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Daily Update: November 9, 2021


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Daily Update: November 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.

The Federal Reserve is facing a series of shakeups, including potential changes to the central bank’s leadership, that could have sweeping implications for the U.S. economy at large.

Last week, the Federal Open Market Committee approved a long-awaited plan to taper its $120 billion in securities purchases by $15 billion per month, prospectively to end by June. However, Fed Chairman Jay Powell said afterward, on Nov. 3, that the plan "does not imply any direct signal regarding our interest rate policy," adding that "we think that we can be patient" in exploring any shift from maintaining the benchmark federal funds rate near 0%, according to S&P Global Market Intelligence. But weak earnings alongside prolonged inflation and labor shortages could force the Fed’s hand sooner to further change monetary policy.

"If inflation expectations continue to rise in the first two to three months of 2022, the chance of an accelerated tapering and sooner than expected hike will get very real," Tom Essaye, a trader and founder of the research firm The Sevens Report, told S&P Global Market Intelligence. 

A slew of openings at the Fed has created an opportunity for U.S. President Joe Biden to reshape the central bank.

Boston Fed President Eric Rosengren and Dallas Fed President Rob Kaplan retired after stock trades last year came under scrutiny for ethical concerns, and this week Fed Governor Randal Quarles announced that he’s resigning from his dual governor and bank supervision vice chairman positions effectively by the end of December. Alongside determining nominations for the Fed’s Board of Governors, the Biden Administration is weighing whether to renew or replace Jay Powell as chair.

Market participants are divided on what direction would be best for the Fed, according to S&P Global Market Intelligence.

"The Federal Reserve is in danger of becoming more and more political, and we should be worried about that," Michael Hewson, chief market analyst at CMC Markets, told S&P Global Market Intelligence. 

"Too seldom mentioned in discussions of Fed independence is the need for it to be independent of Wall Street and the industry in general, and the Fed trading and ethics scandal is a symptom of avoiding this issue," Carter Dougherty, a spokesman for the financial market watchdog Americans for Financial Reform, told S&P Global Market Intelligence. Fed appointees generate "perhaps the most market-sensitive information in the world. If we want to ensure that the Fed is perceived as making decisions in the public interest, and only in the public interest, then we need to curb the revolving door between the Fed and Wall Street,” he added.

"I expect nominees to be dovish and racially diverse, likely with somewhat non-traditional backgrounds," Michael Crook, deputy chief investment officer with Mill Creek Capital Advisors, told S&P Global Market Intelligence. "Around the dovishness, I believe it will manifest as fully embracing the Fed's new operating framework."

Today is Tuesday, November 9, 2021, and here is today’s essential intelligence.

Market Dynamics

Insurance Industry's IPO Count, Offering Totals Hit Multiyear Highs Through Q3

Global insurance and insurtech companies raised about $5.39 billion from IPOs in the first nine months of 2021, the largest amount it has raised through three quarters in at least five years, according to an S&P Global Market Intelligence analysis. The insurance industry also recorded the highest IPO count in that time period since at least 2015, with 19 IPOs through September.

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

Banking Industry Under Pressure

Margin, Provision Risk To Weigh On Top Chinese Banks' Earnings In Q4

Earnings at major Chinese banks are set to grow more slowly in the fourth quarter as a cooling economy is weighing on lending margins and asset quality. The combined net profit at the four largest banks—Industrial & Commercial Bank of China Ltd., or ICBC, China Construction Bank Corp., Agricultural Bank of China Ltd., and Bank of China Ltd.—is expected to grow by a low- to mid-single digit for the full year 2021, after rising 11.89% for the first nine months from a year earlier.

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

Metro Bank Could Be 'Deep Value Play' For Carlyle – Goodbody

U.K. challenger bank Metro Bank’s share price surged on Nov. 4 after it confirmed that it was approached by funds affiliated with U.S. private equity firm The Carlyle Group Inc. regarding a potential takeover, peaking at 146.50 pence at one point, compared to a closing price of 103.00 pence on Nov. 3. Metro said it has engaged with Carlyle, but that there is no certainty as to whether an offer will be made.

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

Technology & Media

Cybersecurity M&A Values, Volumes Spike In 2021 Amid Demand Growth

While cybersecurity has long been a hot sector for M&A activity, 2021 is seeing more deals at higher valuations than ever before. In the U.S., the volume of cybersecurity M&A deals hit 151 in the first three quarters of 2021, compared to 80, 88, and 94 in 2018, 2019, and 2020, respectively, according to data from 451 Research.

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

Online Video Spend Nearly $44 Billion By 2025

Major streamer launches and pandemic behaviors continued to influence digital video adoption and boost consumer spending on online video in 2020. Cheaper price points and an expanded breadth of content have translated to strong growth for some of the major subscription video-on-demand services. 

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

Alexa, Tell Me About The Smart Speaker Market In 2021

Consumer demand for smart speakers, which are voice-enabled products such as the Amazon Echo and Google’s Nest Mini, continues to grow. Worldwide unit shipments are on track to increase by 12% in 2021. Despite some supply chain challenges due to the COVID-19 pandemic that slowed production in 2020 and 2021, and in some cases reduced product availability, overall demand for smart speakers has remained robust.  

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

Lawmakers Propose Regulation To Limit COVID-19 Misinformation Online

In recent months, U.S. lawmakers have proposed a series of laws designed to rein in harmful political speech, conspiracy theories, and other false news as misinformation about COVID-19 has spread online. The Information Technology and Innovation Foundation will discuss the various proposals floated and the possible implications during a webinar Nov. 9 called "Protecting Political Speech While Reducing Harm on Social Media."

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

Outlining The Broadband Provisions Of The Build Back Better Act

With the U.S. House of Representatives having passed a sweeping infrastructure package, major players in the broadband and telecom space are now eyeing the broadband provisions in another piece of legislation. The $1.75 trillion Build Back Better Act devotes around $1 billion to broadband affordability and accessibility, alongside funding for committees and awareness efforts.

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

ESG in the Time of COVID-19

Natural Capital Valuation: An Incentive To Protect Nature?

Natural capital accounting pricing measures could potentially encourage more forest-friendly farming practices and help tackle global deforestation, a major issue in the fight against climate change.

—Read the full report from S&P Global Ratings

COP26: Global Carbon Market Rulebook Heads Into Crunch Second Week Of Negotiations

Negotiations on rules establishing international carbon markets were heading into a tough second week at the UN's Climate Conference in Glasgow Nov. 5. Voluntary carbon credit values have been rising strongly in recent weeks, particularly nature-based products. Since S&P Global Platts launched its CNC nature-based carbon credit assessment in June its value has risen 154% to $11.80/mtCO2e.

—Read the full article from S&P Global Platts

COP26: Article 6 Hangs In Balance As Climate Summit Enters Final Week

Negotiations over the rules governing international emissions trading remained in deadlock Nov. 8 as the UN Climate Change Conference in Glasgow entered its second and final week. Article 6 of the Paris Agreement is one of the unresolved elements of the "rulebook" which will set out the terms of how governments can trade emissions reductions to help meet climate targets.

—Read the full article from S&P Global Platts

COP26: Carryover Of Old Carbon Credits 'Most Contentious Issue' In Paris Rulebook: IETA

The carryover of emissions reductions from the Kyoto Protocol is the most contentious issue holding up negotiations on the Paris Agreement "rulebook" being discussed at the UN Climate Change Conference in Glasgow. The comments relate to discussions around Article 6—the part of the Paris Agreement that deals with international carbon markets.

—Read the full article from S&P Global Platts

COP26: Vast Support For Voluntary Carbon Market Integrity: IIF Chief

Making sure emissions reduction projects are real, additional, and verifiable is seen as critical as the global market for carbon offsets is set to expand at a rapid pace, and anything less would bring reputational risks for companies seeking to implement sustainability plans.

—Read the full article from S&P Global Platts

Gas Utilities Expand Renewable Natural Gas Project Investments In Q3

U.S. gas distributors ramped up their commitment to a growing portfolio of renewable natural gas projects in the third quarter to coordinate with federal and state programs. In the first two weeks of third-quarter earnings reports, they pointed to opportunities in renewable natural gas, or RNG, that are presented by proposed tax credits in the $1.75 trillion Build Back Better Act, and they updated investors on their projects.

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

NW Natural Forms Subsidiary To Supply Renewable Natural Gas Nationwide

Northwest Natural Holding Co. is expanding its role in the growing renewable natural gas market with the formation of a subsidiary focused on supplying renewable fuels to utilities and commercial, industrial, and transportation sector customers across the U.S.

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

Africa Embraces Gas In Energy Transition Debate Amid Fears Of Secure Supplies

African countries will rely heavily on fossils fuels like natural gas in the energy transition amid fears that security of energy supply may be threatened amid lackluster financing and pressure from developing countries to fast-track their transformation, energy ministers said at a conference in Dubai on Nov. 8.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

EU's Steel Supply Chain To Face Extra Scrutiny Under New U.S. Trade Rules

The U.S.-EU agreement to drop steel and aluminum related tariffs announced Oct. 31 will force manufacturers to scrutinize their supply chains to avoid high-carbon emitting steel and ensure tariff-free products headed to the U.S. are largely made inside the EU. 

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

Feature: A Gambit Or A New Way To Finance U.S. LNG Projects? Tellurian Is About To Find Out

With the latest tinkering of its strategy for commercializing Driftwood LNG, U.S. developer Tellurian is betting on the carbon price in Europe creating a floor for the international gas hubs to which it has linked its LNG supply contracts.

—Read the full article from S&P Global Platts

OPEC+ Hikes October Output By 480,000 B/D But Many Members Underperform

OPEC's 13 countries pumped 27.55 million b/d, up 260,000 b/d from September, while Russia and eight other partners added 13.66 million b/d, up 220,000 b/d. The monthly rise was attributed mainly to the group's largest oil producers Saudi Arabia, Russia, the UAE, and Kuwait, which still have ample spare output capacity, as well as Kazakhstan, which completed heavy maintenance on a key field.

—Read the full article from S&P Global Platts

Vitol's Muller Says Oil Stocks Down To Pre-Pandemic Levels As OPEC+ Spare Capacity May Cause 'Angst'

OPEC+'s gradual approach to output hikes is taking place amid concern about the coalition's spare oil capacity, which is being challenged by production hiccups at some producers, including Angola and Nigeria, security concerns in Libya, and sanctions on Iran and Venezuela.

—Read the full article from S&P Global Platts

OPEC+ Needs To Be Careful In Policy To Balance Market Amid Q1 Demand Softening: UAE

Despite the low inventories and U.S. pressure to pump more oil, OPEC+ ministers agreed on Nov. 4 to hike output as planned by 400,000 b/d in December, citing concerns about COVID-19 infections and demand recovery.

—Read the full article from S&P Global Platts

Listen: OPEC+ Ignores Biden’s Wish For More Oil Supply To Cool Prices

U.S. gasoline prices remain high well after the summer driving season. Domestic oil production isn't coming back fast as investors remain wary. And now President Joe Biden has struck out asking OPEC to put more oil supply on the market to help ease prices.

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Platts

Written and compiled by Molly Mintz.