Daily Update: September 9, 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.

Extreme weather events, which are increasing in frequency and severity as climate change worsens, typically have devasting implications in the immediate term. But the damage to be dealt with in the aftermath of such incidents can often be prolonged and have more detrimental outcomes—most recently evidenced now that Hurricane Ida has passed through the Southern and Northeastern U.S.

When Ida made its initial landfall in Louisiana and subsequently continued into New York and New Jersey, millions of people lost power and tens of oil, gas, and petrochemical companies in one of the country’s most critical energy centers suspended operations. But even after the storm passed, the outlook remains clouded for both communities and market participants. Preliminary losses estimated at roughly $25 billion but may take months to fully evaluate.

In the medium-term, many will remain without power or wireless access for weeks, with nearly 440,000 Louisiana electricity customers still offline as Sept. 7, according to S&P Global Platts. Seventy-nine percent of oil output hasn’t recovered, and energy prices are rising. Damage assessments to physical oil and gas assets are still underway. Trade disruptions, affecting coal, liquified natural gas, grains, and other commodities have the potential to reach as far as Japan.

After suffering 22 extreme weather and climate-related disasters, each with losses greater than $1 billion in 2020, according to the National Oceanic and Atmospheric Administration, many U.S. lawmakers and energy providers are seeking urgent action to make energy grids more resilient and to safeguard companies and communities alike from compounding climate risk as much as possible.

“Mother Nature is still the undisputed, undefeated, heavyweight champion of the world … We respect her. We try to create resiliency around it. That is the nature of our capital program. But this one brought a really devastating punch to the fight,” Rod West, group president of utility operations for Entergy, the largest utility serving the Louisiana area, told S&P Global Market Intelligence. "The truth of the matter is we've been here before," he added, in reference to Hurricane Ida's landfall on the 16^th anniversary of 2005’s Hurricane Katrina. "While that was a water event, this is a wind event."

Today is Thursday, September 9, 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

The number of rating actions increased in August and through Sept. 3, with positive rating actions far outpacing negative ones. The downgrade ratio (downgrades as a percentage of total rating actions) declined further in August 2021, as there were only 26 downgrades compared with 53 upgrades. So far in 2021, there have been 474 issuers that have had a negative rating action and 1,352 issuers with a positive rating action.

—Read the full report from S&P Global Ratings

Market Dynamics

Feature: Rising Wheat Prices Make Pasta And Bread Expensive

With concerns over tightening wheat supply across major producers, end products such as bread and pasta in importing nations are becoming costlier. Apart from a likely decline in supply, export regulations imposed by countries like Russia and Belarus are also seen supporting wheat prices.

—Read the full article from S&P Global Platts

Oil Prices To Continue To Fall As Pandemic Worries Slow Global Oil Demand Growth: EIA

With no clear end in sight to the pandemic and concerns growing over the spread of the delta variant, market concerns about oil demand impacts are fostering continued declines in crude oil prices, the U.S. Energy Information Administration said Sept. 8 in its latest Short-Term Energy Outlook.

—Read the full article from S&P Global Platts

Introducing the S&P Multi-Asset Dynamic Inflation Strategy Index – Part 1

Currently, the risk of inflation centers on whether the post-pandemic recovery will be merely reflationary or truly inflationary. It may be difficult for market participants to assign a probability to a sustained period of inflation and to adapt portfolio construction, should the probability be sufficiently high. For an investor seeking protection against rising or high inflation, there is no “one-size-fits-all” solution—the portfolio must dynamically adjust to changes in the market environment, and this is exactly what the S&P Multi-Asset Dynamic Inflation Strategy Index is designed to do.

—Read the full article from S&P Dow Jones Indices

Banking Industry Under Pressure

European Banks Able To Cope With Bad Loans, As UK Banks Release Provisions

Banks across Europe set aside lower provisions for potential loan losses in the second quarter, with British banks booking significant reversals, and the risk of bad loans piling up is manageable, according to analysts. Twelve of the 25 largest banks in Europe booked reversals of provisions in the second quarter, meaning their overall funds to account for bad loans shrank.

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

Chinese Banks May Raise More Tier 2 Debt To Bolster Capital Amid Uncertainties

Chinese banks may sell more Tier 2 bonds through the year to strengthen their capital levels, after an issuance by the nation's second-largest lender pushed aggregate fundraising by Asia-Pacific banks to the highest monthly level in four months in August.

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

Technology & Media

Credit FAQ: How Could Cyber Risks Affect Structured Finance Transactions?

In S&P Global Ratings’ view, securitizations have lower direct exposure to cyber events than non-special-purpose entities, such as corporates and financial institutions. However, the potential negative credit impact following a cyberattack could be more pronounced given the limited resources available to securitizations. Many of the structural features already in place to ensure operational continuity in structured finance transactions have positive spill-over effects on cyber readiness. These include cash reserves to address liquidity risks, performance triggers that may change the priority of payments, and replacement provisions for key transaction parties who may become materially affected by a cyber event.

—Read the full report from S&P Global Ratings

Antenna Retailer Petitions Against Gray-Meredith Merger Over Ad Policy

A battle is brewing between an over-the-air antenna retailer and a broadcast station owner, with a pending multibillion-dollar merger hanging in the balance.

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

As More States Approve Sports Betting, Record 45M Will Bet On NFL Games In 2021

With more states launching legalized sports betting operations, a record number of Americans are likely to make a wager during the upcoming NFL season. Roughly 45.2 million Americans may place a bet on the nation's most popular sport in 2021, a 36.2% rise from last season, according to a study conducted for the American Gaming Association.

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

ESG in the Time of COVID-19

European Offshore Wind Will Continue To Lead Global Growth

S&P Global Ratings sees even more growth potential in offshore wind than last year, notably from new European environmental targets aiming at upping installed capacity to more than 100 GW by 2030 from 25 GW today. To achieve carbon neutrality in 2050, Europe may need to install at least 400 GW more of capacity, which can only happen with floating offshore wind.

—Read the full report from S&P Global Ratings

As Congress Drafts Budget Bill, Dozens Of Climate Advocates Seek Clean Energy Incentives

Dozens of clean energy trade groups and conservation organizations appealed to the US House Ways and Means Committee to include several incentives for renewable energy and storage technologies in the forthcoming budget bill.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities 

U.S.-Iran Nuclear Talks Enter 'Make-Or-Break' Month As 1.7 Mil B/D Hangs In Balance

The Biden administration appears to be increasing the urgency for reviving the Iran nuclear deal after talks have languished for months and as 1.7 million b/d in oil supply expected by end-2022 hangs in the balance.

—Read the full article from S&P Global Platts

Security Incidents Surge In 2021 But Oil Market Insulated From High Spare Capacity

Security incidents targeting oil facilities, pipelines and tankers have been on a steep upward trend in 2021, according to data compiled by S&P Global Platts. Security events – such as physical attacks on petroleum infrastructure, or shipping – in the Persian Gulf and the Arabian Peninsula region have tripled on an annualized basis since 2017, according to data compiled in the Platts Oil Security Sentinel.

—Read the full article from S&P Global Platts

Polymer’s Long-Term Demand Prospects Sharpens Potential Role For Chemical Feedstocks

The emerging market for alternatives to virgin polymer feedstocks is as dynamic as ever. For the broader oil industry, understanding the drivers that underpin plastics are as crucial. Over the past two decades, the petrochemical sector accounted for 40% of all net oil demand growth. But industry views vary on whether or not petchems will continue to buoy oil demand growth in the long-term, given the growth potential of alternative feedstocks

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.