The Day at a Glance | August 20 2024

The Top

• Retail sales unexpectedly slowed down in Mexico. 

• Canada’s inflation stood at 2.5% in July, its lowest level in 40 months. This data backs a 25 basis point cut in the benchmark rate next September.

• China kept its benchmark interest rates unchanged, in line with market expectations. The one-year Loan Prime Rate remained at 3.35%, while the five-year LPR held steady at 3.85%.

• Former US President Barack Obama will endorse Kamala Harris’ presidential bid on Tuesday night in a high-profile speech aimed at boosting her candidacy.

• The Eurozone’s current account surplus widened in June due to lower imports and higher primary income, including profits, interest, and dividends from overseas investments, according to data from the European Central Bank.

Economic Environment

Retail sales unexpectedly slowed down in Mexico. INEGI reported that retail sales decreased by -0.5% in May, on a seasonally adjusted monthly basis. Annually, based on original figures, sales dropped by -3.9% in May, well below the market expectation of a -1.7% decline. Within these annual figures, it´s worth pointing out that eight out of nine sectors contracted, with the largest drops seen in hardware, paint, and glass (-14.1%), stationery (-13.5%), and internet and catalog sales (-10.8%). The only sector that expanded in its annual comparison was groceries, food, and beverages, up +4.4%. Undoubtedly, signs of an economic slowdown are becoming increasingly evident across various indicators in our country, and with this context, the drop in retail sales suggests that the economy’s main driver, consumption, is also cooling. This coming Thursday, INEGI will release the final GDP figures for the 2Q24, which will incorporate this information.

Markets and Companies

Main US stock indices opened with slight changes after logging a rebound yesterday. Following a volatile start to the month, market anxiety has eased in recent sessions amidstexpectations that the Federal Reserve could begin cutting interest rates in its September meeting. Although an economic slowdown in the US is not ruled out, a recession is not expected to occur in the short term. Regarding monetary policy, markets will keep a close eye on the Federal Reserve´s most recent meeting minutes, while Jerome Powell will give a speech at the Jackson Hole Symposium on Friday. Investors are hoping for greater clarity on monetary policy expectations. In Europe, markets were trading lower, while a positive bias was observed in Asia. In the debt market, Treasury yields are retreating as investors await the Fed´smeeting minutes ahead of the Jackson Hole Symposium. The 10-year bond is at 3.83%, while the 2-year bond is trading at 4.01%.

In commodities, oil is recording a slight rebound after declining in recent sessions amidst slower demand in Asia and the possibility of a ceasefire in the Middle East. 

In Mexico, the IPC is up and is trading at 54,169.4 points.

Regarding the exchange rate, the peso is trading at 18.78 per US dollar after closing at 18.66 yesterday.

Corporate News

• Eli Lilly shares rose as trials of its obesity-reducing drug showed positive results in decreasing the risk of adult diabetes.

• Lowe’s reported quarterly results that exceeded consensus expectations; however, it lowered its full-year guidance.

• Boeing announced it will halt testing of its 777X model after detecting structural flaws in the aircraft.