The Day at a Glance | August 21 2020

The Top

· European recovery loses momentum during August as levels of activity are way below estimates.

· Retail sales recover 7.8% in Mexico during June (-17.2% annual).

· The ECB`s meeting minutes include a point that states that it will reevaluate its monetary stance in its September meeting as it will have greater clarity regarding the economic outlook.

· Brexit agreement seems “unlikely” at the moment: Michel Barnier, EU chief negotiator.

· Economic indicators: US PMIs are expected to be published for the month of August (manufacturing 51.9 e.; services 51 e.).

Economic environment

The European economy`s preliminary PMIs showed a very weak expansion in economic activity during August, which is a sign that the strongest boost in recovery could have already occurred. The Composite PMI set at 51.6 (vs 54.9 e.), with the service sector being the weakest (50.1 vs 54.5 e.) and showed stagnation. Manufacturing did not show improvement with respect to July (51.7 vs 52.9 e.) and contributed to reinforcing expectations of a slower recovery than previously estimated once activity has normalized after the reopening. The Euro was affected by the disappointing figures and investors are concerned that the recovery has stalled. The recent acceleration in cases in Europe could keep the recovery limited regarding services, even though German Chancellor Angela Merkel has stated that European governments will seek to avoid new closures and quarantines at all costs to prevent a more severe economic impact. The disappointing figures suggest that the economic recovery after the reopening could be weaker than expected by markets. At 9:45 am (Mexico), US data will be published, which could reinforce an adjustment in investor and market expectations if it confirms a halt similar to the one seen in Europe.