Daily Update: September 8, 2022 – S&P Global

On February 28, 2022, S&P Global completed its merger with IHS Markit, the next step in delivering data, technology and expertise that accelerates progress.
As great as last year was for our company, in many ways 2022 is shaping up to be even better. In February, we closed a transformative merger with IHS Markit. We believe combining our two companies will create substantial long-term value for all our stakeholders.
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As of August 2022, the total market capitalization of cryptocurrencies stood at $1.1 trillion (down from its all-time high of $3 trillion), or about 2.5% of the U.S. equity market capitalization. Nevertheless, we believe that crypto assets and blockchain technology are here to stay.
COP27 is intended to be an opportunity for countries to report on the progress of their goals under the Paris Agreement on climate change to limit global temperature rises to 2 degrees C above preindustrial levels, and ideally to 1.5 degrees.
Cyberthreats are no longer an emerging risk and as such, need to be an embedded part of an entity’s overall risk management profile, updated as threats evolve. In an ever-more-connected world, the risk of systemic attacks resulting in damaging financial and reputational consequences keeps increasing. How insurers respond to this risk may also have far-reaching consequences, particularly should they move to exclude systemic attacks from claims.
Daily Update: September 8, 2022
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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 End of Summer in the Eurozone
The quiet period of August has now passed in European financial capitals. Emails are once again being answered and economists are revisiting the grim outlooks they published in July. 
According to the outlook S&P Global Ratings’ economics team published in late June, growth forecasts for the eurozone economy were pared back to 2.6% in 2022 and to 1.9% for next year, from earlier forecasts of 2.7% and 2.2%, respectively. The economics team projected consumer price inflation to reach 7% this year and 3.4% in 2023 due to higher energy and food prices resulting from the war in Ukraine and supply chain issues resulting from the pandemic. 
There hasn’t been much good news to report since the June outlook. In July, eurozone inflation hit a record high of 8.9%. “We see that the European economy is dealing with severe external shocks, while still struggling to fully recover from the pandemic,” wrote Sylvain Broyer, chief economist for Europe, the Middle East and Africa at S&P Global Ratings, in a July 19 report
“Production must catch up on a large number of backlogs, while inventories are depleted. Public investment is on the rise. Interest rates are deeply negative in real terms. Households’ balance sheets are strong, and the labor market shows no sign of cooling. Given the magnitude of the shocks, a sharp downturn in growth is 100% sure, but the chance of a full-fledged recession is only 30% to 43%.”
According to another analysis published by S&P Global Market Intelligence in early July, several measures of financial performance are consistent with an imminent industrial recession and period of economic distress.
European banks are struggling with higher funding costs and elevated credit losses, according to S&P Global Market Intelligence. The European Central Bank has little choice but to pursue monetary normalization by raising rates in the face of high inflation. This will impact European banks, which are emerging from an extended period of cheap, long-term and stigma-free funding, irrespective of their credit standing, with very favorable collateral requirements, according to S&P Global Ratings.
The euro has fallen sharply in 2022, reaching parity with the U.S. dollar in July for the first time since 2002. While this undoubtedly causes household hardship for citizens of eurozone member states, cheaper euros make European markets and assets attractive to bargain-hunting investors and are a boon to exports. 
European governments have been working to find some relief from high energy prices for consumers. But energy prices are ultimately at the whim of Russian President Vladimir Putin’s government. In a worst-case scenario, with a full Russian gas cutoff and mandatory EU rationing, Germany would fall into recession, and eurozone growth would weaken by 1.4 percentage points, according to S&P Global Ratings. 
Perhaps, from the quiet of August, better news will emerge for the eurozone. In the U.S., inflation has fallen from its peaks, and job numbers continue to outperform expectations. For now, we can only wait for the revised outlooks from the eurozone and hope for better tidings. 
Today is Thursday, September 8, 2022, and here is today’s essential intelligence.
Written by Nathan Hunt. 

Global Economy Slides Into Contraction, Price Pressures Ease To 1½ Year Low

Global economic output contracted in August for the first time since June 2020, according to the latest PMI survey data. Although only modest, the downturn reflects an increasingly broad-based deterioration of output and demand conditions both by sector and region. Companies are also taking a more cautious approach to cost control and employment in the face of the worsening economic climate. More encouragingly, price pressures have abated, with the rate of inflation of firms’ costs having now cooled for a third month in a row to reach the lowest for one and a half years.
—Read the article from S&P Global Market Intelligence

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A Bit Of Life Returns To M&A Market In August

The dealmaking environment still faces headwinds even though M&A announcement activity is looking somewhat better in August. Through Aug. 19, the total value of U.S. M&A announced in the month reached $81.32 billion, exceeding both the $45.62 billion recorded in July and the $76.93 billion reached in June. Those numbers exclude a proposed $17.5 billion reverse merger between AppLovin Corp. and Unity Software Inc.
—Read the article from S&P Global Market Intelligence

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Global Scramble For LNG Tankers Likely To Boost Gas Prices Further

A lack of adequate natural-gas tankers due to surging demand for the fuel particularly from Europe in the wake of a power crunch and limited supplies is set to spur another spike in LNG costs and lead to higher chartering rates, industry sources said. “Short-term charter vessels are still available scantily but long-term is not. There’s not enough supply [of LNG carriers],” an industry source said.
—Read the article from S&P Global Commodity Insights

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CO2 Reduction Meets Water-Use Tension In Hunt For Lithium

Global efforts to address climate change are driving an increased appetite for lithium but extracting the material could pose a risk to water-sensitive regions where the metal is abundant. Out of 435 active lithium-containing mining projects analyzed by S&P Global Market Intelligence, 189 are in areas that are either projected to face medium to high water stress by 2030 or are in arid regions of low water use, as defined by the World Resources Institute.
—Read the article from S&P Global Market Intelligence

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Global Gas-To-Oil Fuel Switching To Jump 80% As European, Asian Gas Prices Soar

Global oil demand from gas-to-oil switching could jump by more than 80% over the next six months after soaring prices for natural gas and LNG push more power producers, refiners and industrial users to burn fuel oil and other liquid fuels, according to estimates by Platts Analytics. Refiners, power producers and major industries will account for 633,000 b/d incremental liquids demand in the first quarter of 2023, compared to around 350,000 b/d of incremental demand in Q3 2022, Platts Analytics estimated.
—Read the article from S&P Global Commodity Insights

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Electric Vehicles, Renewable Energy Continue To Top State Legislative Priorities

State lawmakers have been busy advancing robust energy-related legislation during current legislative sessions. While the overall number of enacted measures has dropped in comparison to 2021, a significant amount of bills passed both chambers and ultimately received approval. Approximately 88 energy-related measures were enacted between April and June. Legislative activity during the second quarter decreased roughly 43% compared to the same period in 2021. During the first half, 142 bills were enacted — a roughly 25% decrease compared to the first half of 2021 with 188 bills passed.
—Read the article from S&P Global Market Intelligence

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