The Day at a Glance | September 1 2020

The Top

· Europe records negative inflation for the first time in 4 years: -0.2% annual in August.

· China accuses the US of using “national security” as an excuse to affect Chinese companies.

· Economic indicators: Unemployment in Europe (7-9% vs 8% e.), Manufacturing ISM in the US (54.5 e.).

Economic environment

Prices in the European economy contracted for the first time in four years and reflect a prolonged impact on demand by the virus despite the reopening. Inflation in the Eurozone recorded a negative figure during August and below estimates (-0.2% vs 0.2% e.), meanwhile underlying inflation reached a historically low level (0.4%). This data is a sign of alarm for the European Central Bank as the deflationary trend in prices has been more aggressive than initially expected. The fall reflects discounts in prices carried out by factories and businesses that seek to handle low demand and suggests that the worst of the recession in the European block`s history could have a deeper and longer lasting effect on consumption. Some expect the drop to rebound in September with the end of discounts having occurred at the end of summer but the ECB will probably have to do more to avoid low inflation for an extended period of time. Next week (Sept 10th) it will have a meeting to make a monetary policy decision after a record 7 consecutive years of it not being able to keep inflation within its objective. Markets are anticipating a 500 billion dollar increase in the asset purchasing program before the end of the year due to the pandemic.

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