food and energy components, the core CPI rose 0.9% y/y in
June, unchanged from the prior month.
The Producer Price Index (PPI) came in at 8.8% y/y in June,
showing signs of easing as a result of government intervention
after hitting a 13-year high of 9.0% in May. Similarly,
month-on-month PPI inflation edged down to 0.3%, compared with 1.6%
m/m in May.
China's market regulator has fined several internet companies,
including Didi Chuxing (DiDi), Tencent, and Alibaba, for not
seeking approval for earlier merger and acquisition deals, reports
Reuters. The fines were announced by the State Administration for
Market Regulation (SAMR) on its website, saying that it had charged
the companies CNY500,000 (USD77,099) in each case for failing to
obtain approval for a total of 22 deals. Subsidiaries of DiDi were
involved in 8 of the 22 deals. (IHS Markit Automotive Mobility's
Surabhi Rajpal)
Tesla has announced plans to set up a design studio in China to
develop models locally for Chinese customers, according to China
Daily. In a statement, the automaker said, "We look forward to soon
seeing China-designed and China-made Tesla models sold in the
world". It also said that it will continue to increase its
investment in the country. Tesla also announced started taking
orders for a new variant of the China-made Model Y sport utility
vehicle (SUV). The new addition has a driving range of 525
kilometers. (IHS Markit AutoIntelligence's Nitin Budhiraja)
Chinese electric vehicle (EV) maker NIO has announced plans to
have 4,000 battery swapping stations globally by 2025, reports
Reuters news agency, citing comments from NIO's president, Qin
Lihong. The automaker aims to have 700 battery swapping stations by
the end of this year. Currently, NIO has built 301 NIO Power Swap
stations, 204 Power Charger stations, and 382 destination charging
stations in China, reports news source Gasgoo. (IHS Markit
AutoIntelligence's Nitin Budhiraja)
A group of Taiwanese clean energy companies plan to develop
"mega-scale" offshore wind projects, banding together to form
"Taiwan Team." The ambitions of the joint venture (JV) led by
Swancor Renewable Energy extend beyond the horizons of its native
land too, with plans to win business elsewhere in Asia, which is
now and is expected to remain the top region for global wind sector
growth in the coming decade. The unveiling of the potential
homegrown champion 5 July comes ahead of a ramping up of local
procurement requirements in the third phase of Taiwan's offshore
wind development program, said Shan Xue, IHS Markit principal
research analyst. Taiwan's plans for offshore wind development
involve a three-stage strategy. It is targeting 5.7 GW of installed
capacity by 2025 during the first two stages. In May, Taiwan raised
the bar for the third stage, or "Phase III" of development, by 5 GW
to 15 GW. It aims to build 1.5 GW of resources per year between
2026 and 2035. The country plans to start auctioning off 3 GW for
2026-27 in 2022, and then a further 3 GW each in 2023 and 2024, for
2028-29 and 2030-31, respectively. Until now, the offshore wind
sector in Taiwan has been dominated by overseas players such as
Denmark's Ørsted and Copenhagen Infrastructure Partners, Germany's
wpd and EnBW, Japanese utility JERA, and various affiliates of
Australian financial services group Macquarie. (IHS Markit Climate
and Sustainability News' Keiron Greenhalgh)
South Korea's major battery manufacturers - LG Energy Solution,
Samsung SDI, and SK Innovation - have pledged to invest KRW40.6
trillion (USD35.4 billion) in the electric vehicle (EV) battery
industry over the next decade as part of a government-led
initiative to position the country as the global leader in this
field, reports the Maeil Business Newspaper. Under the initiative,
the three battery majors will spend a combined KRW20.1 trillion on
research and development (R&D) and invest KRW20.5 trillion in
facilities until 2030. LG Energy Solution has announced plans to
invest KRW15.1 trillion by 2030, including KRW9.7 trillion in
R&D. It will build an institute in South Korea for training in
battery technology, expected to be completed in January 2023.
Samsung SDI is also expected to inject more than KRW9 trillion in
battery R&D projects and facility investments at home by 2030.
Furthermore, SK Innovation plans to invest KRW18 trillion in
battery research and production facilities at home and abroad by
2025. (IHS Markit AutoIntelligence's Jamal Amir)
Hyundai and affiliate Kia have signed a memorandum of
understanding (MOU) with Next Hydrogen Corporation, a Canadian
company specializing in water electrolysis technology and a
subsidiary of Next Hydrogen Solutions Inc, according to a company
press release. Under the MOU, the companies will jointly develop an
alkaline water electrolysis system and its related stack for the
purpose of generating green hydrogen economically, as well as
exploring new business opportunities and technological
applications. The aim is to advance stack-related technologies that
are at the core of the alkaline water electrolysis system to reduce
the cost of building the system and maintaining and operating it.
The key benefit to be derived from the project is that, by
enhancing the performance of stack-related technologies in the
alkaline water electrolysis process, it will be possible to develop
a new stack that can be operated at high current density and
produce green hydrogen economically, according to the automaker.
Hyundai and Kia will also oversee the test performance of the new
stack. A pilot test is planned for next year. (IHS Markit
AutoIntelligence's Jamal Amir)
Vietnam has imposed its strictest COVID-19 containment measures
to Ho Chi Minh City, its largest city, and its surrounding
provinces from 9 to 24 July, following the biggest rise in cases
since May. According to the Ministry of Health, as of 9 July there
have been 21,560 confirmed cases nationwide, with 104 fatalities.
(IHS Markit Country Risk's
Anton Alifandi)
Vietnam's slow vaccination progress means that further similar
government containment measures are likely in the one-year outlook.
The government has issued Directive 16, the strictest of its three
containment levels, to Ho Chi Minh City (city-wide) and the
provinces of Dong Nai (province-wide), An Giang (province-wide),
and Binh Duong (four biggest cities). Under Directive 16, all
events and gatherings are prohibited, all intercity transport and
public transport are stopped, and people are ordered to stay at
home except for essential and emergency needs such as buying
groceries or medicines.
As the government continues with its containment measures to
combat COVID-19 infection, the likelihood of supply-chain
disruptions in the electronics, footwear, and garment sectors is
high. Until June, the northern provinces have been the worst hit,
in particular Bac Giang (5,696 cases), Bac Ninh (1,646 cases), and
Hanoi (490 cases), according to the Ministry of Health's figures as
of 9 July. Those cases led to a number of industrial parks being
shut down, including those hosting suppliers of global electronic
companies such as Foxconn and Samsung.
Ride-hailing firm Grab has announced that it will trial a new
service using hybrids or electric vehicles (EVs) in central
Singapore, reports The Straits Times. The service, called JustGrab
Green, will use vehicles such as the Hyundai Kona Electric, Toyota
Prius, and Kia Niro Hybrid, having at least an A2 Vehicular
Emissions Scheme banding. Grab claims that these vehicles emit less
than 125g CO2/km, a 55% reduction compared with gasoline (petrol)
vehicles. The service will be initially launched in central
Singapore covering the areas of Central Business District, Bukit
Merah, Bukit Timah, Orchard, Bishan, Marine Parade and Geylang. The
service will be expanded to all of Singapore progressively. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
Posted 09 July 2021 by Ana Moreno, Director, Product Development, IHS Markit and
Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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