All major European and most US equity indices closed lower,
while APAC markets were mixed. The US dollar closed higher along
with US and European government bonds. European iTraxx credit
indices closed sharply wider across IG/high yield and CDX-NA was
only modestly wider on the day. Gold closed higher, while silver
was flat and copper/oil were lower.
Americas
- Most US equity markets closed lower except for the DJIA +0.2%;
Russell 2000 -0.6%, Nasdaq -0.2%, and S&P 500 -0.1%.
- 10yr US govt bonds closed -1bp/0.90% yield and 30yr bonds
flat/1.63% yield.
- CDX-NAIG closed +1bp/54bps and +3bps/305bps, which is +4bps and
+14bps week-over-week, respectively.

- DXY US dollar index closed +0.2%/90.98.
- Gold closed +0.3%/$1,844 per ounce, silver flat/$24.09 per
ounce, and copper -1.4%/$3.53 per ounce.
- Crude oil closed -0.4%/$46.57 per barrel.
- Economists fear that low-wage service workers face a
devastating winter as the latest surge of COVID-19 shutdowns keep
shoppers and diners home once again. Starting Monday, indoor dining
will be banned in New York City, governor Andrew Cuomo announced on
Friday. California governor Gavin Newsom has limited restaurants in
several regions to pick up and delivery, restricted capacity in
retailers and asked residents to remain in their homes "as much as
possible." Pennsylvania banned indoor dining for three weeks
starting Saturday, while Delaware announced capacity limits and a
10pm curfew on its bars and restaurants. (FT)
- The US total producer price index (PPI) for final demand rose
0.1% in November, the slimmest gain since a drop of 1.3% in April.
The 12-month change (y/y) was +0.8%, up from 0.5% in October, as
November 2019 prices fell. (IHS Markit Economist Michael
Montgomery)
- Total goods prices rose 0.4% with food up 0.5%, energy up 1.2%,
and everything else in goods up 0.2%. Fruit and vegetable prices
fell but chicken and pork prices climbed 7.0% and 8.8%,
respectively. Food prices are up 1.2% y/y, so most of this is
noise.
- Oil-based products drove the monthly rise in energy prices in
October, but natural gas, propane, and electricity prices did so in
November. Energy prices are down 11.2% y/y.
- Total services prices posted a goose egg with trade margins
down 0.3% and transportation and warehousing piece off 0.9%.
"Other" services prices firmed 0.2%. Airline fares plunged 7.1% to
push transportation down while hospital fees climbed to push up
"other."
- Producer prices are now back into the black on a y/y basis
broadly in the components, but energy and transportation are not.
Low fuel prices are helping hold down airfares, while the pandemic
ravages travel volumes. More broadly, prices are drifting higher
under anemic wage gains and recession-restricted volumes.
- The University of Michigan US Consumer Sentiment Index rose 4.5
points (5.9%) to 81.4 in the preliminary December reading, erasing
most of a November decline. The level of the index remains
consistent with our expectation for slowing growth in consumer
spending in the fourth quarter. (IHS Markit Economists David Deull
and James Bohnaker)
- The increase was reflected in views regarding both future and
current conditions. The index measuring consumer expectations rose
4.2 points to 74.7, while the index measuring views on current
conditions rose 4.8 points to 91.8. This suggests a modest boost to
expectations from encouraging news on vaccines, which are expected
to be widely available by late spring or early summer.
- Consumer sentiment also rose irrespective of household income.
Sentiment reported for households earning less than $75,000 a year
rose 4.4 points to 78.0, while sentiment for higher-income earners
rose 4.9 points to 84.4.
- Views on the economy were likely bolstered by the performance
of equity markets, which attained record highs in early December.
They appeared relatively unaffected by the alarming rise in new
COVID-19 cases and deaths that escalated during November, which
have prompted some state and local governments to reimpose business
restrictions and lockdowns.
- According to the University of Michigan, partisan leaning has
been the key factor driving trends in consumer sentiment since the
November elections. Among self-identified Democrats, the index of
expectations rose by 39.5 points over the last five months, while
it has fallen by 34.9 points among Republicans. Self-identified
Independents reported sentiment comparable to levels expressed in
the early stages of the pandemic.
- The index of buying conditions for large household durable
goods rose 9 points in December to 123, the highest since March.
The index for vehicles slipped 2 points to 119, while that for
homes edged up 1 point to 133.
- The expected one-year inflation rate plunged 0.5 percentage
point to 2.3%, an eight-month low, while expected five-year
inflation was steady at 2.5%.
- Toyota has announced that its latest fuel-cell electric Class 8
trucks are beginning a pilot program service in California. Two
prototypes will be used for drayage between the ports of Los
Angeles and Long Beach in California; eight more trucks are planned
to begin service in 2021. Toyota is one of several OEMs working
towards fuel-cell electric vehicle (FCEV) propulsion as a solution
for medium and heavy commercial vehicle applications, which
typically use diesel fuel. The FCEV solution offers zero emissions
and, with trucks for this application and consistent duty cycles,
installing fueling infrastructure to support it is more manageable
than for light vehicles. Toyota is also participating in similar
programs in other countries, including Japan. Other truck-makers
looking to develop potential FCEV solutions in this space include
Hyundai and Daimler, as well as startup Nikola; as with Toyota,
their development of the solution is occurring in several regions
and is not particularly focused on the US. (IHS Markit
AutoIntelligence's Stephanie Brinley)
- Performance electric-car startup Polestar has begun delivering
vehicles in Canada, starting with the Polestar 2 on 10 December,
reports Automotive News Canada. According to the report, these
first Polestar deliveries are to retail operators, and customers
will be able to have their cars delivered or will be able to
schedule a time to pick them up at the retail location. In Canada,
the price of the Polestar 2 starts at CAD71,800 (USD56,200),
including shipping. Polestar has created a digital-first retail
model in which customers order online, although it has "retail
spaces" in the Canadian cities of Toronto, Montreal, and Vancouver
(see Canada: 15 July 2020: Polestar announces first retail
locations in Canada). Unlike traditional dealerships or showrooms,
the retail spaces have no inventories. Customers can arrange for an
at-home test drive and contactless delivery through the website.
Automotive News Canada reports the Polestar 2 is being launched
with financing as low as 0.9% and numerous leasing options, a
four-year vehicle warranty, and free pick-up and delivery within
240 kilometers of a retail space. Country manager for Polestar
Canada Hugues Bissonnette reportedly said, "The Polestar 2 places
us directly in the center of the burgeoning premium electric
vehicle segment and is the car that will propel Polestar toward
future growth." Polestar is expected to start out slowly in the
Canadian market, in part because of its limited product line-up and
retail locations. By 2023, IHS Markit forecasts Polestar sales in
the Canadian market of 500 units per annum. (IHS Markit
AutoIntelligence's Stephanie Brinley)
- In a press release, Petronas announced a hydrocarbon discovery
at Sloanea-1 exploration well in Block 52 offshore Suriname. The
Sloanea-1 well encountered several hydrocarbon-bearing sandstone
packages and drilled to a total depth of 4,780 meters (15,682
feet), the company said. Block 52 is located approximately 75 miles
(120.7 kilometers) north of the coast of Paramaribo in the
Suriname-Guyana basin and covers an area of 4,749 square
kilometers. The water depths on the block range from 50 - 1,100
meters (160 - 3,600 feet). The block was awarded to Petronas in
April 2013. In May 2016, Petronas and its former partner Deutsche
Erdoel AG drilled the Roselle-1 wildcat well on Block 52. The well
was drilled to a total depth of about 5,000 meters (16,404 feet) in
87 meters (285.4 feet) of water. In May 2020, ExxonMobil completed
the farm-in for a 50% interest in Block 52. Petronas operates the
block with a 50% interest, and ExxonMobil holds the remaining 50%
interest. (IHS Markit Upstream Companies and Transactions' Karan
Bhagani)
Europe/Middle East/Africa
- European equity markets closed lower across the region; Spain
-1.5%, Germany -1.4%, Italy -1.0%, and UK/France -0.8%.
- 10yr European govt closed higher across the region;
Spain/France/UK/Germany -3bps and Italy -1bp.
- iTraxx-Europe closed +3bps/51bps and iTraxx-Xover
+17bps/267bps, which is +6bps and +33bps week-over-week,
respectively.

- Brent crude closed -0.6%/$49.97 per barrel.
- The U.K. will become the first major industrialized nation to
end all public finance for fossil fuel projects overseas, in an
effort to mark itself out as a leader in tackling climate change.
Prime Minister Boris Johnson will make the announcement at a
virtual United Nations summit on Saturday, which he's co-hosting
with France, Italy and Chile. More than 70 world leaders are due to
attend the event, alongside Pope Francis and Apple Inc. Chief
Executive Tim Cook, who will each pledge to step up ambitions to
curb emissions. (Bloomberg)
- RWE has chosen Van Oord as its preferred supplier for the
engineering, procurement, construction and installation (EPCI) of
the monopile foundations and array cables for the 1.4 GW Sofia
Offshore Wind Farm, sited 195 km off the United Kingdom at the
North Sea's Dogger Bank. Van Oord's UK subsidiary MPI Offshore will
create a logistics hub from its Stokesley office in Teesside, to
deliver the comprehensive scope of work. Installation vessel Aeolus
will install the 100 extended monopile foundations without
transition pieces, while the 350 km of array cables will be
installed by cable-laying vessel Nexus. Van Oord will sub-contract
the fabrication of the foundations and array cables. Work on the
foundation and array package is set to begin after the project's
financial investment decision in the first quarter of 2021, with
installation scheduled for 2024. The Sofia project will be the
fifth and largest UK offshore wind farm that RWE and Van Oord have
worked on together. (IHS Markit Upstream Costs and Technology's
Genevieve Wheeler Melvin)
- Britishvolt has announced that it has selected a site for its
new battery manufacturing facility. According to a statement, the
company has acquired rights to land in Blyth in Northumberland
(UK). It added that it plans to invest around GBP2.6 billion in
this location. Construction is set to begin in mid-2021, while
production after the initial phase of construction would begin at
the end of 2023. It has said that on the completion of the final
phase of the project in 2027, it expects to employ around 3,000
people on site producing over 300,000 lithium-ion batteries for the
domestic automotive industry. It also sees 5,000 jobs being created
in the wider supply chain. (IHS Markit AutoIntelligence's Ian
Fletcher)
- Daimler Trucks and Linde has signed an agreement to jointly
develop a new generation of liquid hydrogen refueling technology to
service the fuel cell trucks that Daimler is developing. According
to a company statement, the collaboration is aimed at making 'the
refueling process with hydrogen as easy and practical as possible'.
The two companies will focus on developing a new process for
handling liquid hydrogen known as "subcooled" liquid hydrogen. This
approach will allow for higher storage density, greater range,
faster refueling and superior energy efficiency. The new process
will use higher than ambient pressure levels and special
temperature control which avoids boil-off effects and "return gas"
(gas from the vehicle's tank returning to the filling station)
during refueling and will not require complex data communication
between the filling station and the truck during refueling. Linde
is a global leader of engineering and industrial, process and
specialty gases. The two companies are planning for the first
refueling of a prototype vehicle at a pilot station in Germany in
2023. (IHS Markit AutoIntelligence's Tim Urquhart)
- Spain breached European habitats protection and water laws in
allowing Andalusian strawberry producers to take out too much
groundwater from the Doñana natural area, according to an advisory
opinion from an EU judge. In the 3 December opinion on a case
(C-559/19) that the European Commission brought against Spain,
Advocate General Juliane Kokott, concluded the excessive
abstraction of groundwater in the Andalusian Doñana natural area
infringes EU law. The water is used for strawberry irrigation but
exceeds groundwater recharge levels in certain areas meaning the
water table has been falling for many years, drying out the
protected natural areas. The opinion contends that this excess
water extraction infringes the habitats directive in causing
"significant adverse effects" on three protected areas of European
importance - Doñana (a bird protection area since 1987), Doñana
Norte y Oeste and Dehesa del Estero y Montes de Moguer. Prohibition
of deterioration However, the opinion does not accept that that
Spain has breached the "prohibition of deterioration" requirement
in the EU water framework directive. A court statement on the
opinion explains that for Advocate General Kokott, "the prohibition
of deterioration does not require groundwater abstraction to be
reduced such that less water is abstracted than is recharged, but
only that overexploitation does not increase. Simply lowering the
groundwater level, that is to say, reducing groundwater reserves,
is therefore not to be regarded as deterioration per se."
Nevertheless, the opinion does find that Spain breached the water
framework directive on other counts. Notably, it failed to take
into account abstraction of drinking water when reviewing the
impact of human activity on groundwater status in the Doñana
natural area. (IHS Markit Food and Agricultural Commodities' Sara
Lewis)
- Lonza has declined to comment on reports that Lanxess and
private equity groups including Advent International, Carlyle
Group, Partners Group, and a consortium comprising Bain Capital and
Cinven have been shortlisted to bid for the Lonza Specialty
Ingredients (LSI) division, which is up for sale. Lonza tells CW
that it is in discussions with potential buyers, but does not
"comment on speculation," and that "as soon as we have more
information, we will share it with the markets." According to
anonymous sources cited in a Reuters report, a total of six
companies have been allowed to proceed to the next round of bidding
for LSI. Private equity firm Lone Star Funds as well as SK
Innovation are mentioned as possible bidders, but it is not clear
whether they have been shortlisted, the report says. Separately, a
Bloomberg report says that private equity firms Blackstone Group,
CVC Capital Partners, and Clayton Dubilier & Rice are no longer
in the running. It adds that no final decisions have been made, and
there is no certainty that the shortlisted bidders will make
binding offers. LSI is one of two segments within Lonza. The other
is pharma, biotech, and nutrition. Lonza's plans to carve out LSI
were first announced in June 2019. LSI is estimated to be worth
3.0-3.5 billion Swiss francs ($3.4-3.9 billion). (IHS Markit
Chemical Advisory)
- Saipem and Eni have signed a memorandum of understanding (MoU)
to identify and engineer decarbonization projects in Italy, with a
focus on potential collaborations in the sector of the carbon
capture, utilization and storage (CCUS) of carbon-dioxide (CO2).
The objective is to contribute towards the decarbonization process
of entire industrial production chains, particularly those of the
highest energy intensity, by taking clear steps with immediate
action to combat climate change and to achieve CO2 reduction
targets at national, European and global levels. Through the MoU,
Eni and Saipem will also evaluate participation in programs
financed by the European Union as part of the Green Deal Strategy,
proposing the possible inclusion of specific initiatives within the
plan for the use of funds intended to support member states of the
European Union in the post-COVID-19 phase. According to Saipem, the
company has designed more than 70 plants for the capture of CO2 and
over 40 plants for the subsequent transformation into urea. Saipem
acquired CCUS technology and intellectual property from Canadian
firm CO2 Solutions in January 2020; the acquisition included a CO2
capture plant in Saint-Félicien, Québec. (IHS Markit Upstream
Costs and Technology's Genevieve Wheeler Melvin)
- Greek industrial production declined by 3.1% month on month
(m/m) in October, according to seasonally adjusted figures released
by the Greek statistical authority. Production had risen by 1.5%
m/m in September and declined by 1.2% m/m in August. (IHS Markit
Economist Diego Iscaro)
- Output levels fell by 3.8% year on year (y/y) in October.
Moreover, they remained 4.1% below their pre-coronavirus disease
2019 (COVID-19) virus pandemic level in February.
- While production of capital and intermediate goods rose by 2.1%
m/m and 0.6% m/m, respectively, production of energy (-9.1% m/m)
and consumer non-durables (-1.4% m/m) were a major drag in
October.
- Meanwhile, figures also published by the statistical office
show Greece's consumer prices (measured by the EU-harmonized index)
declining by 2.1% y/y in November. Prices thus fell for the eighth
month in a row, and are down by an average of 1.2% since the start
of 2020.
- Falling energy prices continued to be a major drag on inflation
in November (see Chart 1). However, core inflation was also
extremely weak, at -2.3% y/y.
- Core inflation was hit by falling prices in the service sector
(-2.2% y/y) as demand collapsed as a result of the restrictions
implemented to contain the COVID-19 virus pandemic.
- On the other hand, food prices (including alcohol and tobacco)
rose by 1.9% y/y in November, up from 1.6% in October. Marked
increases in prices of unprocessed food products, which rose by an
average of 5.7% during the three months to October (November's data
are not available yet), have kept food inflation relatively high
recently.
- The data point to very weak underlying growth momentum at the
start of the fourth quarter. The industrial sector is likely to
make a negative contribution to GDP growth during the fourth
quarter, while the service sector is expected to exert an even
larger drag on activity due to the tightening of COVID-19
virus-related restrictions in November.
- The South African manufacturing sector's output edged up by
2.6% month on month (m/m) during October. However, overall
manufacturing production has not yet recovered to pre-COVID-19
levels, with manufacturing production contracting by 3.4% year on
year (y/y) during the month. (IHS Markit Economist Thea
Fourie)
- Production losses compared with a year earlier were recorded by
manufacturing sub-sectors including petroleum, chemical products,
rubber and plastic (down 6.8% y/y). Other sub-sectors recording y/y
output losses included basic iron and steel, non-ferrous metal
products, metal products and machinery (down 5.0%); motor vehicles,
parts and accessories and other transport equipment (down 6.8%);
and wood products, paper and publishing and printing (down
3.4%).
- Output gains compared with a year earlier were recorded in the
food and beverages (up 0.5% y/y) and glass and non-metallic metals
(up 4.2% y/y) sub-sectors.
- Overall manufacturing production fell by 12.8% during the first
10 months of 2020, the Statistics South Africa (StatsSA)
statistical service reported.
- South Africa's GDP bounced back by 13.5% quarter on quarter
(q/q) during the third quarter. The sharp rebound in economic
activity during the third quarter was not enough to bring GDP back
to the pre-COVID-19 virus outbreak level. Instead, the country's
headline GDP fell by 6.1% y/y during the third quarter, leaving
overall GDP down by 7.9% y/y during the first nine months of
2020.
- South Africa's annual inflation rate fell marginally to 3.2% in
November, from 3.3% in the previous month. This leaves South
Africa's annual inflation rate at 3.3% for the first 11 months of
2020, from 4.1% for the same period last year. (IHS Markit
Economist Thea Fourie)
- The month-on-month (m/m) inflation fell to zero in November,
from 0.3% in the previous month. Food prices contributed 0.1
percentage point to the monthly rate, but this was mitigated by a
0.1-percentage-point fall in transport costs over the period.
- Prices of food and non-alcoholic beverages have been edging in
up in the past two months, with statistical service Statistics
South Africa (StatsSA) reporting food and non-alcoholic price
increases of 5.9% year on year in November, from 4.2% y/y in
September.
- Overall goods inflation remained unchanged, nonetheless,
averaging 2.6% in November, unchanged from the October level.
Services inflation slowed marginally to 3.7% y/y in November, from
3.8% y/y in the previous month.
- South Africa's headline inflation rate remains close to the
lower end of the South African Reserve Bank (SARB)'s inflation
target range of 3-6%.
- Price increases in South Africa remain low, benefiting from
weak domestic-demand price pressures, lower transport costs, and
limited feed-through of the rand's weaker exchange rate on the
overall price level in the economy. The decision by private medical
aid funds not to raise their premiums during the first half of 2021
could push headline inflation as low as 2.5% by February 2021.
Asia-Pacific
- APAC equity markets closed mixed; South Korea +0.9%, Hong Kong
+0.4%, India +0.3%, Japan -0.4%, Australia -0.6%, and Mainland
China -0.8%.
- China's new aggregate financing, the widest measure of net new
financing to the real economy, increased by CNY2.1 trillion in
November 2020, up CNY136 billion from the amount a year ago,
compared with a CNY549.3 billion increase in the previous month,
according to the release of the People's Bank of China (PBOC). The
stock total social financing (TSF) rose 13.6% year on year (y/y),
edging down from 13.7% y/y increase in October, the first further
deceleration since March. (IHS Markit Economist Yating Xu)
- The issuance of local government bond continued to decline
month on month to CNY400 billion in November, but it remained
CNY228.4 billion above the level a year ago, which was the main
contributor to the headline TSF increase. Bank loans to the real
economy increased by CNY1.5 trillion, up CNY167.6 billion compared
to a year ago, which was the second largest contributor to the new
TSF. Particularly, household borrowing continued to increase,
reflecting the broad-based recovery in property sales in November.
Meanwhile, continuous recovery in manufacturing investment and
strong export growth continued to support corporate borrowing.
- Broad money supply (M2) growth rose by 0.2 percentage point to
10.7% y/y in November as fiscal deposit declined, largely
reflecting acceleration fiscal spending in the year end. M1 growth
further increased to 10%, reflecting steady improvement in real
economy.
- TSF increased by CNY31.84 trillion through November, up CNY9.6
trillion from a year ago. Bank loans increased by CNY18.8 trillion,
compared with an annual target of CNY20 trillion.
- Although the local government bond may continue to support TSF
in December given the low base effect, the moderation trend in new
TSF is likely to continue as this round of credit expansion could
have ended and monetary policy gradually normalizes.
- However, since domestic economy is yet to recover to potential
growth, consumer inflation is on a downward trend, and there is a
lot of uncertainties with the pandemic, monetary policy is expected
to maintain stable in the short term.

- Telecoms equipment company Huawei Technologies is reportedly
planning to construct research and development (R&D) center in
Chinese city of Guangzhou to develop intelligent vehicle-related
technologies. The company is permitted to use a piece of land in
city's Baiyun District that will be used to set up this R&D
center, reports Gasgoo. The center will support projects such as
smart city, cloud computing and Internet of Things (IoT), promoting
the application of Huawei's information communications technology
in various industries of Guangzhou. Huawei is looking to expand its
presence in the automotive industry. The company has R&D
centers in Shanghai and Suzhou. Huawei's 5G technology offers
advantages such as high transmission speed, reliability and latency
that meet the technical connectivity requirements for autonomous
vehicles. This year, Huawei partnered with 18 Chinese automakers to
accelerate the use of 5G in vehicles. Last year, the company
announced plans to use its 5G technologies to develop
millimeter-wave radar and laser radar sensors for autonomous
vehicles. In May 2019, Huawei established its intelligent vehicle
business unit, which focuses on five aspects: smart driving, smart
cockpit, intelligent connectivity, smart electrification, and cloud
service. (IHS Markit Automotive Mobility's Surabhi Rajpal)
- Qingdao city in China's Shandong province is planning to
construct more than 50 hydrogen-refueling stations and to have
around 8,000 fuel-cell vehicles (FCVs) on roads by 2030, reports
Gasgoo. According to the report, Qingdao's authorities expect to
set up a hydrogen industrial cluster and demonstration zones, as
per the city's near-term plan for 2020-22. Between 2023 and 2025,
Qingdao is planning to build a hydrogen industrial ecosystem and
application system and support the mass application of hydrogen
energy and fuel cells. In the longer term, between 2026 and 2030,
Qingdao plans to see a comprehensive utilization of hydrogen energy
in such areas as transport, logistics, power generation, and supply
of heat. Additionally, technologies such as the Internet of Things
(IoT), 5G, and big data will be introduced to enhance the
intelligence, reliability, and operational efficiency of the
hydrogen infrastructures. With electric vehicles (EVs) gaining
popularity in China, the country is focusing on promoting hydrogen
fuel-cell technology as well. China aims to build 1,000
hydrogen-refueling stations by 2030 to support the
commercializations of FCVs in both the commercial and the passenger
car sectors. In June last year, Shanghai announced plans to
establish an ecosystem for the hydrogen industry, a hydrogen park
occupying over two square kilometers by 2025, with an expected
annual output value of the FCVs reaching CNY50 billion. (IHS Markit
AutoIntelligence's Nitin Budhiraja)
- Hyundai's updated Strategy 2025 roadmap is supported by three
key pillars: Smart Mobility Device and Smart Mobility Service -
both part of the original plan revealed in 2019 - as well as H2
Solution, the addition of which reflects Hyundai's commitment to
fuel-cell development and commercialization. IHS Markit forecasts
that global production of Hyundai Motor Group's light vehicles,
including those of affiliate Kia, will grow to around 8.0 million
units in 2025, up from 7.4 million units in 2019. We also forecast
that the group's global production of alternative-powertrain
vehicles will grow to around 2.3 million units in 2025, up from
394,000 units in 2019. (IHS Markit AutoIntelligence's Jamal
Amir)

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