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.
All major European equity indices closed higher on the week,
while US and APAC markets were mixed. US and all benchmark European
government bonds closed sharply lower. European iTraxx and CDX-NA
closed wider on the week across IG and high yield. Oil, silver, and
copper closed higher, the US dollar was flat, and gold and natural
gas were lower on the week.
Americas
All major US equity markets closed higher on the week except for
Russell 2000 -0.4%; DJIA +1.2%, S&P 500 +0.8%, and Nasdaq
+0.1%.
10yr US govt bonds closed at a 1.61% yield and 30yr bonds 2.17%
yield, which is +15bp and +14bps week-over-week, respectively.
DXY US dollar index closed 94.07 (flat WoW).
Gold closed $1,757 per troy oz (-0.1% WoW), silver closed $22.71
per troy oz (+0.7% WoW), and copper closed $4.28 per pound (+2.1%
WoW).
Crude Oil closed $79.35 per barrel (+4.6% WoW) and natural gas
closed $5.57 per mmbtu (-1.0% WoW).
CDX-NAIG closed at 54bps and CDX-NAHY 308bps, which is +2bp and
+10bps week-over-week, respectively.
EMEA
All major European equity indices closed higher on the week;
Spain +1.8%, Italy +1.7%, UK +1.0%, France +0.6%, and Germany +0.3%
week-over-week.
All major 10yr European government bonds closed lower on the
week; Italy/Spain+6bps, France/Germany+7bps, and UK+16bps
week-over-week.
Brent Crude closed $82.39 per barrel (+3.9% WoW).
iTraxx-Europe closed 52bps and iTraxx-Xover 264bps, which is
+2bp and +10bps week-over-week, respectively.
APAC
Major APAC equity markets closed mixed on the week; India +2.2%,
Australia +1.9%, Hong Kong +1.1%, Mainland China +0.7%, South Korea
-2.1%, and Japan -2.5% week over week.
US light-vehicle sales were impacted more sharply by low
inventory levels in September than in August and y/y sales dropped
26.1%. In the year to date, the sales improvement has been
constrained at 13.2%. Light vehicle sales in September were at the
lowest monthly level since April 2020, during the depths of the
COVID-19 lockdown period of last year. The lack of inventory is
holding down the sales volume despite favorable consumer interest
and buying conditions. This situation is expected to continue
through 2021 and into 2022. IHS Markit has decreased its forecast
for US light-vehicle sales in 2021 to 15.55 million units. This
figure is up from 14.59 million units in 2020, but less than the
over 16 million units in prior forecasts. (IHS Markit
AutoIntelligence's Stephanie Brinley)
Foxconn and Lordstown Motors have announced an "agreement in
principle" for the two to "work jointly" on Lordstown electric
vehicle (EV) programs at the EV truck startup's Ohio (US)
manufacturing facility. In addition, Foxconn has agreed to buy
USD50 million of Lordstown stock, according to press statements
from both companies. The two companies say the "goal of the
partnership is to present both Lordstown Motors and Foxconn with
increased market opportunities in scalable electric vehicle
production in North America." There are four key elements of the
tentative agreement. First, the two will use "commercially
reasonable best efforts" to negotiate the sale of Lordstown's Ohio
plant to Foxconn for USD230 million. That would, however, exclude
Lordstown Motors' hub motor assembly line, battery module and
packing line assets, as well as other undefined intellectual
property rights and other excluded assets. Second, the two will
negotiate a contract manufacturing agreement under which Foxconn
would manufacture the Lordstown Motors Endurance; this would be a
condition of closing any sale of the plant. Under this condition,
Lordstown would also agree to provide Foxconn with certain rights
to future Lordstown vehicle programs. Third, Lordstown Motors would
issue warrants to Foxconn for 1.7 million shares of common stock at
an exercise price of USD10.50 per share; this would be exercisable
until the third anniversary of the deal's close. Fourth, the two
have agreed to explore licensing arrangements for additional
pick-up truck programs. Fifth, following closing, Lordstown would
enter into a long-term lease for a portion of the facility for its
current Ohio-based employees, and Foxconn would offer employment to
agreed-upon Lordstown operational and manufacturing employees.
Although the deal does have potential for both companies, as
Lordstown has a larger plant than it needs now and the facility
could speed up Foxconn's automotive production aspirations, these
are early negotiations, and it is unclear when or if the talks will
ultimately bear fruit. (IHS Markit AutoIntelligence's Stephanie Brinley)
Brent prices zoomed past $80/bbl this morning as OPEC+
announced an agreement to continue increasing production in
November by 400,000 b/d, in line with recent monthly increases.
Continued production increases were largely a foregone conclusion
given recent price action and shortage fears spreading through
energy markets like wildfire. Despite some rumors over the weekend
of a potential pro-active acceleration of the unwinding to
alleviate market anxiety, the group issued a remarkably swift
decision to stick to schedule, maintaining the reactive and
lead-from-behind posture championed by Saudi Energy Minister
Abdulaziz bin Salman and adopted by the group through much of this
year. While the move will keep the OPEC+ production cursor pointed
higher over the next few months and likely into the winter, it may
fall short of disproving spare capacity naysayers or responding to
what is likely an increasingly loud chorus of consuming countries.
(IHS Markit Energy Advisory's Roger Diwan, Karim Fawaz, Ian Stewart, and
Sean Karst)
Communication is key: With prices above $80/bbl, OPEC+ is now
walking a delicate line between what could be described as
pragmatic reactive management and either intentional or
unintentional under-supplying of tightening markets amid a global
energy crisis. Where markets interpret OPEC+ actions along this
spectrum can have dramatically different price implications.
Whereas pragmatic reactive management implies an ability to respond
to market needs if the stability of physical markets is threatened,
undersupplying markets implies either willingly or, more bullish
still, unwillingly, squeezing markets at a time when oil demand is
liable to benefit from the unexpected switching boon from gas.
A full increase of 400,000 b/d would put more oil into the
system than our current base case, which calls for flatter OPEC+
output as some gulf members step back to make way for more Russian
and Kazakh increases, with other members beginning to reach
production ceilings. In November we forecast a global deficit of
800,000 b/d (with a monthly OPEC+ uplift of 200,000 b/d), which
could be closer to 1 MMb/d as switching from natural gas to fuel
oil and diesel begins to bite in the northern hemisphere. This risk
extends through the winter, with any surprise stock declines
starting to have a bigger impact on price now that the huge
inventory buffer from 2020 is gone in most markets outside of
China.
Paris-based investment firm Ardian joined forces with
Zurich-based FiveT Hydrogen on 1 October to create a €1.5-billion
($1.7 billion) fund known as Hy24 that will be dedicated to
accelerating large-scale clean hydrogen projects and
infrastructure. (IHS Markit Net-Zero Business Daily's Amena Saiyid and Mark Thomas)
Hydrogen, especially the "green" variety produced from
renewable power sources, is increasingly being viewed as an
alternative to carbon-intensive fossil fuels because in liquid form
it can be transported in existing pipelines, in solid form it can
be used in fuel cells for automobiles, and it can be used to
produce steel and cement, two traditionally carbon-intensive
industrial processes.
Expected to secure its first closing before the end of 2021,
Hy24 plans to reach its funding goal by drawing on global chemical,
energy, engineering, and construction companies as well as
institutional investors that are already vested in finding clean
hydrogen solutions. The partners say they will be creating "the
industry's largest clean hydrogen infrastructure manager."
Hy24 already has commitments from two sets of investors: Air
Liquide, TotalEnergies, and construction group Vinci being one,
while New York-based Plug Power, original equipment manufacturer
(OEM) Chart Industries, and Baker Hughes form the other.
The fund has already secured initial commitments of €800
million ($927.5 million), the backers say. Air Liquide,
TotalEnergies, and Vinci said 1 October they each will invest €100
million ($115 million). Lotte Chemical and financial services group
Axa also have indicated a commitment to participate as anchor
investors, according to Hy24.
The People's Bank of China and the China Banking and Insurance
Commission at the end of September held a working seminar with
several local government bodies and 24 major banks. The meeting
reiterated the importance of several things: stable real estate
financing to encourage wider financial stability, "stable land
price, stable house price and stable expectations", and the notion
of property for living, not for flipping. In addition, the meeting
also noted the need to protect homeowners' rights and the need to
speed up financing for homes for rent. (IHS Markit Banking Risk's
Angus Lam)
Real estate financing has come into focus since the house price
slowdown in China and the issues with Evergrande Group. The current
focus is not surprising since about 29% of loans issued by Chinese
banks are used towards the real estate sector.
Chinese authorities have already stepped up their safety net
around Evergrande Group through taking control of the pre-sale
revenues of housing projects to ensure that the funds are used to
develop the projects, therefore allowing their completion. IHS
Markit expects that this will affect Evergrande's ability to repay
its liabilities to debt holders but will reduce the contagion risk
and homebuyers' confidence in terms of property projects that are
yet to be completed. It is currently uncertain whether the move
will become a permanent feature for all property projects from all
developers in China.
US Trade Representative Katherine Tai spoke about US-China
trade relations at the Center for Strategic and International
Studies in Washington, DC on 4 October, announcing the US's
intention to begin a new round of trade negotiations with her
Chinese Counterpart - Vice Premier and Communist Party of China
(CPC) Politburo member Liu He - over China's performance under the
Phase-one trade agreement. (IHS Markit Country Risk's David Li and John Raines)
The US policy position appears largely unchanged, with
potential for additional measures and stronger scrutiny of Chinese
state-owned firms. Although the official restart of negotiations is
a risk-positive development for both sides, the US's overall policy
position on trade relations with China remains largely unchanged,
with US media suggesting that most existing tariffs will remain in
place. Tai's speech also raised the possibility of additional
levies against Chinese products, following the conclusion of the
Phase-one agreement's two-year purchasing commitment timeline.
However, Tai also said that the administration of President Joe
Biden would reinitiate the process under which US companies can
apply for tariff exclusions with the aim of "optimally serving [US]
economic interests", suggesting a more targeted approach and
greater openness to adjust the current tariff regime.
The US also indicated that it would move away from a unilateral
approach, signaling greater intent to engage with Indo-Pacific
allies through bilateral and multilateral channels. Although it
remains highly unlikely that the US would directly engage
Indo-Pacific countries through multilateral trade agreements (Tai
indicated that the US does not intend to rejoin the CPTPP), it is
likely to utilize multilateral platforms more actively for dispute
settlement, and to provide political support to countries that face
discriminatory economic measures from China.
China is unlikely to make significant concessions regarding its
state-led economic development model, and is also likely to
continue its combative diplomatic position against the US. Upcoming
domestic political events in China will encourage President Xi
Jinping and his administration to project strength domestically,
bolster unity, and to avoid the risk of being perceived
domestically to have yielded to US demands.
The US position of challenging China from a "position of
strength" would threaten Chinese interests if it were accompanied
by targeted statements or actions, such as new sanctions or support
for allies in areas that Beijing perceives as crossing "red lines",
including territorial issues in the South China Sea and the Taiwan
Strait.
If the US applies a more generous tariff exemption mechanism
than during the previous Trump administration - particularly in the
technology, electronics, and manufacturing sectors - this would
indicate US intent to de-escalate trade disputes with China,
improving the prospects for a favorable outcome for
negotiations.
In September, Turkish annual consumer price inflation continued
to rise, pushing to 19.6% according to data from the Turkish
Statistical Institute (TurkStat). Inflation has been on an upward
trajectory since late 2019, nearly eight percentage points higher
than it had been a year earlier. (IHS Markit Economist Andrew Birch)
The sharp rise of food prices - which comprise more than
one-quarter of the consumer price index basket - was the primary
driver of overall inflation, up 28.8% as of September. However,
transport, housing, and hotel, café, and restaurant prices all also
contributed strongly to headline inflation.
Core inflation also continued to accelerate in September, up to
17.0% according to TurkStat, up from 16.8% the previous month and
more than 5.5 percentage points higher than it had been a year
earlier. Sharp lira losses over the past year are contributing to
the rise of all prices.
The sharp acceleration of producer price inflation paused in
September, though price growth was still substantial, at 44.0%.
Soaring input prices are putting upward pressure on producers, who
will pass along those added costs, eventually, to consumers.
Canada's merchandise trade balance has registered three
consecutive—and six total—surpluses in 2021 so far, after
consistent deficits since late 2014.This month's export gain was
supported by higher levels of natural gas, crude oil, and coal
pushing energy product exports up 5.1% m/m. Intermediate metal
products also helped lift exports. (IHS Markit Economist Evan
Andrade)
The merchandise trade balance reached a surplus of $1.9 billion
in August, after posting a surplus of $778 million the month
prior.
Nominal exports grew 0.8% month on month (m/m) to $54.4
billion—advancing for a third consecutive month—while
imports declined 1.4% m/m to $52.5 billion.
On a volume basis, real exports advanced a further 2.3% m/m
while imports fell 2.5% m/m.
Automotive trade took a bite out of both sides of the trade
ledger, as exports fell 7.3% m/m and imports fell a further 11.1%
m/m, driven almost entirely by lower volumes.
General Motors (GM) and Wolfspeed have reached a strategic
supplier agreement on silicon carbide. Under the agreement, the
supplier is to develop and provide silicon-carbide power device
solutions to the automaker. No financial terms were disclosed. GM's
statement said, "Wolfspeed's silicon carbide devices will enable GM
to install more efficient EV [electric vehicle] propulsion systems
that will extend the range of its rapidly expanding EV portfolio."
The silicon-carbide devices will be used in the integrated power
electronics in the GM Ultium Drive units in EVs. GM will
participate in the Wolfspeed Assurance of Supply Program, a project
the company says is intended to secure domestic, sustainable and
scalable materials for EV production. The silicon-carbide power
device solutions are to be produced at Wolfspeed's 200mm-capable
Mohawk Valley fabrication facility in Marcy, New York (United
States). The facility is due to open in mid-2022 and will be the
world's largest silicon-carbide fabrication facility, according to
the announcement. (IHS Markit AutoIntelligence's Stephanie Brinley)
Geely has begun mass production of low earth orbit satellites
to enable accurate navigation data for autonomous vehicle (AV)
development, reports The Nikkei. The production takes place in
China's Taizhou, Zhejiang Province, with an annual capacity target
of approximately 500 satellites. These satellites are independently
developed by Geely group company Geespace, which was launched in
2018 to develop and operate low-orbit satellites. This marks the
entry of China's largest privately owned automaker into a field
long dominated by the military. Low-orbit satellites will help
Geely with the high-speed internet connectivity, accurate
navigation, and cloud-computing capabilities that are required to
develop AVs. (IHS Markit Automotive Mobility's Surabhi Rajpal)
The world's three largest orange juice (OJ) producers, Brazil,
the US and Mexico, are expected to produce 1.76 billion gallons of
single strength equivalent (SSE) orange juice in 2020-21, according
to the final season outlook update published by Florida Department
of Citrus (FDOC) on 30 September. (IHS Markit Food and Agricultural
Commodities' Vladimir Pekic)
Taking into account the combined beginning inventories that
amounted to 604.6 million gallons of SSE OJ at the start of the
2020-21 season and the expected total production of 1.76 billion
gallons of SSE OJ in 2020-21, the total availability of OJ will
reach 2.36 billion gallons of SSE juice. This represents a 19% y/y
drop from the comparative figure of 2.92 billion gallons of total
available SSE OJ in the previous season.
This represents a decrease of almost 500 million gallons of SSE
OJ from the previous season, which is largely due to the decline in
juice yields and reduced orange production.
"At the conclusion of the Florida 2020-21 season, preliminary
estimates indicate that total supply of orange juice on the world
market was forecasted to decrease by 21.8% over the previous period
from 2.25 billion SSE gallons to 1.76 billion SSE gallons due to
reduced availability in production from leading suppliers, such as
Brazil, Mexico, and the United States," stated the FDOC.
Brazil, the largest global OJ producer, is expected to produce
1.22 billion gallons (-30.9% y/y) of SSE OJ during its season that
runs from July 2020 to June 2021, followed by Mexico with 278.5
million gallons (+122.2% y/y) of SSE OJ in its season that runs
from October 2020 to September 2021.
Mexico has overtaken the US in the rankings as the US is
projected to produce 263.5 million gallons (-27.7% y/y) of SSE OJ
in the October 2020 to September 2021 season.
Henry Hub natural gas reached a new almost 13-year intraday
high of $6.45 per mmbtu Wednesday at 3:20am ET, before dropping
precipitously to close -10.1%/$5.68 per mmbtu.
The Federal Reserve Bank of New York (NY Federal Reserve) for
the first time has linked the indirect risks that climate change
poses to the banking sector. The staff of the regional reserve bank
examined the impact on banks with loans to the oil and gas sector
by using a stress test approach that was developed in response to
the 2008 global subprime mortgage crisis. (IHS Markit Net-Zero
Business Daily's Amena Saiyid)
In a recently released report, Hyeyoon Jung, Robert Engle, and
Richard Berner of the NY Federal Reserve found that the exposure
for some of these banks arising from indirect climate risk to be
"economically substantial."
"This report shows that this risk is so concentrated in the
equity of the world's largest banks that it could threaten their
ability to retain prudential capital reserves, and in turn limit
their ability to withstand financial shocks that could threaten
global financial stability as a whole," IHS Markit CleanTech and
Climate Executive Director Peter Gardett told Net-Zero Business
Daily.
The staff reached this conclusion after measuring climate risk
in 27 large global banks in the UK, US, Canada, Japan, and France
that together hold more than 80% of the syndicated loans made to
the oil and gas industry.
Their report, however, stopped short of recommending any course
of action for the US Federal Reserve Board, which plans to include
climate change risk as part of its framework to assess the
financial stability of banks that it oversees, and is in the throes
of completing a study.
Dow announced several developments related to circular plastics
production during its 2021 Investor Day on 6 October. Each of the
moves concerns the supply of pyrolysis oil, a naphtha-like
steam-cracker feedstock derived from plastic waste. (IHS Markit
Chemical Advisory)
In Europe, Dow has expanded on an initial 2019 agreement with
Fuenix Ecogy Group to build a second plant in Weert, Netherlands,
with the capacity to process 20,000 metric tons/year of waste
plastics. The resulting pyrolysis oil will be used to produce
circular plastics at Dow's Terneuzen site in the Netherlands.
Dow has also finalized an agreement with Gunvor Petroleum
Rotterdam, a refinery located in the Port of Rotterdam,
Netherlands, to purify pyrolysis oil. Gunvor will supply the
cracker-ready feedstock to Dow beginning this year. Dow is
separately fast-tracking the design, engineering, and construction
of a market development-scale pyrolysis oil purification unit in
Terneuzen.
In the US, Dow has established a multiyear agreement with New
Hope Energy (Tyler, Texas) to supply pyrolysis oil. New Hope Energy
in May announced a pyrolysis oil supply agreement with CPChem.
Dow says it has received or is on track to receive
International Sustainability & Carbon Certification (ISCC) for
each of its major European and US sites. The certification, which
must be renewed annually, allows Dow to guarantee the circularity
of plastics supplied to customers.
In April, Dow announced a partnership with Mura Technology to
support the rapid scaling of Mura's new Hydrothermal Plastic
Recycling Solution (HydroPRS) advanced recycling process. The
world's first HydroPRS plant is in development in Teesside, UK,
with the first 20,000-metric tons/year line expected to begin
supplying feedstock to Dow in 2023.
Western European passenger car registrations fell back further
during September. According to our latest forecast, registrations
in the region declined by 26% year on year (y/y) last month to
886,378 units. Nevertheless, earlier substantial gains have helped
to keep volumes in positive territory in the year to date (YTD).
For the first three quarters of 2021, registrations are up 6.5% y/y
at around 8.238 million units. The further downswing in the market
during September has led to the seasonally adjusted annual rate
(SAAR; D11) falling back to 9.643 million units, while the final
trend cycle (D12) figure sits at 9.830 million units. We have also
published a comparison with 2019 data that underlines the continued
weakness of the market compared with pre-COVID-19 pandemic levels,
showing a 25.8% decline last month compared with September 2019 and
a 24.9% retreat when comparing the YTD 2021 and 2019 figures. Last
month was yet another weak one for Western Europe following a
relatively flat September 2020. One of the big factors dragging
down the performance last month was a lack of supply of vehicles
due to the ongoing semiconductor shortage, which has been hitting
output around the world and is continuing to do so. Besides the
direct impact on the supply of vehicles to customers from
factories, the duration of the shortage has depleted inventories to
much lower levels than usual as OEMs have been unable to restock.
(IHS Markit AutoIntelligence's Ian Fletcher)
LG Electronics has said that its advanced driver assistance
systems (ADAS) front camera will be deployed in the Mercedes-Benz
C-Class, reports the Yonhap News Agency. The camera, which is
co-developed by LG Electronics and Daimler, enables vehicle assist
functions such as automatic emergency braking (AEB), lane keeping
assist, lane departure warning (LKA), and traffic sign recognition.
It said that the camera is powered by algorithms developed by its
vehicle components solutions (VS) business unit, incorporating
technologies of telecommunications, telematics, and image
recognition, as well as artificial intelligence (AI) and deep
learning. It has obtained ISO 26262 certification from independent
inspection body TÜV SÜD. LG Electronics is expanding its presence
in the future mobility sector with three focus areas: infotainment,
powertrain, and auto lighting systems. The VS division reported
sales of KRW5.80 trillion in 2020, up by 6.1% from 2019. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
After contracting 26% y/y in the second quarter of 2020 on the
back of strict COVID-19 pandemic-related restriction measures
introduced in April 2020, Botswana's real GDP expanded by 36% y/y
during the second quarter of 2021. The record growth rate largely
reflects low base effects and a gradual resumption of economic
activities postponed or restricted due to measures taken by the
government to curb the spread of the COVID-19 virus. On a quarterly
basis, Botswana's real GDP growth decelerated to 0.2% in the second
quarter, from 5% in the first quarter. (IHS Markit Economist Archbold Macheka)
Economic growth in the second quarter was broad-based, with
activity in all industries expanding, except agriculture, forestry
and fishing, which contracted 8.4% y/y as real value added of
livestock farming shrank 17.2% y/y because fewer cattle were
marketed during the quarter under review. The public administration
and defence sector, which remained the major contributor to GDP,
accounting for 18.5%, grew 5.6% y/y in the second quarter of 2021,
compared with 1.3% y/y in the second quarter of 2020.
Mining and quarrying accounted for 14.2% of total GDP by
growing 153% y/y in the second quarter of 2021, after declining
60.8% y/y in the corresponding quarter in 2020. The sharp rebound
was driven mainly by a significant increase in the diamond
industry's real value added of 172.2% y/y. This increase was thanks
to diamond production in carats, which surged by 202.8% y/y as
rough diamond demand gradually picked up.
Although still not functioning at full capacity, Botswana's
economy is not far off its pre-pandemic growth pace, but various
hurdles to maintaining this growth path persist. The country's
COVID-19 vaccine rollout has been slow, with only 234,777 people,
representing 9.8% of the total population, fully vaccinated as of 4
October. Botswana is securing its vaccines under the World Health
Organization-backed COVAX scheme and has signed up for 940,800
doses, but has so far received less than 10% of the total order.
Additional agreements to supply vaccines have been reached with
mainland China and US pharmaceutical company Moderna, while
donations have since come in from India and mainland China.
Spot sea 40-ft container prices halved to $8,000 in routes from
China to the US west coast after many Chinese factories temporarily
closed due to power cuts. In addition, spot 40 ft. container prices
fell by a quarter to $15,000 between Chinese ports and the US east
coast. However, US sea shipping companies are still increasing
their long-term contracts, following trends led by the Shanghai
Ocean Shipping Exchange (SSE), the Vietnamese Cashew Association
(Vinacas) reported. The research company Caixin Global has
explained that this sudden fall is due to the combination of
manufacturing halt and the Chinese Golden Week (1-7 October)
festival, with most players expecting rising prices in mid and
long-term contracts until Q1 2022. (IHS Markit Food and
Agricultural Commodities' Jose Gutierrez)
The latest forecast from the US Energy Information
Administration (EIA) reinforces messages that have been coming for
the past year from international bodies, independent analysts, and
climate advocates: at its current trajectory, humanity will fall
far short of the Paris Agreement goal of reaching net-zero
emissions by 2050. (IHS Markit Net-Zero Business Daily's Kevin
Adler)
EIA's conclusion in its "International Energy Outlook 2021,"
released 6 October is that global energy demand will rise by 50%
between 2020 and 2050, and carry annual CO2 emissions from this
sector 24.7% higher.
Annual energy CO2 emissions in 2050 will total 42.839 billion
metric tons (mt) globally, representing a yearly average gain of
0.7% from 2020 onwards.
EIA projects that renewable energy will make significant
inroads in the global power mix by 2050, rising by 3.3% per year
(compared with 1% for oil and 0.9% for natural gas). It says that
batteries will contribute to reliability. Yet it states that gas
and coal will be needed to meet power demand as well.
Renewable generation will nearly triple from 65.1 quadrillion
Btu in 2020 to 191.7 quadrillion Btu in 2050. This will place its
share of the power market at about 58.4% in 2050, compared with
about 27.6% today.
Considering all end uses for energy-residential, commercial,
industrial, and transportation-fossil fuels still will provide a
large share, particularly for industry and transportation in 2050.
However, it is worth noting that EIA places renewables' share of
energy consumption (235.2 quadrillion Btu) nearly on par with
hydrocarbon-based liquid fuels (248.5 quadrillion Btu), and ahead
of gas and coal.
Rising consumption of fossil fuels will overwhelm the
improvements anticipated in the carbon intensity of energy
production and usage, thus leading to the net gain in CO2
emissions.
Hyundai Mobis has held a ground-breaking ceremony for its new
fuel-cell stacks production plant at the Industrial Complex in
Cheongna International City, Incheon, according to a company press
release. The company plans to invest KRW1.3 trillion (USD1.1
billion) in this facility and also a new fuel-cell systems assembly
plant in Ulsan. The new plants are expected to become operational
from the second half of 2023. When fully operational, the
facilities are expected to produce 100,000 hydrogen fuel cells
every year. Once construction of these facilities is completed,
Hyundai Mobis will operate a total of three fuel-cell plants.
Hyundai Mobis is part of South Korea's leading automaker Hyundai
Motor Group, which has a strong focus on hydrogen fuel-cell
technology. (IHS Markit AutoIntelligence's Isha Sharma)
August was an extremely weak month for German industrial output
and orders, driven especially by the automotive and
machinery/equipment sectors, which are suffering markedly from
material shortages. The plunge in demand was exacerbated by an
unwinding effect related to July's big-ticket (ship-building)
orders from Asia. Germany's industrial sector will have a
significant dampening effect on fourth-quarter GDP growth despite
the ongoing support from the recovering service sector. (IHS Markit
Economist Timo Klein)
Seasonally and calendar-adjusted German industrial production
excluding construction declined by 4.1% month on month (m/m) in
August, representing a setback to levels last seen in September
2020. Furthermore, the latest output level is about 10% below its
February 2020 pre-pandemic high.
Total production including construction similarly posted a 4.0%
m/m decline in August, given a comparable 3.1% drop in construction
output. In contrast, energy output rebounded by 4.1% m/m, following
a cumulative decline of 7.5% during May-July.
The split by type of good reveals that the investment goods
sector, which had outperformed in July, weakened the most during
August. Nevertheless, the intermediate and consumer goods sectors
also registered sizeable declines. In the case of the latter, this
was the first decline since April, as the loosening of
COVID-19-related restrictions in May had given consumer goods
output a boost.
The European Banking Authority (EBA) published on 6 October its
latest quarterly risk dashboard covering banks' positions at the
end of the second quarter of 2021. The dashboard was based on a
sample of 131 banks covering 80% of the EU banking sector. Reported
impairment remained stable - with the sample reporting an average
non-performing loan (NPL) ratio of 2.3% - but assets under
moratoria and state-relief schemes continued to face quality
deterioration. Although there is a divergence at the sectoral
level, the latest data reveal overall improving asset quality in
Central and Eastern Europe (CEE). (IHS Markit Banking Risk's Greta Butaviciute, Brian Lawson, and Natasha McSwiggan)
NPL and Stage 2 loan ratios have fallen for many countries but
not all. Although NPL ratios have decreased in most countries, they
have risen in sectors most affected by the remaining social
distancing and travel restrictions measures, such as accommodation
and food services, arts, entertainment, and recreation.
The volume of loans under active EBA-eligible moratoria
continued to fall in all countries for which data are available in
the second quarter. However, the NPLs for loans still under
moratoria rose in some countries, in particular Poland and Croatia,
although they decreased in Bulgaria, Romania, and Slovakia.
The total capital ratio stood comfortably at 19.6% in June
2021, while the leverage ratio rose by 0.1 percent to 5.7%, well
above the EBA's recommended minimum of 3% for EU banks. The strong
capital position reflected higher capital and a reduction in total
assets on a quarterly basis, with the decline "driven by debt
securities and derivatives". IHS Markit also assesses that
temporary loan forbearance measures have prevented a rise in
risk-weighted assets (RWAs), and capital ratios are likely to
weaken when NPLs materialize.
The return-on-assets ratio, despite having returned to a level
recorded prior to the coronavirus disease 2019 (COVID-19) virus
outbreak, remains very low at just 0.47% in June. At the cut-off
date of end-June, 27.8% of reporting banks had a return on equity
(ROE) of below 6%, versus 33.4% in the prior quarter; in the last
quarter of 2020, 78.8% of banks had reported such low returns.
Cyber risks and environmental, social, and governance (ESG) are
areas of growing concern for financial stability. The EBA notes
that no major cyberattack has yet been reported but assesses that
banks' information and communication technology (ICT) systems
"remain vulnerable to significant disruptions", with cyber risks
exacerbated by remote working and extensive use of third-party
providers.
US employers announced 17,895 planned layoffs in September,
according to Challenger, Gray & Christmas, up 14% from a
24-year low of 15,723 in August. The total for September is 85%
lower than the September 2020 reading. (IHS Markit Economist Juan Turcios)
For the year to date, 265,221 job cuts have been announced,
down from the 2,082,262 job cuts announced over the same period in
2020 and the lowest January-September total on record (Challenger
began tracking job-cut announcements in January 1993).
According to Andrew Challenger, senior vice president of
Challenger, Gray & Christmas, "These numbers are still
incredibly low. Employers are devising ways to meet the needs of
their employees, whether by addressing burnout and the desire for
flexibility, raising wages, offering support for child and family
care issues, or being more deliberate in their workers' career
development plans. They want to retain, not cut."
So far this year, employers have cited COVID-19 as a reason for
8,684 planned job cuts. In September, only 234 planned job cuts
were due to COVID-19 despite the elevated count in new cases due to
the Delta variant. Employers have cited other reasons, including
closing (53,571), market conditions (48,148), restructuring
(47,297), demand downturn (45,614), and acquisition/merger (12,225)
more frequently than COVID-19 as causes of job-cut announcements
this year.
Aerospace/defense has announced 33,646 job cuts this year, the
highest number of any industry. Rounding out the five sectors that
have reported the most job cuts this year are telecommunications
(25,148), services (22,505), energy (19,545), and health
care/products (18,936).
US Nonfarm payroll employment rose 194,000 in September, short
of expectations. Prior months' gains, though, were revised higher.
The unemployment rate declined 0.4 point to 4.8%, reflecting a
large increase in civilian employment and a decline in the civilian
labor force. (IHS Markit Economists Ben Herzon and Michael Konidaris)
The deceleration in payroll employment was more than accounted
for by a sharp decline in employment in education services (public
and private), a sector with strong seasonal patterns and, hence,
subject to seasonal distortions.
In the typical September before the pandemic, employment in
public and private education services would rise by about 1.5
million before seasonal adjustment. Employment in this sector rose
1.3 million this September, leading to a 180,000 decline after
seasonal adjustment.
Outside of this sector, payrolls expanded 374,000 in September,
up from a gain of 303,000 in August. These are reasonably solid
gains but are down from considerably stronger gains earlier in the
year.
The Delta wave of new COVID-19 infections is taking a toll on
employment in accommodation and food services. After rising an
average of 282,000 per month over the six months ending in July,
employment in this sector has risen only a cumulative 20,000
since.
Voyager Therapeutics (US) has announced that it has entered
into an agreement giving Pfizer (US) the option to license novel
capsids generated from its proprietary RNA-driven TRACER (Tropism
Redirection of AAV by Cell-type-specific Expression of RNA)
screening technology, using two undisclosed transgenes to treat
certain neurologic and cardiovascular diseases. Under the terms of
the deal, Voyager will receive USD30 million upfront, and stands to
receive up to USD20 million in exercise fees for two options, which
Pfizer can select within 12 months. In addition, Voyager could
potentially earn up to USD580 million in total development,
regulatory, and commercial milestones associated with licensed
products incorporating the two Pfizer transgenes together with a
Voyager licensed capsid. Voyager is also eligible to receive mid-
to high-single-digit tiered royalties based on net sales of
Pfizer's products incorporating the licensed capsids. Voyager's
TRACER system is an RNA-based functional screening platform that is
designed to enable rapid in vivo evolution of adeno-associated
virus (AAV) capsids with enhanced tropisms and cell- and
tissue-specific transduction properties in multiple species,
including non-human primates (NHPs). Initial data have demonstrated
that the capsids that are produced can effectively penetrate the
blood-brain barrier. For Pfizer, the deal with Voyager aligns with
its efforts to develop, manufacture, and commercialize gene
therapies. (IHS Markit Life Science's Milena Izmirlieva)
The African Union's top health official, John Nkengasong, said
yesterday (7 October) that the organisation will soon begin
discussions with the World Health Organization (WHO) and Gavi, the
Vaccine Alliance, to facilitate the rollout of GlaxoSmithKline
(GSK, UK)'s RTS,S/AS01 (RTS,S; Mosquirix) malaria vaccine.
According to Reuters, Nkengasong, who is the director of the Africa
Centres for Disease Control and Prevention (Africa CDC), told a
news conference: "We will be engaging with GAVI and WHO in the
coming days to understand first of all the availability of this
vaccine." His comments were made following the announcement of the
WHO's recommendation for the malaria vaccine to be deployed for
widespread use among children in Sub-Saharan Africa and in other
regions with moderate to high P. falciparum malaria transmission,
deeming it to be a useful complementary tool on top of existing
tools to prevent malaria. The health official indicated that the
African Union intends to work swiftly with the WHO and Gavi to
clarify costs and funding required to facilitate access to the
vaccine in member states. Nkengasong stated that it is currently
unclear when the vaccine will be accessible in countries where
malaria is endemic, "because the cost per dose is not known and it
is not clear how quickly production can be scaled up", according to
Reuters. Although GSK has so far committed to produce 15 million
doses of the vaccine annually up to 2028, at the cost of production
plus no more than a 5% margin, this volume falls well below
projected demand, and methods of financing remain uncertain. (IHS
Markit Life Sciences' Sacha Baggili)
Among the topics at the GM Investor Event on 6 October was an
update on the Cruise business by Cruise president Dan Ammann. The
key takeaways from the event are that Cruise is very close to being
ready to offer paid rides to consumers and sees opportunity to
generate a revenue of USD50 billion in 2030. Cruise sees that once
the cost per mile of these rides falls to about USD1.00 (or the
average cost of US low-mileage car ownership), the total
addressable market (TAM) reaches USD500 billion per year, with
Cruise and GM expecting that they can capture at least USD50
billion of that. Once the cost can be pulled down to USD0.60 per
mile, which is close to the US average mileage car ownership cost
in many areas today, the TAM reaches USD1 trillion. Many of
Cruise's fundamental cost expectations remain consistent, although
the pandemic has changed the development pace and could alter
consumer behavior. (IHS Markit AutoIntelligence's Stephanie Brinley)
The historic drought conditions plaguing much of the Western US
look unlikely to change any time soon and farmers and ranchers
should brace for further water restrictions in the coming year,
state and federal officials told a Senate panel on Wednesday
(October 6). (IHS Markit Food and Agricultural Policy's JR Pegg)
More than 90% of West is suffering from drought and water
levels at two major reservoirs ─Lake Mead and Lake Powell─hit
record lows in August, triggering a water conservation plan that
will impact all eight states within the Colorado River Basin.
"The likelihood of deeper cuts in the future is high," said Tom
Buschatzke, director of the Arizona Department of Water
Resources.
Arizona alone could lose 18% of its Colorado River allotment
next year, he said, and farmers will likely suffer from the
reduction despite state programs intended to mitigate the
reduction. Those programs may help in the short-term, but the
lingering drought could force lasting changes, Buschatzke told the
Senate Energy and Natural Resources Subcommittee on Water and
Power.
The future is "going to be very different" for farmers in the
West, he said. "They're not going to be able to farm the way they
have farmed historically and it's a real paradigm shift for the
agriculture community."
Federal and state officials are going to have to work
cooperatively to figure out how to deal with impacts of the
"megadrought" and ensure water is stored responsibly and
distributed fairly, said subcommittee Chair Mark Kelly (D-Ariz.),
who tried to sound a voice of optimism.
European cattle prices have risen over for the eleventh week in
a row, as short supplies in a number of member states continue to
dominate market conditions. The EU's benchmark price is now
knocking at the door of EUR400 per 100kg for the first time in over
three years, as processors and wholesalers compete for access to
scarce livestock resources. Official data for the first six months
of 2021 show that total beef production was down by 0.5%
year-on-year across the EU - but this figure masks substantial
regional variations. While output was substantially higher in some
of the less significant markets across the EU, output for the first
half-year was down 8.8% year-on-year in Ireland, by 4.1% in
Austria, by 1.5% in Germany, and by 0.4% in the Netherlands. France
saw an increase in output of just 0.6%, while production in Italy
was stable year-on-year. With imports from South America
constrained by a combination of Covid, transport bottlenecks and
high energy costs - and with UK competitors still adjusting to life
outside the Single Market - the EU beef and cattle sector is
characterized by a fundamental shortage of supplies which is now
evident for both male and female cattle. In the week ending 3
October, the Commission's overall benchmark price for A/C/Z R3
cattle was EUR398.35 per 100kg, up by 0.6% on the previous week.
(IHS Markit Food and Agricultural Commodities' Chris Horseman)
Repsol has hiked its planned low-carbon investments by €1.0
billion ($1.15 billion) in 2021-25, to €6.5 billion, and increased
its emission-reduction targets to achieve net-zero emissions by
2050. The company says the additional €1.0 billion will raise its
total investments for the five-year period to €19.3 billion. The
low-carbon spending increase compares with figures given by Repsol
in its last strategic plan, issued in November 2020, and represents
35% of the company's total planned expenditure in 2021-25. This
proportion of expenditure will rise to 45% in 2030, the company
says. (IHS Markit Chemical Advisory)
Repsol has raised its intermediate decarbonization milestones
to 15% by 2025, 28% by 2030, and 55% by 2040, up from 12%, 25%, and
50%, respectively. "The upgrade of our targets demonstrates the
solid progress the company is making towards becoming carbon
neutral by 2050. Ambition, technology, and project execution are
enabling us to increase the speed at which we will achieve this
target," says Repsol CEO Josu Jon Imaz.
The company has also announced an absolute emission-reduction
target for the first time, committing to a 55% reduction in
emissions from its operated assets (Scope 1 and 2) and 30% cut in
net emissions (Scope 1, 2, and 3) by 2030. It has also increased
its internal carbon price applied to all new investments, with
prices per metric ton of carbon dioxide (CO2) differentiated for
investments within the EU and rest of the world. Repsol has set a
carbon price of $70/metric ton in 2025 and $100/metric ton in 2030
for the EU, up respectively from $40/metric ton and $70/metric ton
previously. In the rest of the world, the price has been set at
$60/metric ton in 2025, up from $40/metric ton. "Establishing a
carbon price allows new projects to be designed efficiently and
investment decisions to be evaluated, and is made taking all
variables into account," it says.
Repsol says its investment plans for the period 2021-25 include
€1.5 billion for its chemicals business, with the company aiming to
recycle the equivalent of 20% of its polyolefins production by
2030. It will also progress mechanical- and chemical-recycling
projects for polyolefins, polyurethanes, and the production of
methanol from waste to incorporate these in the production of
materials, it says.
Posted 11 October 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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.