Daily Update: February 13, 2024

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Prices in Europe May Begin To Reflect Houthi Attacks

Attacks by Houthi rebels in Northern Yemen against ships in the Red Sea are beginning to have an impact on food, consumer goods and energy prices in Europe. The Red Sea and the Suez Canal form an important trade corridor facilitating commerce between much of Asia, the Middle East and Europe. Houthi attacks have had a limited impact on global trade in aggregate, but this impact has disproportionately affected European consumers. The response and credibility of the US in confronting this threat were addressed on the Platts Capitol Crude podcast in an interview with Brenda Shaffer, a foreign policy and international energy specialist and a professor at the US Naval Postgraduate School.

“The security situation is likely to escalate, with the US attempting to address these threats and potential attacks, not just on the Houthis’ ability to disrupt shipping but … potentially [attacks] on its sponsor … Iran,” Shaffer said. “The impact on energy flows depends on the geography. So, energy flows from the Middle East to Europe, which are not the majority of energy flows, … there’s already a price difference.”

According to S&P Global Commodity Insights, the freight cost for the Persian Gulf-Mediterranean route climbed to a four-month high in early February. Many owners of the standard Suezmax ships used on this route are refusing to transit the Red Sea, opting instead to take the lengthy and expensive trip around the Cape of Good Hope. The difference is already being seen in some oil markets, with shipments of crude to Europe declining in recent months. The challenge for oil exporters is that the cost of additional insurance on vessels using the Red Sea amounts to an extra $1 per barrel. 

The economic impact extends well beyond energy markets. The European furniture retail sector is heavily dependent on Asia for manufacturing. Seats, sofas, bedding and lighting are particularly affected by Red Sea shipping disruptions. Retailers are having to adapt to delays and are looking increasingly to reshoring options to avoid geopolitical impacts to trade. 

Delivery delays in Europe are also affecting food and construction materials, leading to slower supplier delivery times. UK manufacturers were the worst affected, with 12% of the survey panel seeing lead times deteriorate in January. Greek producers also saw delivery delays (9%), as did those in France and Germany (8%).

Despite these challenges, the worldwide Purchasing Managers' Index surveys compiled by S&P Global Market Intelligence indicate that the global slowdown in trade has begun to ease despite the Red Sea tensions. Manufacturing has continued to decline, with new export orders falling for the last 23 months. However, services improved for the first time since August 2023, leading some observers to wonder if global trade could soon return to growth.

Today is Tuesday, February 13, 2024, and here is today's essential intelligence.

Written by Nathan Hunt.

Economy

Emerging Markets Growth Accelerates At The Start Of 2024

A third consecutive monthly acceleration in global output growth was supported by faster emerging market expansion while developed markets also returned to growth for the first time in six months. Overall, emerging markets continued to lead growth at the start of the year, with improvements seen in India and Brazil, while mainland China and Russia continued to see steady expansions.

—Read the article from S&P Global Market Intelligence

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Capital Markets

Secondary Markets: Private Credit In The Spotlight

The interest rate normalization in recent years has dramatically changed credit market dynamics, slowing down the previously red-hot public markets and giving the private markets a chance to take center stage. It has also forced market participants to go back to the basics and focus on fundamentals. With the end of hyper liquid markets distorting the investment process, it is now time more than ever to buckle down, read the fine print and analyze the risks.

—Read the report from S&P Global Ratings

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Global Trade

Brazil Ferrous Scrap Exports Reach Record High In 2023 Amid India Steel Boom

Brazil set a record high in ferrous scrap export volumes in 2023, with about 800,000 mt of material flowing abroad, more than doubling the 369,305 mt recorded in 2022, according to latest customs' data analyzed by S&P Global Commodity Insights. India emerged as the primary destination in 2023, taking 63%, or 501,744 mt, of total shipments, surpassing Bangladesh, a traditional destination for Brazilian material, by 182%.

—Read the article from S&P Global Commodity Insights

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Sustainability

The S&P 500 ESG Index Turns 5!

The S&P 500® ESG Index celebrated its fifth birthday on Jan. 28, 2024. Over the past five years, the index has become an important piece of the sustainable indexing puzzle for investors looking to leverage the strength of the S&P 500 while incorporating meaningful and measurable sustainability-focused enhancements.

—Read the article from S&P Dow Jones Indices

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Energy & Commodities

OPEC+ Output Sees Biggest Drop In Six Months, But Short Of Pledged Cuts: Platts Survey

OPEC+ crude output fell 340,000 b/d in January, the steepest drop in six months, as some members implemented voluntary cuts and protesters shut down Libya's largest field for more than two weeks, the latest Platts survey from S&P Global Commodity Insights found.

—Read the article from S&P Global Commodity Insights

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Technology & Media

Listen: Next In Tech | Episode 153: Smart Cities

While visions of smart cities might conjure up flying cars and robot delivery, the reality is that many are leveraging digitization today with significant impacts on a smaller scale. Analyst Zoë Roth looks at what’s going on today and the potential for the future with host Eric Hanselman. Digital infrastructure is a key foundation, but effective data management is needed to develop the full potential of smart cities.

—Listen and subscribe to Next in Tech, a podcast from S&P Global Market Intelligence

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