The Day at a Glance | March 14 2022

The Top

*U.S. and Chinese representatives will have a meeting in Rome and talk about the conflict in Ukraine today.

*China declares confinement in Shenzhen; Germany logs a new record number of Covid-19 cases.

*Ministry of the Treasury and Public Credit increases fiscal stimulus for gasolines for a second consecutive week in order to avoid an increase in consumer prices.

Economic environment

Covid-19 cases rebound. Covid-19 cases have increased in recent days in countries like China and Germany, a sign that the pandemic has not passed. In Germany, infections logged a new record for a third consecutive day on Monday, a sign that the virus is spreading rapidly; in contrast with steep declines recorded in countries like the United States or the United Kingdom. This is explained by the spread of the BA.2 variant, which is more contagious. The Department of Health has warned that this is a critical situation. In China, confinement measures have intensified in the last few weeks. The country is going through its worst wave of cases since the start of the pandemic; it logged 1,938 new cases yesterday. Authorities have decided to reinstate quarantine measures in the city of Shenzhen, an important city for industrial manufacturing and technology, represents 11% of GDP, and is home to 17.5 million people. Last week, the Jilin province was also locked down (24 million people; 11% of the country`s total annual automobile production). In Shanghai, classes and public transportation services have been suspended. It`s feared that mitigation measures in China could affect growth in the world`s second largest economy in the 1Q22; which is why expectations of seeing interest rates cut on behalf of the central bank have increased. Additionally, confinement measures will have repercussions on production chains at a global level. Congestion in the Qindao, Shanghai, Ningbo and Zhoushan ports have increased in recent days as efforts to contain the virus have affected activities. Delays in these ports are expected to lead to renewed increases in maritime transportation costs, which would worsen production chain disruptions, along with the Russia-Ukraine conflict. Furthermore, regions that are important for manufacturing activities (such as Shenzhen or Guangdong) could suspend production activities.