The Day at a Glance | November 10 2020

The Top

· FED warns of risks among financial markets in case the pandemic`s economic impacts deepen.

· EU imposes tariffs on $4 billion dollars of US goods: 15% on all imported Boeing models and 25% on agricultural and industrial products.

· Economic indicators: Euro Area ZEW Economic Sentiment Index showed deterioration regarding the economy`s situation (32.8 vs 52.3 prev.).

Economic environment

In its Financial Stability Report, the United States Federal Reserve warned that prices of assets in key markets could see volatility in case the virus`s negative economic impacts deepen in the following months. The report affirms that uncertainty in the outlook remains and optimism among investors could disappear in case the economic recovery becomes stagnant or if efforts to control the virus`s spread fail. The FED assured that the energy and leisure & lodging sectors are still the most vulnerable to the virus and highlighted that commercial real estate assets have begun to show weakness. The risk is the pandemic`s long lasting persistence: “Given the generally high level of leverage in the non-financial business sector, prolonged weak profits could trigger financial stress and defaults”, assured the report. For the financial sector, the FED warned that hedge fund leverage levels have remained very high and that insurance companies are reaching indebtedness levels not seen since 2008. The FED called for reforming regulations in the non-banking financial sector (which includes funds in the money market and mortgage providers) in order to avoid similar episodes seen in March.