The Day at a Glance | July 23 2024

The Top

• The Citi Survey revealed increases in inflation forecasts for the end of 2024 and 2025.

• US Vice President Kamala Harris will campaign in Wisconsin this Tuesday for the first time as a presidential candidate after enough Democrats committed to backing her, clearing her path to the nomination.

• According to a Reuters poll, the Fed will cut the federal funds rate twice this year, in September and December, as resilience in consumption justifies a cautious approach despite the decrease in inflation.

• ECB Vice President Luis de Guindos hinted at a possible interest rate cut in September, highlighting the central bank’s new forecasts as the “most important” factor in determining whether inflation is returning to its target level.

• Oil prices fell on Tuesday due to growing expectations of a ceasefire in Gaza.

Economic Environment

The Citi Survey revealed increases in inflation forecasts for the end of 2024 and 2025. The consensus of the Citi survey anticipates an increase in the INPC for the first half of July; 0.47% in the general index and 0.19% in the core index, while for July it estimates an increase of 0.68% month-over-month in the general index and 0.30% month-over-month in the core index. For the next 12 months (July/July), and on an annual basis, inflation is expected to be 3.86%. By the end of the year, the expectations for general and core inflation are 4.40% (previously 4.30%) and 4.00% (previously 4.00%), respectively. For 2025, the expectations are 3.85% (previously 3.80%) and 3.79% (previously 3.75%), respectively. Regarding the funding rate, it is expected to close the year at 10.25%, and most analysts (22/32) anticipate that the next move by the Bank of Mexico will be a 25 basis point cut in the meeting scheduled for August. The exchange rate is expected to close 2024 at 18.80 pesos per dollar and 2025 at 19.40 pesos per dollar. Real GDP growth for 2024 is forecasted at 1.9% (previously 2.0%) and for 2025 at 1.5% (previously 1.7%).

Markets and Companies

Main US stock indices are logging marginal movements as they await the release of quarterly reports, with today’s highlights being the results of Alphabet and Tesla after the market closes. Yesterday, markets recorded gains, while there continues to be a rotation towards small-cap companies in anticipation of potential interest rate cuts. This trend is reflected in the positive performance of the Russell 2000 index, which includes a sample of small and mid-cap companies. In Europe, the Stoxx 600 index was trading higher as investors digest the earnings reports from companies like Porsche and Sabadell, while LVMH will disclose its quarter results after the closing bell.

In the debt market, the yield on the 10-year Treasury bond stands at 4.23%, logging a slight decline as the market awaits the release of the US Personal Consumption Expenditures (PCE) inflation figure, which will be published on Friday.

In Mexico, the IPC index is trading higher, standing at 54,052.9 points.

As for the peso’s exchange rate against the dollar, it is at 18.07, after closing at 17.93 yesterday.

In 2Q24, Grupo México reported quarterly sales growth of 27.4%, while EBITDA increased by 43.3% year-over-year. The report exceeded our expectations. The results were primarily driven by growth in the mining division, which in turn benefited from an 18.2% year-over-year increase in the average copper price during the quarter.

During 2Q24, Volaris reported a year-over-year decline in revenue of 7.1% and a growth in EBITDAR of 23.1%.For 3Q24, Volaris forecasts a capacity (ASMs) decline of about 14% year-over-year, while the EBITDAR margin would be around 33%, up from 24.4% recorded in 3Q23.

In 2Q24, Regional recorded a year-over-year growth in its loan portfolio of 12.4%. The financial margin, before provisions, increased by 20.3% year-over-year, while net profit grew by 23.7% year-over-year. The results were in line with expectations.

Alsea will publish its quarterly results this afternoon. Mexican operations will perform well, with revenues advancing in high single digits. On the other hand, in Europe, revenues would decrease in low single digits due to unfavorable exchange rate effects, and in South America, the worsened economic environment in several countries would lead to a decline in revenues, along with unfavorable exchange rate effects. On a consolidated level, we estimate that revenues will advance in low single digits.

Liverpool will publish its 2Q24 results this afternoon. We estimate that commercial sales will advance in mid-to-high single digits. At the same time, we estimate good performance in the Financial Services and Leasing businesses, so consolidated revenues would increase by around 8%. At the profit level, we expect the EBITDA margin to remain practically in line with what was observed in 2Q23.

Corporate News

• General Motors shares were up as the company reported better-than-expected quarterly results.

• The Coca-Cola Company reported better-than-expected earnings and additionally raised its guidance for organic revenues for this year.

• Comcast reported mixed quarterly results: its earnings exceeded expectations, but its revenues fell short.