Daily Update: December 22, 2020

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The pandemic is taking different shapes in  the U.K. and U.S.—two countries that are about to undergo dramatic political transformations.

On Dec. 16, U.K. Prime Minister Boris Johnson promised the public that he would rescind some coronavirus containment measures for the days surrounding the Christmas holidays so families could gather. However, three days later, the prime minister announced strict lockdown restrictions for London and southeast England on Sunday due to a variant mutation of the coronavirus dubbed “B.1.1.7,” which is believed by scientists to be  50-70% more transmissible than the original.

In response, 40 nations across Europe and beyond closed their borders on Monday to British travelers, cancelled flights and trains, and even paused freight deliveries at ports—leaving some individuals stranded and disrupting essential trade routes. Thousands of European truck drivers are currently stuck on the British side of the U.K.-France border and government officials are warning that the U.K.’s fresh fruit supply could diminish by the end of the week. However, the U.K.’s oil and container shipments, including crude oil loadings, are continuing as normal and have not been affected, port and oil company officials told S&P Global Platts yesterday.

The European Commission encouraged EU states to reopen their borders with the U.K. to allow for freedom of essential movement. Leaders are expected to meet today to discuss adopting a streamlined approach to border restrictions. “Blanket travel bans should not prevent thousands of EU and U.K. citizens from returning to their homes,” Brussels said today, adding that “flight and train bans should be discontinued given the need to ensure essential travel and avoid supply chain disruptions.”

The move comes roughly two weeks ahead of the end of the Brexit transition period. Observers have expressed that Prime Minster Johnson’s sudden lockdown may complicate the country’s trade talks with the EU and make it nearly impossible for the U.K. Parliament to review a deal ahead of the Dec. 31 deadline.  The closures of the Port of Dover and the Eurotunnel will likely worsen the already-present logistics congestion and supply chain disruptions previously caused by pre-Brexit stockpiling, according to Panjiva, part of S&P Global Market Intelligence.

In the U.S., after months of stalemated discussions, Congress passed on Dec. 21 a $900 billion stimulus package that will provide $284 billion to bring back the Small Business Administration’s  Paycheck Protection  Program, $25 billion for eviction moratoriums and rental assistance aid, an increase of $300 in weekly unemployment benefits,  and direct payments of $600 to millions of Americans  who meet income requirements.

Beyond provisions prioritizing the pandemic, the 5,600-page bipartisan spending package includes the Energy Act of 2020, which outlines $35.2 billion for energy provisions that lawmakers have sought for years like tax credits for renewable energy generation and federal spending for energy research, development, and commercialization, according to S&P Global Market Intelligence. 

“I applaud this relief package, but our work is far from over. Starting in the new year, Congress will need to immediately get to work on support for our COVID-19 plan,” President-elect Joe Biden, who will be inaugurated on Jan 20., said Dec. 21 on Twitter. “My message to everyone out there struggling right now: help is on the way.”

While the passage of the package was celebrated, many criticized the deal as being too little in size and arriving too late in the pandemic. This latest package is less than half the size of the stimulus passed in March, which totaled $2.2 trillion.

“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,” Beth Ann Bovino, Chief U.S. Economist at S&P Global Economics, said in a report earlier this month analyzing outcomes of three potential stimulus packages. “The emergency pandemic stimulus is meant to extend the bridge so that the U.S. economy can get to the other side of the recovery. The stimulus would help stabilize the health of the American people and the American economy. But more may be needed to bring the economy back to full health.”

Ms. Bovino sees “a revival of public infrastructure spending relative to GDP, to levels seen in the mid-20th century infrastructure investment … as one way to get the U.S. back on track once COVID-19 makes its exit, and it may even help stave off the virus' next attack.”

Today is Tuesday, December 22, 2020, and here is today’s essential intelligence.

The Future of Credit

Emerging Markets Monthly Highlights: A Brighter 2021, From Afar

Recovery prospects look brighter for 2021, but the sequence of the recovery matters. The recent endorsement of the COVID-19 vaccine in the U.S. and other countries supports a potentially faster economic recovery in 2021. However, the vaccine still needs to be effectively distributed and immunization needs to take place before the pandemic fades.

—Read the full report from S&P Global Ratings

Latin American 2021 Corporate Credit Outlook: A Year Of Varying Recovery

Economies in Latin America are picking up steam, but they remain vulnerable to setbacks due to the fragility of the recovery and the fact that governments don’t have much room for additional fiscal stimulus if a second wave occurs.

—Read the full report from S&P Global Ratings

COVID-19 Crisis Stresses UK Student Accommodation's Reliance On Foreign Students

Having experienced one of the world's more fervent bouts of country-love in recent years, the U.K. has been given more reason than most to reflect on its strong ties to the rest of the world during a health crisis that has ripped mercilessly through countries, continents and economies. Its world-class university system, and the student accommodation sector that services it, offers a perfect example of those bonds.

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

Banking Sectors Under Pressure

MEA banking stories to watch in 2021: Green financing, Lebanon, Kenya

Green sukuk and bond issuance in the Middle East and North Africa region will likely increase in 2021 as governments and state-linked companies seek to diversify their financing sources and take advantage of falling pricing.

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

Technology & Innovation

Utilities vulnerable to cyberattack even if they did not use SolarWinds software

U.S. electric utility companies may be vulnerable to a Russian-orchestrated cyberattack even if they were not direct clients of the company whose tainted software was used to breach thousands of networks, according to cybersecurity experts.

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

ESG in the Time of COVID-19

Commodities 2021: US renewable generation growth sees new leaders rising to the occasion

Renewable generation across the US has been steadily rising over the years and shows no signs of slowing in 2021, which would tend to suppress wholesale power prices, but the latest stimulus bill could mix things up before the year is over.

—Read the full report from S&P Global Platts

Q3: U.S. Solar and Wind Power by the Numbers

Despite the COVID-19 pandemic, the U.S. solar power industry saw another strong Q3, adding 1,158.99 MW of new utility-scale capacity. 2020 might well surpass 2019 in terms of capacity additions. In 2019, 5,439 MW of solar power was added, compared to 5,285 MW through the third quarter in 2020.

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

3 New England states plus DC commit to launch new transportation carbon market

The governors of Massachusetts, Connecticut, Rhode Island and the mayor of Washington, D.C., have formally agreed to create and participate in a 10-year regional transportation-focused carbon market.

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

The Growing Importance of Data Centers for European & U.S. Renewable Projects

The market for high growth power demand areas in Europe and the U.S. is tight. Data center growth in a region can justify demand growth assumptions and ensure a renewable project has the right economics to succeed.

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

The Future of Energy & Commodities

Watch: Market Movers Americas, Dec 21-25: Oil production, climate policy to be key energy themes in 2021

In this week's Market Movers, we will be taking a look ahead to 2021 and some of the themes S&P Global Platts sees driving commodity markets in the Americas. Oil fundamentals: Middle class to remain under pressure. Permian Basin: Lower production to continue in 2021. Climate policy: Biden's picks show focus on clean energy future. Natural gas: Production weakness to keep Henry Hub elevated. Coal: Prices to get a boost from natural gas market

—Watch and share this Market Movers video from S&P Global Platts

FEATURE: An asymmetrical oil market searches for balance

The physical oil market is responding unevenly to the recent rally in crude futures, with a healthy dose of skepticism and sanguinity.

—Read the full report from S&P Global Platts

Commodity Tracker: 5 charts to watch in 2021

Where are the bright spots and risk areas for commodities in the coming year? In the final Tracker of 2020, S&P Global Platts editors and analysts round up some of the biggest trends, from oil supply and demand to China's resilient steel sector, as well as the outlook for global LNG and container freight markets.

—Read the full report from S&P Global Platts

Written and compiled by Molly Mintz.