The Day at a Glance | January 5 2021

The Top

· Important election in Georgia, United States.

· The economic recovery`s boost in Mexico was lost during December: IMEF.

· Disagreements between Russia and Saudi Arabia force to extend OPEC+ meetings; Russia calls to increase production in February.

· United Kingdom announces a new national quarantine until mid-February; Japan could declare a state of emergency in Tokyo because of the virus.

· Economic indicators: December`s manufacturing ISM will be published in the United States (56.6 e. vs 57.5 prev.).

Economic environment

Elections in Georgia, United States will take place today and will define how the Senate is made up. After the legislative election in November, none of the candidates gained a large enough advantage to win Georgia`s seats, which is why voting will take place today and the last two seats will be taken. The election has increased nervousness among markets as surveys are close and a Democratic victory in both cases would imply the that the elected President`s party (Joe Biden) will take control over the Senate. If Democrats win both seats, the distribution of legislators will stay at 50 for each party, but any legislative decision that is divided would be defined by the Vice-president’s (Kamala Harris) vote. The economic implications are important as Democratic control of the Senate would open up the possibility of advancing legislations related to greater corporate taxes, regulating industries and progressive taxes; it would also open up the door to a third fiscal stimulus, which Biden is considering. These actions could increase the fiscal deficit in the US, affect corporate income, reinforce the trend of increasing interest rates in the US market and a weak dollar.

Economic activity – in both manufacturing and services – receded in Mexico during December, according to the IMEF. Leading economic activity indicators published by the Mexican Institute for Financial Executives (IMEF, for its initials in Spanish) continued to show weakness in the Mexican economy during the last month of 2020. Manufacturing activities decreased to 48.7 and services receded to 48.1 with both indicators still pointing towards economic contraction. The fall in services was more pronounced and reflects an economy whose recovery lost momentum in the last months of 2020. Large manufacturing companies are the only ones that recorded constant expansion during the 2S20, but the rest of the economy has seemed shaky, according to the IMEF`s report. It`s possible that new fiscal stimuli in the US could help maintain certain stability in manufacturing activities, but the mitigation measures implemented in Mexico will most likely continue to push services to decline in the first month of 2021.

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