All major US and European equity indices closed higher on the
week, while APAC was mixed. US and benchmark European government
bonds closed sharply higher on the week. European iTraxx and CDX-NA
closed tighter week-over-week. The US dollar, natural gas, gold,
and silver closed higher on the week, while oil and copper were
lower.
Americas
All major US equity markets closed higher on the week; Russell
2000 +6.1%, Nasdaq +3.1%, S&P 500 +2.0%, and DJIA +1.4%
week-over-week.
10yr US govt bonds closed 1.45% yield and 30yr bonds 1.89%
yield, which is -11bps and -5bps week-over-week.
DXY US dollar index closed 94.32 (+0.2% WoW).
Gold closed $1,817 per troy oz (+1.8% WoW), silver closed $24.16
per troy oz (+0.9% WoW), and copper closed $4.34 per pound (-0.6%
WoW).
Crude Oil closed $81.27 per barrel (-2.8% WoW) and natural gas
closed $5.63 per mmbtu (+1.8% WoW).
CDX-NAIG closed 49bps and CDX-NAHY 288bps, which is -3bps and
-17bps week-over-week, respectively.
EMEA
All major European equity indices closed higher; Italy +3.4%,
France +3.1%, Germany +2.3%, UK +0.9%, and Spain +0.8%
week-over-week.
Major 10yr European government bonds closed sharply higher on
the week; Italy closed -30bps, France -22bps, Spain -21bps, UK
-19bps, and Germany -17bps week-over-week.
Brent Crude closed $82.74 per barrel (-1.2% WoW).
iTraxx-Europe closed 48bps and iTraxx-Xover 243bps, which is
-3bps and -19bps week-over-week, respectively.
APAC
Major APAC equity markets closed mixed on the week; Japan +2.5%,
Australia +1.8%, India +1.3%, South Korea flat, Mainland China
-1.6%, and Hong Kong -2.0% week-over-week.
- Mainland China's official composite output purchasing managers'
index (PMI), covering both manufacturing and non-manufacturing
sectors, fell by 0.9 point from the previous month to 50.8 in
October, with an acceleration of contraction in manufacturing and
slower expansion in services and construction. (IHS Markit
Economist Yating Xu)
- Mainland China's official manufacturing PMI declined by 0.4
point to 49.2, after a 0.5-point drop in the previous month as both
demand and supply remained sluggish amid power crunch and raw
material shortages. The breakdown of the survey showed that output
and new orders both declined at a faster clip than in September.
New export orders dropped for the sixth month in a row, while at a
slower pace driven by the United States' strong consumption during
Halloween and the upcoming Black Friday and Christmas.
- Manufacturers have been facing high inflationary pressure as
prices of purchased materials surged at the fastest pace since
June. Output prices also registered the fastest rate in recent
years. Under the rising cost and weakening demand, inventory of
purchased materials and finished goods both declined at faster
paces compared with a month ago. Manufacturing growth outlook
further weakened as expectations sub-index dropped to the lowest
since March 2020.
- By scale of firms, the decline in manufacturing PMI was largely
driven by faster contraction in medium-sized firms and continuous
weakness in small firms, while the figure for large firms remained
in expansion. Specifically, output sub-index for small firms
declined to the lowest since the start of the pandemic while large
firms' production improved. By sector, energy-intensive industries
continued to lead the headline decline while high-tech and
equipment manufacturing remained in expansion.
- Mainland China's non-manufacturing business activity index fell
by 0.9 point to 50.8, staying in expansion territory for two
consecutive months. Both service businesses and construction PMI
moderated owing to the escalated pandemic control in response to
the spread of Delta virus and the rising input prices.
Telecommunication maintained robust growth and holiday-related
catering and accommodation showed acceleration from September,
while transportation sub-index declined to low 50 and finance and
real estate remained in contraction territory.

- The seasonally adjusted IHS Markit U.S. Manufacturing
Purchasing Managers' Index™ (PMI™) posted 58.4 in October, down
from 60.7 in September and below the earlier released 'flash'
estimate of 59.2. The latest improvement in the health of the U.S.
manufacturing sector was sharp, despite being the weakest for ten
months. (IHS Markit Economist Chris
Williamson)
- Contributing to the overall upturn was a steep rise in new
business at manufacturing firms in October. Companies continued to
highlight strong demand conditions, but some noted that raw
material shortages were hampering demand from clients as stocks of
inputs had already been built or delivery times were too
extensive.
- The pace of new order growth was the slowest for ten months.
New export sales rose only fractionally as foreign demand was also
weighed down by the knock-on effects of uncertain supply.
- Despite marked increases in costs, firms expanded their input
buying sharply again in October. Although at the slowest pace for
seven months, companies attributed higher purchasing activity to
efforts to build stocks amid greater new order inflows. Meanwhile,
stocks of purchases rose only modestly as firms utilized current
input holdings to supplement production.
- Similarly, stocks of finished goods fell solidly as companies
sought to meet new order deadlines. Backlogs of work rose markedly,
and at one of the sharpest paces on record as firms grappled with
pressure on capacity. The rate of growth eased to a four-month low,
however, as employment increased at a solid pace.
- According to German Federal Statistical Office (FSO) data, real
retail sales excluding cars declined by 2.5% month on month (m/m;
seasonally and calendar adjusted) in September. Combined with net
declines during July-August, the level of real retail sales is now
broadly where it was in September 2020 ahead of the second wave of
the pandemic that eventually triggered another lockdown in
December. (IHS Markit Economist Timo
Klein)
- On the bright side, price- and calendar-adjusted retail sales
still were around 4% higher in September 2021 than in February
2020, the last pre-pandemic month.
- September's breakdown by goods category, based on
price-adjusted year-on-year (y/y) data (total -0.7% without
shopping-day adjustment; details see table below), reveals another
underperformance of food versus non-food sales, as in August. Food
sales were 2.2% below year-ago levels whereas non-food sales
increased by 0.2% y/y. Among the latter, 'internet and mail orders'
re-established their traditional lead at 18.8% y/y, followed by
pharmaceutical/cosmetic goods at 6.9% y/y. All other major
categories experienced a decline in sales, foremost clothing/shoes
at -14.2% y/y - this corrects for an unusual spike of 8.3% in
August. Sales at general department stores (-9.7%) and of
'furniture/household goods/DIY' (-9.0%) also did badly, while sales
at specialized shops lost only moderately (-1.9%).

- The G20 nations vowed to end public financing for overseas coal
power plants and showed ambition about limiting global warming to
1.5 degrees Celsius above pre-industrial levels, but critics said
the pledges lack new, clear objectives that can inject momentum
into the COP26 talks. (IHS Markit Net-Zero Business Daily's Max
Lin)
- The EU and 19 of the world's largest economies, responsible for
over three-quarters of GHG emissions globally, concluded their
latest summit in Rome 31 October as the UN climate talks began in
Glasgow.
- Of the G20 nations, Australia, Canada, China, France, Germany,
Japan, Italy, South Korea, Turkey, the UK, and the US had made
similar pledges earlier.
- Many researchers believe that coal, as the most
carbon-intensive fossil fuel, needs to be phased out in the power
sector by 2040 to avert climate disaster.
- Since the Paris Agreement was sealed at 2015's COP21, the
global pipeline of proposed coal-fired power plants has collapsed
by 76%, or 1,175 GW, an analysis by think-tank E3G showed.
- The G20 refrained from committing to a phaseout date for
domestic coal power generation. Among its members, China and India
accounts for nearly two-thirds of the world's coal demand.
- Hyundai and Kia are partnering with Massachusetts-based
electric vehicle (EV) battery startup Factorial Energy to test its
novel solid-state battery technology and the battery's integration
in Hyundai EVs, according to a press release by Factorial Energy.
"Under the Joint Development Agreement, which includes a strategic
investment, the companies will integrate Factorial technology at
the cell, module, and system levels, perform vehicle-level
integration, and co-develop specifications for manufacturing
Factorial's batteries," the company said in its official statement.
According to the battery startup, Hyundai's investment is its first
major strategic investment from a major automotive group. It said
that Hyundai's investment in Factorial would further deepen its
existing research relationship with the South Korean automaker.
Factorial is known to have developed a breakthrough solid-state
technology that addresses key issues holding back the wide-scale
consumer adoption of EVs, including driving range and safety.
According to Factorial, its battery cell advances are based on
FEST, which stands for 'Factorial Electrolyte System Technology.'
It leverages a proprietary solid electrolyte material that enables
safe and reliable cell performance with high-voltage and
high-capacity electrodes and has been scaled in 40Ah cells that
perform at room temperature. (IHS Markit AutoIntelligence's Jamal
Amir)
- US President Joe Biden announced a range of domestic actions
aimed notably at the oil and natural gas sector that the White
House said will help as part of a push to reduce nearly one-third
of worldwide methane emissions by the decade's end under a global
pledge launched with the EU on 2 November. (IHS Markit Net-Zero
Business Daily's Amena
Saiyid)
- Released on the second day of the UN COP26 meeting in Glasgow,
the actions recognize the opportunity capturing methane presents
because of its potency as a GHG. Although a short-lived GHG,
methane has a global warming potential that is at least 80 times
that of CO2 over a 20-year span.
- At the global pledge launch, Biden released the US Methane
Emissions Reduction Action Plan, which includes various actions his
administration is taking to tackle methane emissions. The plan to a
large extent targets methane leaks arising from the extraction,
production, storage, transportation, and distribution of oil and
gas products, but it also tackles emissions from the agriculture
sector and landfills.
- The EPA is seeking increased monitoring at well sites and
compressor stations to detect and plug methane leaks. At well sites
with estimated methane emissions of at least 3 metric tons (mt) per
year, EPA will require quarterly monitoring for leaks and prompt
repairs for any that are found. This provision alone would result
in routine monitoring at 300,000 well sites nationwide that are
responsible for 86% of fugitive emissions.
- Among other provisions, the agency also is proposing to give
owners and operators the flexibility to use advanced detection
technology that can find major leaks more rapidly and at lower cost
than ever before. It also is proposing standards to eliminate
venting of associated gas and requiring capture and sale of gas
where a sales line is available—at new and existing oil
wells.
- South Africa received a promise of an $8.5-billion helping hand
from five G20 members 2 November as the globe's 12th-largest
emitter seeks to cuts its GHG emissions and transition away from a
coal-centric power generation sector. (IHS Markit Net-Zero Business
Daily's Keiron Greenhalgh)
- The climate finance backing came as the South African
government prepared to submit a roadmap for tackling climate change
to the nation's parliament and an initiative to transform the
country's energy sector launched.
- Change is needed because the same day all these developments
took place, state-owned power generator Eskom was warning of load
shedding because its power plant fleet's health was even creakier
than usual, with almost 18 GW of capacity offline for maintenance.
South Africa's installed power generation capacity is just over 58
GW.
- Help from the G20 nations-France, Germany, the UK, the US, and
the EU-will come in the form of the "Just Energy Transition
Partnership." The partnership will mobilize an initial $8.5 billion
in a first phase of financing involving grants, concessional loans
and investments, and risk sharing instruments, its backers said.
The premise of partnership is to prevent up to 1.5 gigatons of
emissions over the next 20 years, and accelerate South Africa's
transition to a low emissions, climate resilient economy, they
said.
- Electric vehicle (EV) manufacturer Rivian is considering
raising as much as USD8.4 billion in its initial public offering
(IPO), according to the company's filing with the US Securities and
Exchange Commission (SEC). The company is reportedly planning to
offer 135 million shares at a price of between USD57 and USD62,
with an option for underwriters to purchase up to 20.25 million
additional shares. At the top of that range, Rivian would have a
market value of USD53 billion based on the outstanding shares
listed in its filing. Rivian's valuation could be as high as USD60
billion by taking employee stock options and other restricted
shares into account. Rivian said investors, including Amazon and T.
Rowe Price, have indicated an interest in buying up to USD5 billion
in shares of Class A common stock, reports TechCrunch. (IHS Markit
AutoIntelligence's Surabhi Rajpal)
- China's Ganfeng Lithium, a supplier of lithium to automakers,
has signed a three-year supply deal with Tesla, according to
Reuters. Ganfeng will supply battery-grade lithium products to
Tesla, but the total sales amount and value of the deal has not
been disclosed yet. In order to ensure uninterrupted production of
their electric vehicles (EVs), automakers are securing direct
contracts with suppliers for raw materials such as lithium
hydroxide, which is used for battery production. In September 2018,
Ganfeng signed a deal with Tesla regarding the supply of lithium
hydroxide, under which Tesla's designated battery manufacturer
would purchase lithium hydroxide from Ganfeng. The contract was
effective until 2020, with an option to extend it for another three
years. (IHS Markit AutoIntelligence's Nitin Budhiraja)
- Taiwan's economy lost some steam during the third quarter of
2021 amid an uneven performance in economic activities. Consumer
spending also slumped at a record pace because of the prolonged
scars from the coronavirus disease 2019 (COVID-19) virus outbreak
in mid-May despite a slow improvement in the third quarter. That
said, this was offset by buoyant investment demand that was
prompted by booming exports and factory expansions. Uneven recovery
is expected ahead as investment and exports will probably remain
the driving force of the economy, while consumer spending will
continue to lag behind. Meanwhile, unfavorable base effects, along
with headwinds from mainland China's economic concerns,
supply-chain disruption, and the continued fallout of the pandemic,
will cloud the short-term outlook. (IHS Markit Economist Ling-Wei
Chung)
- Preliminary data show that Taiwan's economy lost traction in
the third quarter as the slump in consumer spending deepened at a
record pace, partially offsetting a surge in investment demand and
still-robust export performance. Real GDP expanded by 3.8% year on
year (y/y) in the third quarter, decelerating from a 7.4% y/y jump
in the second quarter and a 9.3% y/y surge in the first quarter.
The first-quarter 2021 expansion was the fastest since the third
quarter of 2010.
- In seasonally adjusted quarter-on-quarter (q/q) terms, the
economy rebounded in the third quarter of 2021, as real GDP
increased at an annualized 2.3% from the preceding quarter,
reversing a 4.2% drop posted in the second quarter.
- Domestic demand turned into the driver's seat in the third
quarter as investment spending soared at a pace not recorded in 11
years, outweighing the plunge in consumer demand. Domestic demand
contributed 4.1 percentage points to GDP growth as gross investment
added 6.3 percentage points and government spending contributed 0.5
percentage point, offsetting the subtraction of 2.6 percentage
points by private consumption. On the other hand, net exports
turned negative in the third quarter, subtracting 0.3 percentage
point, reversing the contribution of 5.1 percentage points in the
second quarter. Despite still-robust exports, import growth
outpaced export gains in the third quarter, fueled by soaring
investment demand.
- Gross investment provided the main impetus to economic growth
in the third quarter of 2021, surging 28% y/y, which marked the
fastest expansion since the third quarter of 2010. Local companies,
such as semiconductor and other technology firms, have continued to
expand capacity to meet demand, which has in turn bolstered
investment in machinery equipment and related outlays.
- Peru's Consumer Price Index (CPI) increased by 0.6% month on
month (m/m) and 5.8% year on year (y/y) in October, according to
the National Institute of Statistics and Information (Instituto
Nacional de Estadística e Informática: INEI). Annual inflation
stood at 2.5% as recently as May. (IHS Markit Economist Jeremy
Smith)
- Price movements were once again closely tied to renewed
increases in international commodity prices, especially crude oil,
staple grains, and vegetable oils. The electricity and housing,
food and beverages, and transportation and communications
consumption categories accounted for 88% of CPI variation compared
with September.
- The Peruvian sol appreciated in October for the first time in
2021 following a cabinet reshuffle and reappointment of the highly
regarded central bank president. In prior months, politics-driven
currency depreciation had exacerbated the effect of rising import
costs. Still, earlier bouts of depreciation were likely still
filtering into consumer prices in October.

- The Federal Open Market Committee (FOMC) concluded its
scheduled two-day policy meeting this afternoon. The statement
released at the conclusion of the meeting was consistent with our
expectations. First, the Committee announced that it would begin
later this month to reduce the pace of its securities purchases in
monthly increments of $15 billion, relative to the current pace of
$120 billion per month. This would put them on track to decline to
zero by the end of June 2022. Second, policymakers expressed less
conviction that the surge of inflation largely reflects transitory
factors, a hint that if inflation does not soon moderate, monetary
policy could be tightened earlier than currently anticipated. (IHS
Markit Economists Ken
Matheny and Lawrence Nelson)
- The Reserve Bank of Australia (RBA) left the official cash rate
target unchanged at 0.10% and there were no adjustments to the
bank's government bond-buying program, but the monetary policy
board decided to halt the yield-targeting program for three-year
Australian Government Securities (AGS). Although the
policy-anchoring yield target was dropped, Governor Philip Lowe
continued to insist that interest rate hikes are not imminent. (IHS
Markit Economist Bree
Neff)
- The yield-targeting program commenced in March 2020 as a way to
anchor monetary policy expectations to a longer-term horizon (three
years) and to contain funding costs through the pandemic. The
target had been extended to the April 2024 dated bond as the
pandemic persisted and because the RBA still viewed three years as
an appropriate timeframe to keep the policy rate on hold and
gradually unwind other stimulus measures.
- As conditions have shifted - a lower-than-expected unemployment
rate, higher inflation, and a potentially sharp rebound in activity
post-lockdown - defending the AGS target at 0.10% over the past
week has become far more difficult. The RBA had not defended the
target since late February, but it was forced to intervene on 21
October and was expected to defend again last week after the
higher-than-expected inflation reading, but it did not. This
accelerated bets that the RBA would drop the yield-targeting
program.
- The RBA's policy statements this month also highlighted
revisions to the bank's core forecasts, which will be released in
full at the end of this week. The bank's baseline forecast
anticipates real GDP growth of 3% for 2021 (a downgrade from
August), 5.5% in 2022 (an upgrade), and 2.5% for the subsequent two
years. The adjustments to the GDP outlook stem from expectations of
a fast rebound in activity following the Delta variant-induced
lockdowns as vaccination rates have picked up quickly, allowing
containment measures to be unwound.
- Finding clean energy and infrastructure projects to deploy
trillions in private capital is the challenge that financiers face
and governments must resolve, Black Rock CEO Larry Fink said 3
November. The financial community is committed to bringing that
capital forward, but the "key is finding the jobs, and finding the
ability to deploy that capital and there lies the fundamental issue
today," said Fink, who heads the world's largest investment fund,
which has $9.5 billion of assets under management. (IHS Markit
Net-Zero Business Daily's Amena
Saiyid)
- Speaking on a climate finance panel at the UN COP26 meeting,
Fink was commenting on the $130 trillion in private capital
commitments that the Glasgow Financial Alliance for Net-Zero
(GFANZ) said it has secured to help economies transition to net
zero.
- GFANZ is a network of more than 450 banks, insurers, and asset
managers across 45 countries that was formed in April by former
Bank of England Governor Mark Carney and US Special Presidential
Envoy for Climate John Kerry to bring all net-zero financial
initiatives, including the Net Zero Asset Managers Initiative,
under one umbrella.
- With the $130 trillion in private commitments, Carney said: "We
now have the essential plumbing in place to move climate change
from the fringes to the forefront of climate finance so that every
financial decision takes climate change into account."
- Fink cautioned Carney and other financial leaders that there is
currently no system in place to rapidly deploy private capital to
the emerging world without "three, four, five, six years of waiting
for regulation and having it passed."
- The lack of inventory pushed US light-vehicle sales down by
22.5% y/y in October; YTD sales were up by 9.2%. October's 1.0
million units were similar to the volume in September. Although the
pace of sales is projected to have increased mildly from September,
auto demand levels in the US continue to be subdued by new vehicle
inventory constraints. IHS Markit forecast as published in October
stands at 15.1 million units, but the softer-than-expected October
sales point to potential that full-year sales could possibly be
somewhere between 14.9-15.1 million units. (IHS Markit
AutoIntelligence's Stephanie
Brinley)

- Geely Auto Group has launched its global powertrain brand
"Leishen Power", and a new modular intelligent hybrid powertrain
platform, Leishen Hi-X. According to a company statement, the
Leishen hybrid platform features ultra-high 43.32% thermal
efficiency engine, three-speed Dedicated Hybrid Transmission (DHT),
40% lower fuel consumption NEDC rating, and full powertrain FOTA
(Firmware Over the Air) update capabilities. The modular platform
can be used for A-C-segment models and in HEV/PHEV/REEV
configurations for brands within Geely Auto Group. The 40% lower
fuel consumption NEDC rating would mean a substantial reduction in
emissions and a shorter time to achieve the clean air targets set
up by the Chinese authorities. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
- Coca-Cola HBC, a strategic bottling partner of The Coca-Cola
Company, announced that juice volumes increased 14.0% y/y in the
third quarter, outperforming the company's overall volume growth of
13.1% y/y in Q3. (IHS Markit Food and Agricultural Commodities'
Vladimir Pekic)
- "Juice volume was up 14.0%, with growth in all three segments
[established, developing, and emerging markets], while
ready-to-drink tea volume grew by 6.5%," said Coca-Cola HBC.
- The company's overall volumes grew fastest in the emerging
markets segment (+21.3% y/y), followed by an increase of 8.0% y/y
in established markets and a drop of 1.9% y/y in developing
markets.
- Emerging markets' volume increased by 21.3%, with continued
strong performance from Nigeria, Russia, Ukraine and others.
"Sparkling volumes were up low 20s, while adult sparkling and
energy [drinks] performed very well in the quarter, both increasing
high double digits. Stills volumes were up mid-teens with strong
performance from water led by Russia, and juice led by Nigeria,"
said the company.
- Nigerian performance gained momentum in Q3, with volume up
mid-30s despite the double-digit comparator. Sparkling grew by high
30s with very strong performance from Coke Zero. Stills grew by
low-double digits with a high-double digit increase in the juice
segment.
- US oil production will grow 800,000 b/d entry to exit in 2022.
Onshore production will contribute 550,000 b/d—with slightly
over 50% of growth coming from private companies, while public
operators shift form maintenance mode to 2-5% growth. Strong Gulf
of Mexico growth comes from both the basing effect of Hurricane Ida
and the start-up of new projects (Spruance, Vito, and Mad Dog Phase
2). Entry-to-exit growth in 2023 reaches 600,000 b/d, reflecting
continued cash harvest as WTI eases owing to strong 2022 global
supply and a tapering COVID-19 restart. (IHS Markit Energy
Advisory's Raoul
LeBlanc, Reed
Olmstead, Narmadha
Navaneethan, Imre
Kugler, and Prescott Roach)
- Producers are restraining reinvestment of the cash bonanza from
rising prices in line with our expectations, resulting in minimal
changes to the IHS Markit production outlook. While the production
outlook rose less than 100,000 b/d compared with the previous
forecast, free cash flow has ballooned to $87 billion, which should
offer a competitive (perhaps even compelling) yield for the
publicly listed operators.
- Reinvestment of the incremental dollar remains the key
corporate decision determining US supply growth. Both debt
repayment—to achieve debt/EBITDA ratios under 1.5x—and
substantial share price reflation are necessary preconditions
before executives risk the embryonic credibility of their business
model by returning to hypergrowth, or even a hybrid returns plus
growth strategy. The 2021-23 cash surplus should more than
compensate for the previous decade of deficits (although not on a
discounted basis). Accelerated balance sheet repair should mostly
end in 2022, shifting surplus cash toward buybacks if shares do not
reflate, and reinvestment if they do.
- Our large jump in annual capex from $60 billion to $87 billion
(45%) seems out of step with the discipline story and the
low-growth headline, but a decomposition analysis shows the figure
results from the compounding effect of reasonable assumptions for
five drivers: 1) modest (7-9%) service cost reflation, 2) fewer
drilled but uncompleted well (DUC) conversions, 3) base decline
increase from the robust rise in activity over the course of 2021,
4) rapidly expanding budgets of smaller private operators, and 5)
diluted overall capital efficiency due to low-grading and lower
well performance exhibited by private operators.
- The Permian remains the growth engine but loses a step in 2022.
A few factors decelerate growth: the 570,000 b/d growth in 2021 is
revving up the base decline for 2022 by 400,000 b/d, tempering
overall oil growth to just 400,000 b/d. Independents will ramp up
rigs in 2022, but private companies will continue to respond more
aggressively to price signals and make up more than 50% of activity
in 2022. Most of these increases are from micro-private operators
running a single rig, often in legacy plays or non-core areas.
- US productivity (output per hour in the nonfarm business
sector) declined at a 5.0% annual rate in the third quarter, more
of a decline than we had expected, following an increase of 2.4% in
the second quarter that was revised up 0.3 percentage point. (IHS
Markit Economists Ken
Matheny and Lawrence Nelson)
- Compensation per hour rose at a 2.9% annual rate in the third
quarter and at a 3.5% rate in the second quarter. The
second-quarter increase was revised up 0.1 percentage point.
Compensation per hour has risen at a 5.9% annual rate from the
fourth quarter of 2019, far higher than the 1.6% annualized
increase in productivity over that span. The marked increase in
compensation per hour reflects pandemic-induced effects on
employment: employment in lower-wage sectors has declined relative
to employment in higher-wage sectors.
- Unit labor costs surged in the early stages of the pandemic, as
compensation per hour rose much more than productivity. The rise in
unit labor costs had slowed on average in more recent quarters but
jumped again in the third quarter. After declining at a 0.9% rate
over the first half of 2021, unit labor costs rose at an 8.3% rate
in the third quarter. Over the last four quarters, unit labor costs
have risen 4.8%, up from a 0.1% increase over the four quarters
ending in the second quarter.
- Hours rose at a 7.0% rate in the third quarter, continuing a
strong recovery that began in the third quarter of 2020. Over the
last five quarters, hours have risen 15.7% (not annualized),
reversing nearly all of the 14.5% decline over the first two
quarters of 2020.
- Preliminary data show that Hong Kong SAR's real GDP expanded
5.4% year on year (y/y) in the third quarter of 2021, after jumping
7.6% y/y in the second quarter and 8% y/y in the first quarter,
which marked the fastest expansion since the first quarter of 2006.
For the first three quarters of the year, real GDP climbed 7% y/y,
following six straight quarters of contraction that began in
mid-2019. (IHS Markit Economist Ling-Wei
Chung)
- Domestic demand continued to provide the main impetus to the
economy as contained local infections supported consumer and
business sentiment and spending. Domestic demand contributed 8.7
percentage points to third-quarter growth as private consumption
added 4.4 percentage points and fixed investment contributed 1.8
percentage points. On the other hand, net exports remained negative
in the third quarter, subtracting 3.3 percentage points from GDP
growth, as the pick-up in domestic demand bolstered import growth,
which outpaced export expansions.
- Merchandise exports continued to expand at a double-digit pace,
albeit at a slower rate in the third quarter. Exports of goods
climbed 14.3% y/y, after jumping 20.5% y/y in the second quarter.
It also represented a second straight quarter of deceleration.
Exports to all major markets continued to climb at the double-digit
pace in the third quarter, except Vietnam due to the worsening
outbreak conditions there. In September alone, merchandise exports
expanded 16.5% y/y, slowing from a 25.9% y/y jump in August. It
also marked the slowest reading since December 2020, although the
deceleration was attributed partially to an unfavorable comparison
base.
- In particular, accounting for about 60% of total exports,
shipments to mainland China increased 11.2% y/y in September,
decelerating markedly from a 30% y/y surge in August and also
represented the lowest reading since November last year.
- Fixed investment climbed 11% y/y in the third quarter, after
surging 23.9% y/y in the second quarter. Although part of the gain
was boosted by a low comparison base, business spending
strengthened as overall business sentiment improved, supported by
the stabilized local pandemic conditions, the corresponding
relaxation in social distancing measures, and robust overseas
demand. In addition, the property market has remained active in the
third quarter and resulted in the increase in the costs of
ownership transfer. That said, mainland China's crackdown on
business as well as volatilities in the local stock market somewhat
restrained business sentiment.
- Both Turkish consumer and producer price inflation continued to
build in October, according to the latest data from the Turkish
Statistical Institute (TurkStat). That month, annual consumer price
inflation pushed up to 19.89%, rising by over 0.4 percentage point
from the previous month and exactly eight percentage point higher
than it had been a year earlier. (IHS Markit Economist Andrew
Birch)
- In October, the consumer prices of food had posted the most
extreme annual increase, up by 27.41%. However, food price
inflation has actually been subsiding slightly since an August
peak. Annual energy price inflation, on the other hand, continued
to build in October, rising by nearly 0.5 percentage point from
September to reach 25.41%.
- Stripping out these and other highly volatile prices, the
annual core inflation rate was lower overall, at 16.82% as of
October 2021. Core inflation actually subsided very slightly from
September, when it had reached 16.98%. Although the easing of core
inflation was meagre, it may provide justification for the Central
Bank of the Republic of Turkey (TCMB) to cut its main policy rate
again, as it is indexed to that rate.
- Meanwhile, annual producer price inflation soared in October to
reach 46.31%, the highest rate it has been since the Justice and
Development Party took office in 2002. Soaring energy costs and the
sharp depreciation of the lira are fueling the rapid producer price
increases.

- Global CO2 emissions in 2021 are on a pace to make up nearly
all of the decline experienced in 2020 due to the economic slowdown
created by the COVID-19 pandemic, according to findings released 4
November by the Global Carbon Project at COP26. (IHS Markit
Net-Zero Business Daily's Kevin Adler)
- CO2 emissions are projected to reach 36.4 billion metric tons
(mt) in 2021, just 0.8% below the record of 36.7 billion mt in
2019, and nearly a 5% rise from 2020's level. This has driven the
global CO2 concentration to 415 ppm in 2021, compared to 277 ppm in
1750.
- The report said China and India were chiefly responsible for
the overall increase in global CO2 emissions.
- "Reaching net zero CO2 emissions by 2050 entails cutting global
CO2 emissions by about 1.4 billion tons each year on average," he
said. "Emissions fell by 1.9 billion tons in 2020. So, to achieve
net zero by 2050, we must cut emissions every year by an amount
comparable to that seen during COVID."
- Looking at a long-term trend, the 2021 forecast is that global
CO2 emissions will be 36.4% higher in 2021 than in 1990.
- While the overall trajectory highlights the immense challenge
of carbon reduction, an adjustment in Global Carbon Tracker's
accounting for land use in this year's report suggests that the
increase in emissions is not as high as reported earlier.
Previously, the GCP data showed global CO2 emissions increasing by
15 billion mt from 2011 through 2019, but this new report revises
that increase down to 0.8 billion mt, due to a higher annual credit
for land sinks.
- The Global Carbon Tracker said that coal contributed 40% of
global emissions, followed by oil (32%) and natural gas (21%). Coal
and gas will surpass their pre-pandemic emissions levels this year,
but the report said "oil emissions remain around 6% below 2019
levels, and this persistent reduction is one of the main reasons
2021 [total] emissions did not set a new record."
- The Volkswagen (VW) Group has announced that it is to take a
stake in EIT InnoEnergy, an alternative energy investment fund, in
which the European Union (EU) is a major investor, according to a
company statement. VW will partner with EIT InnoEnergy to invest in
technologies and business models to 'achieve economic breakthroughs
which will contribute to the decarbonization of the transport
sector and accelerate the shift to electromobility.' Commenting on
the investment Jens Wiese, Head of Group M&A, Investment
Advisory and Partnerships at VW, said, "In order to decarbonize the
transport sector, we will need a wide range of innovations. In
addition to our own activities, in the future we will also
increasingly rely on cooperation with start-ups to achieve this.
The partnership with EIT InnoEnergy will help us find the most
promising companies from all areas of the energy transition, which
we can then support in scaling their business models." VW and EIT
InnoEnergy have already been co-operating for five years, with both
organizations working together on the European Battery Alliance
(EBA), with VW's stake in Swedish startup Northvolt a key element
in this project. (IHS Markit AutoIntelligence's Tim Urquhart)
- South Korean automakers posted a 22.3% y/y plunge in their
combined global vehicle sales to 548,162 units in October,
according to data released by the five major domestic
manufacturers, as reported by the Yonhap News Agency and compiled
by IHS Markit. The five automakers reported a 21.5% y/y decline in
their combined domestic sales last month to 106,424 units, while
their combined overseas sales went down by 22.4% y/y to 441,738
units. (IHS Markit AutoIntelligence's Jamal Amir)
- The country's best-selling automaker, Hyundai, posted a global
sales decline of 20.7% y/y to 307,039 units in October. Its
domestic sales totaled 57,813 units, down 12.0% y/y, while its
overseas sales decreased by 22.5% y/y to 249,226 units. Global
sales of its affiliate, Kia, fell by 18.9% y/y to 217,872 units,
with its domestic sales down 21.2% y/y to 37,837 units and its
overseas sales down 18.4% y/y to 180,035 units.
- The plunge in South Korean OEMs' combined global sales during
October was mainly due to the global semiconductor shortage and the
prolonged COVID-19 virus pandemic, which continued to weigh down on
vehicle production and sales. South Korea relies heavily on
overseas sources for automotive chips. The current shortage has
disrupted automakers' production in the country and the issue is
expected to continue to have an impact as manufacturers ramp up
production of next-generation electric vehicles (EVs).
- Automakers are readjusting their vehicle production volumes
while competing with electronics companies to acquire more chips to
minimize the reduction in output.
- As the global semiconductor shortage has intensified because of
lockdown measures to prevent the spread of the COVID-19 virus in
Southeast Asia, we expect vehicle production in South Korea to be
significantly affected throughout this year. As a result, we now
expect light-vehicle production in the country, including passenger
vehicles and light commercial vehicles, to decline by 1.9% y/y in
2021 to 3.39 million units.
- California-based Impossible Foods is accelerating its
international expansion with the launch of its flagship plant-based
burger in Australia and New Zealand. The company's flagship
product, Impossible Beef Made From Plants (known as Impossible
Burger in other markets), is now available at all 150+ locations of
Australia's burger brand, Grill'd, and also at Butter—a fried
chicken concept with several locations in the greater Sydney area.
(IHS Markit Food and Agricultural Policy's Max Green)
- In New Zealand, Impossible Beef will debut at burger chain
Burger Burger along with a number of other restaurants in
Auckland.
- Earlier this year, regulatory body, Food Standards Australia
New Zealand (FSANZ), approved Impossible Foods' key ingredient,
heme (soy leghemoglobin), for use in plant-based meat products,
paving the way for the commercial launch in both markets.
- In its approval, FSANZ noted that the decision "supports
greater consumer choice for meat analogue products with a source of
iron which may benefit consumers wanting to reduce or eliminate
animal products from their diet." The body added that approval of
the ingredient "supports greater consistency with international
food regulations, industry innovations and creates trade
opportunities for Australia and New Zealand."
- Impossible Foods' products are already available in the US,
Canada, Singapore, and Hong Kong, and were recently launched in the
UAE, the company's first market in the Middle East. Impossible
Foods' stated mission is to be sold in every major market globally
where conventional meat from animals is sold.
- US nonfarm payroll employment rose 531,000 in October, beating
expectations, and the unemployment rate declined 0.2 percentage
point to 4.6%. Combined with upward revisions to payroll gains for
prior months, these developments reveal a labor market on a solid
footing heading into the fourth quarter. (IHS Markit Economists Ben
Herzon and Michael
Konidaris)
- The gain in overall payroll employment was more than accounted
for by a 604,000 increase in private payrolls. Notable gains there
included leisure and hospitality (164,000), professional and
business services (100,000), manufacturing (60,000), and
transportation and warehousing (54,000).
- The latter two industries have been boosted by elevated demand
for goods, as the composition of consumer spending remains more
heavily tilted toward goods (and away from services) than
pre-pandemic norms.
- The recovery in payroll employment has come a long way, but the
count of jobs still remains 4.2 million below the February 2020
level.
- This is not for a lack of trying on the part of business. As of
August, there were considerably more job openings than job seekers
(in the labor force and unemployed), and the labor-force
participation rate has barely budged since spring. At some point,
continued robust job growth will likely require a rising
labor-force participation rate.
- Elsewhere in this morning's report, average hourly earnings
rose 0.4%, while the average workweek slipped 0.1 hour to 34.7
hours. Combined with the robust gain in private payrolls, these
indicators set up private wage and salary income for solid
annualized growth of roughly 8% in the fourth quarter.
- IHS Markit's AAA Tax-Exempt Municipal Analytics Curve (MAC)
rallied 5bps for 9-year and longer paper, with that same part of
the curve 9-10bps better week-over-week.

- IHS Markit Securities Finance data indicates that 24.7% of the
issue value of the current on-the-run 10yr US government bond were
on loan as of the 4 November close, which is near the highest level
since the bond was issued in August.

- The UK's Monetary Policy Committee (MPC) voted 7-2 to maintain
the Bank of England's (BoE) Bank Rate at 0.1% at its meeting that
ended on 3 November. The dissenting voices were deputy governor
Dave Ramsden and Michael Saunders, who voted to increase the Bank
Rate by 15 basis points to 0.25%. They were the first members of
the MPC to vote for an interest-rate rise since August 2018. (IHS
Markit Economist Raj
Badiani)
- The MPC voted unanimously to maintain the stock of sterling
non-financial investment-grade corporate bond purchases at GBP20
billion (USD28 billion), financed by the issuance of central bank
reserves.
- Meanwhile, the MPC voted 6-3 in favor of the BoE continuing
with its existing program of UK government bond purchases, financed
by the issuance of central bank reserves, maintaining the target
for the stock of these purchases at GBP875 billion to be achieved
by end-2021. The existing program of GBP150 billion of UK
government bond purchases started in January 2021 and is close to
completion.
- Three members (Catherine L. Mann, Dave Ramsden, and Michael
Saunders) voted to reduce the target for the stock of UK government
bond purchases from GBP875 billion to GDP855 billion.
- As of 2 November 2021, the total stock of assets held in the
Asset Purchase Facility had reached GBP871 billion, including
GBP127 billion of the GBP150-billion program of UK government bond
purchases announced on 5 November 2020.
- In its November update, the BoE expects its policy rate to rise
from the current 0.1% to 0.2% by the end of 2021 and to 1.0% (from
0.3% in the August update) in the final quarter of 2022, based on
the market path for interest rates.
- Seasonally and calendar-adjusted German industrial production
excluding construction declined by 1.4% month on month (m/m) in
September, extending a 3.7% m/m setback in August. Thus, the latest
output level remains almost 11% below its February 2020
pre-pandemic high. (IHS Markit Economist Timo
Klein)
- Total production including construction was a little firmer,
falling 1.1% m/m in September to a level that was 9.5% below that
of February 2020. This owed to construction output increasing by
1.1% m/m in September and generally having held up much better than
manufacturing throughout the pandemic. Meanwhile, energy output
rebounded during August and September after a major decline in the
May-July period.
- The split by type of good (see table below) reveals that the
investment goods sector, which had already suffered a major setback
in August, extended its decline in September. Intermediate goods
production declined for the fourth consecutive month, but not to
the same extent as investment goods. In contrast, consumer goods
output was broadly flat in September and maintained an upward
tendency when compared with levels at the start of 2021. This was
enabled by the loosening of coronavirus disease 2019
(COVID-19)-related restrictions since May.
- The September breakdown by industrial branch reveals diverging
developments. Motor vehicle production at least stabilized (up 2.1%
m/m) following a huge drop in August (-18.9%). Nevertheless, output
in this sector remains some 40% below pre-pandemic levels, linked
primarily to the shortage of semiconductors that turned into a
severe bottleneck once manufacturers ran out of stocks accumulated
in early 2021. The other main sector posting higher output in
September was chemicals/pharmaceuticals, which increased by 2.9%
m/m, its fourth increase in the past five months. In contrast,
output in the food/beverages/tobacco and metal sectors was broadly
flat in September (both up 0.3% m/m), and production in the
machinery and equipment and electronic and electric equipment
sectors declined anew by 3.3% and 3.7% m/m, respectively.

- The Central Bank of the Argentine Republic (Banco Central de la
República Argentina: BCRA) on 4 November temporarily changed the
regulations detailing the minimum net foreign-exchange position
ratio. Banks will need to maintain this ratio at the same levels as
the lowest between the average daily ratios during October 2021 or
the ratio displayed in 4 November. This regulation is intended to
last until the end of the month and was instituted to limit demand
for dollars in the financial sector. (IHS Markit Banking Risk's
Alejandro Duran-Carrete)
- So far, banks' holding of dollars is relatively high, making
this movement relatively inconsequential if only kept through
November. The net foreign-exchange position was instituted to limit
the exposure of financial institutions to foreign-exchange
fluctuations. Owing to Argentina's historical context, banks have
typically remained in a positive position, reducing direct
exposures to a depreciation of the local currency.
- However, this action was primarily triggered as a de-facto
capital control aimed at stopping the drain of dollars in the
country. IHS Markit forecasts that capital controls will continue
until at least 2023, increasing the probability of these measures
being rolled over or reintroduced after the end of November.
- In turn, this would both reduce the holding of dollarized
securities and depress the already declining pace of dollarized
credit. These are a significant hedge against the weak monetary
situation that the country currently has. Going forward, the
relatively low levels of foreign-exchange reserves at the BCRA
threaten the reserve requirements for dollar deposits placed at the
central bank, tightening the sector's foreign-exchange
liquidity.
- Autonomous truck startup TuSimple, in collaboration with UPS,
is mapping new freight lanes in southern states of the United
States. TuSimple's autonomous trucks will operate on new routes
between Arizona and Florida, reports Reuters. TuSimple said that
since 2019 it had logged 160,000 miles transporting freight for
UPS's North America Air Freight (NAAF) division. It has achieved
13% fuel savings at speeds between 55 and 68 miles per hour.
TuSimple focuses on developing Level 4 autonomous solutions for the
logistics industry and its trucks run out of facilities in Arizona
and Texas (United States), China, Japan, and Europe. TuSimple, in
partnership with Navistar, is developing Level 4 autonomous trucks
and has received 6,775 reservations for these vehicles, with
manufacturing scheduled to start in 2024. (IHS Markit Automotive
Mobility Surabhi Rajpal)
- Geely Auto Group has revealed its vision for the next five
years with nine ambitious initiatives under its "Smart Geely 2025
Strategy". The initiatives include full-stack in-house development
of autonomous vehicle (AV) technologies, CNY150 billion (USD23.4
billion) of investment in research and development (R&D), and
launching over 25 new smart vehicle models in the next five years.
The automaker aims to achieve global sales of 3.65 million units,
with overseas sales of 600,000 units, by 2025. Geely also aims to
reduce its carbon emissions by 25% in the next five years, realize
a 100% full-scenario digital value chain, achieve an EBIT margin of
over 8%, and assign 350 million shares to the first batch of 10,000
employees, reports Gasgoo. This development coincides with Geely
launching global powertrain brand Leishen Power and a new modular
intelligent hybrid powertrain platform, Leishen Hi-X. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
- EU lamb prices have pushed back up towards the record-high
levels recorded in the spring of this year, as purchasers continue
to fret about availability of supplies. (IHS Markit Food and
Agricultural Commodities' Chris Horseman)
- Throughout of lambs at EU abattoirs remains at below-average
levels, while imports of sheepmeat from the UK are still
constrained by border checks and other paperwork.
- Meanwhile, supplies from New Zealand are still tracking some
17% below the levels of last year, primarily because of very high
transport costs and constrained availability of containers.
- This is all adding up into an EU benchmark price which looks
poised to break through the EUR700 per 100kg barrier for what would
be only the second time.
- In the week ending 31 October, the EU average price for heavy
lambs was EUR693.04 per 100kg, up by 1.1% on the previous
week.
- Prices have risen especially sharply in Germany - up by 3.9%
week-on-week to EUR780.82 per 100lkg - and also in Spain, where the
reference price has now risen by 11% over the past five weeks.

Posted 08 November 2021 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.