Financial markets have been buoyed by vaccine optimism, as two leading candidates reported very high efficacy and negligible side effects in clinical trials. The developers are likely to seek emergency regulatory approval soon. With 2021 moving into view, we’re looking closely at credit prospects for global banking and insurance, as well as critical risks around commercial real estate.Read the Weekly Digest
Our periodic roundup of key takeaways from our articles brings together all of S&P Global Ratings’ coronavirus-related research—including our regularly updated list of rating actions we have taken globally on corporations, sovereigns, and project finance.
Published November 1, 2020
Our economic modeling suggests fiscal stimulus is more powerful when demand is depressed and interest rates are negative--the current state of the European economy.
We find that fiscal stimulus in the eurozone could boost growth between 1.6 and 2 times the amount spent after four years, that is, for every €100 spent, economies would generate up to €200.
Our study also shows that proposed green, infrastructure, and digitalization spending by the four largest EU economies may not be enough just to close the wide investment gap accumulated before the COVID-19 crisis.
Economic Research: Real Time Economic Data Tracker: An Odd Juncture
The U.S. economy is yet again at a precipice. On one hand, COVID-19 cases have surged, risking fourth-quarter growth that bleeds into an early leading portion of the first quarter next year. On the other hand, at the same time, there have been encouraging announcements on the vaccine front since our last publication of this series, with couple of major vaccine makers--Pfizer/BioNTech and Moderna--announcing 90%-95% effectiveness of their trials so far, which raises hope of a vaccine in distribution sooner than expected. There is an upside risk to growth in the first half of next year, which may see some activity pulled forward from what was anticipated in the second half of the year.
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COVID-19 Heat Map:
We are updating our COVID-19 sector recovery expectations. While there is a tremendous variance of recovery prospects across different corporate sectors, we continue to believe it will take until well into 2022 or, in some cases, 2023 and beyond for many sectors to recover credit metrics.
Low interest rates and the long road to recovery puts financial policy as a key factor and variable that could further shape and delay the recovery timeline.
While most sectors remain in line with our initial view, there are a couple of bright spots (homebuilders, building materials, and consumer staples, for example) that, in some cases, we expect to recover sooner than our initial expectations, while the auto industry is showing some signs of stabilization.
Travel-related segments, especially related to air travel, continue to be under pressure and may not recover until 2023 and beyond as a result of restrictions, reluctant consumers, and heavy debt burdens.
Global Banking: Recovery Will Stretch To 2023 And Beyond
COVID-19 and the oil price shock of 2020 are taking a heavy toll on global banks. S&P Global Ratings has taken 335 negative rating actions globally since the outbreak began, and we anticipate it will be difficult for the financial strength ratings on financial institutions to return to pre-crisis levels. We don't expect the world's largest banking sectors, including more than half of G20's, to recover to pre-COVID-19 levels until 2023, or beyond.
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Published November 10, 2020
Financial Markets Are Showing Greater Interest In Funding Social Projects
Interest in social justice issues by investors, and companies and nations issuing debt, has until recently been relatively slim, with social bond issuance totaling only 5% of the sustainable debt market in 2019 (see "A Pandemic-Driven Surge In Social Bond Issuance Shows The Sustainable Debt Market Is Evolving," published June 22, 2020). But that is changing rapidly because of the pandemic. S&P Global Ratings sees growing investor interest in funding social projects that address rising unemployment, income inequality, and strains on housing, health care, and education systems. Issuance of sustainable investments (including social bonds) to finance both public and private responses and create positive social outcomes, have accelerated. As of October, social bond issuance stood at US$71.9 billion, nearly four times greater than in 2019 (see chart 1). We project that social bond issuance could approach $100 billion this year, while total sustainable debt could hit a record $500 billion up from $341 billion in 2019.
Scenario Analysis Shines A Light On Climate Exposure: Focus On Major Airports
Here, in an exploratory analysis, S&P Global Ratings tests the application of Climate Change Physical Risk data from Trucost in an analysis of 367 major global airports. We explore how the data might enhance our dialogue with rated airports regarding future physical climate risks, the possible range of exposures, and how airports have adapted or plan to adapt. Trucost's data is derived from publicly available information, licensed datasets, and its own models.
Energy In Transition
Global power generators have faced mounting uncertainty - the transition toward renewable energy sources, weakening load growth, and declining fuel prices. We explore the ‘Energy Transition’ and its credit implications.