The Day at a Glance | August 2 2024

The Top

• The US labor market weakened in July.
• In Mexico, investment and private consumption figures continue to show moderation.
• The Bank of England’s Chief Economist, Huw Pill, commented on Friday that the fight against inflation has not been won, and that there is no guarantee that interest rates will be cut soon.
• The Governor of the Bank of Japan mentioned in a speech that interest rates should rise to at least 0.75% (currently 0.25%), suggesting that more rate hikes are coming.
• Oil prices are likely to close lower for the fourth consecutive week, reflecting potential slower global economic growth and demand concerns.

Economic Environment

In the US, the labor market weakened in July. The Bureau of Labor Statistics (BLS) released employment data for July 2024, recording an increase of 114,000 jobs, well below the consensus expectation of 175,000 and the 179,000 observed in June. Additionally, the BLS revised job growth for May and June downward by a total of 29,000 jobs for the two months. Meanwhile, the unemployment rate stood at 4.3% in July, after setting at 4.1% in June, 4.0% in May, and 3.9% in April. Within the report, the BLS highlighted two things: 1) temporary layoffs increased by 249,000, reaching 1.1 million in July, while permanent layoffs remained virtually unchanged at 1.7 million, and 2) on July 8^th, Hurricane Beryl impacted the central Texas coast during the survey period. Additionally, wage growth in July was 3.6% year-over-year, below the 3.9% observed in June and the lowest since May 2021. The weakness in employment data and the rise in unemployment may reflect the impacts of Hurricane Beryl, suggesting that significant improvement in indicators could be seen next month. However, it should not be ruled out that an economic slowdown is occurring, backing a scenario of an interest rate cut next September.

In Mexico, investment and private consumption figures continue to show moderation. Gross fixed investment increased by 6.0% year-over-year in May, according to original figures. Construction increased by 9.8% year-over-year, and machinery and equipment by 1.8%, also according to unadjusted figures. By sector, private investment grew by 6.5% year-over-year, and public investment by 1.6% year-over-year. On a monthly and seasonally adjusted basis, investment grew by 0.7% in May. Meanwhile, private consumption in Mexico reported an annual increase of 2.6% year-over-year in May, according to original figures. Within this, spending on imported goods grew by 9.6% year-over-year, and on domestic goods and services by 1.2% year-over-year. On a monthly and seasonally adjusted basis, private consumption fell by -0.4% in May, marking two consecutive months of marginal declines. The aggregate demand figures once again revealed that private consumption and investment, especially governmental, are moderating, and are contributing to our scenario of slower growth for 2024.

Markets and Companies

The US stock market is trading lower, reacting to July’s labor market figures, which showed the creation of 114,000 jobs, below the 185,000 expected by consensus and the 179,000 logged in June. The unemployment rate rose to 4.3%. These employment figures have reignited concerns about a slowdown in the US economy. In the technology sector, declines were logged following weak earnings reports from Intel and Amazon. In Europe and Asia, stock markets are also trading lower, in line with their US counterparts.

Regarding the debt market, the 10-year Treasury bond yield continues to decline, settling at 3.86%, in reaction to US employment figures and expectations of rate cuts by central banks.

In Mexico, the IPC index opened lower and stands at 52,057.2 points.

The exchange rate of the peso against the dollar stands at 18.97, after closing at 18.86 yesterday. Overnight, the exchange rate reached a high of 19.19 and a low of 18.91.

FIBRA Prologis announced that it has received signed acceptance letters for more than 50% plus one of Terrafina’s outstanding CBFI´s. The offer expires today at midnight.

Corporate News

• Shares of Meta were up nearly 8% due to a better-than-expected earnings report. Additionally, the company raised its guidance for the current quarter.
• Moderna revised its earnings guidance downward, expecting increased competition in the US and lower sales in Europe.