The Day at a Glance | December 4 2020

The Top

· S&P ratifies Mexico´s rating of ´BBB´ but kept the outlook negative.

· Job creation in the US disappoints (245k vs 440k e.).

· OPEC+ will not extend production cuts but it agreed on gradually increasing the supply of crude oil. It will increase production in 500 thousand daily barrels next month and will hold monthly meetings for future decisions.

Economic environment

Rating agency S&P Global Ratings ratified Mexico´s long term sovereign ratings in foreign currency of ´BBB´ with a negative outlook. The rating for its long term local currency sovereign credit is ´BBB+´ with the same outlook. The news confirms Mexico´s investment grade. S&P considered that the government´s cautious policies amidst the crisis triggered by the pandemic has kept public debt under control. Additionally, it expects to see a fiscal deficit close to 3% of GDP in 2020, which is lower than Mexico´s peers. S&P expects to continue seeing cautious fiscal and monetary policies, even though it´s not so optimistic about the economy´s future growth. The outlook remained ´negative´ due to expectations of a slow economic recovery in addition to the fact that PEMEX´s finances are still under pressure, which doesn’t eliminate the risk of seeing a downgrade in Mexico´s rating in the next 12-18 months. The rating agency forecasts a slower rate of growth compared to Mexico´s peers in the following years, and the country´s rebound after the pandemic is expected to be one of the slowest in the region given expectations of weak private investment. Lastly, the high level of PEMEX´s indebtedness will require more government aid, which increases Mexico´s credit-related risks.

November´s employment figure in the US disappointed, setting way below estimates. The Department of Labor confirmed 245 thousand new jobs in November, figure way below the estimated 440 thousand. The data reflects an important slowdown in the labor market´s recovery in November, month during which the new COVID-19 wave affected the country. The most affected sectors were retail and the government. The rate of unemployment fell to 6.7% while the participation rate also fell (61.5%). The data suggests that the economy´s recovery has been losing momentum as the distribution of vaccines is highly awaited. This could put more pressure on Congress to approve a fiscal stimulus package as soon as possible. This is the second time that employment sets below estimates since April and December´s figures are also expected to be weak once stricter measures are implemented on behalf of local governments in efforts to control the virus.