The Day at a Glance | November 7 2022

The Top

*Midterm elections in the United States.

*Exports (-0.3% annual) and imports (-0.7%) decreased in China during October for the first time since the pandemic.

*Gross fixed investment in Mexico surprised to the upside during August (1.9% m/m; 6.5% annual); private consumption increased 0.7% monthly (7.1% annual).

*COP27 kicked off in Egypt, discussions will focus on climate change reparations.

*The cost of energy in Europe reached a new record high despite government aid; natural gas doubled in value since October of 2021.

*Consumer confidence in Mexico remained stable at 41 points.

*ECB must maintain interest rate increases until underlying inflation reaches its peak: Francois Villeroy.

*Bank of England called for greater regulation at a global level after pension funds avoided their collapse.

*Liquidity problems among Chinese construction companies extends to Vietnam.

Economic environment

US midterm elections. US midterm elections will take place on Tuesday; power in Congress will be rearranged. Everything points towards a very likely victory on behalf of the Republican Party in the House of Representatives, although the fight for the Senate will be close. A victory for the Republican Party in the House of Representatives will considerably limit President Joe Biden`s plans during the second half of his time in office, eliminating any chances of seeing radical changes in public policy. A Reuters survey showed that 69% of US citizens consider that the country is headed down the wrong road as most voters have expressed frustration due to high prices and blaming Democrats. The last surveys suggest that Democrats could lose up to 20 seats in the House of Representatives, which could lead them to lose majority. Nevertheless, Democrats in the Senate still have a change of keeping 60% of the House of Representatives. With this, the most likely scenario is that Congress will be split, which would lead to new initiatives being frozen as they will not have bipartisan support. In general, midterm elections will be good for equity markets: According to Bloomberg, equity markets have logged higher yields after elections have taken place in 16 of the last 19 midterms. However, political polarization in the United States maintains risks of the loser`s side disregarding results, which could revive political instability.

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