The Day at a Glance | November 17 2020

The Top

· Recovery in China strengthens.

· Retail sales in the US disappoint.

· EU and United Kingdom extend Brexit negotiations; an agreement could be announced next week.

Economic environment

The Chinese economy`s recovery once again accelerated in October. According to official figures, the Chinese economy is heading towards being the only one that records growth in 2020, after improvements were logged in industrial production (6.9% annual) and retail sales (4.3% annual) during October. The recovery in domestic consumption and consumer confidence is maintained and could strengthen towards the last months of the year as the country retains control over the virus`s spread. The labor market also shows firm recovery after recording a fall in the rate of unemployment to 5.3%; which is essential to make the recovery sustainable in the medium term. The country`s Central Bank is still concerned about the uncertainty regarding the recovery in the rest of the world and forecasts it will keep monetary stimulus unchanged; even though some consider that conditions have already been met to begin a gradual withdrawal. The Yuan – which reached its greatest strength against the dollar in two years – and industrial metals have benefited the most from the recovery.

Retail sales in the United States grew less than estimated in October, after official figures published by the Department of Commerce confirmed a 0.3% monthly (vs 0.5% e.) gain. September`s figures were also revised downwards, from 1.9% to 1.6%. With this, the annual rate of recovery in retail consumption set at 5.7% above what was seen in the same period of 2019; this is one of the few economic indicators that has surpassed levels seen prior to the pandemic. It`s normal to see a slowdown after a solid rebound in the 3Q20, although it`s possible that this could be affected even more because of the virus`s outbreak in the country and the implementation of new restrictions (or citizens` efforts to avoid bars and restaurants). This is why the approval of a new fiscal stimulus in Washington is still necessary towards December, which would avoid a fall in sales during the festive season and retain American citizens` incomes that could lose their jobs amidst a second wave of the virus. Meanwhile, market start to take into account the possibility of the FED increasing volumes in its asset purchasing programs in December as data shows the virus`s spread is picking up speed.