The Day at a Glance | April 23 2024

The Top

*Eurozone PMI´s show that the economic recovery in the European block has gained momentum in April, but price pressures have also reignited. 

*Tomorrow will bring Mexico´s general inflation figure for the first half of April. Our estimate forecasts an annual 4.48% rate; the consensus estimate stands at 4.50%.

*According to the Wall Street Journal, the U.S. could impose sanctions on Chinese banks in hopes of stopping Beijing’s commercial support for Russia’s military production.

*The ECB must be very cautious with interest rate cuts after June, says Luis de Guindos.

*China created 3.03 million new urban jobs in 1Q24, indicating that employment remains stable.

*The Japanese government maintains the perspective that the economy is in a moderate recovery.

*As of today, around 20% of the S&P 500´s companies have reported earnings. 

Economic environment

Eurozone PMI´s show that the economic recovery in the European block has gained momentum in April, but price pressures have also reignited. The Eurozone’s composite PMI stood at 51.4 points in April, up from March’s 50.3 figure and marking an eleven-month high. The manufacturing PMI stood at 45.6 points, below the estimated 46.6 figure, marking thirteen consecutive months below the 50-point threshold. Meanwhile, the services sector index reached its highest level in eleven months, rising from 51.5 points in March to 52.9 in April. Overall, business activity in the Euro area expanded at its fastest pace in almost a year, led by the services sector, which more than compensated for a deeper slowdown in manufacturing.

Markets and companies

Global markets hold positive sentiment. Major U.S. indices closed higher yesterday. This morning, markets are starting the day in positive territory as investors are awaiting quarter earnings from the tech sector: Dow +0.31%, S&P +0.39%, and Nasdaq +0.70%. In Europe, markets are logging gains, with the Euro Stoxx up +0.91%; most sectors in the green. In Asia, markets closed mixed: Japan +0.30% and China -0.74%, as preliminary business activity figures from Australia, Japan, and India were evaluated. In Mexico, the IPC opened higher, standing at $56,623 points (+0.13%). Oil recorded a decrease in its price as the market ignored the threat of additional sanctions on Iranian oil, reaching $81.58 per barrel (-0.40%). Natural gas is down (-1.60%). Meanwhile, metals are mostly down, with gold -0.1%, silver +0.2%, and copper -1.4%. Lastly, cryptocurrencies are mixed.

The exchange rate fluctuated during the early hours, ranging from a minimum of 17.09 to a maximum of 17.12, currently trading at 17.07.

Alsea will release its 1Q24 earnings report this afternoon; we expect slowed results. Mexican operations will show a moderation in their growth pace, given a more normalized comparable base. Meanwhile, results in Europe and South America will be affected by unfavorable exchange rate effects.

Chedraui will publish its first quarter earnings report this afternoon. We expect positive results in the same store sales (SSS) indicator in Mexican operations, which would drive region revenues up by a high single digit. Meanwhile, in the U.S., SSS would increase in dollar terms; although revenues would be dampened by negative exchange rate effects. In terms of profits, we estimate that EBITDA will increase by around a single-mid digit, and the margin would record a slight expansion.

Livepol will release its 1Q24 earnings report this afternoon. We expect commercial sales to advance in the mid to high single digits. Simultaneously, we expect a solid performance in the Financial Services and Leasing businesses, so consolidated revenues would increase by around +7%.

Regional´s 1Q24 results were positive, exceeding our estimates in terms of net interest margin and net profit. Regional recorded a year-on-year loan portfolio growth of 12.2%, while the net interest margin increased by 21.7% and net profit grew by 36.0%. We highlight that, despite the pressures on funding costs and increased provision generation, net profit showed double-digit growth, driven by revenue growth and expense control.

Yesterday afternoon, Volaris reported its quarterly results, which exceeded our estimates. Revenues logged +5.1% year-on-year growth, totaling $768 million. This increase in revenue is mainly due to solid demand, an increase in total revenues and additional services per passenger, as well as an increase in the average fare. As for EBITDAR, it reached $235 million, a +91% increase thanks to lower jet fuel costs and higher unit revenues. Additionally, the EBITDAR margin stood at 30.6%, a 13.7 percentage point improvement compared to 1Q23.

Corporate news

*Spotify surged more than 15% after beating first-quarter estimates and issuing an optimistic guidance for the second quarter.

*UPS edged up slightly after reporting better-than-expected quarterly earnings.

*PepsiCo fell 2.4% despite reporting better-than-expected earnings.

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