The Day at a Glance | April 26 2024

The Top

• PCE inflation slightly increased from 2.5% year-on-year in February to 2.7% year-on-year in March 2024.

• In Mexico, the trade balance logged a surplus worth2.098 billion dollars in March 2024.

• U.S. Secretary of State Antony Blinken expressed concern in Beijing over China’s support for Russia´smilitary, one of many issues threatening to derail the recent improvement in relations between the world’s largest economies.

• Data on loans and consumption in the Eurozone support arguments for interest rate cuts by the ECB.

• The Bank of Japan kept its interest rates unchanged and highlighted a growing conviction that inflation was on track to reach its 2% target, indicating its willingness to raise rates later in the year.

• Oil prices are on track to break a two-week streak of losses.

• The stock market in the U.S. closed yesterday’s session with declines, reacting to the 1Q24 GDP figure that logged a slowdown.

Economic Environment

The Fed’s preferred indicator for tracking inflation edged up slightly to 2.7% in March. In the United States, personal disposable income and personal consumption expenditure increased by 0.5% and 0.8%, respectively. Meanwhile, the annual inflation rate for personal consumption expenditure (PCE), an indicator used by the Federal Reserve to set its monetary policy stance, rose to 2.7% in March, above the market´s 2.6% estimate and up from the 2.5% observed in February. Core PCE inflation stood at 2.8% in March, remaining unchanged from the previous month but setting above the 2.6% estimated by analysts. On a monthly basis, PCE inflation increased by 0.3%. Thus, inflation in the U.S. moderately rose in March, as expected by CPI inflation, maintaining market expectations of the Federal Reserve’s first rate cut to occur around September.

In 1Q24, there was a deficit in the trade balance worth2.801 billion dollars. The deficit accumulated in the first quarter of 2024 compares to a deficit worth 4.799 billion dollars logged in the same period a year ago, according to INEGI figures. The 1Q24 deficit consists of 143.430 billion dollars in exports and 146.231 billion dollars in imports. On an annual basis, exports grew by 1.7% and imports did the same in 0.2% in the January – March period of 2024 compared to 2023. In March, there was a trade surplus worth 2.098 billion dollars, up from the 1.195 billion dollar surplus logged in March 2023. It is worth pointing out that in March, exports and imports fell by -5.3% and -7.1%, respectively. The trade balance figures show a smaller trade deficit compared to a year ago, suggesting that we should expect a smaller current account deficit for the first quarter of the year compared to a year ago.

Markets and Companies

The stock market in the U.S. closed yesterday’s session with declines, reacting to the 1Q24 GDP figure that logged a slowdown; however, the main stock indices are trading higher today, gaining momentum from a rebound intechnology sector companies, after positive quarterly reports from companies like Alphabet and Microsoft were released. So far, 30% of the companies in the S&P 500 have reported quarterly results, 80% of which exceeded earnings estimates. For the week, stock indices are set to end with positive figures.

In Europe, markets were trading higher, driven by the rebound in mining, construction, and materials companies. In Asia, a positive trend was also observed, with the Bank of Japan leaving its interest rate unchanged, causing the yen to depreciate against the dollar.

In the bond market, the yield on the 10-year Treasury bond stood at 4.65%, experiencing a slight decline after U.S. inflation data for March came in slightly above expectations.

In commodities, oil prices are up, with Brent trading at 89.51 while WTI is at 84.05 dollars per barrel. Gold is at 2,340.06 dollars.

In Mexico, the IPC is trading higher, standing at 57,190.1 points.

The peso-to-dollar exchange rate is at 17.1490, after closing at 17.2054 yesterday. It reached a peak of 17.2803 in the early morning hours.

Orbia reported quarterly results below our expectations.Revenues declined by 18.3% year-on-year (vs. -12.9% expected), while EBITDA decreased by 46.1% year-on-year (vs. -36.5% expected). This can be attributed to weak demand and lower prices, high interest rates, and high levels of PVC exports from China and the U.S. Additionally, the peso´s appreciation had a negative impact. It is worth noting that Orbia had previously mentioned it was expecting a challenging start to the year.

Femsa published its 1Q24 results this morning. Consolidated revenues increased by +11.3%. A good performance was observed in most businesses (Beverages, Retail, and Fuels), although the Health business was mainly impacted by ongoing challenges in institutional sales, a complex macroeconomic environment in Ecuador, and increased competition in Mexico. As for profits, Adjusted EBITDA increased by +15.4% and the margin increased by +50 basis points.

Corporate News

Microsoft shares were up nearly 4% as it reported better-than-expected results.

Alphabet’s quarterly results exceeded expectations. Additionally, the company declared its first dividend payment in its history and a $70 billion share buyback program.

Intel’s shares were down as the company provided guidance for the next quarter below expectations.