The Day at a Glance | June 4 2020

The European Central Bank announced it will increase its bond purchasing program in 600 billion euros and extending it to June 2021

The increase was greater than what was initially expected by markets (500 billion). The program seeks to facilitate funding to respond economically to the virus`s effects and keep interest rates low in midst of a recovery. The maturities will be reinvested until the end of 2022. It`s estimated that 2/3 of the 750 billion in the bond purchases announced in March have not been used, but the ECB has decided to extend the program and increase its volume to avoid a rise in financing rates for European countries that must face the virus`s economic consequences. The ECB announced it will be flexible regarding the type of instruments that it will purchase, other than the jurisdictions in which it will carry out said purchases. Italian bonds reacted positively to this announcement and the euro gained value against the dollar. In Germany, the government led by Angela Merkel announced a new 130 billion euro fiscal package to face to pandemic, with the intention of boosting private consumption and investment; a measure that also exceeded estimates of additional stimulus in the country.

OPEC+ suspends meeting

The organization of the Petroleum Exporting Countries and its allies (OPEC+) suspended its meeting scheduled to take place today, after strong criticism was raised inside the organization because of the lack of compliance to the cuts in production agreed upon in May. Iraq and Nigeria have delayed meeting their goals, which is why some members are dissatisfied with extending the cutbacks to June and July without every involved country`s commitment. Saudi Arabia and Russia seek to extend the cutbacks by 9.7 million daily barrels to summer. If an agreement of engaging all countries is reached, a new meeting between ministers could be held in the short term. In Mexico, production of crude oil fell 1.2% in April to 1.727 million daily barrels, 20 thousand daily barrels with respect to March. The drop in production occurred before Mexico`s commitment to cut back production by 100 thousand daily barrels starting in May. According to The Economist, the National Hydrocarbons Commission`s leader, Sergio Pimentel, has assured that production fell to 1.652 million daily barrels in May – in line with Mexico`s commitment to OPEC+.