Daily Update: October 8, 2021

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.

Latin American economies had been forecast to contract due to the coronavirus. But the six largest countries in the region are surprising market observers and transitioning into a new normal of slow growth.

Average GDP in Argentina, Brazil, Chile, Colombia, Mexico, and Peru grew 0.1% in April-June, showcasing better-than-expected resiliency and export strength—and prompting S&P Global Ratings to accelerate its full-year GDP growth outlook for the Latin-American economies by half a percentage point, to 6.5%. The group shrunk 6.8% last year. Next year’s forecast remains unchanged, with S&P Global Ratings anticipating the region’s average growth rate to return near to its typical 2.5%.

“The region will return to its pre-COVID-19 GDP level in the first quarter of 2022 on average, meaning a generally slower recovery than most of the major economies in the globe,” S&P Global Ratings said in its fourth-quarter Latin America economic outlook. “However, by the end of 2022 the region on average will still be about 4% below its pre-pandemic GDP trend—the difference between actual GDP and where it would have been if it would have continued growing at the same average pace before the pandemic. Most of this 4% is output that will not be recovered and is mostly concentrated in the services sectors.”

Credit conditions are likewise improving alongside the better macroeconomic outlook, operating opportunities, and innovations. New structured finance issuance in the region during the first half of this year nearly doubled from last year’s period to total $10 billion in volume, according to S&P Global Ratings. 

But prices—of soybean products, fuels, and other commodities—are still soaring, according to S&P Global Platts. Price increases signal inflation pressure and warn of risks to come if they persist.

“Headline inflation across the region is above central bank targets, and in most cases inflation expectations for 2021 and 2022 are also above those levels. While temporary factors—such as the rapid rise in energy prices, supply-side disruptions, and the pass-through of weaker exchange rates on prices of imported goods—certainly play a role, core inflation is also rising rapidly,” S&P Global Ratings said in its outlook. “Core inflation in the region is already higher than its pre-pandemic level by two percentage points on average, and upside pressures will likely remain as the services sectors gradually reopen.”

Today is Friday, October 8, 2021, and here is today’s essential intelligence.

The Credit Cycle

Global Actions On Corporations, Sovereigns, International Public Finance, And Project Finance To Date In 2021

So far in 2021, there have been 512 issuers that have had a negative rating action and 1,451 issuers with a positive rating action. The largest percentage of rating actions has been due to an outlook revision to stable from positive. 

—Read the full report from S&P Global Ratings

A Practical Use Case of Textual Data Analysis on Credit Ratings Research

S&P Global Market Intelligence demonstrates the creation of a credit signal that can be used by risk managers to anticipate potential rating moves.

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

China RMBS Shielded From Evergrande Events

The residential mortgage-backed securities (RMBS) rated in China will not be affected by the likely default of China Evergrande Group, S&P Global Ratings said today. 

—Read the full report from S&P Global Ratings

ESG in the Time of COVID-19

Asia Weighs More Than Just CO2 Emissions In Pursuit Of Low-Carbon Crude

In a region where energy import costs have a big influence on overall financial strength of most developing economies, the common view is that Asia will be moving towards embracing low-carbon crudes at a much slower pace, compared to Europe or the Americas.

—Read the full article from S&P Global Platts

Global Hydrogen Trade Could Be Indexed To Natural Gas, Carbon: Saudi Aramco

Hydrogen could be traded on an index basis, linking to markets such as carbon and natural gas for applications in the power sector, Saudi Aramco Chief Technology Officer Ahmad Al Khowaiter said Oct. 7.

—Read the full article from S&P Global Platts

U.K. Seeks Industry Feedback For Low-Carbon Hydrogen Standard

The U.K.'s Department for Business, Energy, and Industrial Strategy is still answering key questions as it develops a low carbon hydrogen standard and how it would fund net-zero projects moving forward, the BEIS said Oct. 7 in a Q&A with industry stakeholders.

—Read the full article from S&P Global Platts

COP26 Must Deliver 'Rulebook' For Paris Agreement: Experts

The rapidly expanding global market for greenhouse gas emissions credits would benefit significantly from clear rules on how governments will account and trade greenhouse gas reductions — even as the industry-led market develops outside the UN process.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

Listen: How Have Panic Buying And The E10 Launch Impacted U.K. Gasoline And Diesel?

Car tanks may be running empty in the U.K. after panic buying at the pumps amid a lack of lorry drivers to bring supply from refineries and oil terminals to the retail stations, but what impact if any does this have on the broader gasoline and diesel markets?

—Listen and subscribe to Oil Markets, a podcast from S&P Global Platts

Oil Prices Far Above 'Equilibrium', At Risk Of Overheating: Russian Deputy Minister

Russia does not want the oil market to overheat and is aiming for global crude prices to settle long-term into a $45-$60/b range, deputy energy minister Pavel Sorokin said Oct. 7.

—Read the full article from S&P Global Platts

Beijing Likely To Continue Gasoline, Gasoil And Jet Fuel Exports Cut: Sources

Beijing is likely to continue to cut gasoline, gasoil, and jet fuel exports and eliminate them altogether by 2025 to ensure that the country meets its carbon emission peak target, said several sources with knowledge about the matter in the week to Oct. 6.

—Read the full article from S&P Global Platts

Struggling Coal Towns Must Transform As Energy Landscape Shifts

The town of Wayne, West Virginia., near the Kentucky border, knows something about transitioning coal workers to clean energy jobs. The non-profit Coalfield Development, housed in a retrofitted five-and-dime brick store downtown, has already retrained more than 1,400 people for jobs in industries with a more promising future than coal.

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

Written and compiled by Molly Mintz.