The Day at a Glance | August 8 2023

*China’s trade balance deteriorated more than expected in July. 

*Moody’s warns of possible downgrades to some major US banks. 

*US foreign trade shrunk in July; the deficit decreased. 

*Italy surprised its banks with an unexpected 40% tax rate on their profits. 

*The Central Bank of Brazil pointed to a low probability of accelerating the interest rate cuts process. 

*European Climate Observatory Copernicus announced that July 2023 significantly exceeded the record for the hottest month ever recorded on the planet. 

Economic environment

China’s foreign trade logged its worst setback since February 2020. China’s trade balance components once again exhibited signs of weakness in July, adding greater pressure on authorities following sluggish economic growth in the 2Q23. Exports surprised to the downside with a -14.5% decline in July, showing more significant deterioration compared to the previous figure (-12.4%) and the consensus of analysts’ forecast (-12.6% e.). This could be a sign that economic activity might further decrease during the third quarter. On the import side, the drop was also much more significant than expected. A -5.3% decrease was estimated after a -6.8% setback was recorded in June. However, imports logged -12.4% contraction. As a result, China’s foreign trade suffered its weakest performance in over 3 years, stemming from weak global demand that threatens the world’s second-largest economy´s hopes to recover from the Covid-19 pandemic. Chinese authorities are seeking ways to stimulate domestic demand without resorting to significant monetary policy cuts.