The Day at a Glance | July 9 2024

The Top

• General Inflation increased in June due to the non-core component. 

• Fed Chairman Jerome Powell will testify this Tuesday before the Senate Banking Committee in a hearing that will likely assess whether recent signs of slowing inflation and labor market moderation will prompt the central bank to accelerate its plans to cut interest rates.

• US President Joe Biden will host the heads of NATO member states in Washington on Tuesday for an annual summit, providing the Democrat with an international platform to convince his allies at home and abroad that he can still lead.

• The US Federal Reserve is considering a rule change that could save the country’s eight largest banks billions of dollars in capital.

• During the January-June 2024 period, 1,996,136 light vehicles were produced (+5.2% year-over-year) and 1,721,852 were exported (+10.6% year-over-year) in the Mexican automotive market.

• In Mexico, consumer confidence stood at 47.5 points in June, logging a monthly 0.6 point increase. 

Economic Environment

General inflation increased in June due to the non-core component. Today, INEGI reported that June´s National Consumer Price Index recorded a monthly 0.38% change, above our estimate and the consensus forecast (0.28%). Annually, general inflation set at 4.98% in June, loggingacceleration from the 4.69% observed in May. On the other hand, core inflation, which excludes the most volatile items such as energy, agricultural products, and government tariffs, increased by 0.22% month-over-month in June, practically in line with our estimate and the consensus forecast (0.23% month-over-month). Annually, core inflation set at 4.13% in June, below the 4.21% recorded in May. By components, goods increased 0.18% month-over-month and 3.28% year-over-year (previously 3.38% year-over-year) and services did the same by 0.27% month-over-month and 5.15% year-over-year (previously 5.22% year-over-year). On the other hand, non-core inflation rose by 0.87% month-over-month and 7.67% year-over-year. June´s inflation data is a reminder that the final stretch towards achieving the Central Bank of Mexico’s 3.0% inflation target will be very challenging, especially since we cannot rule out unexpected increases among the most volatile items. There are still two more data points to be released before Banxico makes its monetary policy decision (the first half of July and the whole month), so we must pay close attention to said figures; however, surprises like these complicate the Central Bank’s task.

Markets and Companies

Main US stock indices are trading higher, following new record highs reached by both the S&P 500 and Nasdaqyesterday. Investors are awaiting the US inflation figure to be released this week, as well as the start of the 2Q24 quarterly earnings season, with notable results expected from companies such as Pepsi, Delta Airlines, Citi, and JPMorgan.

In Europe, markets are logging declines as investors digest the political situation in France following the election results. Additionally, BP shares are down after the company announced it expects to recognize an asset impairment charge in 2Q24. In Asia, markets maintain a positive trend.

In the debt market, the 10-year Treasury bond yield stands at 4.293%, showing a slight uptick ahead of Jerome Powell’s testimony before Congress this week and the consumer inflation figure, which will be released on Thursday.

In Mexico, the IPC is trading lower and stands at 52,846.5 points.

Regarding the peso-dollar exchange rate, it stands at 17.96 after closing at 17.99 yesterday.

Fibra Macquarie announced that its shareholders’ meeting approved the acquisition offer for Terrafina and the launch of a reciprocal public acquisition and subscription offer. The offer will be made at an exchange ratio of 1.125 Macquarie certificates for each Terrafinacertificate and expires on August 5^th, 2024. Meanwhile, FibraPrologis extended its offer period for Terrafina until July 22^nd.

Corporate News

• BP shares are down after the oil company announced it expects to recognize an asset impairment charge of approximately 2 billion dollars. The company also anticipates weakness in its refining margins.

• Intel shares continue their rally, accumulating a gain of around 6.0% for the week.