Daily Global Market Summary – 3 February 2022

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Most major APAC and all major US and European equity indices
closed lower. US and benchmark European government bonds closed
lower, with the latter selling off significantly post-ECB meeting.
CDX-NA and European iTraxx widened sharply across IG and high
yield. Oil closed higher, while the US dollar, natural gas, gold,
silver, and copper were all lower on the day. All eyes will be on
tomorrow’s 8:30am ET US non-farm payroll report for indications of
how much pressure the omicron variant had put on the US labor
market last month.

Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our Experts
by IHS Markit
platform.

Americas

  1. All major US equity indices closed lower; DJIA -1.5%, Russell
    2000 -1.9%, S&P 500 -2.4%, and Nasdaq -3.7%.
  2. 10yr US govt bonds closed +6bps/1.83% yield and 30yr bonds
    +4bps/2.16% yield.
  3. CDX-NAIG closed +3bps/63bps and CDX-NAHY +15bps/350bps.
  4. DXY US dollar index closed -0.6%/95.38.
  5. Gold closed -0.3%/$1,804 per troy oz, silver -1.5%/$22.38 per
    troy oz, and copper -0.6%/$4.47 per pound.
  6. Crude oil closed +2.3%/$90.27 per barrel and natural gas closed
    -11.1%/$4.89 per mmbtu.
  7. Amazon.com Inc. said profit nearly doubled in the critical
    holiday period, as the company managed to control labor and supply
    costs better than expected and saw gains in its cloud-computing and
    advertising businesses. The company saw a huge boost in the quarter
    from its investment in electric-vehicle maker Rivian Automotive,
    Inc., adding nearly $12 billion to its operating income in the
    period on gains from that company’s initial public offering in
    November last year. That accounted for the most of Amazon’s profit.
    (WSJ)
  8. On February 2, the US Department of Energy (DOE) joined the US
    Departments of Homeland Security (DHS) and Housing and Urban
    Development (HUD), plus the Commonwealth of Puerto Rico, to launch
    a new effort to accelerate work to strengthen the island’s power
    grid and advance new initiatives to enhance Puerto Rico’s energy
    future. (IHS Markit PointLogic’s Barry Cassell)

    • The parties executed a memorandum of understanding that
      enhances collaboration among federal agencies and the Commonwealth,
      and kickstarts the PR100 Study. This study is a community-driven
      and locally-tailored roadmap to help Puerto Rico meet its target of
      100% renewable electricity, improve power sector resiliency, and
      increase access to more affordable energy and cleaner air.
    • Dozens of grid modernization projects will start construction
      this year, and the government-owned Puerto Rico Electric Power
      Authority will sign contracts for at least 2 GW of renewable energy
      and 1 GW of energy storage projects.
    • “The Biden-Harris Administration is helping Puerto Rico
      strengthen the island’s resilience, and in the process unlock its
      potential for cheap and abundant renewable energy,” said US
      Secretary of Energy Jennifer Granholm. “Today’s commitments and the
      launch of the PR100 Study show that 2022 will be a year of action
      to modernize Puerto Rico’s grid and increase energy resilience as
      we accelerate our work with Puerto Rico to execute data-driven,
      community-tailored pathways towards 100% clean electricity.”
    • FEMA Permanent Work Projects Will Begin Construction – FEMA,
      the Central Office for Recovery, Reconstruction and Resilience
      (COR3), the Puerto Rico Electric Power Authority (PREPA), and
      PREPA’s contracted system manager, LUMA Energy, have established
      working groups and collaboration processes to reconstruct the
      island’s electric grid. It is expected that at least 138 projects
      will be under construction bidding or have begun initial
      construction activities, including island-wide substation repairs,
      the replacement of thousands of streetlights across five
      municipalities, and the creation of an early warning system to
      improve dam safety.
    • Clean Energy Projects Will Move Forward – Puerto Rico is
      procuring 3,750 MW of renewable energy and 1,500 MW of energy
      storage, enough clean energy to power over 1 million homes. Over
      the last year, DOE has provided technical assistance to the
      Government of Puerto Rico to align the procurement process with
      global best practices and ensure access to capital to ultimately
      lower electricity costs for ratepayers who currently pay twice the
      national average. PREPA is currently in final negotiations of the
      first tranche of proposed projects: 844 MW of renewable energy, 220
      MW of energy storage, and two Virtual Power Plants.
    • Implementation of $1.9 billion in HUD Grant Funding – In 2022,
      the Puerto Rico Department of Housing (PRDOH) will implement an
      action plan to enhance electrical system reliability and
      resilience. Puerto Rico’s proposed plan includes the development of
      both small and large microgrids.
  9. Amid a surge in output, US productivity (output per hour in the
    nonfarm business sector) rose at a 6.6% annual rate in the fourth
    quarter, more than reversing a 5.0% decline in the third quarter.
    During 2021, productivity rose 2.0% following a 2.5% increase
    during 2020. Those increases exceeded the average annual increase
    during the three years prior to the pandemic of 1.5%. (IHS Markit
    Economists Ken
    Matheny
    and Lawrence Nelson)

    • Compensation per hour rose at a 6.9% annual rate in the fourth
      quarter following increases averaging 6.1% over the prior two
      quarters. Growth in compensation per hour has been elevated, on
      average, during the pandemic: since the fourth quarter of 2019,
      compensation per hour has risen at a 6.8% annual rate. Employment
      in lower-wage sectors has declined relative to employment in
      higher-wage sectors, while wage gains have risen particularly in
      lower-wage sectors such as leisure and hospitality.
    • With productivity growth nearly matching growth in compensation
      per hour, unit labor costs edged up at a slight 0.3% annual rate in
      the fourth quarter. However, this follows much larger increases in
      previous quarters so that during 2021, unit labor costs rose
      3.1%.
    • 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 slowed on average after the initial surge but
      quickened again over the second and third quarters of 2021. Over
      those two quarters, unit labor costs rose at an average annual rate
      of 7.6%, as compensation per hour rose at a robust pace (6.1%)
      while productivity declined (down 1.3%).
    • The rise in labor costs during the pandemic is contributing to
      inflationary pressures.
  10. US manufacturers’ orders declined 0.4% in December, close to
    the consensus estimate. Shipments rose 0.4%, and inventories rose
    0.3%. (IHS Markit Economists Ben
    Herzon
    and Lawrence Nelson)

    • Orders for core capital goods, a key predictor for equipment
      spending in the National Accounts, were revised higher through
      December. Shipments of core capital goods were essentially
      unrevised.
    • Nominal figures in the manufacturing sector remain elevated due
      to rapidly rising prices.
    • Over the 12 months of 2021, manufacturers’ orders and shipments
      posted double-digit gains, with orders up 13.3% and shipments up
      11.3%. Nominal inventories also rose briskly, up 8.9% on the
      year.
    • Over the same 12-month period, manufacturing prices rose more;
      the Producer Price Index (PPI) for the net output of the
      manufacturing sector rose 15.0%.
    • In real terms, after mounting a full recovery by late 2020,
      manufacturers’ shipments declined and have since remained below
      pre-pandemic levels.
    • This reflects ongoing bottlenecks in manufacturing supply
      chains that have prevented manufacturers from keeping pace with
      elevated demand for goods. Indeed, after accounting for the effect
      of price gains on inventories, real manufacturers’ inventories
      declined 3.6% over the 11 months that ended last November (the most
      recent month for which these data are available).
  11. US employers announced 19,064 planned layoffs in January,
    according to Challenger, Gray & Christmas—essentially
    unchanged from the 19,052 announced cuts in December and low by
    historical standards. The total for January is down 76% from the
    January 2021 reading. (IHS Markit Economist Juan
    Turcios
    )

    • Vaccine refusal was the number one reason cited by employers
      for announcing job cuts. Roughly 30% of the announced job cuts in
      January were due to employee refusal to get vaccinated against
      COVID-19 (5,757 out of the 19,064 announced job cuts).
    • According to Andrew Challenger, senior VP of Challenger, Gray
      & Christmas, “Many employers who implemented vaccine policies
      last year gave workers until early January to comply. Job cuts
      remain low, and companies are still hard-pressed to fill open
      positions. This is a lot of people to cut, particularly in Health
      Care, where workers are increasingly leaving while those who remain
      battle intensifying burnout.”
    • Last year, employers announced plans to cut 321,970 jobs. This
      was the lowest annual total on record and 86% lower than the
      2,222,249 job cuts announced over 2020 (Challenger began tracking
      job-cut announcements in January 1993).
    • With job-cut announcements hovering near historic lows, job
      openings near all-time highs, and an elevated quits rate, the labor
      market appears to be tight and tilted in the favor of workers.
    • While the Omicron wave likely dampened employment gains in
      January, employers were still making their best efforts to retain
      existing talent.
    • COVID-19 was cited as a reason for 330 planned job cuts in
      January. Since August, COVID-19 has been cited only a total of
      1,284 times as a reason for planned job cuts despite the increase
      in cases that occurred first because of the Delta variant and then
      the massive wave of new infections brought on by the Omicron
      variant.
    • The healthcare sector announced the highest number of cuts in
      January at 5,053 (4,934 of which were due to vaccine refusal).
      Rounding out the five sectors that reported the most job cuts in
      January are warehousing (3,051), services (1,786),
      entertainment/leisure (1,691), and consumer products (1,432).
  12. Ford has partnered with Sunrun to advance home energy
    management by using the onboard battery capability of the F-150
    Lightning electric vehicle (EV) pick-up. According to a company
    statement, Sunrun will facilitate installation of the 80-amp Ford
    charge station pro and home integration system, which will allow
    the truck to store and supply power to homes. The F-150 Lightning
    is equipped with Ford intelligent backup power, which enables
    customers to use bidirectional power technology to provide energy
    to their homes. The extended-range battery system for the F-150
    Lightning can store 131 kWh and supply up to 9.6 kW of power. If
    the grid goes down, the truck uses Ford intelligent backup power
    and the home integration system to automatically power a home. Matt
    Stover, Ford charging and energy services director, said, “F-150
    Lightning brings new innovations to customers, including the
    ability to power their homes when they need it most. Teaming up
    with Sunrun leverages their expertise to bring solar power to even
    more customers, giving them the chance to turn their truck into an
    incredible energy storage source —and future truck features can
    help accelerate the development of a less carbon-intensive grid”.
    (IHS Markit AutoIntelligence’s Surabhi Rajpal)
  13. TuSimple has partnered with Union Pacific Railroad to haul
    freight using fully driverless trucks on a route in Arizona, United
    States. TuSimple plans to conduct “Driver Out” freight deliveries
    without a human behind the wheel for Union Pacific. Loup Logistics,
    a wholly owned subsidiary of Union Pacific, is coordinating the
    freight shipments and supporting seamless transit between rail and
    the critical first and last mile. Kenny Rocker, executive
    vice-president of marketing and sales at Union Pacific, said,
    “Partnering with TuSimple allows us to extend our operations beyond
    our rail hubs and serve our customers faster and more efficiently.
    This groundbreaking autonomous driving technology and our
    partnership provide us a significant opportunity to scale the
    technology in our network, proactively reducing global supply chain
    congestion.” TuSimple has also announced that its autonomous trucks
    have completed more than 550 miles of driving without a human
    behind the wheel on public roads in Arizona, reports FreightWaves.
    (IHS Markit Automotive Mobility’s Surabhi Rajpal)
  14. US lawmakers are eyeing federal legislation to combat price
    gouging in the wake of COVID-19, but one retail group tells
    Congress that market forces, not price gouging, are increasing
    prices. (IHS Markit Food and Agricultural Policy’s Joan
    Murphy
    )

    • At a February 2 hearing of a House Energy and Commerce
      subcommittee, Democrats and Republicans faced off on the need for
      the first federal price-gouging law, with Republicans accusing
      Democrats of intentionally deflecting the issue of rising inflation
      with heightened concerns over price gouging.
    • “Corporate greed is motivating some large companies to use the
      pandemic and supply chain issues as an excuse to raise prices
      simply because they can,” said House Energy and Commerce Chairman
      Frank Pallone, Jr. (D-N.J.) at the hearing. “The pandemic has been
      a windfall for the largest companies and their investors.”
    • “Americans are feeling the pain of a year of one-party rule.
      President [Joe] Biden’s inflation has hit a 40-year high,” said
      Rep. Cathy McMorris Rodgers (R-Wash.). “[Democrats are] running the
      show, and we see record spending, we see top-down mandates,
      COVID-19 restrictions, surging energy costs that are making rising
      prices and empty shelves worse. Unfortunately, today is a
      deliberate diversion on the root issues.”
    • No federal price gouging law To date, there is no federal law
      that expressly bans price gouging, and while the Federal Trade
      Commission (FTC) can pursue unfair and deceptive acts, the agency
      lacks authority to obtain civil penalties, the committee’s
      Democrats said. More than three dozen states have authority to
      pursue price-gouging cases during emergencies or disasters, but the
      definition of an emergency varies widely.
    • Under the bill, COVID-19 Price Gouging Prevention Act (H.R.
      675), FTC would be granted authority to seek civil penalties from
      those price gouging during the COVID-19 pandemic, and state
      attorneys general would also be able to enforce the legislation
      without losing any of their existing authority under state
      law.
  15. Mexico’s Alpek plans to acquire Oman-based polyethylene
    terephthalate (PET) producer OCTAL, Alpek announced on Tuesday. The
    Mexican petrochemical producer intends to purchase 100% of OCTAL’s
    shares for $620 million, subject to regulatory approval, by H1 this
    year. (IHS Markit Chemical Market Advisory Service’s Chuan Ong)

    • Alpek sees value in OCTAL’s PET sheet business, which has the
      potential to grow 6.4% annually through 2025, amid a demand for
      100% recyclable packaging.
    • OCTAL’s proprietary “DPET” technology is also attractive to
      Alpek, and can be deployed across its existing plants to save
      costs, on top of synergy savings from asset integration.
    • Alpek explained that OCTAL’s DPET technology produces PET
      sheets with a carbon dioxide footprint that is 25% lower than
      industry standards, an improvement to Alpek’s carbon intensity,
      helping Alpek reduce emissions in a transition to more sustainable
      packaging alternatives.
    • The Mexican company added that the acquisition will allow Alpek
      to benefit from projected strong global demand for PET resin, and
      will expand Alpek’s presence into the PET sheet and thermoforming
      industries.
    • Alpek splits its business into two segments – the polyester
      segment encompasses purified terephthalic acid (PTA), PET, recycled
      PET (rPET), and polyester fibres, while its plastics and chemicals
      segment includes polypropylene (PP), expandable styrenics, and
      other specialty and industrial chemicals.
    • According to Alpek, it is the largest rPET producer in the
      Americas, the third-largest expandable polystyrene (EPS)
      manufacturer worldwide, and the only producer of PP in Mexico.
    • OCTAL said its operations span four plants in Saudi Arabia, the
      U.S., and Oman, with the world’s largest single-location integrated
      PET producing site in Salalah, Oman.

Europe/Middle East/Africa

  1. All major European equity markets closed lower; Spain -0.3%, UK
    -0.7%, Italy -1.1%, France -1.5%, and Germany -1.6%.
  2. 10yr European govt bonds closed significantly lower; Germany
    +10bps, UK +12bps, France +14bps, Spain +15bps, and Italy
    +23bps.
  3. iTraxx-Europe closed +5bps/57bps and iTraxx-Europe
    +19bps/300bps.
  4. Brent crude closed +1.8%/$91.11 per barrel.
  5. The ECB’s press release following its February policy meeting
    was very similar to the December 2021 version, which was relatively
    dovish compared with those of other major central banks recently.
    The key elements of the ECB’s policy guidance remain unchanged, as
    follows (IHS Markit Economist Ken
    Wattret
    ):

    • Policy rates are expected to remain “at their present or lower
      levels” until the three inflation criteria introduced in July
      2021’s guidance are achieved.
    • Net asset purchases under the Pandemic Emergency Purchase
      Programme (PEPP) are being conducted at a slower pace in the first
      quarter of 2022. They will cease at the end of March.
    • The Governing Council intends to reinvest the principal
      payments from maturing securities purchased under the PEPP until at
      least the end of 2024.
    • Monthly net purchases under the Asset Purchase Programme (APP)
      will amount to EUR40 billion (USD46 billion) in the second quarter
      of 2022 and EUR30 billion in the third quarter. From October
      onwards, they will be maintained at a monthly pace of EUR20 billion
      for as long as necessary. Net purchases are expected to end
      “shortly before” policy rates start to rise.
    • Principal payments from maturing securities purchased under the
      APP will be reinvested for an extended period past the date when
      policy rates start to rise.
    • Under stressed conditions, flexibility will remain an element
      of monetary policy whenever threats to monetary policy transmission
      jeopardize the attainment of price stability. Net purchases under
      the PEPP could be resumed, if necessary.
    • The Governing Council stands ready to adjust all of its
      instruments, as appropriate, to ensure that inflation stabilizes at
      its 2% target over the medium term.
    • There was one subtle but significant change to the latter
      element of the guidance above. While it was reiterated that the ECB
      stands ready to adjust all of its instruments, the prior reference
      to “in either direction” was removed, implying a tightening bias
      (although the easing bias for policy rates was retained).
      Furthermore, the press conference was littered with indications
      that the ECB’s assessment of inflation prospects and risks had
      changed, potentially materially.
  6. Continental has unveiled a potentially key piece of technology
    in the acceleration of the electrification of the global vehicle
    parc in the form of a robotic battery electric vehicle (BEV)
    charging system, according to a company press statement.
    Continental is partnering on the new technology with startup
    Volterio; it became clear after discussions that they were both
    working on a similar solution simultaneously. Continental’s
    development and production service provider Continental Engineering
    Services (CES) will combine its own know-how and proprietary
    technology with Volterio’s; CES will also be able to meet all
    necessary certification criteria while developing the system to
    production maturity. The plan is for the first near
    production-ready system to be available this year. It will be
    demonstrated practically to OEMs and other potential customers
    before full series volume production begins in 2024, and Germany is
    planned as the production location. This robotized BEV charging
    system is potentially an exciting development for the speed of
    electrification in Europe and in other regions. As around half of
    the EU’s residents do not have access to a garage or driveway in
    which they can home charge a BEV, compelling home charging
    solutions for those consumers are needed. While this solution does
    not necessarily help those potential BEV owners who live in houses
    with no off-street parking, it could be easily rolled out in city
    centre parking garages and the kind of car parking spaces that are
    allocated to flat developments in Europe and elsewhere. There are
    also many potential benefits for the user. Unlike conventional
    charging stations, users no longer have to worry about handling
    heavy, potentially contaminated or rain-soaked charging cables in
    confined garages, while the system does not require very accurate
    parking – unlike aforementioned wireless charging infrastructure.
    (IHS Markit AutoIntelligence’s Tim Urquhart)
  7. Opel has been forced to take on temporary workers to cover for
    its employees that have been struck down by the Omicron variant of
    the COVID-19 virus as it looks to roll out the new Astra, according
    to a report by the Wirtschaftswoche newspaper. The temporary
    workers have been employed at Opel’s biggest plant location in
    Rüsselsheim (Germany), which is currently ramping up production of
    the company’s latest generation C-Car model. The newspaper report
    stated the employment agency Adecco was recruiting workers for
    production, final assembly and warehouse work. Customer deliveries
    of the new sixth-generation Astra began in January, and Opel has
    high hopes for a model that appears vastly improved over its
    predecessor. Astra production has been moved from Ellesmere Port
    (UK) back to the Rüsselsheim facility. Opel appears to be suffering
    as a result of the decision to cut 2,100 positions at the company
    between January 2020 and 2022 through allowing contracts to expire,
    early retirement and then not rehiring. IHS Markit forecasts that
    Astra production will increase from 121,000 units in 2021 to
    182,000 units. (IHS Markit AutoIntelligence’s Tim Urquhart)
  8. Dutch renewable-chemicals and polymers company Avantium expects
    to start constructing the world’s first commercial furan
    dicarboxylic acid (FDCA) plant this year, the company said last
    week. The company said that its shareholders gave the mandate to
    raise funds using both debt and equity to finance this flagship
    project. (IHS Markit Chemical Market Advisory Service’s Chuan Ong)

    • Avantium expects to begin construction of the FDCA plant around
      Q1 or afterwards within this year, and to complete works by
      2023.
    • This will enable it to commercially produce and launch its
      downstream polymer, polyethylene furanoate (PEF), by 2024, it
      said.
    • Tereos Cooperative will supply high fructose syrup as feedstock
      for Avantium’s FDCA plant.
    • This FDCA plant will be built in Delfzijl, a city within the
      province of Groningen in the Netherlands, with a nameplate capacity
      of 5,000 mt/year.
    • Avantium said its technology catalytically converts plant-based
      sugars into FDCA, which is then made into PEF, a novel
      polyester.
    • As a material, polyester most commonly refers to polyethylene
      terephthalate (PET), which is made using purified terephthalate
      acid (PTA) and monoethylene glycol (MEG).
    • Avantium’s PEF is 100% plant-based, 100% recyclable and
      degradable, with superior performance properties compared to
      current petroleum-based packaging materials, it said.
    • According to Avantium, it has partnered Mitsui, Toyobo, Alpla,
      Danone, Carlsberg, Paboco, BillerudKorsnäs, and R&F Chemical,
      to develop 100% plant-based PEF bottles and film.
  9. ElectReon, an Israel-based company specializing in inductive
    charging of electric vehicles (EVs), has announced plans to make
    its debut in the US market with the deployment of its wireless
    charging infrastructure in Detroit, Michigan, reports the Times of
    Israel. According to the source, ElectReon has won a bid to build
    an Electric Road System (ERS) on a public road in Detroit as part
    of a program called the Inductive Vehicle Charging Pilot announced
    by Michigan governor Gretchen Whitmer. The program aims to test
    electrified roads to promote the adoption of EVs and enhance
    environmental sustainability. Whitmer said, “As we aim to lead the
    future of mobility and electrification by boosting electric vehicle
    production and lowering consumer costs, a wireless in-road charging
    system is the next piece to the puzzle for sustainability.” The
    pilot scheme is intended to run in partnership with the Michigan
    Department of Transportation, which will provide USD1.9 million for
    the project. In the United States, Electreon will design, evaluate,
    test, and implement the electrified road, with the aim of making it
    operational by 2023 on a one-mile-long stretch of road in Detroit
    including dynamic and stationary wireless charging. (IHS Markit
    AutoIntelligence’s Tarun Thakur)
  10. Dubai-based Swvl Inc, a ride-sharing technology startup, has
    secured additional private investment in public equity (PIPE)
    financing from the European Bank for Reconstruction and Development
    and Teklas Ventures. This is related to the company’s proposed
    merger deal with a special-purpose acquisition company (SPAC),
    Queen’s Gambit Growth Capital. According to a company statement,
    the additional investment increases the amount of expected PIPE
    proceeds to USD121.5 million. Swvl plans to use the infused capital
    to fund its expansion efforts and technology platform, as well as
    to support its strategic growth initiatives. Swvl allows customers
    to book fixed-rate rides on buses and vans in its network. Its
    algorithms and technologies help make vehicles and routes more
    efficient. The company currently operates in 10 cities across six
    countries and makes more than 3 million trips a month. Last year,
    Swvl acquired a controlling stake in Latin American mass-transit
    company Viapool and agreed to buy on-demand bus service Shotl. (IHS
    Markit Automotive Mobility’s Surabhi Rajpal)

Asia-Pacific

  1. Major APAC equity markets closed mixed; South Korea +1.7%,
    Australia -0.1%, Japan -1.1%, and India -1.3%.
  2. Preliminary data show that Hong Kong SAR’s real GDP expanded by
    4.8% year on year (y/y) in the fourth quarter of 2021, decelerating
    from a 5.5% y/y expansion in the third quarter. It also marked the
    third quarter of deceleration after hitting an 8% y/y surge in the
    first quarter of 2021. For 2021 as a whole, real GDP climbed by
    6.4% y/y, reversing two straight years of contractions beginning in
    mid-2019. (IHS Markit Economist Ling-Wei
    Chung
    )

    • Domestic demand moderated somewhat in the fourth quarter of
      2021, as a substantial deceleration in fixed investment offset a
      still-robust expansion in consumer spending. Private consumption
      added 3.9 percentage points to fourth-quarter-2021 growth, and
      government consumption contributed 0.5 percentage point, but fixed
      investment came in flat. Meanwhile, net exports’ contribution to
      fourth-quarter-2021 growth turned positive, after falling in the
      previous two quarters as export growth outpaced import
      expansions.
    • Supported by robust external demand, merchandise exports
      continued to expand at a double-digit pace, albeit at a slower rate
      in the fourth quarter of last year. Exports of goods climbed by
      13.3% y/y, after expanding by 14.2% y/y in the third quarter. This
      compares with 20%-30% surges in the first and second quarters of
      2021. Exports to all major markets continued to climb at more than
      20% y/y in the last quarter, except Japan. In December 2021 alone,
      merchandise exports expanded by 24.8% y/y, similar to a 25% y/y
      jump in November 2021. The strong momentum came despite an
      unfavourable comparison base when merchandise exports began
      double-digit expansions during the same period in December
      2020.
    • Accounting for about 60% of total exports, shipments to
      mainland China climbed by 20.8% y/y in December 2021, accelerating
      from a 10-month low of 11.2% y/y growth in September 2021 amid
      power shortages there. In addition, the revivals in the regional
      economies continued to provide support, led by an 84% y/y surge in
      exports to India, a 52.2% y/y jump to Thailand, and a 46.2% y/y
      expansion to South Korea. In addition, shipments to the United
      States remained strong, rising by 19.9% y/y, albeit slowing from a
      32.2% y/y surge in November 2021. Shipments to Germany climbed by
      37.6% y/y, partly offsetting a mere 2.6% y/y gain in sales to the
      United Kingdom.
    • Sales of consumer durable goods increased by 5.1% y/y in
      December 2021, after gaining by just 1.5% y/y in November 2021, but
      still slowing substantially from a 29.9% y/y surge in October 2021.
      Within that, sales of vehicles expanded by 8.7% y/y and those of
      electrical products gained 5.5% y/y in December 2021. They helped
      offset a 4.1% y/y drop in furniture sales, higher than a 1% y/y
      fall in November 2021.
    • Online sales also jumped by 31.5% y/y in December 2021, as
      consumers turned to online shopping amid the impact of the
      pandemic, accelerating from a 28.2% y/y expansion in November 2021.
      Online sales accounted for 10.8% of total retail sales in December
      2021.
    • Concurrently, fixed investment came in flat, rising by a mere
      0.1% y/y in the fourth quarter of 2021, decelerating sharply from a
      13.1% y/y expansion in the third quarter. Although stable local
      outbreak conditions have provided support to business sentiment,
      confidence was nonetheless undermined by the continued correction
      in the local stock market.
  3. Hyundai’s premium Genesis brand is planning to open electric
    vehicle (EV) charging stations across South Korea, according to a
    company statement. The automaker has deployed two high-speed
    chargers at each of five locations: Genesis Gangnam, Genesis Suzy,
    Dongbu Hi-Tech Center, Nambu Hi-Tech Center, and Hyundai
    Motorstudio Goyang. Genesis also plans to operate a pilot project
    for wireless charging, a technology that can charge an EV by
    parking it on a charging pad installed on the floor. Genesis will
    install one wireless charger at each of the Genesis Gangnam,
    Genesis Suji, and Hyundai Motorstudio Goyang EV charging stations,
    as well as demonstrating wireless charging in conjunction with test
    drives of the GV60 at the Genesis Gangnam and Genesis Suji
    locations. By 2023, Genesis plans to expand and build about 75
    wireless chargers in collaboration with various partners. (IHS
    Markit AutoIntelligence’s Surabhi Rajpal)
  4. SsangYong will launch its first electric vehicle (EV), the
    Korando e-Motion sport utility vehicle (SUV), in South Korea on 4
    February. In the past three weeks, it has received preorders of
    3,500 units for it, reports Yonhap News Agency. It is equipped with
    LG Energy Solution’s 61.5 kWh lithium-ion battery and can travel up
    to 307 km on a single charge. The SUV costs between KRW39 million
    (USD32,000) and KRW46 million depending on options, and will be
    available at less than KRW30 million after the government subsidy
    is applied. (IHS Markit AutoIntelligence’s Surabhi Rajpal)
  5. India’s new budget for the fiscal year (FY) starting 1 April
    (FY 2022-23) proposes sharp increases in public capital expenditure
    (capex) but includes few measures to directly support private
    consumption and address rising unemployment, suggesting that the
    recovery will be increasingly led by public investment and
    spending. The budget targets a deficit of 6.4% of GDP, only
    marginally down from an estimated 6.9% of GDP in the current FY.
    (IHS Markit Economists Deepa
    Kumar
    and
    Hanna Luchnikava-Schorsch
    )

    • Finance Minister Nirmala Sitharaman on 1 February presented a
      budget for the FY starting April 2022 (FY 2022-23), bringing the
      proposed total spending to a record INR39.4 trillion (USD530
      billion) and targeting the central government fiscal deficit at
      6.4% of GDP. Indian states would be allowed to run deficits of up
      to 4% of GDP, potentially bringing the general government deficit
      to 10.4% of GDP.
    • The budget is expansionary and is seen as another stimulus
      budget to tackle the impact of the protracted COVID-19 virus
      pandemic that led to an economic contraction of 7.3% in FY 2020.
      The economy partially recovered in FY 2021 despite the severe
      second wave of infections at the start of the year, with real GDP
      growth estimated by IHS Markit at 8.1%.
    • Infrastructure investment will remain the focus of the
      government’s capital spending, with INR200 billion allocated for a
      highway expansion plan, in addition to large allocations for
      railways, airports, mass transport, waterways, and logistics
      infrastructure. The affordable housing scheme received INR480
      billion, while the running water, power (with a focus on renewable
      energy), and telecommunications sectors will also benefit from
      announced government schemes.
  6. Indian integrated electrical utility and power company Tata
    Power Limited has announced a strategic partnership with Apollo
    Tyres Limited for the deployment of public charging stations across
    India, reports Live Mint. As part of the agreement, Tata Power will
    deploy charging stations at 150 of Apollo Tyres’ commercial and
    passenger vehicle tire retail outlets to support electric vehicle
    (EV) charging for two- and four-wheelers. The charging stations
    will be accessible by customers visiting these outlets, and by the
    general public as well. Tata has also launched a mobile application
    called Tata Power EZ Charge to give its customers a simple and easy
    charging experience. The app helps users to locate EV charging
    stations as well as making bill payments online. (IHS Markit
    AutoIntelligence’s Tarun Thakur)
  7. Headline inflation picked up to 2.2% year on year (y/y) in
    January, putting it solidly within Bank Indonesia’s (BI)’s 2-4%
    inflation target range for the first time since May 2020. BI
    officials have started laying out monetary policy tightening
    expectations for the year ahead, and they indicate that inflation
    has to become more of an issue to trigger actual interest rate
    hikes. (IHS Markit Economist Bree
    Neff
    )

    • Headline inflation in Indonesia averaged 4.4% for the
      pre-pandemic years of 2014-19, therefore current inflation levels
      remain low in historical terms. Headline consumer price inflation
      has held under 2% y/y since June 2020 when COVID-19 containment
      measures were ramped up, triggering job losses and collapsed
      consumer demand.
    • Not only has the headline figure hit a pandemic high, but so
      has core inflation. The measure, which removes volatile food and
      energy prices, hit a 16-month high, pointing to a broader buildup
      in price pressures in the economy.
    • A government policy worsened the food, drinks, and tobacco
      inflation rate in January, while the government worked to mitigate
      other price pressures. A portion of the increase in this
      sub-component stemmed from a planned excise tax increase for
      cigarettes on 1 January. Concurrently, the government stepped in
      and announced a subsidy for cooking oil after its prices rose
      sharply in recent months. However, this proved insufficient, and at
      the end of January the government capped retail prices for cooking
      oil. On top of the price cap, the government announced a domestic
      market obligation for palm oil producers in late January to sell
      20% of their planned crude palm oil exports to the domestic market
      in order to help contain domestic cooking oil prices.




Posted 03 February 2022 by Chris Fenske, Head of Fixed Income Research, Americas

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