US and European equity markets closed sharply higher, while APAC
markets closed mixed. US tech equities and US government bonds had
a profoundly positive reaction during last night's US election
results, with both also closing significantly higher on the day
alongside iTraxx/CDX credit indices and oil. The US dollar closed
flat on the day after being higher overnight and gold/silver were
both lower on the day. The markets will continue to focus on the US
presidential election outcome and COVID-19 in addition to
tomorrow's FOMC meeting statement and US initial claims for
unemployment insurance report, and Friday's US non-farm payroll
report.
Americas
- Joe Biden won Michigan and Wisconsin Wednesday, putting him on
the brink of taking the White House from President Donald Trump,
hours after the president's team opened legal fights to stop vote
counting in at least two states. Both CNN and NBC projected Biden
would win Michigan, which Trump took in 2016, giving him 264
Electoral College votes out of the 270 needed to win the
presidency. Trump has 214. Biden needs only to win an additional
outstanding state, such as Nevada where he is leading, or Georgia,
where his campaign believes absentee votes will push him over the
top. (Bloomberg - updated at 5:34pm EST)
- US equity markets closed higher, with tech overperforming and
small caps underperforming; Nasdaq +3.9%, S&P 500 +2.2%, DJIA
+1.3%, and Russell 2000 +0.1%. The Russell 2000 is +7.1%
quarter-to-date versus Nasdaq +3.8% and S&P 500 +2.4%.
- 10yr US govt bonds closed -13bps/0.77% yield and -15bps/1.54%
yield, rallying sharply after the results of the US Senate election
indicated that the Democrats fell short of winning enough new seats
to form a majority - greatly decreasing the likelihood of passing
the larger of the two stimulus spending programs being debated in
Congress between the Democrats and Republicans.
- Municipal bonds rallied alongside today's significant US
government bond post-election rally, as tax exempt yields were
lower across the entire AAA IHS Markit Municipal Analytics Curve;
7-year and longer maturities closed 9bps lower on the day.

- CDX-NAIG closed -3bps/57bps and CDX-NAHY -18bps/383bps.
- DXY US dollar index closed flat/93.54 after being as high as
94.30 at 9:47pm EST last night as US election results were being
reported.
- Gold closed -0.7%/$1,896 per ounce and silver -1.8%/$23.89 per
ounce.
- Crude oil closed +4.0%/$39.15 per barrel.
- Baker Hughes has acquired Compact Carbon Capture (3C), a
pioneering technology development company specializing in carbon
capture solutions. The acquisition signals that Baker Hughes, split
out from GE Oil & Gas as an oil and gas service company, sees
growth in the energy transition by providing decarbonization
solutions for carbon-intensive industries, including oil and gas
and broader industrial operations. According to the company, 3C's
technology differs from traditional carbon capture solvent-based
solutions by using rotating beds instead of static columns,
effectively distributing solvents in a compact and modularized
format. The rotating bed technology enhances the carbon capture
process resulting in up to 75% smaller footprint and lower capital
expenditures. In addition, 3C's modular and scalable configuration
can be easily deployed into existing brownfield applications and
can be optimized for a broad range of capacity and applications,
including offshore and industrial emitters. 3C is headquartered at
Marineholmen in Bergen,Norway. The 3C technology is invented in a
collaboration with Fjell Technology Group, Equinor, CMR Prototech
and SINTEF Tel-Tek. The development project was initiated by
Equinor back in 2007, but the first patent for the technology was
granted already in 1999. (IHS Markit Upstream Costs and
Technology's Helge Qvam)
- In a press release, Penn Virginia Corporation announced the
signing of an agreement to sell its 59.3% outstanding shares to
Juniper Capital Advisors, LP for an enterprise value of $367.8
million. The transaction is expected to close in the first quarter
of 2021.Under the deal, Juniper will make a $188.4 million
investment in Penn Virginia which includes: a cash investment of
$150 million at $8.75 per share, and a contribution of
complementary oil and gas assets for 4.96 million equity interest
in a Penn Virginia subsidiary (in an up-C structure) valued at
$38.4 million based on Penn Virginia's closing price on 2 November
2020. The offer price is an 13% premium to the 2 November closing
price of Penn Virginia. Moreover, Juniper is restricted to sell any
of its equity securities in Penn Virginia for six months following
the closing of the transaction. The enterprise value includes 59.3%
of Penn Virginia's 30 June 2020 working capital surplus, long-term
debt and liabilities. On closing, Juniper will own approximately
59.3% of the equity. Penn Virginia holds 86,500 net acres in
Gonzales, Fayette, Lavaca and DeWitt counties. Penn Virginia's net
proved reserves for 59.3% were 78.9 MMboe (89% oil and NGLs; 42%
developed) at year-end 2019 and the net production for 59.3%
averaged 14,533 boe/d (83% oil and NGLs) during the second quarter
of 2020. Juniper said the acquisition will deliver superior
long-term value to its shareholders. Penn Virginia Corporation is
an independent oil and gas company engaged in the development and
production of oil, NGLs, and natural gas, with operations in the
Eagle Ford shale in south Texas. The company is based in Houston,
Texas. (IHS Markit Upstream Companies and Transactions' Karan
Bhagani)
- The seasonally adjusted final IHS Markit US Services PMI
Business Activity Index registered 56.9 in October, up from 54.6 in
September and higher than the earlier released 'flash' estimate of
56.0. The improvement indicated that the rate of growth regained
momentum at the start of the fourth quarter to the sharpest since
April 2015. Greater output was often attributed to stronger demand
conditions and a further uptick in new business. October data
indicated a steep upturn in new business at service providers, with
the rate of expansion accelerating for the second month running.
Some companies noted that looser coronavirus restrictions had
encouraged sales. The pace of growth was the most marked since
February 2019. That said, new export orders rose at a softer pace
in October, as reimposed lockdown measures in key external markets
dampened demand. (IHS Markit Economist Chris Williamson)
- We look forward to this week's FOMC meeting as investors,
policymakers, and indeed the world anticipate the outcome of this
week's elections in the United States. The FOMC will keep the
target for the federal funds rate at its current setting of a range
of 0% to ¼%. (IHS Markit Economists Ken Matheny and Chris Varvares)
- The committee will affirm the outcome-based forward guidance
adopted in September that signaled no rate hike is likely for
several years.
- With the pandemic spiraling higher and no new fiscal stimulus
apparently imminent, the FOMC will continue to ponder what
additional steps it might consider if the recovery falters. There
have been increasingly strident calls from Fed leadership for
additional fiscal support. We might have to wait until late January
to see legislation enacted, depending on the outcome of US
elections.
- The FOMC will discuss the Fed's balance sheet and its
involvement in markets for Treasury securities. In recent months,
they have hesitated to provide guidance about the outlook for the
balance sheet beyond the near term, even as they have distributed
forward guidance regarding interest-rate policy.
- The US nominal trade deficit narrowed in September by $3.2
billion to $63.9 billion, as a 2.6% increase in exports outpaced a
0.5% increase in imports. Both of these figures were close to our
expectations, but the narrowing of the deficit was a bit less than
we had assumed. (IHS Markit Economist Kathleen Navin)
- Both exports and imports continued to recover, with imports
having shown considerably more progress than exports.
- Both exports and imports reached a pandemic-driven trough in
May, when exports were down 32.4% from February and imports were
down 19.1% from February.
- Since May, exports have reversed 51% of their decline, while
imports have reversed 86% of their decline.
- The relatively strong comeback for imports reflects what has
been a fairly robust recovery in domestic demand, a portion of
which is imported goods and services.
- The relatively soft comeback for exports is a reflection of
lagging foreign demand, as recovery overseas has been more tepid
than that in the US. As of the third quarter, real US GDP was down
3.5% from the fourth quarter of last year, while our estimate of
trade-weighted foreign GDP was down 6.0% from the fourth quarter of
last year.
- We look for continued recovery for exports and imports in
coming quarters.
- In October, US light-vehicle sales continued to improve but
remained well below the year-earlier level. In October, sale were
estimated to be up 1.1% y/y, following a significant rebound in the
third quarter. However, YTD sales are down an estimated 16.8% y/y.
The seasonally adjusted annual rate (SAAR) of US light-vehicle
sales is estimated at 16.2-16.5 million units in October, at the
time of writing. The pace of light-vehicle sales continues to
improve from the April 2020 low SAAR reading of 8.7 million units.
While we do not expect the monthly SAAR to diverge substantially
from the average pace of the past three months (an average of
approximately 16.0 million units), we anticipate that the upcoming
monthly volume results in November and December will reflect some
y/y volatility. (IHS Markit AutoIntelligence's Stephanie
Brinley)

- Tenneco has reported on its financial performance in the third
quarter, including revenue of USD4.27 billion, down 1.5% year on
year (y/y), and an increase in EBIT. (IHS Markit AutoIntelligence's
Stephanie Brinley)
- Tenneco suffered a 42% y/y decline in revenue in the second
quarter on reduced production globally, and the relative
improvement in revenue performance in the third quarter reflects
the resumption of production.
- In the year to date (YTD), Tenneco's revenue has dropped to
USD10.73 billion, down from USD13.31 billion a year earlier.
- The supplier reported a net loss of USD499 million in the third
quarter (including a non-cash tax valuation allowance charge of
USD523 million), compared with net income of USD70 million in the
third quarter of 2019.
- The company's adjusted net income was USD27 million in the
third quarter, compared with USD99 million in income a year
earlier.
- Tenneco posted EBIT (earnings before interest, taxation, and
non-controlling interests) of USD236 million in the third quarter,
up from USD148 million a year earlier.
- Tenneco reported adjusted EBIT of USD388 million in the third
quarter, compared with USD387 million during the third quarter of
2019. Tenneco also stated that, in the third quarter, it generated
cash of USD486 million from operations and paid down a revolving
credit facility to reduce debt to USD5.8 billion.
- Tenneco's previously announced cost-reduction program,
Accelerate, had been expected to deliver annual run-rate cost
savings of USD200 million, working capital improvements of USD250
million, and capital expenditure improvements of USD100 million
after two years, compared with 2019. When reporting its
third-quarter results, Tenneco said the Accelerate+ program was
delivering structural cost reductions as planned.
- Tenneco expects to deliver USD265 million in annual run-rate
savings by the end of 2021 and USD250 million in working capital
improvements. The company says it is on target to achieve USD165
million of run-rate savings from the program by the end of
2020.
- Tenneco had been expected to split its businesses in mid-2020
(see United States: 15 February 2019: Tenneco aftermarket and ride
performance spin-off to be called DRiV), but the move has not been
executed.
- In October, Tenneco abandoned a planned Michigan office move.
Tenneco cut salaries by at least 25% in the second quarter; in the
third quarter, salary costs were reduced by 10% through salary
reductions or unpaid furloughs.
- US electric vehicle (EV) startup Lordstown Motors has completed
a merger with special purpose acquisition (SPA) company DiamondPeak
Holdings. The combined company will be called Lordstown Motors
Corporation and its shares will be traded on the NASDAQ stock
exchange under the ticker 'RIDE'. According to a company statement,
the merger deal is valued at USD1.6 billion and it will provide
Lordstown Motors with USD675 million of gross proceeds. The funds
will be used for the production of the Endurance pick-up truck and
its in-wheel electric hub motor. The merger deal includes USD500
million private investment in public equity (PIPE) from General
Motors (USD75 million) as well as institutional investors. The
merged company's board of directors will include Steve Burns,
founder and CEO of Lordstown, and David Hamamoto, chairman and CEO
of DiamondPeak. (IHS Markit AutoIntelligence's Stephanie
Brinley)
- The Canadian merchandise trade deficit widened by $0.1 billion
to $3.3 billion in September, as imports and exports both increased
1.5% month on month (m/m). Data revisions focused on imports raised
the August deficit from $2.4 billion to $3.2 billion. (IHS Markit
Economist Patrick Newport)
- Nominal exports were 5.8% ($2.8 billion) below February's
pre-pandemic level in September, while nominal imports were 2.4%
($1.2 billion) below February's level.
- Canada's trade surplus with the United States narrowed by $0.9
billion to $2.0 billion. The trade deficit with the rest of the
world narrowed by $0.8 billion to $5.3 billion.
- Nominal imports in September increased $0.7 billion to $48.8
billion, $1.2 billion below February's pre-pandemic level. Imports
of energy products rose $0.5 billion in September to $2.1 billion,
accounting for the lion's share of the imports increase. The
increase was volume driven, as Canadian refineries stepped up
purchases of Louisiana crude oil.
- Nominal exports in September were $2.8 billion lower than in
February, in part because low energy prices have reduced the value
of energy products, which were down $2.0 billion from February.
Exports of lumber products marked a 14-year high of $1.6 billion,
skyrocketing 58.1% above February's levels; this increase may be
related to a surge in housing starts in the United States. Farm,
fishing and intermediate food products (up 14% from February) and
metal ores and non-metallic minerals (up 16%) have also made strong
advances recently. Motor vehicle and parts, up 4% from February,
have also rebounded smartly.
- Exports to countries other than the United States surged 10.9%
m/m in September, bouncing back from an 8.1% m/m plunge in August,
to $12.3 billion, surpassing February's pre-pandemic level, driven
by increases in gold and aircraft to the United Kingdom, aircraft
and nickel to Norway, and copper to Germany. The trade deficit with
countries other than the United States narrowed by $0.8 to $5.3
billion. The trade surplus with the United States narrowed by $0.9
billion, as exports fell and imports rose.

- The Paraná state government has launched its sustainable
mobility project with 10 units of the Renault ZOE electric vehicle
(EV), according to company sources. The VEM PR mobility project
will make 10 EVs available to public servants in Paraná, along with
the installation of 10 charging stations in Curitiba (Paraná). The
vehicles have been loaned by the Brazilian Agency for Industrial
Development (ABDI) for use by public servants. The State Department
of Health will initially be in charge of the cars. Ricardo Gondo,
president at Renault Brazil, said, "Taking part in a carsharing
project in the state of Paraná, which is home to the corporate
headquarters of Renault Brazil, is a source of great pride for us.
We do not want to simply sell EVs - our goal is to become a
reference in sustainable mobility projects in the domestic market."
The vehicles can be reserved and tracked via the MoVe app and can
be unlocked using employee ID cards. Efforts to grow the EV
business in Argentina and Brazil reflect worldwide interest in
increasing the sales of these types of vehicles, although it is
expected that EV infrastructure will grow relatively slowly in
these two countries. (IHS Markit AutoIntelligence's Tarun
Thakur)
Europe/Middle East/Africa
- European equity markets closed higher again; Switzerland +2.8%,
France +2.4%, Germany/Italy +2.0%, UK +1.7%, and Spain +0.5%.
- Most 10yr European govt bonds closed higher; UK -7bps,
France/Spain/Germany -2bps, and Italy flat.
- iTraxx-Europe closed -3bps/58bps and iTraxx-Xover
-10bps/339bps.
- Brent crude closed +3.8%/$41.23 per barrel.
- The BMW Group has posted strong third-quarter financial
results, with a 17.4% y/y increase in net profit during the period
to EUR1.815 billion, according to a company press statement. This
improvement was fueled by a strong return of demand in key markets,
especially China, as well as strong sport utility vehicle (SUV)
sales and strict cost management in a difficult operating
environment. This improved net profit was actually generated on the
back of a slightly diminished revenue figure of EUR26.283 billion,
which was down 1.4% y/y. However, the company's sales during the
period increased by 8.6% y/y to 672,592 units, which indicates that
model mix and exchange rates affected the revenue figure. The
third-quarter sales volume figure was actually a new record for the
period for the Group. The strong financial momentum in the third
quarter was helped by a good result from the BMW Brilliance
Automotive Ltd joint venture (JV) in China. The Group's earnings
before tax (EBT) increased by 9.6% y/y to EUR2.464 billion during
the period, while return on sales increased to 9.4%, up from 8.4%.
Following an extremely difficult first half of the year for the
entire global industry, both in terms of sales and profitability,
as the impact of the COVID-19 virus pandemic closed dealerships and
factories all over the world, BMW looks to have embarked on a very
strong recovery path in the third quarter. Its double-digit
improvement in net profit in the third quarter is, as BMW's
management has commented, testament to strict cost control and
management and a desirable product portfolio. (IHS Markit
AutoIntelligence's Tim Urquhart)
- Brenntag, the market leader in chemical and ingredients
distribution, has reported a resilient third-quarter performance
and says the impact from the COVID-19 pandemic on its business is
"still limited."
- Net profit was down in the third quarter to €120.6 million
($141.1 million) from a prior-year figure of €128.4 million on
sales of €2.88 billion, down 7.7% year on year (YOY) on a constant
currency basis. The company achieved YOY growth in operating
EBITDA, up 4.9% to €264.4 million.
- The EMEA, APAC, and Latin America regions "showed a
particularly good development," but conditions in North America
were tougher, Brenntag says. Group operating gross profit slipped
0.2% YOY to €690.6 million.
- Third-quarter operating gross profit in EMEA was €294.8
million, up 4.8% YOY. The company says that despite restrictions
due to COVID-19, its business in the region achieved operating
EBITDA growth of 11.3% YOY, to €112.9 million.
- The business environment in North America remained "challenging
with the oil and gas industry particularly weak," Brenntag says.
Operating gross profit generated by Brenntag in North America was
down 9.3% YOY to €273.9 million and operating EBITDA was €110.0
million, down 11.7%.
- Brenntag reports robust third-quarter results for its business
in Latin America on slowly recovering volumes, good margin
management, and cost control. Regional operating gross profit of
€44.5 million was up 15.7% YOY and operating EBITDA jumped 39.8%
YOY to €15.1 million.
- The company says its results in APAC reflect the recovery in
the regional economy in the third quarter after strict lockdown for
several months due to the pandemic. At €72.5 million, operating
gross profit in the region was 12.0% above the prior-year level of
€68.1 million. Third-quarter operating EBITDA leapt 35.9% YOY to
€33.0 million.
- Brenntag has confirmed its full-year outlook, which it
reinstated in September after suspending guidance in April. The
company expects 2020 operating EBITDA of €1.000-1.040 billion,
compared with €1.001 billion in 2019. The forecast assumes "no
further significant government measures to contain the pandemic and
related negative effects on the economy," the company says. It also
does not envisage any special items or significant changes in
current exchange rates by the end of the year. The forecast
includes contributions to earnings from acquisitions.
- The company announced details recently of its transformation
program, which includes job cuts and site closures.
- Plastic Omnium has announced that it has established a new
fuel-cell joint venture (JV) with ElringKlinger. Under the deal to
create EKPO Fuel Cell Technologies, ElringKlinger will contribute
its existing fuel-cell business and knowhow, while Plastic Omnium
will invest EUR100 million (USD117 million) and bring additional
development capacity to accelerate growth. ElringKlinger will hold
60% of the new company, while Plastic Omnium will hold the
remaining 40%. At the same time, Plastic Omnium will also acquire
ElringKlinger's Austrian subsidiary, ElringKlinger Fuelcell Systems
Austria GmbH (EKAT), which specialises in integrated hydrogen
systems, for an enterprise value of EUR15 million. Both agreements
are expected to be completed by the end of the first quarter of
2021 following approval from the relevant authorities. These
agreements will help accelerate Plastic Omnium's strategy of
expanding its presence in the hydrogen fuel-cell space.
ElringKlinger has been making progress in this area for the past 20
years, and among the assets that it will contribute are its
fuel-cell components business, 150 patents and existing research
and development (R&D), several high-power-density fuel-cell
stack platforms, 150 employees, as well as a facility located in
Baden-Württemberg (Germany), where the JV will also be
headquartered. (IHS Markit AutoIntelligence's Ian Fletcher)
- Offshore drilling contractor Transocean reported a net income
of USD359 million for the third quarter of 2020, compared to a net
loss of USD497 million in the second quarter of 2021. The company's
third quarter 2020 results included net favorable items of USD428
million, including a USD449 million on restructuring and retirement
of debt and USD45 million related to discrete tax items. These
favorable items were partially offset by a USD61 million loss on
disposal of assets and USD5 million in restructuring costs. After
consideration of these net favorable items, Transocean's third
quarter 2020 adjusted net loss was USD69 million. Transocean's
total contract drilling revenues for the quarter were USD773
million, compared with USD930 million for the second quarter of the
year. Contract drilling revenues decreased primarily due to USD177
million of revenues recognized in the second quarter 2020 as a
result of a legal settlement agreement with a customer for
performance disputes, partially offset by higher revenues from
increased utilization and an additional operating day. Transocean
President and CEO Jeremy Thigpen stated that the company was
increasingly encouraged by contracting activity that could unfold
in the second half of 2021. (IHS Markit Upstream Costs and
Technology's Matthew Donovan)
- In the first four months of 2020 sales of frozen food products
in Italy rose by 13.5%, with frozen savory snacks growing by 21.5%
and frozen fish by 16.5%, the Italian Frozen Food Institute (IIAS)
estimates. Frozen vegetables remain the most purchased product in
the category with a 45% market share, followed by frozen fish
(17-18%). The categories that grew the most were: frozen seafood
(+16.5%), savory snacks (+21.5 %), pizzas (+12.5%) and potatoes
(+12%). IIAS president Vittorio Gagliardi explained that the
lockdown, including the prohibition on farmer markets and measures
aiming to reduce supermarket trips, has boosted demand for
long-life food and in particular for frozen products which are
perceived as being the closest alternative to fresh. Door-to-door
sales, which are widely popular in Italy, rose by 40% during the
analyzed period as supermarkets home deliveries is not an
established practice in medium and small-size towns. At the same
time, sales of frozen products in the foodservice fell sharply with
losses estimated at EUR600 million (USD701 million) for full-year
2020. Gagliardi recalled that recent studies published by
government's agencies suggest that frozen products' nutrients are
at the same level and in some cases higher than those of the fresh
product. He pointed out that preservatives cannot be used in frozen
products, with the exception of pre-fried ones. Those factors have
certainly helped in boosting sales for the category, as consumers
are increasingly looking for high-vitamin content products. He said
that current market trends suggest a substitution of animal protein
with vegetable proteins for a wide range of products as more
consumers adopt vegan or vegetarian diets and are keener to consume
vegetable and fruit-based products because they are perceived as
healthy. In 2019, Italians purchased almost 850,000 tons of frozen
food, with a 1.5% increase in sales for retail and 1.1% for
foodservice. Per capita consumption hit a record high of 14
kilograms per person. (IHS Markit Food and Agricultural
Commodities' Cristina Nanni)
- Tesla is planning to expand its deployment of full self-driving
technology to its electric vehicles in Canada and Norway, reports
industry news website Electrek. The Electrek report cites a Twitter
post from Tesla CEO Elon Musk naming the two countries as being
next for deployment of the technology. However, reportedly, the
deployment will not occur until the system is out of the "early
beta" stage for selected US customers, which is expected to happen
as soon as December. Tesla says its full self-driving system has
the ability to set a destination and navigate the car autonomously
to the destination, although the automaker warns that the driver
must monitor and always be ready to take the wheel. Norway is a
significant market for Tesla and electric vehicles, as they have
received heavy incentives. Tesla's rolling out of the technology to
other countries as well as the United States reflects its method of
gathering data from its vehicles on the road, and being less
reliant on high-definition maps or lidar. (IHS Markit
AutoIntelligence's Stephanie Brinley)
- Passenger car registrations in Finland fell again during
October. According to the latest data published by the country's
Automotive Information Centre (Autoalan Tiedotuskeskus: AuT),
registrations during the month dropped by 20% year on year (y/y) to
7,499 units. Registrations for the year to date (YTD) are now down
16.9% y/y at 80,903 units. The light commercial vehicle (LCV)
market gained by 8.0 y/y to 1,214 units in October, while in the
YTD it is now down 16.9% y/y at 10,430 units. Registrations in the
medium and heavy commercial vehicle (MHCV) category slipped by 8.9%
y/y to 337 units last month, and its YTD registrations are now down
19.5% y/y at 2,820 units. The COVID-19 virus pandemic has been a
drag on the Finnish market so far in 2020, as it has in other parts
of Europe, and this continued in October. The trade association
said that the fall suffered by the passenger car market last month
was partly down to a rapid reduction in order books after the
number fell at the height of the health crisis. Looking forward,
the government is pushing ahead with its plans for a scrappage
incentive that emerged last month and which are intended to
stimulate demand for new vehicles. (IHS Markit AutoIntelligence's
Ian Fletcher)
Asia-Pacific
- APAC equity markets closed mixed; Japan +1.7%, India +0.9%,
South Korea +0.6%, Mainland China +0.2%, Australia -0.1%, and Hong
Kong -0.2%.
- Mitsubishi Chemical Holdings reports a net loss of ¥49.68
billion ($474.7 million) for the company's fiscal first half ended
30 September, swinging from net income of ¥81.3 billion a year
earlier.
- Mitsubishi registered a third-quarter operating loss of ¥28.1
billion, compared with an operating profit of ¥130.5 billion a year
earlier.
- Revenue decreased 17.6% year on year (YOY) to ¥1.5
trillion.
- The company says that during the first half of the fiscal year,
demand was slower YOY, particularly for automotive applications,
owing to the impact of the COVID-19 pandemic. Notwithstanding a
recent pickup in demand, business conditions remain challenging,
says Mitsubishi.
- Sales decreased by 16% YOY to ¥473.6 billion at Mitsubishi's
performance products business. Operating income plunged 46% YOY to
¥21.4 billion. Functional products' revenue declined because of
reduced demand principally in automotive applications, despite the
recent pickup in demand. Sales volumes fell for high-performance
engineering plastics and other offerings for advanced moldings and
composites. In performance chemicals, revenue decreased amid lower
overall sales volumes to the automotive industry, including for
performance polymers in the advanced polymers segment. Another
downside for sales volumes was the impact of scheduled maintenance
and repairs at phenol-polycarbonate chain facilities in the
advanced polymers segment.
- Sales decreased by 31.5% YOY to ¥381 billion at the chemicals
business, Mitsubishi's largest segment. It swung to an operating
loss of ¥14.6 billion from an operating profit of ¥35.8 billion a
year earlier. In the methyl methacrylate (MMA) business, revenue
declined despite improving conditions in the MMA monomer and other
markets. In petrochemicals, sales decreased because of a greater
impact from scheduled maintenance and repairs at an ethylene plant,
with selling prices down following declines in raw material costs
and other factors. In carbon products, revenue was down because of
lower prices in line with reduced raw material costs and a drop in
sales volumes from declining demand for coke and other
offerings.
- Mitsubishi has downgraded its forecast for the fiscal year
ending 31 March 2021. It now projects a net loss of ¥34 billion,
compared with a previously estimated net profit of ¥49 billion.
Sales projections have been lowered to ¥3.1 trillion, versus an
earlier estimate of ¥3.3 trillion. In the first half, the company
included an ¥84.5-billion impairment loss on technology-related
intangible assets in the healthcare segment.
- No changes have been made to guidance for full-year operating
income, which is expected to reach ¥137 billion. This is because
while market conditions for MMA and other products in the chemicals
segment are likely to be less favorable than initially expected,
selling, general, and administrative expenses and R&D
expenditure in the healthcare and other segments are projected to
decline, Mitsubishi says.
- Subaru's earnings took a significant hit during the first half
of the fiscal year (FY) ending 31 March 2021 (April-September) as
the COVID-19 virus pandemic hit its business. During the six months
ended 30 September, the automaker reported profit attributable to
owners of the parent at JPY23.7 billion (USD226.4 million), a
decline of 65.2% year on year (y/y) from the same period last year.
(IHS Markit AutoIntelligence's Nitin Budhiraja)
- Revenues during the period stood at JPY1.218 trillion, down by
24.1% y/y, while operating profit experienced a 67.7% y/y fall to
JPY30.61 billion.
- During the period, Subaru's consolidated global vehicle sales
decreased by 27.9% to 363,000 units because of the major impact of
the COVID-19 virus pandemic on first-quarter FY 2020/21
operations.
- Overseas vehicle sales fell by 26.4% to 321,000 units, while
vehicle sales in Japan dropped by 37.4% to 43,000 units.
- In terms of production, the automaker reported that its global
output was down by 28.9% to 354,000 units as a result of production
adjustments including temporary suspensions of plant operations
globally.
- Overseas production fell by 22.7% to 133,000 units, while
production in Japan declined by 32.2% to 221,000 units during
April-September.
- The decline in profits and revenues during the first half of
the current FY can be attributed to the poor performance by the
automaker in the first quarter of the FY driven by the impact of
the COVID-19 virus outbreak.
- Subaru undertook several rounds of production suspensions and
adjustments during March-June owing to the pandemic.
- South Korean automakers Hyundai's and Kia's combined global
vehicle sales in October stood at 651,661 units, marginally down by
0.2% year on year (y/y) from 653,227 units in October 2019,
according to separate data releases issued by the two companies and
compiled by IHS Markit. Hyundai posted a decline of 4.2% y/y in its
global vehicle sales last month to 385,947 units. Of this total,
domestic sales accounted for 65,669 units, up by 1.2% y/y, while
overseas sales declined by 5.2% y/y to 320,278 units. The marginal
decline in Hyundai Motor Group's global sales during October was
largely due to a poor performance by the Hyundai brand in overseas
markets owing to weak demand caused by a contraction in consumer
spending and the sluggish global economy amid the coronavirus
disease 2019 (COVID-19) virus pandemic. However, Kia posted growth
in overseas markets on the back of strong demand for its Sportage
and Seltos SUVs and K3 sedan. Meanwhile, Hyundai Motor Group
benefitted in its domestic market from encouraging demand for new
models, attractive sales promotions, and consumption tax relief on
passenger vehicles. In an attempt to boost vehicle sales, the South
Korean government reduced consumption tax on purchases of passenger
vehicles to 3.5%, from the previous 5%, between March and June.
(IHS Markit AutoIntelligence's Jamal Amir)
- Hyundai has signed two memorandums of understanding (MOUs) with
partners in the Yangtze River Delta region and the Jingjinji region
to build a local hydrogen ecosystem in China, according to a
company press release. Under the first MOU, which was signed
between Hyundai, Shanghai Electric Power Company Limited, Shanghai
Sunhwa New Energy System, and Shanghai Yonghwa Electric and
Financing Leasing Company, a hydrogen commercial vehicle platform
will be built in the delta region. The four companies will build a
fuel-cell electric vehicle (FCEV) ecosystem such as hydrogen
production, the construction of hydrogen charging facility, and
vehicle sales and operation (finance) based on Hyundai's fuel-cell
truck in the Yangtze River Delta, the backbone of China's economy.
They aim to co-operate to establish a low-cost and high-efficiency
business model based on their respective expertise, and supply more
than 3,000 fuel-cell trucks in the region by 2025 through
continuous discovery of potential customers. Hyundai signed a
second MOU with the Chinese Antai Science and Technology Company
Limited and Hebei Steel Industrial Technology Service Company
Limited to build a FCEV platform in the Jingjin area. Under this
agreement, Hyundai will supply fuel-cell trucks suitable for market
needs, while Antai Science and Technology will provide hydrogen
storage, transportation, and support for the construction of
hydrogen charging stations. Heogang Industrial Technology will
supply hydrogen using by-product hydrogen resources. It will be in
charge of discovering customers who will use fuel-cell heavy
trucks. The three companies plan to co-operate with the goal of
promoting a pilot project of fuel-cell heavy-duty trucks in the
Jingjinji area and supply 1,000 units of such trucks by 2025.
Hyundai is working with various parties in China, which aims to
have 1 million FCEVs on its roads by 2030 as the country's hydrogen
industry is on a sharp growth trend, creating massive potential.
Initially, the automaker will focus on China's four major hydrogen
hubs: Jinjinji, Yangtze River Delta, Guangdong Province, and
Sichuan Province. (IHS Markit AutoIntelligence's Jamal Amir)
- Chinese third-generation hybrid rice yield has broken a record.
The research team, headed by the 'father of hybrid rice' Yuan
Longping, has achieved a record yield of 23 tons per hectare from
an experimental field at Hunan province. The average yield from
fields planted with the third generation of hybrid rice varieties
(Sanyou No 1) had reached 13.68 tons per hectare on (2 November),
according to China Daily (3 November). In July, early harvests from
the same field growing another strain of third-generation hybrid
rice yielded an average of 9.29 tons/ha. That said, the combined
harvest (early and late seasons) reached 22.5 tons, an increase of
1.5 tons per hectare compared with other high-yield hybrid
varieties. This means one-hectare hybrid rice field can feed as
many as 75 people, Yuan added. "There are 16.7 million ha of hybrid
rice fields in China. The new strain, if planted nationwide, will
significantly boost overall rice production." The strain, Sanyou No
1, is known for its high yields, quality, resilience to poor
weather conditions and relatively easy breeding methods. It also
grows quickly. (IHS Markit Food and Agricultural Commodities' Hope
Lee)

- Preliminary data show that Taiwan's real GDP resumed growth in
the third quarter of 2020, increasing 3.3% year on year (y/y),
marking the strongest expansion since the second quarter of 2018.
It reversed a 0.6% y/y fall posted in the second quarter of 2020,
which was the largest decline since the third quarter of 2009 amid
the adverse effect from the COVID-19 virus outbreak. (IHS Markit
Economist Ling-Wei Chung)
- In seasonally adjusted quarter-on-quarter (q/q) terms, the
economy rebounded sharply in the third quarter of 2020 at an
annualized 18.9% from the preceding quarter, representing the
fastest expansion since the fourth quarter of 2009. It reversed two
consecutive quarters of a steep contraction in early 2020 that came
in the worst since 2008.
- The rebound in the third quarter of 2020 was mainly driven by
robust net exports, contributing 3.2 percentage points to the
third-quarter GDP growth, as exports rebounded with growth hitting
a two-year high, while imports continued to contract.
- Domestic demand, although continuing to lag behind exports,
recovered some ground as well. Domestic demand gained marginally by
0.2% y/y, reversing a 0.6% y/y fall in the second quarter, as
private consumption contracted at a slower pace, despite a
deceleration in investment growth.
- Booming technology demand, especially from mainland China and
the US, has provided the key boost to Taiwan's export performance
during the third quarter as shipments of electronics as well as
information and communication products surged 20.4% y/y and 20.6%
y/y, respectively.
- Shipments of non-technology products continued to shrink but at
a slower pace, as a gradual reopening of the economies around the
world helped offset the adverse effect from the pandemic.
- Exports of goods rebounded with a 6% y/y increase (in US dollar
terms, or 0.2% y/y gain in Taiwan dollar terms) in the third
quarter, after contracting 2.4% y/y in the second quarter.
Together, total exports of goods and services expanded by a
stronger-than-expected 3.5% y/y, after dropping 3.5% y/y in the
second quarter. This came despite a still-stagnant tourism sector
that dragged on exports of services.
- Private consumption remained the drag to real GDP growth in the
third quarter, despite some improvement. Private consumption fell
1.5% y/y, although narrowing from a record pace of 5% y/y in the
second quarter when consumption and tourism-related activities were
hit the hardest by the pandemic.
- Dampened by travel restrictions locally and globally, outbound
tourism remained at a standstill, with the numbers of residents
travelling overseas plunging 97.8% y/y and resulting in a 93.4% y/y
slump in overseas travel spending, which subtracted over 6
percentage points from private consumption. Coupled with the
plunges in consumption related to public transportation, lodging,
hotels, and recreations, they remained the key factors weighing
down private consumption in the third quarter.
- The result for the third quarter came in stronger than
expected, and signaled the end of the economy's recession that came
brief but deep in the previous two quarters. Taiwan's largely
successful containment of the outbreak at home has helped provide
support to consumer and business sentiment, offsetting the adverse
effect from the pandemic, especially on the still-stagnant tourism
sector.
- The Reserve Bank of Australia (RBA) monetary policy board
simultaneously cut the official cash rate target and the yield
target for three-year Australian government securities (AGS) to
0.10% from 0.25%. There was also a reduction to the interest rate
for new drawings under the Term Funding Facility to just 0.10%.
(IHS Markit Economist Bree Neff)
- The interest rate for Exchange Settlement balances was dropped
to 0% from 0.10%.
- Over the next six months, the RBA will buy AUD100 billion
(USD70.4 billion, equivalent to 5% of Australian GDP)-worth of AGS
and state/territorial government bonds with maturities of 5-10
years. The split is expected to be 80% AGS and 20%
state/territorial. The first purchases will be made in secondary
market auctions on 5 November, and the RBA will review the size of
the program in the coming months to determine whether it is
sufficient to support the economic recovery.
- In order to convey the breadth of these changes, RBA governor
Philip Lowe made a rare media appearance and greatly expanded the
standard press release that follows the monetary policy board's
decision. Lowe indicated that the measures would help to lower
interest rates across the yield curve, thus supporting the
country's economic recovery by keeping financing costs and the
exchange rate lower.
- According to Lowe, based on the bank's forecasts the monetary
policy board does not expect to raise the policy rate for at least
three years, and is "prepared to do more if necessary". The RBA has
explicitly stated that it will adjust the yield targeting program
for three-year AGS before making any change to the policy
rate.
- The RBA's updated forecasts - which will be released in full at
the end of this week - project real GDP growth of about 6% for the
year to June 2021, up from the previous forecast's projection of 4%
for the same period due to effective domestic containment of the
COVID-19 virus pandemic.
- IHS Markit had expected the RBA to retain its last room for
maneuver on the official cash rate target and the three-year AGS
yields - and to leave the policy rate unchanged at 0.25% - because
of the strong aversion to negative interest rates that it has
expressed for much of the past year. With the policy rate down to
0.10%, we do not expect further action by the RBA on interest
rates. Efforts will instead focus on the bond buying program, with
clear indications that the RBA is willing to extend the
program.
- High-frequency data show that Singapore was slowing in August
and September 2020, in accordance with forecasts, and likely to be
followed by only marginal growth into early 2021. (IHS Markit
Economist Dan Ryan)
- Consumer spending, as manifested by retail sales, hit a bottom
in May and then recovered. However, the August data point towards a
flattening, which would follow the pattern of other countries and
which implies only marginal growth in the third quarter.
- International reserves have been slowly trending upwards,
meaning that the central banks have been buying foreign currency
and selling Singapore dollars. The amounts, however, are too small
to suggest that Singapore is trying to weaken its currency.
- After bouncing back from the initial pandemic nadir, exports
then corrected in September and are left down slightly from a year
earlier. With imports actually trending up, the resulting trade
balance is in the two-plus billion dollar range.
- Industrial production rebounded strongly in August and
September. Since exports did not follow a similar pattern, this
implies a boost to fixed investment and to a lesser extent
purchases of consumer goods.
- Inflation has been low and relatively constant for consumer
prices. Core prices are still lower than a year earlier, while the
overall Consumer Price Index (CPI) is even with a year ago, albeit
with more volatility.
- Producer and wholesale prices remain much lower than a year
ago. This could be considered normal under coronavirus disease 2019
(COVID-19) conditions, since these indices tend to grow more slowly
than overall inflation, which in turn has been negative.
- Interest rates remain low. The Monetary Authority of Singapore
is unlikely to raise rates until the pandemic is quelled, likely in
mid-2021.
- The Singapore dollar weakened in the second quarter of 2020, as
the pandemic caused capital outflows, but the currency has since
returned to normal levels. It now appears that the dollar will be
relatively stable in the short run, until trade and investment
flows return to pre-pandemic levels.
- The pandemic hit Singapore about a month later than other Asian
countries; therefore, its recovery has been correspondingly
delayed. However, the economy now appears to be flattening at the
end of the third quarter.
Posted 04 November 2020 by Chris Fenske, Head of Capital Markets Research, Global Markets Group, S&P Global Market Intelligence
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