The Day at a Glance | August 26 2024

The Top

• In Mexico, the current account deficit decreased in the first half of 2024.

• The global outlook turns gloomier, and central banks’ shifts indicate more turbulence ahead.

• New orders for key capital goods manufactured in the US unexpectedly fell in July, and the previous month’s data was revised downward, suggesting a loss of momentum in business spending on equipment that extended into the first part of the third quarter.

• German business confidence fell for the third consecutive month in August, according to a survey released on Monday, dampening hopes of a recovery for Europe’s largest economy.

• Israel and Hezbollah engaged in a major exchange of missile attacks, raising fears of an escalation in the region.

• Oil prices rose nearly 3% on Monday after reports of a near-total production halt in Libya, adding to earlier gains amid concerns that the escalating conflict in the Middle East could disrupt regional oil supplies.

Economic Environment

In Mexico, the current account deficit decreased in the first half of 2024. In the second quarter of 2024, the current account (trade balance + remittances + external transfers) logged a surplus of $3.639 billion, higher than the $2.106 billion recorded a year earlier, according to data from the Bank of Mexico. As a percentage of GDP, the surplus was equivalent to 0.7% of GDP, compared to 0.5% recorded in 2Q23. The surplus occurred amidst slower economic activity in emerging economies, while advanced economies showed improvement compared to the first quarter of the year. For the first half of the year, the current account logged a deficit worth -1.8% of GDP, smaller than the -2.2% recorded in the first half of 2023. The 1H24 deficit is not a concern, as it was equivalent to $17.735 billion, fully financed through foreign direct investment of just over $31 billion, and showed that the Mexican Peso´s fundamentals remain strong, although the economic environment is becoming more complicated due to various internal and external factors. For the entirety of 2024, we maintain our estimate of a current account deficit worth -0.6% of GDP.

The global outlook turns gloomier, and central banks’ shifts indicate more turbulence ahead. Increasing signs of modest global economic growth in the coming years and emerging risks in the labor market were the focus at the US Federal Reserve’s annual Jackson Hole Symposium, highlighting the changing trajectory of monetary policy as central banks in the US and Europe consider cutting interest rates. Additionally, the Bank of Japan reaffirmed its determination to pull its economy out of decades of ultra-loose monetary policy amidst growing signs of sustained price growth. With this, the divergence in policy directions, along with persistent weakness in China, the world’s second-largest economy, point to turbulent times ahead for the global economy and financial markets. Lastly, most analysts agree with the International Monetary Fund’s forecast that the global economy will record modest growth in the coming years, provided that the US achieves a soft landing, Europe’s growth recovers, and China emerges from its crisis.

Markets and Companies

The S&P 500 is logging slight changes. The S&P 500 is recording slight changes today as investors attempt to push stocks back to record levels after the Fed signaled that rate cuts are approaching. Last week, the S&P 500 closed 1% below its all-time high reached in mid-July. In Europe, indexes are mixed while investors digest the rising tensions in the Middle East after Israel and Hezbollah’s weekend attacks. Asian markets are also showing mixed movements. As for commodities, oil prices are up nearly +3% due to the production halt in Libya and the strikes between Israel and Hezbollah. Metals are up; gold remains near its all-time highs, buoyed by a weaker dollar and Jerome Powell’s comments, which bolstered expectations of a rate cut in September. Cyptocurrencies are also on the rise. In Mexico, the IPC is up +0.05% and stands at 53,717 points.

Over the weekend, the exchange rate fluctuated between a low of 19.04 and a high of 19.25, currently trading at 19.20. 

Corporate News

• Shares of PDD Holdings, the parent company of Temu, fell 16% after disappointing second-quarter results. The China-based online retailer reported revenues of 97.06 billion yuan, compared to a FactSet estimate of 100.17 billion yuan. Management said that revenue growth pressures are likely to persist due to increasing competition and other headwinds.

• Shares of SolarEdge Technologies rose more than 6% after SolarEdge announced that its CEO, Zvi Lando, had resigned effective immediately. Ronen Faier, who was previously CFO, has been named interim CEO.