Daily Update: December 16, 2020

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In a year in which multiple sectors have suffered, none have perhaps fared worse than retail. The sector’s annus horribilis threatens to get worse before it gets better. As COVID-19 infection rates climb in most non-Asian countries and lockdowns increase in severity around the world, all while vaccines are months or a year away from being ubiquitous enough to provide herd immunity, a simple trip to the store remains fraught with anxiety.

Traditionally, the last few months of the year are a time when retailers are hiring to handle holiday traffic. This year, the U.S. retail trade shed 34,700 jobs in November, down 0.23% from October. Retail employment in the country is down 550,000 jobs below its February level.

In the U.K., major high street retailers such as Debenhams, Topshop, and Miss Selfridge have fallen into administration—a form of insolvency that protects the parent companies from creditors. No fewer than 52 medium or large non-food retailers in the country have gone into administration or liquidation this year, according to the U.K. Center for Retail Research.

"With federal assistance and forbearance opportunities set to expire at year-end, coupled with increasingly onerous restrictions and lockdown measures as a result of a rapidly rising number of COVID-19 cases, further job losses and business closures are expected, painting an increasingly difficult scenario for households and workers," Lindsey Piegza, chief economist at Stifel, told S&P Global Market Intelligence.

Members of the incoming Biden Administration, set to take over on Jan. 20, have signaled they intend to institute new COVID-19 safety rules for retailers. Safety measures under consideration could include enforcing six-foot distances between employees, providing protective equipment to workers, and allowing time for workers to wash hands. Paid leave for workers that have been exposed has also been proposed.

However, the safety measures may provide an additional burden to already struggling retailers. "You're going to have businesses that are too small to comply with new regulations or too small to have the ability to weather COVID," Ed Mills, a Washington policy analyst for the financial services firm Raymond James, told S&P Global Market Intelligence.

There may be light at the end of the tunnel for retailers that can hold on long enough to benefit from the recovery, according to S&P Global Ratings’ annual report on the retail and restaurant industry’s top trends for 2021. “We believe consumers will continue current spending patterns into the first half of 2021, when we expect a vaccine will be widely available. Then we expect the shift of wallet back to experiences to occur gradually over the remainder of the year and into 2022,” the report said.

Many of the behaviors ingrained in the year of COVID-19 are likely to remain after masks and restrictions gradually fade into the past. Retailers that have adopted consumer-friendly models such as click-and-collect, curbside pick-up and delivery, and social commerce will be in a stronger competitive position.

Today is Wednesday, December 16, 2020, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Economic Research: Bang For The Buck: How U.S. Fiscal Stimulus Could Benefit The Recovery

With an average fiscal multiplier, the U.S. economy reaches its pre-pandemic GDP level by third-quarter 2021 in a $1 trillion stimulus scenario and by second-quarter 2021 with $1.5 trillion; without stimulus, GDP does not reach pre-pandemic levels until 2022 at earliest.

—Read the full report from S&P Global Ratings

Biden Administration Facing Déjà Vu Moment As Lofty Goals Meet Economic Crisis

For the incoming Biden administration's economic team, 2021 may be looking a lot like 2009. In 2009, it was the aftermath of the global financial crisis that confronted the Obama administration; this time it will be the ongoing coronavirus pandemic and the subsequent recovery as vaccines are rolled out that stands in the way of U.S. President-elect Joe Biden and his ambitions for economic reform.

—Read the full article from S&P Global Market Intelligence

GIC-Backed Justco Sees Rising Demand From Enterprises For Coworking Space

JustCo (Singapore) Pte. Ltd., a coworking spaces provider backed by Singapore's sovereign wealth fund GIC Pte. Ltd., is seeing "tremendous growth" in the demand for flexible working spaces, with enterprise customers now leading, thanks to a shift in the way people may work following the coronavirus pandemic. Accordingly, companies are rethinking their real estate strategies and shifting to more hybrid work models.

—Read the full article from S&P Global Market Intelligence

Warranted Optimism: Sentiment vs. Supply Chains

Executives have become increasingly positive in their statements in the most recent earnings conference call season. The improving sentiment can be confirmed by observing changes in supply chain activity. The relationship between improved management sentiment and increased activity can be seen in the Industrials and Consumer Discretionary sectors.

—Read the full article from S&P Global Market Intelligence

The Future of Credit

U.S. Bankruptcies Surpass 600 In 2020 As Coronavirus-Era Filings Keep Climbing

U.S. corporate bankruptcy filings continue to increase during the coronavirus crisis as 18 new companies joined the list of 2020 bankruptcies in the last two weeks, according to an S&P Global Market Intelligence analysis.

—Read the full article from S&P Global Market Intelligence

Credit FAQ: Mexican States And Municipalities Will Face A Tall Order In 2021

The COVID-19 pandemic has heightened fiscal pressures on Mexican subnational governments, while the number of negative rating actions by S&P Global Ratings on these entities has increased. S&P Global Ratings believes the ability of rated local and regional governments (LRGs) to enhance their financial management policies and medium-term planning capacity will enable them to avoid further slippages in 2021 amid an incipient economic recovery.

—Read the full report from S&P Global Ratings

Banking Sector Under Pressure

Amid Buy-Now-Pay-Later Boom, Could Banks Still Get In On The Market?

With the buy-now-pay-later market expected to grow almost 400% by 2025, incumbent lenders that still rely on traditional credit cards and cumbersome financing methods are set to lose out to the likes of Klarna. Banks may have even more cause for concern as these new players could capitalize on their well-recognized brands to move into other financial services.

—Read the full article from S&P Global Market Intelligence

Delayed Lebanese Bank Earnings Reveal Extent Of Country's Woes

Lebanese banks' long-awaited 2020 earnings statements reveal the disastrous consequences — for shareholders and customers alike — of their reliance on investing in government debt to make profits.
—Read the full article from S&P Global Market Intelligence

Technology & Innovation

Facebook To 'Tread Very Carefully' In M&A Space Amid Antitrust Woes – Analysts

Facebook Inc.'s latest legal challenge from the U.S. Federal Trade Commission and a group of attorneys general could have the social platform thinking twice before buying up any further potential competitors, analysts say.

—Read the full article from S&P Global Market Intelligence

Selling DIRECTV May Prove Crucial To AT&T's 5G Strategy

AT&T Inc. has sold more than $10 billion in assets over the past two years, but analysts say more cash is needed to fund the company's 5G ambitions.

—Read the full article from S&P Global Market Intelligence

Global Cable Operator Survey: Broadband Demand Drives Headend, Spectrum Upgrades

Cable operators are firmly committed to both network equipment upgrades and to leveraging additional spectrum moving forward, according to a new Kagan global survey of 101 cable operators serving approximately 200 million fixed broadband subscribers. The driving force for cable network transitions and associated equipment upgrades remains escalating consumer demand for bandwidth, hence the increasing availability of gigabit broadband service.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Companies Expand Family-Friendly Policies, But Focus Favors Parents Over Caregivers

Many institutions have responded to the pandemic by increasingly offering more flexible working arrangements for their employees. Companies also recognize that meeting employees’ needs supports their bottom lines, and offering more family-friendly benefits tends to produce higher returns. S&P Global, in partnership with AARP, examined Corporate America’s family-leave policies by analyzing the relationship between family-friendly benefits, turnover, and company performance—since the U.S. private sector has largely taken the lead in such policies. While some federal paid leave mandates have been introduced in the U.S. since the pandemic began, these mandates may not be long-term and don’t apply to the largest companies in America.

—Read the full report from S&P Global

The Future of Energy & Commodities

Infographic: LNG Price Bonanza: JKM Spot Price Rises More Than Six-Fold

LNG trade in 2020 has remained fairly resilient compared with other energy commodities, with single-digit year-on-year growth expected despite the impact of COVID-19 in the spring. Since May, when the JKM spot price bottomed out below $2/MMBtu due to oversupply, the market has enjoyed a sustained rally, the JKM increasing more than six-fold.

—Read the full article from S&P Global Platts

Oil Demand To Stay Weak Amid Uncertainty Over COVID-19 Vaccine Availability: IEA

The International Energy Agency modestly cuts its oil demand estimates for 2020 and 2021 despite a recent rally in crude futures, as the looming uncertainty over the efficacy, availability, and deployment of COVID-19 vaccines, will keep oil demand weak in the short term.

—Read the full article from S&P Global Platts

FEATURE: European Transportation Fuels Face Uneven Road To Recovery

Demand for transportation fuels in Europe should increase as coronavirus vaccines boost road use during 2021, but a lack of clarity on the mass rollout means market participants will likely continue to negotiate smaller volumes for next year's term contracts for now.

—Read the full article from S&P Global Platts

EC Proposes Excluding Gas Projects From PCI Funding, Focus On Hydrogen

The European Commission Dec. 15 published its proposals to reform regulation covering energy infrastructure projects that are eligible for financial support, including a plan to exclude natural gas infrastructure.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.