The Day at a Glance | October 6 2021

The Top

*Natural gas prices in Europe increases 60% in two days; France and Spain call for emergency measures from the EU to avoid an impact on the economic recovery.

*Democrats in the Senate will vote on suspending the debt ceiling for the third time; Republicans are committed to rejecting it once again.

*Gross fixed investment increased 2.1% during July in Mexico (17% annual); private consumption barely grew 0.1% in the same month (12.8% annual).

*U.S. will not ban cryptocurrencies like China, but we must ensure a regulated industry: Gary Gensler, Chairman of the SEC.

*Inflationary expectations in the United Kingdom reached their highest level in 13 years and increase chances of higher interest rates.

*Private employment increased more than expected in the United States during September (ADP 568 thousand vs 428 thousand e.).

Economic environment

Persistent rise in European energy prices. Prices of natural gas produced in the Netherlands and the United Kingdom continue to increase to historically high levels, something that has raised concerns of greater inflationary pressures and has pushed businesses to stop production and forced France and Spain to request intervention on behalf of the European Union. The accelerated rise in prices in recent days could be related to short positions of some market agents that had to be liquidated in light of increasing margin calls, which is why the recent rebound could be temporary. However, concerns don’t stop there because low levels of natural gas and coal inventories in the region could not be enough in the face of increasing demand during the cold season. Currently, Asia has also significantly increased its demand for European natural gas in order to ensure the supply of energy, which reinforces the rise in prices. It`s estimated that starting next week temperature levels in Europe will start to decrease this season – even below normal levels – which points towards an increase in demand from businesses and households. The situation has pressured France, Spain, Greece, the Czech Republic and Romania to call on the EU to soften the rise in prices and investigate the reasons behind the excessive increase. European Commissioner for Energy Kadri Simson has asked for the operating rules of the market to be revised in order to avoid the rise in prices from affecting the economic recovery. Some businesses that rely on energy, such as fertilizer and ammonia producers, have started to decrease production due to their inability to pay such high rates.