The Day at a Glance | August 22 2024

The Top

• In Mexico, inflation for the first half of August slowed to 5.16%.

• Mexico´s economy cooled at the end of the second quarter of 2024.

• Eurozone PMI´s surprised by logging strong figures in August, despite companies raising prices, while new orders continued to decline.

• The European Central Bank´s meeting minutes showed that ECB officials saw no urgency in cutting interest rates last month but hinted at a new discussion in September as high rates take their toll on growth.

• In the week ending August 17^th, initial jobless claims stood at 232,000, a 4,000 increase from the previous week’s 228,000.

• Oil prices remained stable on Thursday after falling for four consecutive days as investors worried about the global demand outlook; however, the decline in US fuel inventories provided a floor.

Economic Environment

In Mexico, inflation for the first half of August slowed to 5.16%. INEGI reported that the National Consumer Price Index for the first half of August posted a biweekly -0.03% (0.14% prev.) change, below our estimate of 0.08% and the consensus forecast of 0.13%. On an annual basis, general inflation for the first half of August was 5.16%, lower than the previous 5.52% figure. Meanwhile, core inflation, which excludes the most volatile items such as energy and agricultural products, and government tariffs, rose by 0.10% in the first half of August, below our estimate (0.18%) and the consensus forecast (0.18%). On an annual basis, core inflation stood at 3.98% in the first half of August, down from 4.08% recorded in the second half of July. By components, merchandise inflation stood at 3.07% y/y (3.10% prev.) and services at 5.11% y/y. Regarding the most volatile items, i.e., non-core inflation, the annual rate came in at 8.80% (10.09% prev.).

Mexico´s economy cooled at the end of the second quarter of 2024. In Mexico, the Global Indicator of Economic Activity (IGAE for its acronym in Spanish), a proxy for monthly GDP, stagnated in June after growing by 0.7% in May and falling by -0.6% in April, according to seasonally adjusted figures. The primary sector fell by -0.4% and the secondary sector expanded by 0.4%, while the services sector declined by -0.2%. On an annual basis and according to original figures, the IGAE decreased by -0.6% in June 2024. By sectors, primary activities fell by -2.7%, secondary activities by -0.7%, and tertiary did the same by-0.4%. Additionally, final GDP figures for 2Q24 were released, which showed that the Mexican economy grew by 2.1% (1.5% prev.), slightly below the preliminary 2.2% figure.

Markets and Companies

The US stock market continues its positive streak, awaiting Jerome Powell’s speech tomorrow at the Jackson Hole Symposium, where more signals about the direction of monetary policy are expected. At the moment, the market anticipates that the Fed will cut its reference rate in September, and by year-end, it could settle at a range of 4.25%-4.5%, down from the current 5.25%-5.5%. In this regard, the Federal Reserve´s most recent meeting minutesshowed members’ willingness to cut interest rates as long as inflation continues to decline. In Europe, markets are also trading higher, with the ECB meeting minutes suggesting that another interest rate cut could be seen in September. In Asia, markets also showed gains, digesting the region’s PMI data release.

In the debt market, Treasury bond yields are rising, awaiting Jerome Powell’s remarks at Jackson Hole. The 10-year bond stands at 3.83%, while the 2-year bond is trading at 3.98%.

In commodities, oil is logging a slight rebound after weeks of declines due to slower demand in Asia. Gold is slightly down but remains close to $2,500 per ounce. This year, the price of gold has been boosted by expectations of interest rate cuts by central banks.

In Mexico, the IPC is up and is trading at 56,910.7 points.

The peso-dollar exchange rate is trading at 19.47 after closing at 19.27 yesterday.

Corporate News

• Snowflake’s shares fell despite the company reporting better-than-expected results and raising its guidance for 2024. 

• Peloton reported its first increase in sales in nine quarters. Additionally, at the profit level, it reported a smaller-than-expected loss.