Daily Brief | July 01 2025

Top News

·     Public finances improved in the first five months of the year due to increases in revenue and spending cuts.

·     Later today, the ISM manufacturing index for June will be released, with market consensus estimating it will be around 48.8 points.

·     US President Donald Trump expressed frustration with the trade agreement negotiations with Japan, while Treasury Secretary Bessent warned that countries could face higher tariffs on July 9, the deadline for reaching an agreement.

·     Eurozone inflation rose from 1.9% in May to 2.0% in June, in line with market consensus forecasts. 

Economic Outlook

Public finances improved in the first five months of the year due to increases in revenue and spending cuts. From January to May 2025, budget revenues totaled 3.471 trillion pesos, which represented a shortfall of 64.4 billion pesos compared to the SHCP’s projections and an annual growth of 3.7% in real terms compared to the same period in 2024. Within revenues, it is noteworthy that oil revenues plummeted by -23.8% y/y, while tax revenues advanced by 8.9% y/y. Within tax revenues, ISR tax grew by 8.2%, VAT rebounded by 12.5%, and IEPS fell by -1.1%. With regard to public spending, in the first five months of the year it stood at 3 trillion 722 billion pesos, resulting in a spending reduction of 224 billion pesos below the Ministry of Finance’s program and below that observed for January-May 2024 by 5.3% in real terms. When reviewing the details of the spending, it is noteworthy that the adjustment is practically across the board, except for debt service and pensions, which grew by 13.1% and 5.1% annually, respectively. In short, public finances performed better than the program and its annual comparison, as the traditional public balance (revenue – expenditure) stood at -251 billion pesos vs -411 billion pesos in the program and -562 billion pesos a year ago. In general, it is noteworthy that in a weak economic outlook, tax revenues continue to grow at high rates, so in the absence of shocks, it is highly likely that the SHCP will achieve its fiscal targets of a primary balance of 0.6% of GDP and RFSPs of between -3.9% and -4.0%.

Markets and Stocks

U.S. stock index futures are trading lower on Tuesday, kicking off the second half of the year with profit-taking after the S&P 500 closed the previous quarter at record highs. The decline comes amid tensions between President Trump and Elon Musk, which is putting pressure on Tesla shares ahead of the market open, and ahead of key economic data, such as labor market figures due out on Thursday. Despite the recent market rally, caution remains over the expiration of the tariff moratorium and the direction of monetary policy.

In the debt market, Treasury bond yields fell slightly in a session marked by anticipation of labor figures in a week shortened by the July 4 holiday. The 10-year bond yield stands at around 4.21%, while 30-year and 2-year bonds show moderate declines.

In commodities, oil prices are stable, with the market watching for the possibility that OPEC will announce an increase in production at its July 6 meeting. In contrast, gold is rising, driven by the weak dollar and increased demand for safe-haven assets amid fiscal and trade uncertainty.

Corporate News

– Tesla shares fell after comments from President Trump, who suggested that subsidies granted to Elon Musk’s companies be reviewed as part of possible cost-cutting measures. The statement came after Musk again criticized the government’s tax package.

– Joby Aviation shares rose before the opening bell, continuing the previous day’s strong rally, after delivering its first flying taxi to the United Arab Emirates as part of its plan to begin commercial operations in 2026.

– Circle Internet Group announced that it has filed an application for a banking license with the US Office of the Comptroller of the Currency. If approved, the company plans to create the first national digital currency bank, offering blockchain-related custody services.