The Day at a Glance | November 29 2024

The Top

• The Central Bank of Mexico´s meeting minutes signaled greater caution. 

• Inflation in the Eurozone rose slightly in November to 2.3%.

• Retail sales in Germany fell more than expected in October, decreasing by -1.5% from the previous month, according to the latest data.

• Consumer inflation in Japan accelerated from 1.8% in October to 2.6% in November, surpassing the central bank’s 2% target and increasing market expectations of a short-term interest rate hike.

• WTO Chief Ngozi Okonjo-Iweala was re-elected for a second term at a special meeting, aligning her mandate with the second administration of US President-elect Donald Trump.

• Oil prices are heading for a weekly drop of over 3%, driven by reduced concerns over the Israel-Hezbollah conflict and the outlook for increased supply in 2025, even as the possibility of OPEC+ extending production cuts cannot be ruled out.

Economic Environment

The Central Bank of Mexico´s meeting minutes signaled greater caution. All Governing Board members mentioned the need to continue decreasing the funding rate while maintaining a restrictive monetary stance. According to the Central Bank of Mexico´s estimates, this would imply a real ex-ante rate above 3.6%. Currently, the observed real ex-ante rate is 6.4%. In this regard, one member explicitly stated that they would prefer to keep the real ex-ante rate above 6.0% for a few months, which aligns with a funding rate above 9.0%. Additionally, nearly all Governing Board members emphasized that given new risks, the monetary stance must be recalibrated constantly, which we interpret as potential pauses in the rate-cutting cycle. Overall, we perceived a cautious tone regarding monetary policy, especially looking ahead towards 2025.

Inflation in the Eurozone rose slightly in November to 2.3%. Annual inflation in the European block stood at 2.3% in November, in line with consensus expectations, following a rate of 2.0% in October. By components, in the second-to-last month of the year, food, alcoholic beverages, and tobacco recorded inflation of 2.8% y/y (previously 2.9%), services 3.9% y/y (previously 4.0%), non-energy industrial goods 0.7% y/y (previously 0.5%), and energy -1.9% y/y (previously -4.6%). Additionally, annual inflation in the block’s largest economies increased between October and November. For example, inflation in France rose from 1.6% to 1.7%, in Italy from 1.0% to 1.6%, and in Spain from 1.8% to 2.4%, while in Germany, the block’s largest economy, inflation remained at 2.4% y/y. Overall, the Eurozone´sinflation accelerated in November, and components closely monitored by the ECB remained high, strengthening the central bank’s arguments for greater caution in future interest rate cuts.

Markets and Companies

US market futures are up this morning, led by the technology sector, particularly semiconductors, following reports suggesting that potential export restrictions to China may be less severe than anticipated. In Europe, markets were mostly up, driven by gains in the mining sector. Eurozone inflation rose to 2.3% y/y in November, exceeding the ECB’s 2.0% target. In Asia, markets closed mixed, with Japan standing out as inflation in Tokyo climbed to 2.6%, fueling expectations of an upcoming rate hike by the Bank of Japan.

Oil prices are mixed but are on track for weekly gains, while gold prices are logging a rebound.

In fixed income, the yield on the 2-year US Treasury bond stands at 4.18%, while the 10-year yield is at 4.21%.

In Mexico, the IPC futures index is up, reaching 50,054 points. The exchange rate is trading at 20.41 pesos per dollar, slightly below the previous close of 20.43.

Grupo Bimbo has filed a lawsuit against Maple Leaf Foods, seeking over 2 billion Canadian dollars for alleged false statements during the 2014 purchase of Canada Bread. Maple Leaf, the then-majority shareholder, led the sale process. Subsequently, Canada Bread faced fines and investigations over price fixing, which Bimbo claims were not disclosed during the transaction.

Corporate News

• Shares of Walmart, Costco, and Target opened positively, driven by expectations of higher sales during Black Friday and the holiday season.