The Day at a Glance | April 24 2024

The Top

*In Mexico, general inflation for the first half of April surprised to the upside by setting at 4.63%.

*U.S. Secretary of State Antony Blinken arrived in Shanghai on Wednesday with more stable ties between the U.S. and China, but with a wide array of unresolved issues threatening the stability of the relationship.

*U.S. core capital goods orders moderately increased in March.

*U.S. Congress approved an aid package for Ukraine after months of delay.

*The ECB´s rate cut in June won’t necessarily be followed by further policy easing, said Bundesbank President Joachim Nagel on Wednesday.

*Brent crude oil prices stabilized around $88 per barrel due to a surprising drop in U.S. inventories.

*The S&P 500 is up slightly; investors digest corporate results. 

Economic environment

In Mexico, general inflation for the first half of April surprised to the upside by setting at 4.63%. Today, INEGI announced that the National Consumer Price Index for the first half of April recorded a 0.09% figure, making it the second highest reading since 2015. Year-on-year, general inflation for the first half of April set at 4.63%, above our 4.48% estimate and the consensus forecast of 4.50%. The main contributors to this increase were tomatoes, green tomatoes, serrano peppers, and eateries. Electricity had the greatest negative impact due to subsidies in 17 cities across the country. Meanwhile, core inflation – which excludes the more volatile items such as energy and agricultural products, and government-controlled prices – increased by 0.16% in the first half of April. On the other hand, non-core inflation stood at 5.38%. INEGI announced that as of the second half of April, a new sample of establishments and products was selected in Acapulco to obtain prices for the city’s index. Surprises in the non-core index remind us that the last mile in the process to return to the Bank of Mexico’s 3.0% inflation target will be very challenging; we do not rule out that non-core inflation may continue to bring surprises in the coming biweekly periods.

Markets and companies

The S&P 500 is up slightly; investors digest corporate results. Yesterday marked the second consecutive positive session for the S&P 500 and the Nasdaq, which continued to recover from their recent losing streaks. The Dow Jones closed nearly +0.7% higher, while the S&P 500 and the Nasdaq rose more than +1%. One-fifth of the companies that make up the S&P 500 have released earnings; more than three out of every four have exceeded Wall Street’s expectations. In Europe, markets show slightly positive movements. The Stoxx 600 index rose +0.1% at 1:45 p.m. London time, with sectors logging mixed figures; tech stocks were up +2.5%, while financial services were down -1%. In Asia, Japan’s Nikkei led gains, following the continued rally on Wall Street. In Mexico, the IPC is up (+0.07%) and stands at 56,675 points. Lastly, cryptocurrencies are logging mixed figures. 

After yesterday’s trading session, the exchange rate ranged between a low of 16.93 and a high of 17.05, currently trading at 17.05. 

Alsea reported its 1Q24 results yesterday afternoon. Revenues increased by +2.7%. Solid consumption trends were observed in Mexico and Spain, while consumption pressures were observed in France and South America. On the profitability side, pre-IFRS16 EBITDA increased by +12.4% year-on-year. Although net income decreased by -21.8% due to higher interest expenses and a currency loss (compared to a currency gain in 1Q23).

Chedraui’s results were impacted by the peso´s appreciation. Consolidated sales remained practically in line with the previous year (+0.6%). Positive trends were observed in Mexico, and in the US, sales had a neutral performance, although they were significantly impacted by the peso´s appreciation against the dollar. EBITDA increased by +5.7% and the margin gained 40 basis points.

Livepol released a solid 1Q24 report. Revenues increased by +9.7% due to good performance in Liverpool and Suburbia. Additionally, EBITDA increased by +14.0% and the margin increased by 50 basis points. Net income increased by +33.5% compared to the 1Q23. 

Walmex will report its 1Q24 results this afternoon. We estimate a mid to high single-digit increase in SSS in Mexican operations. While the SSS indicator in Central America will be more moderate, while also considering unfavorable currency effects. In terms of profitability, we expect EBITDA to increase by a mid to high single-digit.

Kof reported its 1Q24 results this morning. Total revenues increased by +11.2% year-on-year. The increase was mainly due to solid volume growth (+7.3%), partially offset by the unfavorable exchange rate effects. Adjusted EBITDA increased by +13.5%.

Alfa’s 1Q24 results set in line with expectations in terms of revenue, although they exceeded expectations in EBITDA. Revenues increased by 0.5% year-on-year. EBITDA for the quarter increased by 13.0% year-on-year, while comparable EBITDA increased by 3.8% year-on-year, thanks to the strong performance of Sigma, which offset the decrease in Alpek.

In 1Q24, Alpek´s results set in line with expectations, with a 7.7% year-on-year decrease in revenue and a -25.6% year-on-year decrease in comparable EBITDA. We highlight volume growth, particularly in the polyester segment, as well as greater stability in PET margins

Corporate news

*Tesla rose more than 13% after the company announced a renewed push towards more affordable electric vehicle models. Although it did not meet Wall Street’s expectations in revenue and earnings. 

*Visa and Texas Instruments increased by more than 2% and 7%, respectively, boosted by stronger-than-expected reports. 

*Boeing rose 3% after reporting a first-quarter revenue loss that was milder than expected.

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