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A view in MacroEconomics July 2020

For financial markets, this week provided useful insights into what their short-term trend may be as macroeconomic data and the US first-quarter results came in. Obviously, any new information must be read in light of the impact of the lockdown on world economies and the current evolution of the pandemic as the virus continues to spread, especially in the American continent. In fact, the week opened with 230,000 contagions according to last Sunday’s data from the World Health Organization, a new daily record, of which 56,000 in the United States and, of these, 15,000 in Florida alone.

Another front to pay attention to is US-China relations, which tend to be increasingly tense despite the latest macroeconomic data describing a different situation. In fact, China's trade balance is better than expected, in June exports increased by 0.5% year-on-year, against a forecast of -2% and a strong turnaround from -5.3% in May. In addition, the apparent increase in purchases of pigs (140%), soybeans (up 18%) and copper led to a significantly better figure than the June estimates at -9%, registering an increase of 2.7% year-on-year; This indicates that purchases of U.S. products from China are growing. Finally, China's GDP expanded by 3.2% year-on-year in the second quarter, from the previous -6.4%, and expectations were 2.4%. Industrial production rose by 4.8%, accelerating from 4.4% in May while consumption showed relative weakness and last month recorded a 1.8% decline, compared with the 0.5% expected by analysts.

In Europe, industrial production increased by 13.2% on a monthly basis in May, due to the gradual re-opening of activities, with an annual contraction of 20.9%; economists' consensus stood at 9.5%. The Zew index, which is forecasting Germany's economic expectations, fell to 59.3 points this month, down from 63.4 points the previous month and below forecasts of 60 points. The figure is seen as a good indicator of the German economic trend, following an initial recovery in V in May and in June the GDP curve is expected to flatten in the summer months.

The UK GDP figure is also below expectations at 1.8%, disregarding the strong rebound expected after - 20% in May.

The European Central Bank has continued its ultra-expansive monetary policy, leaving interest rates unchanged: the reference rate remains at zero, the deposit rate remains at -0.50% and the marginal lending rate at 0.25%. The ECB will continue with the 'Pepp' pandemic emergency program 'until at least June 2021'. But for the euro area, the main expectations are on the European Extraordinary Council, which should give a definitive indication of the Recovery Fund and in particular the number of resources to the funds lost and borrowed in favor especially of the states with the weakest fundamentals.

For the United States, the beige book published by the Federal Reserve by a country that has embarked on a structured growth path, and the quarter data published by four of the big six banks in the United States, show that the intervention of the government and the central bank, avoided one of the deepest economic crises ever and helped support the profits of big finance and in some cases, even to increase them. In fact, the data of the first quarter, although with some light & shade, in more cases were higher than expected.

Finally, inflation picked up slightly, with consumer prices rising by 0.6% month-on-month in June, from -0.1% in May, compared with 0.5% in consensus. Excluding some very volatile components, inflation rises by 0.2% month-on-month, from -0.1%.

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