Major equity markets closed higher across the globe in a
complete reversal of yesterday's synchronized sell-off. US and
European benchmark government bonds sold off sharply on an
increasing possibility of another major round of government
stimulus to alleviate the financial strain of the second wave of
COVID-19 restrictions. European iTraxx credit indices closed
tighter across IG and high yield, while CDX-NA was close to
unchanged on the day. The US dollar and oil were lower on the day,
while gold, silver, and copper ended higher.
Americas
- US equity markets closed higher, with the S&P 500 and
Nasdaq reaching new all-time highs; Nasdaq +1.3%, S&P 500
+1.1%, Russell 2000 +0.9%, and DJIA +0.6%.
- 10yr US govt bonds closed +8bps/0.93% yield and 30yr bonds
+10bps/1.67% yield.
- CDX-NAIG closed flat/50bps and CDX-NAHY +1bp/304bps.
- The below chart shows that the energy debt sector outperformed
in November across USD BBB and BB rated corporate bond constituents
in the IHS Markit iBoxx Investment Grade and High Yield Corporate
Bond Indices.

- DXY US dollar index closed -0.8%/91.18 and is only 2.3% above
the lowest level since January 2018.
- Copper closed +1.5%/$3.49 per pound, which is new 7+ year high
close.
- Gold closed +2.1%/$1,819 per ounce and silver +6.6%/$24.09 per
ounce.
- Crude oil closed -1.7%/$44.55 per barrel.
- TC Energy has announced that it has awarded USD1.6 billion in
contracts to six US contractors to execute 1,300 km of pipeline
construction in three states in 2021.The six contractors include
Barnard Pipeline, Associated Pipeline, Michels, Precision Pipeline,
Price Gregory International and U.S. Pipeline. When combined with
additional 2021 contracts to be announced later, the total number
of US union workers constructing the Keystone XL in 2021 will
exceed 8,000 and earn more than USD900 million in gross wages. In
total, the Keystone XL is expected to employ more than 11,000
Americans in 2021, creating more than USD1.6 million in gross
wages. (IHS Markit Upstream Costs and Technology's Chris
Alexander)
- In a 23 November research note, IHS Markit's internal
quantitative research group, Research Signals, reported their
initial research using the IHS Markit institutional ownership
point-in-time dataset. Using the company holdings data, they
constructed 17 factors built from holdings and trading activity.
Factors introduced evaluate ownership concentration, changes in
holdings, institutional and hedge fund holdings and liquidity flow
ratios globally across developed and emerging markets. For the US
Total Cap universe, the top performing factors include Change in
Active Shares, Hedge Fund Count and Top 5 Ownership Concentration,
with the latter two also capping performance in Developed Pacific,
along with Liquidity Flow (Count). The highest average monthly
spreads in Developed Europe were turned in by % Buyins out of
Bought (Count), Buyin-Selloff Imbalance (Count) and Average %
Change in Ownership. The following six figures show the best
performing factors in each market segment tracking the growth of $1
over the backtest time period.

- Salesforce.com Inc. agreed to buy workplace-collaboration
software pioneer Slack Technologies Inc. for $27.7 billion in a
deal that would turn the combined company into one of the biggest
players in the competitive business-software market. (WSJ)
- US job postings during the week ending 20 November were 18.3%
below the January average, according to the Opportunity Insights
Economic Tracker. This continues a run of soft weekly readings,
indicating a less-than-robust job market and raising concerns about
the durability of the recovery. Meanwhile, the Weekly Economic
Index, from researchers affiliated with the New York Fed, stood at
-2.7 last week. Combined with prior readings during the fourth
quarter, this points to roughly a 3% decline in real GDP over the
four quarters of 2020. This imparts some downside risk to our
latest GDP tracking, which implies a four-quarter decline of 2.1%.
(IHS Markit Economists Ben Herzon and Joel Prakken)
- The Federal Open Market Committee (FOMC) met on 4 and 5
November amid an ongoing stalemate in Congress over additional
fiscal support for the recovery, rising COVID-19 infections, and
extraordinary uncertainty about the outlook. The committee kept the
target for the federal funds rate at a range of 0.00% to 0.25% and
repeated forward guidance for interest rates first announced at the
conclusion of its previous policy meeting, on 16 September. That
guidance included conditions that would have to be attained before
raising the target federal funds rate from its effective lower
bound. At the November meeting, the FOMC, in addition to its usual
discussion of economic and financial developments and the economic
outlook, considered whether it should issue guidance about its
expectations for large-scale asset purchases beyond the vague
intent to continue to purchases at least at current rates for
coming months. No announcement was made with respect to updated
guidance for asset purchases at the conclusion of the November FOMC
meeting. The minutes suggest that the FOMC will soon provide
qualitative, outcome-based guidance for asset purchases. We
consider potential forms of that guidance and implications for our
forecast. (IHS Markit Economists Ken Matheny and Joel Prakken)
- The seasonally adjusted IHS Markit final U.S. Manufacturing
Purchasing Managers' Index (PMI) posted 56.7 in November, up
notably from 53.4 in October and matching the earlier released
'flash' estimate. The improvement in operating conditions was the
sharpest since September 2014, as the headline PMI rose for the
seventh successive month. (IHS Markit Economist Chris Williamson)
- Contributing to the uptick in the headline index was a
substantial increase in output at manufacturing firms in November.
The rise in production was the steepest in over six years, amid
stronger new order inflows.
- Supply chain disruptions led to a sharper and marked rise in
input costs during November, as raw material shortages and COVID-19
restrictions pushed prices higher. The rate of cost inflation was
the fastest since October 2018. Stronger demand conditions allowed
firms to partially pass-through greater cost burdens on to clients,
as selling prices rose at the steepest pace for over two
years.
- Despite a faster upturn in new orders, manufacturers registered
a softer increase in employment. The rate of job creation was only
marginal overall, with some firms stating that short term
uncertainty over demand and efforts to rein in spending weighed on
workforce numbers.
- Nonetheless, supply delays led to the strongest rise in
backlogs of work for over six years. In fact, vendor performance
deteriorated to the greatest extent since May. As a result of
longer wait times for inputs, stocks were depleted in
November.
- Post-production inventories saw a renewed decrease, after a
slight rise in October, while the rate of decline in stocks of
purchases quickened despite a rise in purchasing activity.
- Expectations regarding output over the coming year improved to
the strongest since February 2015.
- Total US construction spending rose 1.3% in October, matching
IHS Markit's expectation but topping the consensus expectation by
several tenths of a percentage point. Revisions to prior months
were mixed. (IHS Markit Economists Ben Herzon and Lawrence Nelson)
- Core construction spending, which directly enters our GDP
tracking, rose 1.3% in October (a shade less than we expected);
revisions to prior months were mixed.
- Since reaching a trough in May, total construction spending has
recovered to just 0.2% below the pre-pandemic peak reached in
February.
- This recovery has been more than accounted for by private
residential construction, a sector that has benefitted from
historically low mortgage rates, pent-up demand, and a
reprioritization toward homelife, as COVID-19 has damped activities
outside of the home.
- Indeed, private residential construction has overshot by far
its pre-pandemic peak and is approaching an all-time high that was
reached at the height of the housing bubble in 2006.
- On the other hand, the private nonresidential category is
languishing. Since February, private nonresidential construction
has been trending lower. Nine of its eleven itemized categories
were down more than 10% from a year earlier, including lodging
(down 23.3%), educational (down 15%), religious (down 13%),
amusement and recreation (down 23%) and manufacturing (down 12%).
The office category was down 8%. With offices emptied and telework
emerging, this category is in for hard times.
- Public construction spending rose 1.0% in October, but is still
down 2.2% from February.
- Fears are growing for Florida's orange crop, as excessive fruit
droppage in parts of Florida has been reported to IHS Markit. "In
central and eastern Florida, the trees look good," said a source.
"But in Florida's Ridge region around Polk County, which is the
main citrus area in the state, and around Sebring: that's where you
see the fruit on the ground." Mexico's orange crop is believed to
be normal, with expectations of a harvest of some 50 million boxes,
only slightly below the anticipated production from Florida. Mexico
has finished harvesting its early/midseason fruit and will be
running its Valencias from mid-December until March. The fruit is
presently delivering ratios of 12-14, but the sweeter juice will
develop in February. Despite the reasonable outlook for these
harvests, it appears that orange juice buyers in the US are being
cautious and not expecting any increase in overall demand (that is,
retail plus foodservice sales). Buyers are pushing their contracts
back and not taking up their immediate call-offs. (IHS Markit Food
and Agricultural Commodities' Neil Murray)
- General Motors (GM) and Nikola Corporation have announced a
revised partnership agreement. The agreement consists of a
non-binding memorandum of understanding (MoU), according to which
the fuel-cell partnership plan between the two companies continues,
reports Automotive News. However, the plans have been scrapped for
GM to take an equity stake in Nikola and for GM to build Nikola's
Badger electric pick-up truck. According to the MoU, which is
subject to negotiation and a definitive deal between the two
parties, GM will supply its fuel-cell system for Nikola's Class 7
and Class 8 commercial semi-trucks, and potentially, GM's Ultium
electric battery system will be used in Nikola's commercial
trailers. Following this announcement, Nikola's shares fell by 27%,
closing at USD20.41 on NASDAQ, while GM's shares fell by 2.7%,
closing at USD43.84 on the New York Stock Exchange. According to a
statement by GM, Nikola will need to pay upfront to GM to produce
the equipment. According to the news source, Nikola estimates
production of the truck will start by 2022, depending on
manufacturing partner, and it will refund all deposits taken for
the truck. The revised agreement was announced before the 3
December deadline for conclusion of terms of the original deal.
(IHS Markit AutoIntelligence's Tarun Thakur)
- PPG Industries says it has agreed to acquire Ennis-Flint
(Greensboro, North Carolina), a maker of specialized transportation
coatings, for $1.15 billion. Ennis-Flint sells and manufactures
pavement markings, traffic paint, thermoplastics, and products for
intelligent traffic systems. The company generates about $600
million/year in revenues and "mid-teens percentage EBITDA margins,"
PPG says."The addition of Ennis-Flint's products further enhances
our existing mobility technologies in support of increased
automotive occupant safety through driver-assisted and autonomous
driving systems," says PPG chairman and CEO Michael McGarry. "We
look forward to the Ennis-Flint team joining PPG and working
together to further expand the company's product distribution on a
global scale." Much of Ennis-Flint's revenue is derived from
"non-discretionary, essential maintenance spending," PPG says. The
company has manufacturing facilities in the US, Europe, South
America, and Asia, and employs about 1,000 people. The deal is part
of PPG's broader strategy to expand in transportation and mobility
related business. The company formed a "mobility focus team" in
2017 to develop products and technologies for these markets. The
transaction is expected to close in early 2021. (IHS Markit
Chemical Advisory)
- Canada's real GDP surged 40.5% quarter on quarter annualized
(q/q a.r.) in the third quarter following upwardly revised
quarterly declines in the first half of the year. Household
spending contributed the most to the record upswing of 62.8% q/q
a.r., with record-setting leaps in durable and semi-durable goods
expenditures. (IHS Markit Economist Arlene Kish)
- Real residential investment was the star performer within total
capital formation as all residential structure subsectors now
exceed pre-COVID-19 levels.
- Real trade flows neared previous expectations, with imports
advancing at a quicker pace than exports. Trade in services was the
weak link in the trade chain.
- Economic advances going forward will be milder given ongoing
modified confinements. However, expanded government stimulus will
support consumers and businesses to expand spending capabilities.
Low borrowing rates will also contribute to investment spending
despite growing debt levels.
- Resilient domestic demand on the part of consumers helped
revive and drive the economy's recovery in the third quarter.
Spending on household items that already exceeded the pre-pandemic
high remained above that threshold. However, big-ticket items like
purchases of vehicles, furnishings and household equipment, and
medical products jumped, joining the growing list of growing
pre-pandemic spending. Household savings remain high, at 14.6% in
the third quarter, leaving enough wiggle room to support
expenditures in the near term.
- Given the sharp rising in homebuilding, sales, and renovation
spending, the fast-paced jump in residential investment is not
surprising. For non-residential investment, the big uptake in
machinery and equipment is spurred by the large jump in trucks,
buses, and other motor vehicles, followed by communications and
audio and video equipment most likely associated with improving
capabilities of businesses adapting to teleworking. There was also
a healthy boost in industrial machinery and equipment. Against this
backdrop, total real investment, including government spending,
remains 1.7% below end-2019 spending levels. Greater certainty from
geopolitical concerns can help boost non-residential investment
spending.
- Canadian exports were slower to advance than imports in large
part because of the second consecutive quarterly decline in energy
products. On the upside, exports of transportation products
advanced handily, supporting Canada's manufacturing industries.
Exports of real services inched lower again as the fifth quarterly
decline in travel and general government services reported large
losses that offset gains in transportation and commercial
services.
- Imports jumped on hefty gains across most categories, with
motor vehicles and parts leading as the bounce came off extreme
lows in the second quarter. Targeted restrictions will not likely
negatively affect trade of goods going forward.
- The third-quarter rebound was a bit weaker than IHS Markit
expectations, but data revisions indicate that real GDP levels are
higher than previously estimated in the third quarter.
- As per IHS Markit's Commodities at Sea, coal and petcoke
shipments from WC Canada during October 2020 stood at 3.9mt, down
7% y/y. Shipments from Westshore, Neptune, and Ridley stood at
2.5mt (down 11% y/y), 0.1mt (down 47%), and 1.2mt (up 14%),
respectively. Amidst reports of China (Mainland) halting Australian
metallurgical coal imports, there was an expectation of an increase
in the sourcing of Canadian coal from the Chinese steel mills. Teck
recently announced it could garner higher prices for its
metallurgical coal sales to China (Mainland) versus other
destinations. Canadian mining major mentioned its additional spot
sales to China achieved an average premium of more than US$35/t
above Australian FOB spot pricing at the time each sale was
concluded. During 4Q20, Teck Resources to sell 5.8-6.2mt of coal,
with 20% to China (Mainland). Teck reported having sold three
metallurgical cargoes for US$160-165/ton. In 2021, Teck Resources
plans to sell 7.5mt of coal to China (Mainland) with contracts
priced on a CFR basis. For 2019 metallurgical coal shipments stood
at 25mt and for 2021 anticipated at 21.6-22mt, respectively.
Canadian coal and petcoke shipments forecast during 4Q20 calculated
at 12.6mt (up 1% y/y). During the fourth quarter, exports
anticipated strengthening due to increasing demand from Far East
steel mills as well as supply from Vista coal mine. Canadian coal
and petcoke exports during 2020 and 2021 forecasted at 46mt (down
2% y/y) and 49mt (up 6% y/y). Shipments to China (Mainland) during
2020 and 2021 forecasted at 7mt and 11mt, respectively. (IHS Markit
Maritime and Trade's Rahul Kapoor and Pranay Shukla)
- Chile's Ministry of Public Works announced on 27 November that
China Railway Construction Corporation has been allocated the
concession of the Talca-Chillán tranche of Road 5. It will be the
first Chinese investment in Chile's road infrastructure. This
follows the announcement in November by China's State Grid
International Development Limited (SGIDL) that it was in
negotiations to acquire power distributor Compania General de
Electricidad (CGE), owned by Spain's Naturgy. If Chile's regulator
approves the transaction, State Grid will control approximately 57%
of Chile's power distribution, as it already owns another power
distribution firm in Chile, Chilquinta, acquired in 2019. Chile and
China have close bilateral relations, with China being Chile's main
commercial partner, the main buyer of Chile's copper, and the first
source of foreign direct investment (FDI). Chile has also joined
the China-led Belt and Road Initiative (BRI), by which China seeks
to develop worldwide infrastructure projects to facilitate trade.
Foreign involvement in strategic sectors is likely to become a
topic of discussion in the upcoming process of writing a new
constitution, which begins on 11 April 2021 with the election of
155 members of the Constituent Convention, as members of the
political and business class have already raised concern about the
market concentration by foreign capitals. (IHS Markit Country
Risk's Carla Selman)
Europe/Middle East/Africa
- European equity markets closed higher across the region; UK
+1.9%, France +1.1%, Spain +0.8%, Germany +0.7%, and Italy
+0.2%.
- 10yr European govt bonds closed sharply lower; Italy +6bps,
UK/Germany/France +5bps, and Spain +4bps.
- iTraxx-Europe closed -3bps/46bps and iTraxx-Xover
-14bps/251bps.
- Brent crude closed -1.0%/$47.42 per barrel.
- November's "flash" HICP data for the eurozone showed the
headline inflation rate unchanged at -0.3% for the third successive
month, slightly weaker than expected, and negative for the fourth
month in a row. (IHS Markit Economist Ken Wattret)
- The core inflation rate excluding food, energy, alcohol and
tobacco prices was unchanged for the third straight month at just
0.2%, matching its record low.
- Looking at the two key sub-components of the core rate,
inflation for non-energy industrial goods slipped further into
negative territory (to -0.3%), while inflation for services partly
rebounded (to +0.6%).
- Both rates remain very low by historical standards. By way of
comparison, just a year ago, the services inflation rate was
1.9%.
- A full breakdown of November's eurozone HICP by item will be
released on 17 December and is likely to show continued weakness in
the areas most affected by COVID-19. These include prices of
clothing and footwear, package holidays, accommodation services and
passenger transport.
- The inflation rate excluding these items in addition to food,
energy, alcohol and tobacco prices, which we term the "extended"
core rate, has fallen less markedly than the "traditional" core
rate since the pandemic struck in early 2020 (see second chart
below).
- Headline inflation should rise in December given the recent
rebound in crude oil prices, ahead of a pick-up in headline and
core rates during the early months of 2021.
- This expected pick-up will reflect the end of reduced VAT rates
in Germany (in January) and upward base effects from energy prices
(from February to May, given pronounced COVID-19-driven declines in
oil prices in the equivalent period of 2020).
- Looking beyond these near-term upward pressures, with the
output gap having surged, unemployment to continue to rise, and
inflation expectations still rather low, disinflationary and
potentially deflationary forces will remain prevalent in the
eurozone.

- Seasonally adjusted German unemployment has declined by 39,000
in November, similar to October's -38,000. This is the fifth
monthly drop in succession following a cumulative surge by 671,000
during the second quarter. The cumulative decline during
July-November was 122,000, and the unemployment level at
end-November was 2.817 million, which compares to a cyclical low of
2.268 in March and an interim high of 2.939 in June. (IHS Markit
Economist Timo Klein)
- Separately, the Labour Agency has calculated that the COVID-19
virus pandemic's effect on unemployment was -37,000 in November,
following -57,000 in October and -23,000 in September, around zero
in July-August, and huge increases during the second quarter.
- The cumulative net rise in joblessness since April that can be
linked directly to the pandemic is 520,000, down from 638,000 in
June. The German unemployment rate, which had increased from 5.0%
in March (close to 40-year lows) to 6.4% during June-July, has now
slipped to 6.1% in November.
- Seasonally adjusted underemployment (as opposed to
unemployment), which had deviated in both directions during 2019
due to fluctuations in the number of people receiving some form of
(non-insurance-related) government support - which affects the
underemployment data but not official unemployment - declined to a
similar extent as unemployment in November, posting -42,000 month
on month (m/m).
- The Labour Agency points out that statistical undercoverage of
the number of people benefiting from public support measures - in
turn related to COVID-19-influenced contact impediments and
preoccupation with administering short-time work applications - is
at least partly responsible. The official number for these measures
(-12.9% y/y in November, down from -11.8% in October) indicates a
sideways tendency of late.
- Employment is continuing to reverse its February-June plunge
(cumulatively -752,000). In October (employment data lag behind
unemployment numbers by one month), seasonally adjusted employment
increased by 20,000, similar to the average of 18,000 per month
during the third quarter. This equally almost matches the monthly
average increase of 21,000 during 2019, but it is only half as
strong as the average of 40,000 observed during the cyclical upward
trend between March 2010 and end-2018.
- By comparison, the November level is still more than double
that of the previous cyclical trough in July 2009 (281,000), then
hurt by the global financial market crisis. Meanwhile, the
seasonally adjusted vacancy index called BA-X introduced in 2005 -
which measures employers' demand for labor, disregarding all
seasonal and publicly subsidized job offers - recovered by another
point to 99 in November, which is up from May's interim low of 91
but still 21 points lower than in November 2019 and 35 points below
its all-time high of 134 in September 2018.
- The November report appears encouraging at first glance, but
several qualifications are in order. Improvements since mid-2020
have owed to natural corrections from the second-quarter slump
owing to the March-April lockdown, in line with the subsequent
loosening of restrictions. Secondly, we expect another phase of
deterioration in the coming months until roughly mid-2021 (likely
timing of widespread vaccine availability) due to the renewed
lockdown period since early November that will last until just
before Christmas. The spike in short-time work announcements during
November is a harbinger of that.
- RWE will install its patented collars on three of its monopile
foundations at the Kaskasi offshore wind farm. The collars are
designed by civil engineering company JBO, and manufactured by
Bladt Industries. The latter is also manufacturing the foundations
for the monopoles. The collared monopoles are expected to help
increase the stability of the piles in difficult ground. Further to
this, Kaskasi will also use the vibro-pile driving technique to
reduce noise emissions and improve installation times. The Kaskasi
offshore wind farm consists 38 units of 9 MW wind turbines,
installed off the coast of Germany, 35 km north of the island of
Heligoland. Foundation installation is expected to commence in the
third quarter of 2021, and will be carried out by contractor DEME
Offshore. (IHS Markit Upstream Costs and Technology's Melvin
Leong)
- Mercedes-Benz has been testing prototypes of its EQE E-segment
electric vehicle (EV) which is due to slot into the range just
below the range-topping EQS, according to an Autocar report.
According to the pictures accompanying the report, the EQE will
have something of an unconventional 'cab forward' shape, which will
be aimed at making the most of the cabin space and flexibility that
is afforded by the model's electric powertrain. The effect is
reminiscent in some respects of the shape and silhouette of the
Jaguar I-Pace, but with less of an SUV influence than that car. The
lack of a conventional internal combustion engine allows for a much
shorter front end, and the new Mercedes bespoke EVA architecture
with its flat floor should increase interior space. The EQE will
effectively shadow the existing E-Class E-Car segment model in
Mercedes-Benz 's new EQ electric car range. Mercedes have also
confirmed that there will also be an EQE SUV which will be offered
alongside the sedan. (IHS Markit AutoIntelligence's Tim
Urquhart)
- Automotive OEMs are stockpiling components and vehicles ahead
of the end of the Brexit transition phase at the end of the year,
reports The Guardian. The newspaper has said that Volkswagen (VW)
has imported more cars than normal recently, although a
spokesperson for the company has said that it was not possible to
attribute this directly to Brexit, as the company uses these
stockpiles to cover factory shutdowns in December and the number
plate change in March. Honda is also stocking additional components
to ensure that production of the Civic can continue at its Swindon
(UK) facility before it closes in 2021. Morgan Cars has also
confirmed that it is rushing to finish orders for the European
market before the end of the year, stating, "This is to protect
against any potential delays and the initial shock of currently
unknown tariffs on the vehicles." (IHS Markit AutoIntelligence's
Ian Fletcher)
- The French passenger car market dropped by 27% year on year
(y/y) during November as stricter measures were imposed to control
a second wave of the COVID-19 virus pandemic. According to the
latest data published by the French Automobile Manufacturers'
Committee (Comité des Constructeurs Français d'Automobiles: CCFA),
registrations during the month dropped from 172,731 units to
126,048 units. However, there was some impact from working-day
factors as the month had 20 days versus 19 days in November 2019.
When taking this into account, registrations would have fallen by
30.7% y/y on a like-for-like basis. The latest decline means that
passenger car registrations have now fallen by 26.9% y/y to
1,463,795 units during the first 11 months of 2020, mainly because
of the effect of earlier COVID-19 virus-related restrictions. (IHS
Markit AutoIntelligence's Ian Fletcher)
- Italy's increase in GDP was stronger than anticipated in the
third quarter, but the balance of risks is now tilting to the
downside. Indeed, rising numbers of COVID-19 infections and tighter
containment measures point to renewed GDP losses in the fourth
quarter of 2020. (IHS Markit Economist Raj Badiani)
- The steady lifting of the COVID-19 virus pandemic-related
lockdown spelled the end of Italy's technical recession during the
third quarter.
- According to the second estimate, Italy's real GDP rose by
15.9% quarter on quarter (q/q) in the third quarter, revised down
from the initially reported 16.1% q/q.
- This followed falls of 13.0% q/q in the second quarter and 5.5%
q/q in the first.
- Nevertheless, Italian GDP in the third quarter was still 4.7%
below its level at end-2019, the pre-COVID-19 level.
- A breakdown by expenditure reveals that domestic demand added
13 percentage points from the GDP change between the second and
third quarters, with private consumption and fixed investment each
representing boosts of 7.5 and 3.3 percentage points,
respectively.
- Net exports also made a positive contribution of 4.4 percentage
point, with exports revving more sharply than imports.
- A change in inventories was also a drag on the third-quarter
GDP change, signifying a subtraction of 1.0 percentage point.
- Consumer spending grew by 12.4% q/q but was still 7.4% smaller
than a year earlier in the third quarter. This was due to the
release of pent-up demand in line with the reopening of
non-essential shops and many consumer-facing services.
- Meanwhile, fixed investment revived surprisingly well, up by
31.3% q/q and 0.7% y/y in the third quarter. Spending on machinery
and equipment, dwellings and residential structures all posting
robust gains.
- The reopening of factories from 4 May triggered a robust rise
in industrial production, which drove the third-quarter rebound.
Specifically, industrial production rose 42.1% month on month (m/m)
in May, followed by m/m gains of 8.2% in June, 7.0% in July, and
7.7% in August. Encouragingly, industrial output in August was only
1.8% below the level in February, the month prior to the
pandemic-related lockdown.
- In addition, the IHS Markit Italy Manufacturing Purchasing
Managers' Index (PMI) reveals that output rose for a fourth
successive month in September, "with the headline figure the
highest for 27 months and indicative of a moderate improvement in
overall conditions."
- Italy's manufacturing sector reaped the benefits from the
reopening of the global economy. Indeed, Italy has an open economy,
with exports totalling 32% of GDP, make it highly sensitive to
global downturns and upturns.
- Nevertheless, the scale of the overall GDP rebound in the third
quarter was surprising, given that service providers appear to be
lagging behind the recovery. Specifically, the IHS Markit Italy
Services PMI signals a renewed and intensifying downturn in Italian
service-sector activity during the August-October period.
- We anticipate a tighter squeeze on economic activity in the
latter stages of this year. The more severe regional lockdowns
targeting hospitality, transport and the retail sectors likely to
spark a renewed and sharp contraction in the final quarter.
- Saipem has signed a collaboration agreement with Consiglio
Nazionale delle Ricerche (CNR) to further develop its patented
HEXAFLOAT pendulum-type floating foundation design for offshore
wind turbines. The strategic research project will be financed by
Italy's Electrical System Research fund and will cover numerical
modelling, and model testing at Istituto di Ingegneria del Mare's
(INM) indoor basin. The outcome of the laboratory tests will inform
the deployment of a prototype in Naples, managed jointly by CNR and
INM, which is expected to happen in the second quarter of 2021.
(IHS Markit Upstream Costs and Technology's Melvin Leong)
- PKN Orlen (Plock, Poland) will invest an average of 4.4 billion
zloty ($1.2 billion) per year between 2021 and 2030 for a major
expansion of its petrochemicals business and the creation of a
plastics recycling division, as part of an enhanced focus on
petchems and renewables over the next 10 years. (IHS Markit
Chemical Advisory)
- By 2030, the company it will have an annual petchems output of
approximately 15 million metric tons and be "an active player" in
plastics recycling with 300,000-400,000 metric tons/year of
installed capacity, PKN Orlen says. The expansion is forecast to
increase its petchems EBITDA from Zl2.3 billion in 2019 to
approximately Zl7.0 billion by 2030, according to the company. "We
are set to become one of Europe's largest integrated petrochemical
producers and expand our recycling business," it says.
- The capital expenditure (capex) plans, outlined in PKN Orlen's
latest strategy update, are being implemented to achieve targets
including expanding the share of specialty products in its petchems
portfolio from 16% in 2019 to 25% by 2030, and ramping up
production capacities for olefins and other base chemicals to
supply feedstock for the development of the specialty and other
advanced petchem products. The increased focus on petchems will
specifically include expanding the company's position in products
such as phenol and other aromatic derivatives, it says.
- By 2030, about half the company's profits from crude-oil
processing will be derived from PKN Orlen's petchems business, it
says.
- In polymers the company is aiming to strengthen its position
and extend its value chain to include compounding and concentrates,
as well as "building [a] foothold in sustainable development"
through mechanical and chemical recycling of plastics and the
development of waste-to-energy solutions, while implementing
advanced closed-loop technologies, it says. PKN Orlen had no
plastics-recycling capacity in 2019. It also plans to build a
lactic acid unit. Recycling and biomaterials will be new branches
of the company's petchems segment.
- PKN Orlen has set an overall capex program of Zl140.0 billion
for the period to 2030, with Zl85 billion to be spent in new areas
such as petchems and renewables, including hydrogen and biofuels. A
total of Zl55.0 billion will be spent on key existing assets,
mostly in refining, to increase their efficiency and extend their
life cycle to maximize performance.
- Approximately Zl3.0 billion will be spent over the period on
innovation and R&D, with a focus on green technologies, it
says.
- The Turkish economy bounced back strongly in the third quarter
following deep losses inflicted by the COVID-19 virus pandemic in
the second quarter. The government-backed credit boom provided a
strong lift to the recovery. A tightening of economic policies
under the new central bank governor is likely to limit further
gains in the fourth quarter. (IHS Markit Economist Andrew Birch)
- In the third quarter of 2020, Turkish GDP surged by 15.6%
quarter on quarter (q/q) in seasonally and calendar adjusted data
from the Turkish Statistical Institute (TurkStat). The
credit-fueled recovery returned the economy to its pre-pandemic
size after the implementation of lockdown measures sent GDP down by
10.8% q/q in the second quarter.
- In particular, the manufacturing and retail trade sectors
posted vigorous recoveries in the third quarter. After contracting
by 22.6% q/q in the second quarter, manufacturing value added
surged by 37.0% q/q in the third quarter. Meanwhile, wholesale and
retail trade activity skyrocketed by 33.4% q/q in the third quarter
after having contracted by 24.7% y/y in April-June.
- In the second quarter, the Turkish government pushed the
banking system into substantial new lending to try to keep domestic
demand moving ahead. As a result, the value added of the financial
and insurance sector in the second quarter soared by 42.9% q/q in
seasonally and calendar adjusted data. In the third quarter, the
government began to withdraw credit expansion pressures, resulting
in the value added from the financial and insurance sector
contracting by 13.6% q/q.
- That additional credit was instrumental in providing the
impetus for both manufacturing and retail trade growth in the third
quarter. The manufacturing sector was primarily geared towards
fulfilling domestic demand, as exports of merchandise goods
continued to contract in July-September.
- On the expenditure side of the GDP ledger, the credit fueled
recovery led to a surge of both private consumption and gross fixed
capital formation. In both seasonally and calendar adjusted terms,
gross fixed capital formation was the largest it had been since the
second quarter of 2018.
- Through the first three quarters, cumulative GDP was up
slightly from a year earlier, by 0.5%. The third-quarter recovery
was significantly stronger than we had anticipated. This surge in
July-September will likely put full-year economic performance much
better than our last forecast, which projected a full-year 6.0% GDP
decline.
- The third-quarter recovery, however, is not expected to
continue unabated in the fourth quarter. The pivot of economic
policies under new Central Bank of the Republic of Turkey (TCMB)
Governor Naci Agbal has already begun to dramatically raise
interest rates and to restrict credit growth. This tightening of
monetary policy will put an end to the surge of fixed capital
investment and private consumption.
- The monetary policy committee (MPC) of the National Bank of
Angola (Banco Nacional de Angola: BNA) decided to keep the central
bank's key interest rates unchanged at its November meeting, having
last cut the rates in May 2019. At the meeting, the MPC raised the
coefficient of the mandatory foreign-currency reserves. (IHS Markit
Economist Alisa Strobel)
- The Angolan central bank's MPC met on 27 November to discuss
the latest developments in the domestic economy and the
implications of current global economic conditions for the
country's macroeconomic growth performance, taking into account the
consequences of a possible second wave of the coronavirus disease
2019 (COVID-19) pandemic in the main economies globally.
- At the meeting, the MPC decided to maintain the BNA's key
policy rates, after last lowering its key policy rate by 25 basis
points to 15.5% during its May 2019 meeting, which brought the
cumulative reduction in the central bank's policy rate to 250 basis
points since June 2018. Furthermore, in its official release, the
MPC emphasised its commitment to the path of price stability,
maintaining its forecast for annual headline inflation of 25% in
2020.
- The official statement by the MPC also highlighted that, since
its last session, the reform of the operation of the
foreign-exchange market on the foreign-exchange supply side has
continued with the National Treasury joining the foreign-exchange
governance platform. The MPC noted that about 61% of
foreign-exchange purchases from commercial banks were purchased
from their customers in October.
- Oil price softness continues to translate into a weaker
exchange rate of the Angolan kwanza, so limiting room to ease
monetary policy further in the near term. IHS Markit expects,
therefore, the tight monetary-policy stance to continue. A rebound
in oil exports and production growth could provide room for a
moderate rate cut towards the second half of 2021.
- The BNA is maintaining its forecast for annual headline
inflation of 25% for this year, and IHS Markit anticipates
inflation of 22.5%. However, we could see some higher price
developments during the holiday season in consumer prices, which
could edge the annual rate upwards closer to the BNA's estimate.
Headline inflation reached a monthly variation of 1.8% in October,
substantially the same as in the previous month. The accumulated
inflation rate in October reached 20.2%, while the annual rate
reached 24.3%, 0.5 percentage point higher than September's
reading.
Asia-Pacific
- APAC equity markets closed higher across the region; Mainland
China +1.8%, South Korea +1.7%, Japan +1.3%, India +1.2%, Australia
+1.1%, and Hong Kong +0.9%.
- Tesla has gained approval from the Ministry of Industry and
Information Technology (MIIT) to begin sales of the Model Y in
China. The electric vehicle (EV) manufacturer's Model Y appeared in
a product catalogue published recently by the MIIT, China's
industry regulator, indicating it has granted permission for sales
of the new model to begin in China. Tesla's Chinese website shows
no changes to the pre-sales pricing of the Model Y as of 1
December. The price range only provides an estimate for consumers
willing to place an order for the Model Y, so the suggested pricing
is likely to change when the vehicle hits the market. Tesla
currently offers two versions of the Model Y in the market, a
long-range version priced at CNY488,000 (USD74,240) and a
performance version priced at CNY535,000. Earlier reports indicate
that Tesla aims to begin Model Y production within the year at its
Shanghai Gigafactory. The factory currently only produces the
automaker's Model 3 sedan, but the facility is undergoing an
expansion to accommodate production of the Model Y. The Model Y's
appearance in MIIT's product catalogue indicates the vehicle will
soon be entering the market to compete with premium electric sport
utility vehicle (SUV) offerings from Chinese startup NIO. (IHS
Markit AutoIntelligence's Abby Chun Tu)
- South Korean battery-maker LG Chem plans to boost its
production capacity of battery cells in China next year to keep up
with demand from Tesla, reports Reuters. With the increased
capacity, LG Chem's China factory will also initially supply
battery cells for Tesla vehicles in Berlin when production in
Germany begins. LG Chem will invest USD500 million over 2021 to
raise annual production capacity of its cylindrical battery cells
at its Nanjing plant by 8 GWh. The plan involved increasing the
number of production lines to at least 17 from eight. LG Chem has
revised its production expansion target on the projection of rising
electric vehicle (EV) sales in major global markets. The
battery-maker said it aims to increase its production capacity to
260GWh by 2023, up from a projected production capacity of 120GWh
by the end of 2020. The increased capacity will be able to meet
demand for 3.72 million EVs equipped with 70kWh-battery packs. (IHS
Markit AutoIntelligence's Abby Chun Tu)
- China State Shipbuilding Corporation (CSSC) will construct a
new offshore wind manufacturing base in Qinzhou in Guangxi
province, China. The new base will cover an area of 1.8 million
square meters and include two 100,000 ton docks to support
production for a total installed capacity of 1.5 GW yearly.
Construction of the facility will come at an estimated cost of
RMB12.9 million (USD2.0 billion) and will include a full suite of
functions from research and development, equipment manufacturing,
assembly and integration, installation, and maintenance. Although
the facility will mainly support offshore wind construction, it is
also expected to produce offshore oil and gas products such as
platform modules and subsea equipment. The move to construct the
base is part of the Guangxi region's push to promote and support
the offshore wind industry in China, and especially its local Beibu
Gulf Economic Zone. China has plan to add a further 52 GW of wind
farms to its coastal regions by 2030. (IHS Markit Upstream Costs
and Technology's Melvin Leong)
- Chinese consumers' strong demand for fresh sweet cherries
continues in the 2020/21 season with record-breaking wholesale
prices for early shipments. Prices are set to weaken when December
supplies arrive. (IHS Markit Food and Agricultural Commodities'
Hope Lee)
- Chilean cherries exports to China reached 164,800 tons in the
January-October period, an increase of 28% by volume from last
year. The price is about USD7,100 per ton cif, up 5%. Cherry is one
of the most high-valued imported fruits in China.
- The first batch of Chilean cherries of the 2020/21 season has
arrived at Shanghai and Guangzhou, wholesaling at CNY2,000 (USD294)
per box (5.0 kilos) initially, up from CNY1,500/box of last year,
according to FreshPlaza. The early picked fruits were sent by
costly charter flights due to the pandemic.
- From mid-November to 23 November, prices have come down to
CNY600-900/box as more shipments landed. The main varieties include
Santina, Royal Down, Brooks and Glenred. Industry sources predicted
that prices will stabilize in mid-December when cheaper fruits
arrive by sea.
- The late start of the Chinese New Year (12 February 2021) will
benefit suppliers and Chinese marketers.
- According to the Chilean Fruit Exports Association (ASOEX),
global exports in the current season will increase by 36% to
310,350 tons.
- Japanese sales of mainstream registered vehicles were 253,069
units, up by 6.0% year on year (y/y) during November, according to
data released by the Japan Automobile Dealers Association (JADA).
This figure excludes mini-vehicles, thus covering all vehicles with
engines bigger than 660cc, including both passenger vehicles and
commercial vehicles (CVs), sold in Japan. (IHS Markit
AutoIntelligence's Nitin Budhiraja)
- Sales of passenger and compact cars advanced by 6.4% y/y to
219,040 units in November, while truck sales were up by 4.0% y/y to
33,536 units and bus sales were down by 37.3% y/y to 493
units.
- In the year to date (YTD), sales of mainstream registered
vehicles declined by 13.77% y/y to 2.636 million units.
- Sales of passenger cars were down by 13.7% y/y to 2.268 million
units, while truck sales fell by 13.9% y/y to 359,919 units and bus
sales by 30.8% y/y to 8,719 units. The decline in sales last month
can be mainly attributed to last year's low base of
comparison.
- New vehicle sales in Japan had declined by 14.6% y/y in
November last year, as customers continued to cut back on spending
following the 1 October consumption tax rise, the first since April
2014.
- Although consumers have gradually started to return to a new
normal during the COVID-19 virus pandemic, the market remains hurt
as customers have continued to cut back on spending following the
consumption tax rise.

- Indian GDP contracted 7.5% y/y in real terms during the
July-September quarter (the second quarter of the fiscal year
2020). This followed a contraction of 23.9% y/y in the previous
quarter, marking India's first technical recession on record.
Nevertheless, the contraction was smaller than most estimates,
including those of the Reserve Bank of India (RBI) and IHS Markit's
projection of 9.8% y/y. (IHS Markit Economist Hanna
Luchnikava-Schorsch)
- The contraction in private spending narrowed to 11.3% y/y in
July-September, following a much steeper contraction of 26.7% y/y
in the previous quarter. This was mostly a result of a progressive
lifting of strict lockdown restrictions from June, with pent up
demand for both durable and essential goods driving the partial
recovery.
- Fixed investment spending fell by 7.3% y/y, rebounding strongly
from a contraction of 47.1% y/y in the April-June quarter. The
recovery in investment activity was significantly better than
expected and is likely due to the resumption of projects already
announced before the lockdown restrictions, with new project
announcements remaining virtually unchanged from the previous
quarter. The numerical base effect is also a factor, as real fixed
investment contracted by 3.5% y/y during the same quarter of FY
2019.
- A fixed investment breakdown by ownership is not available, but
the new investments likely originated from the private sector, with
firms taking advantage of a temporary boost to liquidity following
the central bank's injections and a lending moratorium imposed to
assist borrowers affected by the COVID-19 virus pandemic. Another
factor supporting private investment was substantial foreign direct
investment (FDI) equity inflows of USD23.8 billion during the
quarter (compared with USD10.1 billion during the equivalent
quarter of 2019).
- Government consumption and investment activity, on the other
hand, was modest despite the announced stimulus measures. Public
consumption expenditure fell 22.2% y/y in real terms during
July-September after rising 16.4% y/y in the previous quarter.
- The net exports position remained favorable: a 17.2% y/y
contraction in imports was substantially steeper than a 1.5% y/y
fall in exports, indicating persistent significant weakness in
domestic demand.
- In terms of output, the economy contracted 7.0% y/y after
recording a fall of 22.8% y/y in the June quarter. The most
surprising development was a notable recovery in manufacturing
output, which recorded modest growth of 0.6% y/y after contracting
by 39.3% y/y in the June quarter. This was in contrast to
industrial output data, which showed that manufacturing sector
output declined by 6.7% y/y during the same period.
- The September-quarter result was better than IHS Markit's
expectations, with the most positive news being the private-sector
source of recovery. Given the incoming high-frequency
post-September data available so far, the economic recovery is
likely to expand into the December quarter, supported by further
removal of lockdown restrictions and a boost to domestic demand
from festival spending and the government's mini-stimulus announced
in October.

- Uber India plans to have 3,000 electric vehicles (EVs) in its
fleet by the end of 2021. According to a report by Mint, Prabhjeet
Singh, president of Uber India and South Asia, said, "As of now, we
plan to have approximately 3,000 EVs and e-rickshaws (across two,
three and four-wheelers) on our platform by the end of 2021." The
company also plans to forge strategic partnerships with OEMs, EV
infrastructure firms for charging and battery swapping, and fleets
and financiers. The latest development is in line with Uber's goal
to have zero-emission vehicles in 100% of its ride-hailing fleet
globally by 2040. (IHS Markit Automotive Mobility's Isha
Sharma)
- Dr Reddy's Laboratories (India) has entered into a definitive
agreement to acquire a portfolio select of anti-allergy brands in
Russia, Kazakhstan, and Uzbekistan, for an undisclosed sum, from
Glenmark Pharmaceuticals (India). According to a press release
published by Dr Reddy's, it plans to acquire rights to the Momat
Rino brand (mometasone furoate, monohydrate nasal spray) in Russia,
Kazakhstan, and Uzbekistan, the Momat Rino Advance brand
(azelastine hydrochloride, mometasone furoate nasal spray) in
Russia, the Momat A brand for Kazakhstan and Uzbekistan, and the
Glenspray Active brands (mometasone furoate and azelastine
hydrochloride) in Ukraine. The agreement includes all rights to the
trademarks, dossiers, and patents in the territories specified. The
acquired brands essentially represent two products, a mometasone
mono product and a combination of mometasone with azelastine, and
they are indicated for the treatment of seasonal and perennial
allergic rhinitis. The divestment by Glenmark comes ahead of the
planned launch of the company's new fixed dose seasonal allergic
rhinitis (SAR) nasal spray Ryaltris (olopatadine hydrochloride and
mometasone furoate). The company has reportedly decided to divest
the Momat Rino brand and its extension as it awaits approval to
launch Ryaltris in the Russian market, and as it moves to focus on
this product for its respiratory franchise in Russia and the
Commonwealth of Independent States (CIS) region. (IHS Markit Life
Sciences' Sacha Baggili)
- Hyundai and South Korean IT company Naver have signed a
memorandum of understanding (MOU) to collaborate on various aspects
of future mobility, reports Korea JoongAng Daily. Under the MOU,
the two companies will co-operate on creating content and services
for connected cars. They will also work on finding business models
in which they can work together with small and mid-size
enterprises. The first service under this partnership will be
enabling passengers to access various Naver services through
Hyundai vehicles' infotainment systems, such as maps, search
engines, shopping, and music streaming. The service will be
introduced from next year. Advanced connectivity such as receiving
alarms from Naver when the vehicle needs to be inspected or picked
up after a service will also be available as early as next year.
"By merging the automotive industry and ICT, [Hyundai Motor] will
innovate customer service and improve mobility convenience," said
Chi Young-cho, head of Hyundai Motor's strategy and technology
division. The latest development is in line with Hyundai's future
growth strategy to move away from being a traditional automaker to
becoming a mobility service provider. Earlier this year, the
automaker announced plans to invest KRW100 trillion (USD90 billion)
over the next five years to develop future vehicle technologies.
(IHS Markit AutoIntelligence's Jamal Amir)
- The Malaysian ringgit strengthened again in November. The
currency was originally expected to show a short-term weakening,
but it is now likely to continue directly to a medium-term
appreciation as well. (IHS Markit Economist Dan Ryan)
- The policy interest rate remains unchanged at 1.75%. Despite
the resurgence of the COVID-19-related control measures, the policy
rate should hold constant, reflecting the strength of the
third-quarter rebound and the flat consumer and wholesale
prices.
- Exports surged in September, resulting in a nearly 15% growth
rate from a year earlier. Imports grew to a lesser extent, pushing
the trade balance on again to high levels.
- In the industrial sector, the leading indicator continues on an
uptrend, although its predictive power is limited. The industrial
production index has been volatile but essentially flat for three
months.
- The nominal wholesale sector has also been volatile - so much
so that no short-term trend is clear. However, real wholesale sales
appear to be rising, which bodes well for consumer and
manufacturing sectors.
- The unemployment rate has been relatively stable in recent
months, hovering around 4.7%. However, it is a big improvement from
the 5.3% level recorded in the pandemic nadir in May.
- The consumer sector has been looking good, at least in
September. Retail sales - both nominal and real - and auto
registrations were on an uptrend, and all are higher than a year
earlier.
- The monthly data show a healthy economy, at least through the
end of the third quarter. These numbers are consistent with the
national income accounts.
- However, the economy is likely to slow in the fourth quarter.
The resurgence of COVID-19 and the resulting lockdowns and movement
control should yield a small fourth-quarter contraction.
Posted 01 December 2020 by Chris Fenske, Head of Capital Markets Research, Global Markets Group, S&P Global Market Intelligence
S&P Global 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.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.