Broyer on the ECB | EM Monthly | Look Forward: Multidimensional Transition | Default, Transition, Recovery | ESG in Ratings Actions | CERAWeek

Welcome to the latest edition of Essential Economics! We kick off this week with Sylvain Broyer’s new piece on the ECB’s operational framework and his appearance on BBC News talking about the timing of ECB rate cuts, which will come later in the year. Our March emerging markets report is out, and the team lead by Jose Perez-Gorozpe and Elijah Oliveros-Rosen writes that domestic demand is strong, but that trajectories are diverging. We just released the latest edition of our Look Forward journal on the multidimensional energy transition, led by Atul Arya and Ashutosh Singh of S&P Global Commodity Insights. The report examines the challenges and opportunities of decarbonization, focusing on topics with the greatest potential for large-scale disruption and deployment. In our latest default and transition study, Nicole Serino documents global defaults rising to the highest year-to-date total since 2009, driven by the rise in European defaults. Brendan Kugle and team take a deep dive into ESG in ratings actions, finding that ESG factors were a rating driver in 13% of all corporate and infrastructure rating actions between April 2020 and December 2023. Finally, I’m off of Houston next week to participate in two big events - our flagship CERAWeek conference as well as the World Petrochemical Conference - and will report back on my learnings.

Broyer on the European Central Bank

Sylvain published a new piece on the ECB and appeared on BBC News World Business Report where he shared his insights ahead of the ECB's latest interest rate announcement potential economic implications. He argued that it is far too early for the ECB to cut rates at present, adding that the door will open later this year but, for now, it's too early.

Bolstering the case for caution, Sylvain noted that the labor market is strong, activity is improving.

To watch the full interview, click here starting at 15m30 (UK only).

To read Sylvain’s latest piece on the topic, click here.

EM Monthly: Strong Domestic Demand, Diverging Trajectories

Our Emerging Markets team writes that recent Q4 GDP data point to continuing resilience across most emerging markets (EMs). This is mostly because of solid, albeit, in some cases decelerating, domestic demand, helped by ongoing fiscal stimulus. Geography matters: EMs with high trade exposure to developed Europe continue to underperform.

We think that domestic demand trajectories will diverge across EMs in 2024.

To access the chart pack, click here.

Look Forward Journal: Multidimensional Transition

In the run up to CERAWeek, we have released the latest edition of our flagship S&P Global Look Forward journal entitled “Multidimensional Transition.” Our main message: we are at a pivotal moment in the energy transition. Sweeping financial investments have set the stage for a decade of deployment. Thousands of new projects and new technologies will enter the world’s energy ecosystem, from hydrogen to carbon capture and more. 

We examine the challenges and opportunities of decarbonization, focusing on topics with the greatest potential for large-scale disruption and deployment.

To read the global report, click here.

Default, Transition, Recovery: European Defaults Push Global Tally Higher

Nicole and team report that, with 15 defaults in February, the 2024 global corporate default tally rose to 29, the highest year-to-date count since 2009. Defaults in Europe are well above previous year-to-date totals, at eight--more than double the total of three at this point in 2023. By sector, 40% of defaults in February came from either heath care or media and entertainment, with three each.

Distressed exchanges remained the primary reason for defaults in February; the seven defaults were the highest number of distressed exchanges in this month since 2008.

To read the full report, click here.

Nicole also joined the BBC World Business Report to discuss key takeaways: listen here.

ESG In Credit Ratings Deep Dive

Brenden and team report that ESG factors were cited as a rating driver in 13% of all corporate and infrastructure rating actions between April 2020 and December 2023. More than three quarters of the ESG-related rating actions were negative. Moreover, health and safety accounted for 83% of ESG-related rating actions, largely associated with the COVID-19 pandemic.

We provide the full list of ESG-related rating actions in this report.

To read the full report, click here.

Coming Up: CERAWeek

Next week I will travel to Houston to attend our annual flagship CERAWeek conference. I’m looking forward to participating in a number of macro and geopolitics panels as well as listening to an impressive array of speakers, networking, and checking out the Agora, with its focus on emerging and disruptive technologies in the energy space. I will report back in next week’s Essential Economics.