The Day at a Glance | September 27 2024

The Top

• In the US, strong consumption and PCE inflation figures were reported.

• Mexico’s trade balance logged a larger deficit in the first eight months of 2024 compared to the same period last year.

• China’s central bank lowered interest rates and injected liquidity into the banking system, and the government is expected to issue a special sovereign bond worth about 2 trillion Yuan as part of a new fiscal stimulus.

• Inflation in France fell to 1.5% (prev. 2.2%) and in Spain to 1.7% (prev. 2.4%) in September, reinforcing expectations of further interest rate cuts by the European Central Bank.

• Core inflation in Tokyo stood at 2.0% in September after the government resumed subsidies for some public services. The data aligns with expectations of more rate hikes by the end of the year or early next year.

• Oil prices remained stable on Friday but are on track for a weekly decline, as expectations of higher production from Libya and OPEC+ outweighed investors’ focus on new stimulus packages from China, the world’s largest importer.

Economic Environment

In the US, strong consumption and PCE inflation figures were reported. In August, personal disposable income and personal consumption expenditures increased by 0.2% (0.2% prev.) and 0.2% (0.5% prev.), respectively – and in nominal terms. Meanwhile, the annual personal consumption expenditure (PCE) inflation rate, the indicator used for the Federal Reserve’s inflation target, stood at 2.2% in August, below the 2.5% reported in July and under the market’s expectation of 2.3%. Within the index, on an annual basis, services increased by 3.7% (prev. 3.7%), energy prices fell by -5.0% (prev. 0.4%), food prices stood at 1.1% (prev. 1.2%), and goods declined by -0.9% (prev. -0.2%). The core PCE index stood at 2.7% in August, after setting at 2.6% in both July and June. On a monthly basis, PCE inflation roseby 0.1% in August. Looking ahead, the Cleveland Fed’s Nowcasting model estimates that headline CPI inflation will set at 2.2% and headline PCE inflation will be 2.0%, both for September.

Mexico’s trade balance logged a larger deficit in the first eight months of 2024 compared to the same period last year. In August 2024, a trade deficit (exports minus imports) worth $4.868 billion was recorded, compared to a deficit of $1.278 billion in the same month of 2023. In August, exports declined, recording an annual drop of -1.0%, driven by a -26.6% decrease in oil exports and a 0.6% increase in non-oil exports. Within non-oil exports, those directed to the US rose by 2.2% y/y, while those to the rest of the world fell by -7.7% y/y. As for imports, they increased by 5.7% y/y in August 2024, with an 8.8% annual increase in non-oil imports and a -26.0% drop in oil imports. By type of goods, consumer goods imports decreased by -1.3%, intermediate goods increased by 8.2%, and capital goods fell by -2.6%. As a result, from January to August 2024, the trade balance recorded a deficit worth $10.438 billion, compared to a deficit worth $8.428 billion in the same period last year.

Markets and Companies

The US stock market is trading higher, consolidating the week’s gains. Investors received encouraging inflation data, with the personal consumption expenditure (PCE) price index for August rising 0.1% monthly, in line with expectations. This strengthens the possibility that the Fed will continue cutting rates in upcoming meetings. In Asia, markets logged strong increases, driven by economic stimulus in China. The CSI 300 index gained 15.7%, its best weekly performance in 16 years, while the Hang Seng rose 12.75%. In Europe, the Stoxx 600 reached a new all-time high, with the chemical and automotive sectors leading gains. The People’s Bank of China’s rate cut generated optimism, while the decline in inflation in France and Spain bolstered expectations of an inflation decrease in the Eurozone. 

In the commodities market, crude prices continue to fall, driven by expectations of increased OPEC+ production, weak demand in China, and Saudi Arabia’s announcements signaling its willingness to abandon the unofficial target of maintaining oil prices at USD $100 per barrel. Meanwhile, precious metals are seeing mixed movements but are on track to close the week with gains, supported by the Fed’s monetary policy.

Treasury yields fell on Friday after the release of key inflation data in the US. The 10-year yield decreased by 4 basis points, settling at 3.76%, while the 2-year yield dropped to 3.59%.

The Mexican stock market opened higher, with the IPC trading at 53,625.3 points.

The exchange rate stands at 19.66 after closing at 19.64 yesterday.

Grupo Aeroportuario del Pacífico announced the refinancing of a USD $40 million credit line with Citibanamex, which was set to mature today. The term of the line has been extended by an additional six months, with interest payable monthly at a variable SOFR rate plus 25 basis points.

ALFA shareholders approved a capital increase of Ps $7.952 billion (equivalent to over USD $400 million). This corresponds to 739 million shares at a price of $10.75 pesos per share. The offer will be exclusive to Alfa shareholders through preemptive rights and subscription rights.

Corporate News

• Biopharmaceutical company Bristol-Myers Squibb received FDA approval for Cobenfy, a new treatment for schizophrenia.

• Danish pharmaceutical company Novo Nordisk fell 2.9% due to a lower-than-expected sales forecast for the third quarter, especially for its weight-loss drug Wegovy.

• Costco Wholesale shares fell after missing revenue expectations for the fourth fiscal quarter, impacted by cautious consumer spending and lower gasoline prices.

• Super Micro Computer is under investigation by the Department of Justice and a report from Hindenburg Research over accounting manipulation.