The Day at a Glance | September 18 2024

The Top

• In Mexico, aggregate demand declined in the second quarter. 

• The Federal Reserve’s monetary policy announcement will be released in the afternoon. There is no market consensus on the size of the rate cut, as it is expected to range between 25 and 50 basis points. 

• This Wednesday, the US House of Representatives, which is controlled by Republicans, will vote on legislation that combines a mandatory spending bill with stricter voting rules, creating an election-year clash with the Democrat-controlled Senate, raising the risk of a partial government shutdown. 

• The UK´s inflation rate remained unchanged at 2.2% in August, although it accelerated in the services sector, increasing expectations that the Bank of England will keep interest rates unchanged on Thursday. 

• Japan’s export growth sharply slowed in August as shipments to the US fell for the first time in three years, while machinery orders unexpectedly dropped in July, a worrying sign for an economy struggling to achieve a solid recovery. 

• Oil prices are down after an industry report showed a rise in US crude and fuel inventories, offsetting the rising tensions in the Middle East and the potentially bullish impact of a US interest rate cut.

Economic Environment

In Mexico, aggregate demand declined in the second quarter. Aggregate demand, equal to aggregate supply, fell by -0.4% q/q in the second quarter of 2024, according to seasonally adjusted and real terms data. On the supply side, gross domestic product increased by 0.2% q/q, while imports of goods and services fell by -2.5% q/q. On the demand side, private consumption decreased by -0.6% q/q, while government spending increased by 0.8% q/q, gross fixed capital formation grew by 0.4%, and exports fell by -0.2% q/q, also according to seasonally adjusted figures for the second quarter. In annual terms, according to original figures, aggregate demand expanded by 2.1% in the second quarter of 2024 (prev. 2.7%), gross fixed capital formation by 6.8% (prev. 8.8%), private consumption by 3.5% (prev. 3.5%), government consumption by 2.6% (prev. 1.5%), and exports were down -2.4% (prev. -6.7%). The aggregate demand figures confirm that the economy slowed down in the second quarter, mainly due to a decline in private consumption and a loss of momentum in gross fixed capital formation. We do not rule out that the slowdown in aggregate demand will continue in the coming quarters.

Markets and Companies

Main US indices are logging marginal changes as investors debate the size of the Fed’s rate cut. The central bank is expected to lower rates by at least a quarter of a percentage point. In Europe, markets are declining as investors assess UK inflation data and await the Fed’s decision. The Stoxx 600 was down 0.3% at 1:56 p.m. London time, with most regional sectors in the red. Utilities fell 0.77%, while media stocks dropped 0.64%. In Asia, indices closed mostly higher as investors awaited the Fed’s decision and digested economic data from Japan. Imports and exports in August rose 2.3% and 5.6%, respectively, setting below Reuters´ poll estimates of 13.4% and 10%.Regarding commodities, US crude prices are falling ahead of the Fed’s decision. Notably, the WTI has dropped more than 13% in the third quarter, while Brent has fallen more than 15%. Metals are recording mixed figures, and cryptocurrencies are down. In Mexico, the IPC is up 0.13% and stands at 52,341 points. 

The exchange rate stands at 19.19 after closing at 19.10 yesterday.

Corporate News

• Casella Waste Systems’ stock fell more than 4% after the company announced plans for a $400 million Class A common stock offering.

• Intuitive Machines, a space exploration company, saw its shares surge more than 52% after receiving a nearly $5 billion space network contract from NASA.