The Day at a Glance | August 1 2024

The Top

• The Federal Reserve is preparing to cut interest rates.

• The ISM Manufacturing Index will be released later, with the consensus expecting it to set at 48.8 points.

• The Bank of England cut its benchmark rate by 25 basis points to 5.0%. The decision was split, as 4 out of 9 members voted to keep it unchanged.

• In the week ending July 27^th, initial jobless claims stood at 249,000, an increase of 14,000 from the previous week’s 235,000.

• The Eurozone´s unemployment rate stood at 6.5% in June, slightly above the 6.4% expected by the market.

Economic Environment

The Federal Reserve is preparing to cut interest rates. On July 31^st, 2024, the Federal Open Market Committee (FOMC) announced its monetary policy decision, keeping the federal funds rate unchanged at a range of 5.25% to 5.50%. The statement highlighted a revised macroeconomic outlook, acknowledging that job creation has slowed down and that the unemployment rate has risen, although it remains historically low. Additionally, it was noted that there has been more progress towards the Committee’s 2.0% inflation target in recent months. Regarding economic risks, the statement explicitly mentioned that the Committee remains attentive to risks on both sides of its mandate. Previous statements had only mentioned inflationary risks. In our opinion, this is the most significant change in the statement and suggests that the Federal Reserve is preparing to implement rate cuts in the coming months, likely beginning in September.

Markets and Companies

Main stock indices in the US are logging gains, with the market reacting positively to Meta’s quarterly report, which exceeded the analysts’ consensus expectations. The market is still digesting the release of Q2 2024 earnings reports. Yesterday, as expected, the Federal Reserve kept its benchmark interest rate range unchanged. However, the Fed’s chairman indicated that if data continues to show lower inflation, the Fed is ready to cut rates in September. In Europe, stock markets are showing mixed movements after the Bank of England cut its interest rate to 5.0% from 5.25%.

In the debt market, the yield on the 10-year Treasury bond is down, standing at 4.01%, reflecting Jerome Powell’s comments about a possible rate cut at the September monetary policy meeting.

In Mexico, the IPC is down and stands at 52,983.3 points. As for the peso-dollar exchange rate, it stands at 18.47 after closing at 18.60 yesterday.

Femsa will enter the convenience store sector in the US. FEMSA signed a definitive agreement with Delek US Holdings to acquire its retail operations, which include 249 convenience stores primarily located in Texas, for a total of $385 million dollars. 

Corporate News

• Meta’s shares rose nearly 8% thanks to a better-than-expected earnings report. Additionally, the company revised its guidance upward for the current quarter. 

• Moderna revised its earnings guidance downward, citing expectations of increased competition in the US and lower sales in Europe.