US equity markets closed modestly higher, while APAC and
European markets were mixed. US and European benchmark government
bonds closed lower across both regions. European iTraxx credit
indices closed slightly wider and CDX-NA was tighter across IG and
high yield. Copper prices broke through a new two-year high, with
oil, gold, and silver also higher on the day, and the US dollar
lower.
Americas
- US equity markets closed higher; S&P 500 +0.5%, DJIA +0.4%,
and Russell 2000/Nasdaq +0.3%.
- 10yr US govt bonds closed +2bps/0.79% yield and 30yr bonds
+3bps/1.59% yield.
- CDX-NAIG closed -1bp/58bps and CDX-NAHY -7bps/375bps.
- DXY US dollar index closed -0.4%/93.02.
- High grade copper futures closed +1.9%/$3.15 per pound, which
is its highest price in over two years.
- Gold closed +2.0%/$1,950 per ounce and silver +1.1%/$24.98 per
ounce.
- Crude oil closed +1.6%/$41.70 per barrel.
- US single-family permits have rebounded by an unprecedented
453,000 annualized and seasonally adjusted units in the past five
months and jumped 7.8% (+/- 1.1%; statistically significant) in
September, surging to levels last seen in March 2007. Single-family
permits matter more than single-family starts because they are much
better measured, are less influenced by weather, and are forward
looking. Single-family construction accounts for 80% of spending on
total new construction. (IHS Markit Economist Patrick Newport)
- Quarterly permits soared 27.5% in the third quarter, crossing
the 1.5-million threshold for the first time since 2007. The single
and multifamily categories were up 39.2% and 7.0% in the third
quarter.
- Housing starts inched up 1.9% (+/- 8.8%, not statistically
significant) in September as single-family starts climbed 8.5% (+/-
9.2%, statistically significant), offsetting a 16.3% plunge in
multifamily starts.
- Housing starts were up 32.5% in the third quarter as the single
and multifamily categories scored whopping 35.8% and 24.5%
increases.
- All four regions have staged solid rebounds; both the single-
and multifamily categories have rebounded smartly. But activity in
recent months has shifted toward the South and the single-family
category—it is too soon to say if this is a byproduct of
telework.
- The months' supply of unsold homes sank to a record-low 3.3
months in August; a third of new homes sold in August had not been
started; units authorized but not started were last higher in 2008.
Bottom line: Builders are not ramping up fast enough—the surge
in single-family new construction will not peter out soon.
- Volvo Trucks has announced receiving a grant award of USD21.7
million from the US Environmental Protection Agency (EPA) and
California's South Coast Air Quality Management District (AQMD) to
deploy Class 8 VNR electric zero-emission trucks. According to the
company statement, Volvo will deploy 70 VNR electric trucks in
southern California for regional freight distribution and drayage.
Of the funding, USD20 million is coming from the EPA's Targeted Air
Shed Grant Program and USD1.7 million from California's South Coast
AQMD. The trucks will be delivered to southern Californian fleet
operators between 2021 and the third quarter of 2022. This is
intended to allow for at least a full year of operation, prior to
the project ending in 2023. Volvo has already delivered 25 trucks
in the region through its Volvo LIGHTS (Low Impact Green Heavy
Transport Solutions) project. The new program means the company
will eventually deploy nearly 100 electric trucks in the region.
Peter Voorhoeve, president of Volvo Trucks North America, said,
"This grant provides Volvo Trucks with an excellent opportunity to
further expedite the success of the ecosystem designed through the
Volvo LIGHTS project to support the wide-scale deployment of
battery-electric heavy-duty trucks. We applaud the EPA and South
Coast AQMD for addressing the key issues in advancing
electromobility and incentivizing technology investments in the
region, and are proud they continue to trust in Volvo Trucks North
America to lead the acceleration of Class 8 zero-emission
vehicles." In addition, Volvo will gather data from the deployment
that will help to improve and refine calculations of total cost of
ownership of electric trucks, including vehicle maintenance and
fuel cost savings. The announcement by Volvo Trucks follows the
truck-maker's statement earlier this year on deploying VNR electric
trucks in southern California through its TEC dealership. (IHS
Markit AutoIntelligence's Stephanie Brinley)
- As concerns over climate change from multiple stakeholders
increase pressure on oil and gas players to reduce the greenhouse
gas (GHG) emissions associated with their operations, the industry
is paying particularly close attention to methane owing to its more
potent global warming potential versus carbon dioxide.[1] A
critical step for oil companies in reducing methane emissions from
their operations is improving the ability to more readily detect
and quantify releases as they occur in the field. Technology and
broader forms of innovation will be a critical part of this effort.
Two technology development activities announced during second
quarter 2020 are aimed at moving the industry in this direction: BP
Ventures's investment in technology startup Satelytics and the
Project ASTRA partnership between ExxonMobil, Pioneer Natural
Resources, the University of Texas, the Gas Technology Institute,
and the Environmental Defense Fund. Both activities seek to enable
near continuous methane monitoring and measurement from oil and gas
operations. By facilitating earlier detection and mitigation of
emissions, producers should be able both to reduce the carbon
intensity of their operations and to quantify the impact of their
methane reduction efforts. (IHS Markit Upstream Costs and
Technology's Judson Jacobs and Carolyn Seto)
- Scientists from the USDA's Agricultural Research Service have
begun experimenting with alfalfa as a sustainable alternative to
traditional fishmeal. According to the USDA, formulating aquafeeds
with plant-based proteins could help reduce the need for fishmeal
in aquafeeds. This could subsequently cut aquaculture's impact on
aquatic natural resources. Using alfalfa as a fishmeal alternative
could ease the burden on oceanic fish populations, which are key
members of the marine ecosystem. Alfalfa has a crude protein
content of 15-22% and contains a rich combination of vitamins and
minerals. It is commonly fed to cattle and horses as silage, hay or
forage. The plant can also be 'juiced' for its protein concentrate
- a process used by USDA and University of Minnesota research
collaborators, for feeding trials in yellow perch. Juicing involves
squeezing alfalfa leaves in a screw press, then heating and
centrifuging the juice. This process forms alfalfa protein
concentrate (APC), which is then dried and processed into small
pellets along with other ingredients. The trials in yellow perch
have shown that fish given pellets containing APC gained less
weight than those fed fishmeal. However, there was little
difference between their health, longevity and overall wellbeing.
Additionally, fillet yields, quality, composition and flavor were
similar between fish fed APC and fishmeal. Deborah Samac, the ARS
Plant Science Research Unit lead, noted additional studies are
underway to perfect the APC concentrations used in aquafeed
formulation, evaluate other processing methods and examine uses for
byproducts of the juicing process. The USDA is also expanding its
feeding trials, which include rainbow trout. The USDA collaborated
on the yellow perch trials with the University of Minnesota-St
Paul, the University of Wisconsin-Milwaukee, the University of
Wisconsin-Madison and the US Fish and Wildlife Service's Bozeman
Fish Technology Center. A company currently developing alternative
fish feed solutions is Netherlands-based Veramaris. The firm
produces natural marine algal oil for fish as an alternative source
of eicosapentaenoic acid and docosahexaenoic acid. Dutch firm
Corbion recently entered a deal with seafood producer Thai Union
for the latter to use its algae feed ingredient - AlgaPrime DHA -
in its shrimp feed. (IHS Markit Animal Health's Daniel Willis)
- Nova Chemicals has agreed to sell its expandable styrenics
business to a subsidiary of Alpek (Monterrey, Mexico) for an
undisclosed sum. The transaction is expected to close in the fourth
quarter. The sale encompasses Nova's expandable polystyrene (EPS)
and Arcel-brand resin product lines, with manufacturing facilities
at Monaca, Pennsylvania, and Painesville, Ohio, as well as
commercial operations in Asia, it says. The plant at Monaca has an
EPS production capacity of 123,000 metric tons/year, with 36,000
metric tons/year of capacity for Arcel, as well as an R&D pilot
plant. The facility at Painesville has an EPS capacity of 45,000
metric tons/year, according to Alpek subsidiary Styropek, which is
acquiring Nova's business. Nova, a wholly-owned subsidiary of
Mubadala Investment Co. (Abu Dhabi), says the sale is an "important
step" in its plan to focus on its olefin and polyethylene (PE)
business, which includes additional investments to advance a
circular economy for plastics. The transaction, if it proceeds to
completion, would see Nova entirely exit the styrenics sector. The
sale will provide Nova with "immediate cash generation to further
strengthen our balance sheet," says Luis Sierra, president and CEO.
It will also enable the company to focus on the completion and
start-up of a 450,000-metric tons/year PE plant under construction
in Ontario, Canada. The new plant, as well as the expansion of the
company's Corunna, Ontario, steam cracker that will supply ethylene
feedstock to the adjacent PE facility, is scheduled for completion
in late 2021. The company says it will optimize costs at the newly
acquired facilities and that the additional sites will allow it to
serve existing and new customers with increased efficiency and
lower logistics costs. Alpek intends to continue growing its
business in the construction and reusable packaging segments, both
of which require long-term use of EPS, as well as developing more
sustainable products such as biodegradable EPS, it adds. Alpek
operates two main business segments: polyester, and plastics and
chemicals. It is a leading producer of purified terephthalic acid
(PTA) and polyethylene terephthalate (PET). It is also the largest
manufacturer of EPS in the Americas.
- PPG Industries today reported third-quarter net income from
continuing operations up 21% year-on-year (YOY), to $442 million,
on sales down 4%, to $3.69 billion. Adjusted earnings totaled
$1.93/share, slightly ahead of analysts' consensus estimate of
$1.92/share, as reported by Refinitiv (New York, New York). Selling
prices rose 1.3% YOY, but volumes fell on continuing negative
impacts from the COVID-19 pandemic.
- Performance coatings segment sales declined 3% YOY, $2.25
billion, while segment income increased 12%, to $426 million.
Architectural coatings segment sales grew across the world, with
the strongest increases in EMEA, where volumes rose by 10%. Volumes
in aerospace coatings fell 35% YOY, however, due to lower
commercial aerospace demand, and automotive refinish coatings
volumes declined 10% YOY but increased sequentially.
- Industrial coatings segment sales fell 5% YOY, to $1.43
billion, while segment income was up 23%, to $253 million. Segment
volumes were down 5% YOY, but increased 40% sequentially as demand
improved from the second-quarter's trough. Volumes improved on a
sequential basis in automotive OEM and industrial coatings, though
volumes remained down on a YOY basis.
- PPG expects fourth-quarter sales volumes to fall by "a
low-to-mid-single digit percentage," with differences by business
line and region. Adjusted earnings for the fourth quarter are
forecast to total $1.50-1.57/share.
- "Looking ahead, we are likely to experience normal seasonal
trends in the fourth quarter, especially in our European and North
American architectural coatings businesses," says Michael McGarry,
PPG chairman and CEO. "Even with the continued uncertainty from the
pandemic we expect overall economic activity to continue to
recover, but in an uneven manner."
- A U.S. judge on Friday ruled that Venezuelan state oil company
Petroleos de Venezuela's [PDVSA.UL] 2020 bonds are "valid and
enforceable," a court document showed, in a setback for opposition
leader Juan Guaido. The bonds are backed by half of the shares in
the parent company of U.S. refiner Citgo Petroleum Corp
[PDVSAC.UL], and Guaido's team had sued last year to declare them
invalid on the grounds that the Venezuelan government had issued
them without the approval of the opposition-held National Assembly.
(Reuters)
- The below IHS Markit Price Viewer screen shows that the bid
price for PDVSA's 8.5% 10/2020 issue increased 233% (10.50 to 35.00
price) yesterday as a result of Friday's ruling.

- EDP Brazil SA, a Brazilian electric utility company and
subsidiary of Energias de Portugal (EDP Group), has partnered with
car rental company Unidas to promote electric cars in Brazil,
reports Valor Econômico. Unidas will purchase vehicles and rent
them out, while EDP will offer charging infrastructure. According
to the source, in the first phase of the project, 100 electric
vehicles (EVs) will be available for rent in São Paulo (Brazil) and
Curitiba, Paraná state (Brazil). The company aims to expand the
fleet to 600 vehicles in 2021. This is EDP's first commercial-scale
partnership with a car rental company to promote electric cars in
Brazil. Last year, EDP announced the setting up of 30 fast-charging
stations for EVs in the country. It said that it will invest
BRL32.9 million (USD5.8 million) in partnership with Volkswagen
(VW), Porsche, and Audi. Volkswagen Trucks and Buses (Volkswagen
Caminhões e Ônibus: VWCO) and CPFL Energia, an electric energy
generation and distribution company in Brazil, entered into a
partnership in the domain of electric mobility in the country (see
Brazil: 28 July 2020: VWCO and CPFL sign agreement on EV mobility
research in Brazil). In March, BMW launched a smart charging
network in partnership with national startup Incharge in Brazil. In
January, Brazil's EV charging infrastructure was boosted with 30
different proposals from the Efficient Electric Mobility Solutions
program. (IHS Markit AutoIntelligence's Tarun Thakur)
- Continued recovery in August left the monthly production index
at 13% lower than the same month in 2019, up from -35.4% in April.
The rate of recovery, however, lost considerable momentum, with
production advancing by just 2.4% m/m compared with an average of
10.2% from May to July. (IHS Markit Economist Jeremy Smith)
- Peru endured the sharpest GDP decline of any major economy in
the second quarter, following especially rigorous and protracted
quarantine measures intended to slow the spread of the coronavirus
disease 2019 (COVID-19) virus.
- The only sectors experiencing year-on-year (y/y) growth in
August were telecommunications (5.1% y/y), and finance and
insurance (19.7%). The service sector is most responsible for the
decline, with the most notable contractions in hotels and
restaurants (60.1% y/y) and transport and storage (27.9%), but
manufacturing (12.1%) and mining (11.2%) remain far from
pre-pandemic levels.
- Meanwhile, INEI reported that employment in Metropolitan Lima
rose by 3.8% m/m to 3.7 million in the quarter ended in September,
down from a 23% increase in the prior month. Employment in the
Peruvian capital fell by more than half from March to June.
Nonetheless, the unemployment rate rose from 15.6% in August to
16.5% in September as the number of workers re-entering the labor
force outpaced new hires.
- In April, Peru unveiled the largest stimulus package in Latin
America, worth around 12% of GDP, to counteract the collapse in
economic activity. Prior to the crisis, Peru had enjoyed a greater
fiscal space than many of its regional peers, but its large
informal sector - accounting for more than 70% of the workforce,
along with low levels of financial inclusion, have complicated the
delivery of government support.
Europe/Middle East/Africa
- European equity markets closed mixed; Germany -1.0%, France
-0.3%, UK +0.1%, Italy +0.6%, and Spain +1.0%.
- 10yr European govt bonds closed +2bps for France, Germany,
Italy, Spain, and the UK.
- iTraxx-Europe closed +1bp/55bps and iTraxx-Xover
+3bps/331bps.
- The UK government is said to be considering measures that would
compel OEMs to sell a growing share of battery electric vehicles
(BEVs) as it moves towards phasing out internal combustion engine
(ICE) passenger cars, reports The Times. The article states that
government ministers believe a "zero-emission vehicle mandate"
could be the most efficient way of delivering its ambitious
targets, while at the same time allowing grants and other support
measures currently available for BEVs, such as zero road tax, to be
phased out. The scheme would also require OEMs to sell more
zero-emission vehicles as a share of their overall sales, or
purchase credits from other vehicle manufacturers. (IHS Markit
AutoIntelligence's Ian Fletcher)
- Ireland is currently set to have the most severe restrictions
in Europe, with hospitality and non-essential services closed and
gatherings banned until early December. We will incorporate the
latest developments into our November baseline, including a
contraction in underlying activity in the fourth quarter of 2020
and a more protracted recovery. (IHS Markit Economist Daniel Kral)
- Just two weeks after Ireland was moved to Level 3 national
restrictions for three weeks, the government has decided to move
the country to the highest Level 5 restrictions for six weeks, from
the night of Wednesday 21 October to Wednesday 2 December. This
comes after daily new COVID-19 cases increased three-fold in less
than three weeks, from 415 new cases on 1 October to almost 1,300
on 19 October, although deaths have remained in low single
digits.
- The full scale of Level 5 restrictions will not be rolled out
yet, with the government calling it "soft" Level 5 instead. This
means that the overall severity of the restrictions is set to be
less severe than during April and early May, the peak months of the
first lockdown.
- New measures include the complete closing of the hospitality
sector, such as restaurants, bars, and cafes, with only take-away
or delivery services allowed. Under Level 3, these places were
allowed to have outdoor seating of up to 15 people.
- All non-essential services will be closed, although the list of
exemptions is sizeable. This is a major difference with Level 3,
when they were allowed to operate while safeguarding social
distancing rules.
- All indoor gatherings will now be banned. Only meetings in an
outdoor setting, which is not a home or a garden, such as a park,
can take place with one more household. No organised outdoor
gatherings are allowed.
- Attendance at weddings is capped at 25 people and funerals at
10 people. Most sports will be banned, apart from a few elite
championships. Children are allowed to train in small groups.
- Restrictions on internal mobility have also been tightened.
While under Level 3 people could travel within their county, Level
5 means strict stay-at-home orders and people can only exercise
within 5 km of one's home. Public transport will be capped at 25%
of capacity for essential workers and essential purposes, while
everyone is advised to walk or cycle where possible.
- A key difference with the lockdown in April-May is that schools
and early learning and childcare facilities will remain open.
School transport will also continue unaffected.
- Ireland is currently set to have the most severe restrictions
in Europe, although many countries across the continent are faring
much worse. The Irish government's severe pre-emptive measures are
likely driven by a combination of factors, including relatively
limited healthcare capacity, particularly beds in intensive care
units, and pressure from its scientific advisers
- The impact of Level 3 restrictions can already be seen in
real-time activity indicators, with Ireland's retail footfall
remaining among the lowest in Europe throughout the COVID-19 virus
crisis.

- Netherlands-based ForFarmers is strengthening its position in
the poultry feed sector by acquiring De Hoop Mengvoeders. Already
one of Europe's largest feed companies ForFarmers will become even
more powerful with the addition of a business that generated EUR110
million in revenues last year. De Hoop sold 322,000 tons of poultry
feed in 2019, of which 80% went to farmers in the Netherlands, with
the remaining 20% exported to Belgium and Germany. The acquired
business produces feed at a mill in Zelhem, in the Dutch province
of Gelderland. ForFarmers said creating a single organization
focused on feed quality and advice for poultry farmers would be of
great added value to the poultry sector. The group said the
acquisition should be seen in the context of recent trends, where
consumers are increasingly interested in the provenance,
sustainability and quality of food. ForFarmers will buy De Hoop's
compound feed business and its related transport activities, along
with the mill and adjacent real estate. Gert-Jan Buunk will manage
the new combination, which will be branded ForFarmers-De Hoop,
together with Michiel Schreurs, Director Poultry ForFarmers
Netherlands. Completion of the transaction, which is pending
approval of the Dutch and German competition authorities, is
expected to take place in the first quarter of 2021. (IHS Markit
Food and Agricultural Commodities' Max Green)
- Despite a full rebound in retail sales and stable construction
sector, IHS Markit keeps below the consensus forecast for the
Romanian economy in 2020 and 2021. (IHS Markit Economist Vaiva
Seckute)
- Retail sales in Romania in July-August were almost at the same
level as at the end of 2019, signaling a full rebound from a trough
in April. Construction output showed an acceleration in July and
August after weakening growth in momentum during the second
quarter.
- On the other hand, industrial sector recovery was limited and
its volumes in July-August were 5.2% lower than compared with the
end of 2019. Exports continued to contract by about 10% year on
year (y/y) in July-August.
- The high-frequency data in the service sector suggests only a
limited rebound in the third quarter so far, especially for
restaurants and hotels and recreational services, which continued
to struggle due to restrictions and lack of tourists.
- The Romanian unemployment rate had already started rising in
February, but from very low levels, and in August it stood at 5.3%
compared with 3.7% in January. The number of employed decreased by
3.5% y/y in the second quarter.
- Wage growth has decelerated during the second quarter, but
regained pace in July and August when it rose above 7% y/y.
- Amid the sharp contraction in exports, the trade balance
worsened further in 2020 despite the negative shock to domestic
demand in the second quarter. IHS Markit expects the trade deficit
to rise from 7.8% in 2019 to 8.7% in 2020.
- The current-account deficit is not expected to widen due to
improving income balances. Nevertheless, current-account coverage
by capital transfers and FDI has deteriorated significantly. Gross
external debt increased to EUR116 billion in August, compared with
EUR109 billion a year ago.
- Romania's fiscal deficit until August this year increased to
EUR11 billion - more than doubling from EUR4.6 billion in August
2019.
- The Romanian fiscal deficit is expected to reach around 11% of
GDP in 2020. Persistent twin deficits in the country will continue
to challenge the country's ability to attract substantial amounts
of financing at a reasonable price, even though risks are
diminished by loose monetary policy.
- Dacia has sold out of its entire initial allocation of 100
units of the new Spring electric vehicle (EV) in the Hungarian
market, according to a company statement. This was after the
preorder slots had been available for just four hours according to
the OEM. The first customer deliveries of the low-cost EV will take
place in 2021, with the vehicle listing at HUF6.5 million
(EUR17,900) in Hungary. However, the Hungarian government has a
generous EV subsidy scheme in place that offers a HUF2.5-million
subsidy and means that customers can purchase the vehicle for just
HUF4.0 million. In May, the Hungarian government introduced a
progressive EV subsidy regime which increased the existing subsidy
from HUF1.5 million to HUF2.5 million, available for cars with a
list price below HUF11 million. The new Spring will be the cheapest
EV on sale in Europe when it is launched onto the market next year
and will be a good bellwether for how ready consumers really are to
adopt EVs, due to its affordability. The Spring is based on the
Renault Kwid, and offers a driving range of 225 km under the
Worldwide harmonized Light vehicles Test Procedure (WLTP) from its
26.8-kWh battery and 33-kW electric motor. (IHS Markit
AutoIntelligence's Tim Urquhart)
- Dacia and Ford have recorded their highest-ever production in a
single month in Romania, with a figure of 58,000 units in
September, reports Mediafax. According to the report, this output
from the two car producers in Romania was 56% higher than the
figure the two OEMs posted in September 2019. Ford tripled
production at its Craiova plant last month in comparison to
September 2019. Dacia has returned to a normal daily output of
1,300 cars a day, compared with 1,400 units before the COVID-19
pandemic. Meanwhile, Ford reached a daily output of 1,000 units of
its EcoSport and Puma models in September, as opposed to 300 to 400
units at the same time last year. This output result for Romania's
two carmakers is a highly positive result and belies the
difficulties the European industry has faced as a result of the
COVID-19 pandemic. Dacia's output was boosted in September by the
company's launch of the new Sandero and Logan models, while Ford is
enjoying healthy demand for the Puma as it is a well-executed and
well-designed model in the increasingly popular B-sport utility
vehicle (SUV) segment. For the full year 2020, Romanian
light-vehicle production is forecast to drop to 436,000 units, down
from 490,000 units last year. (IHS Markit AutoIntelligence's Tim
Urquhart)
- Russian car-sharing company Delimobil plans to sell up to a 10%
stake to investors in a pre-placement, its founder Vincenzo Trani
said. This will take place ahead of Delimobil's planned initial
public offering (IPO) on the New York Stock Exchange in early 2022.
The company had earlier announced that it plans to place 40% of
shares during IPO, and this 10% pre-placement would be in addition
to that. The company had previously also said that it plans to
raise around USD300 million through IPO, but indicated now it may
be reviewing that target. In addition, Delimobil said that it is
working with Sberbank and Bank of America Merrill Lynch as
consultants for IPO, but has not yet signed contracts with them.
Delimobil was established in 2015 and currently has a fleet of over
13,000 vehicles with more than 1 million members. The company plans
to build up its fleet, primarily outside Moscow (Russia) with an
aim to have a fleet of 15,500 cars by the end of 2020 and 28,000 in
2021. Delimobil says despite of suspension of car-sharing service
from mid-April to mid-June during the worst of the coronavirus
disease 2019 (COVID-19) virus pandemic in Russia, the company's
revenue in the remaining months averaged 50% higher than last year.
The car-sharing market in Moscow is currently seeing accelerated
growth due to high parking fees and limited parking space. Many
ride-hailing and car-sharing companies are planning to go public
after seeing Lyft and Uber launching their own IPOs. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
- Israel companies Foretellix and Mobileye have partnered to
launch automated lane keeping system (ALKS) verification package
that meets new regulatory requirements. Foretellix claims the
system to be the world's first commercial solution that will help
automakers comply with regulatory and certification requirements of
a new UN regulation. The system deploys Mobileye's
Responsibility-Sensitive Safety (RSS) to ensure that the tested
vehicle responds to dangerous situations. Jack Weast,
vice-president of autonomous vehicle standards at Mobileye, said,
"Regulators will require proof of a vehicle's ability to avoid
reasonably foreseeable and preventable collisions, The Foretellix
Foretify approach using RSS gives OEMs a way to demonstrate
compliance with the most advanced automated driving regulation in
the world." Mobileye, an Israeli-based company acquired by US
chipmaker Intel, develops advanced perception systems that enable
drivers to detect nearby vehicles, other road users, and unexpected
hazards. Recently, Intel acquired Israeli public transit app Moovit
to help Mobileye develop robotaxis, with plans to launch them in
early 2022. Foretellix is a developer of safety verification
software for autonomous vehicles. It recently released its advanced
driver-assistance systems and highway solution, a verification
package for Level 2 to Level 4 autonomy, which now includes
implementation of the new regulation. (IHS Markit Automotive
Mobility's Surabhi Rajpal)
- Kenya's real GDP contracted by 5.7% y/y during the second
quarter of 2020 as COVID-19 virus outbreak-related lockdown
measures disrupted trade flows, service delivery, and tourism to
the country, the Kenya National Bureau of Statistics (KNBS)
reported. (IHS Markit Economist Thea Fourie)
- Local and regional COVID-19 lockdown measures restricted the
movement of goods and individuals across borders, while closures of
schools and some businesses, especially those dealing with
accommodation and food services, added to the dismal performance of
economic activity during the second quarter.
- The Kenyan sectors recording a sharp contraction in output
during the second quarter included accommodation and food services,
down 83.3% y/y; transport and storage, down 11.6% y/y; and
education, down 56.1% y/y. Output in the retail and wholesale
industry fell by 6.8% y/y, while manufacturing production dropped
by 3.9% y/y.
- The sectors that showed most resilience during the second
quarter included the agriculture, forestry and fishing sector, in
which output expanded by 6.4% y/y and accounted for 25.6% of GDP,
up from 16.2% of GDP at the end of 2019. "The sector's performance
was supported by a notable increase in tea production, cane
deliveries, milk intake and fruit exports," the KNBS reported. A
decline in coffee sales and horticultural exports were recorded
during the second quarter.
- Processing and preservation of meat; bakery products, tobacco
products, and beer fell during the second quarter. Similarly,
non-food manufacturing production contracted by 4.9% y/y during the
second quarter. "This was evidenced by a contraction in assembly of
motor vehicles and manufacture of galvanized iron sheets," the KNBS
reported.
- Growth was recorded in the construction industry (up 3.8% y/y),
the information and communications sector (up 4.3% y/y), and the
finance and insurance sector (up 4.2% y/y), among other
sectors.
- GDP growth in the Kenyan economy is expected to bounce back
during the third quarter of 2020. The Stanbic Bank Purchasing
Managers' Index (PMI) for Kenya improved above the 50-neutral level
in July and since then has continued to strengthen, reaching a
reading of 56.3 in September.
Asia-Pacific
- APAC equity markets closed mixed; Mainland China/South Korea
+0.5%, India +0.3%, Hong Kong +0.1%, Japan -0.4%, and Australia
-0.7%.
- Mainland China's recovery momentum is expected to moderate
further in fourth quarter 2020; services and consumption are likely
to drive near-term economic growth. China's real GDP expanded 4.9%
year on year (y/y) in the third quarter of 2020, up 1.7 percentage
points from the second quarter, according to the National Bureau of
Statistics' (NBS's) 20 October release. Quarter-on-quarter (q/q)
growth moderated, from 11.7% in the second quarter of 2020, to 2.7%
in the third quarter. (IHS Markit Economist Yating Xu)
- The services sector became the growth engine in the third
quarter, taking the mantle from the industry and construction
sector. Real growth in services rose by 2.4 percentage points to
4.3% y/y in the third quarter with improvement registered across
subsectors, but the growth rate remains below the three-year
average.
- The information and software segment continued to lead services
growth, and real estate remained an important contributor to the
headline acceleration.
- Other services growth improved to expansion as the easing of
lockdown measures supported recovery in entertainment, sports, and
healthcare.
- Contribution from the finance segment fell as a result of
monetary policy fine-tuning, and catering and rental businesses
remained in contraction compared with a year ago.
- Industry and construction remained the fastest-growing
component of the economy, but its 1.3-percentage-point improvement
in the third quarter was lower than the services segment's
improvement. However, the 6.0% y/y growth registered in the third
quarter surpasses the three-year average figure. The growth in
construction, at 8.0%, is far above 5.6% y/y and 4.8% y/y
registered in 2019 and 2018, respectively.
- Mainland China's GDP deflator rose 0.7 percentage point to
reach 0.6 y/y in the third quarter. Narrowing industrial deflation
and rising prices in real estate and finance offset the expansion
of deflation in construction and transportation. Given this,
nominal GDP expanded at a faster rate of 5.5% y/y in the third
quarter of 2020.
- Looking ahead, economic recovery is expected to continue into
the fourth quarter, albeit at a slower pace as stimulus measures
are eased and effects of pent-up demand gradually fades.
- Services is expected to succeed industry as the main engine of
growth. From demand side, recovery in household income in the first
half and stabilization of the COVID-19 crisis may continue to
support private consumption recovery while the second wave of
COVID-19 infections in the United States and European Union may
continue to support exports of virus infection-prevention supplies
and other necessities.
- Infrastructure investment is likely to accelerate with the
increase in local government bond issuance. From supply side, the
services sector is likely to lead growth, while industrial growth
is expected to stay stable, supported by the demand recovery.
- IHS Markit expects mainland China's real GDP to grow 1.9% y/y
in 2020; any revision to this will likely be upward.

- Although China's relatively robust property market may still
support near-term economic recovery, weakness in home price
inflation is expected to continue as financing restrictions and
sluggish income recovery weigh on sales. (IHS Markit Economist Lei
Yi)
- The average new home price inflation of 70 major cities across
mainland China stood at 0.3% month on month (m/m) in September,
down 0.2 percentage point from August, according to the National
Bureau of Statistics (NBS).
- The decline in m/m new home price inflation was evenly
distributed across city tiers, with each tier posting a decline of
around 0.2 percentage point in September compared with August's
reading. Up to 55 out of the 70 surveyed cities reported m/m new
home price gains in September, a decline from 59 cities in the
preceding month.
- Year-on-year (y/y) new home price inflation fell to 4.5% on
average, a level last seen in 2016. As of September, y/y price
inflation has either declined or stayed unchanged for 17
consecutive months in tier-2 cities, and for 18 consecutive months
in tier-3 cities.
- A relatively robust real estate market may still support
economic growth stabilization in the short term, as housing
inventory has been in decline for seven consecutive months.
- However, weak home price inflation is expected to persist
despite sustained economic recovery. Although the September decline
in home price inflation may be partially due to the promotions
offered by housing developers during this historically peak season,
housing demand will continue to face headwinds from sluggish income
growth and tightening of local governments' housing credit
policies
- Chinese ride-hailing giant Didi Chuxing (DiDi) is considering
an initial public offering (IPO) in Hong Kong SAR next year,
reports Reuters. DiDi started initial talks with investment banks
after it began generating profit in the second quarter of this
year. DiDi is targeting an IPO valuation of more than USD60
billion, and to boost this, the company is also considering a new
fundraising round before the IPO. DiDi has more than 31 million
drivers registered on its platform and has attracted 550 million
customers, who are using the company's range of app-based
transportation options. There have been ongoing reports that DiDi
was planning an IPO since July, which the company has been denying.
This latest report follows an announcement by Chinese ride-hailing
platform Dida Chuxing filing for an IPO on the Hong Kong Stock
Exchange. (IHS Markit Automotive Mobility's Surabhi Rajpal)
- Toyota is collaborating with KDDI and Telstra for connected car
services in Australia, reports ZDNet. The partnership will deploy
4G mobile network connectivity for select Toyota vehicles
introduced to Australia later this year. Initially, the
connectivity will be used for new safety and security services.
Sean Hanley, Toyota Australia's vice-president for sales and
marketing, said, "Cars are the ultimate mobility device, so this
connected technology will enable us to provide new, convenient and
personalized experiences to our customers while delivering on our
commitment of continual improvement to safety". KDDI and Toyota
have been partnering since 2016 to create a global communications
platform for vehicles and rolling the technology by collaborating
with local telecommunications company. For instance, in the US,
KDDI has teamed up with AT&T to deploy LTE connectivity to
Toyota and Lexus vehicles. In 2019, Toyota's Lexus Australia has
partnered with Telstra to test cellular vehicle to everything
(C-V2X) technology and advanced driver assist features on Victorian
roads. (IHS Markit Automotive Mobility's Surabhi Rajpal)
- Hyundai Motor Group has warned of another KRW3.36 trillion
(USD2.93 billion) of provisions in the third quarter of 2020
related to engine issues in the US, reports Reuters. Of the total,
Hyundai will account for KRW2.10 trillion, while its affiliate Kia
will account for KRW1.26 trillion. The latest provisions bring the
automotive group's total hit from the years-long quality problem
that has tarnished its credibility to around USD5 billion. Hyundai
and Kia recalled around 1.7 million vehicles in 2015 and 2017 in
the US in one of their biggest recalls in the country, over an
engine issue, but questions remain as to whether the recalls
covered enough vehicles or if the fix works. The US National
Highway Traffic Safety Administration (NHTSA) has opened more than
one investigation; US prosecutors are also investigating whether
the recall was handled properly. From 2017 to 2019, the automotive
group has earmarked a series of provisions mostly to address
engine-related issues. The latest provisions reflect
higher-than-expected replacement rates for Theta II GDI engines of
old vehicles subject to recalls, as well as growing consumer
complaints over the same engine and other engines not subject to
recalls, said Hyundai. It is expected that Hyundai and Kia will
swing to losses during the third quarter of 2020, mainly due to
provisions, as well as sluggish vehicle demand amid the COVID-19
virus pandemic. (IHS Markit AutoIntelligence's Jamal Amir)
- Singapore released its advance estimate for seasonally adjusted
third-quarter GDP, showing a 7.9% increase (actual per cent; not
annual rate) over the previous quarter. This was better than
expected; the consensus among forecasters, including IHS Markit,
was for a growth rate in the low-6% range. (IHS Markit Economist
Dan Ryan)
- This good performance was not due to manufacturing. Unlike
other Asian countries, whose rebound was led by manufactured
exports, Singapore's manufacturing sector grew only a few per
cent.
- The main source of growth was services. This sector was
hard-hit by lockdowns and quarantines, but it responded well to the
gradual opening that took place in the third quarter.
- Construction also rebounded sharply, rising 39% over the second
quarter. However, this was similar to IHS Markit forecast of 34% -
thus contributed little to the better-than-expected performance of
overall GDP.
- Recent news suggests that the fourth quarter of 2020 and early
2021 will see only marginal growth, as Singapore and other
countries fight a resurgence of the COVID-19 virus pandemic. This
puts the overall 2020 growth rate at -6.6%. This is a slight
improvement - thanks to the relatively good third-quarter 2020
performance - over the previous forecast of -7.4%.
- Next year should see growth in the mid-4% range, assuming the
pandemic is brought under control in the middle of the year. This
assumption also leads to a strong rebound of 6% growth in
2022.
Posted 20 October 2020 by Chris Fenske, Head of Capital Markets Research, Global Markets Group, S&P Global Market Intelligence
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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.