The Day at a Glance | August 30 2024

The Top

In the US, consumption continues to grow while inflation decreases in line with market consensus expectations. 

• Inflation in the Eurozone fell to its lowest level in three years in August, setting the stage for a new ECB rate cut in its upcoming September meeting.

• China’s Central Bank is seeking to shift its monetary policy framework from a credit-based system to an interest rate-based one. However, liquidity risks and an uncooperative market are making this transition difficult.

• The Canadian economy grew by 2.1% in 2Q24, significantly exceeding the market consensus of 1.6% on a quarterly annualized basis. Markets estimate an 80% probability of rate cuts in September.

• This afternoon, PMI indices for China’s economy will be released, with the consensus expecting the manufacturing index to set at 49.5 points in August, slightly above July’s 49.4 reading. 

• OPEC+ is expected to proceed with an increase in oil production starting in October, as disruptions in Libya and expected cuts by some members offset the impact of weak demand.

Economic Environment

In the US, consumption continues to grow while inflation decreases in line with market consensus expectations. In the US, personal disposable income and personal consumption expenditures increased by 0.3% (0.2% prev.) and 0.3% (0.1% prev.), respectively, in July, indicating that consumption continues to rise in the world’s largest economy. Meanwhile, personal consumption expenditure(PCE) inflation, an indicator for the Federal Reserve’s inflation target, remained at 2.5% in July 2024, set below the market expectation of 2.6% figure and remained and unchanged from June’s revised 2.5%. Within the index, service prices increased by 3.7%, energy by 1.9%, food by 1.4%, while goods remained unchanged. The core index stood at 2.6% in July, the same level as in the previous month. On a monthly basis, PCE inflation rose by 0.1% in July, while the core component increased by 0.2%. Looking ahead, the Cleveland Fed’s Nowcasting model estimates that CPI inflation will set at 2.6% and PCE inflation at 2.4%, both for August.

Inflation in the Eurozone fell to its lowest level in three years in August, setting the stage for a new ECB rate cut in its upcoming September meeting. Annual inflation in the European block stood at 2.2% in August (2.6% prev.), in line with consensus expectations. By component, inflation in food, alcoholic beverages, and tobacco reached 2.4% y/y (previous 2.3%), services 4.2% y/y (previous 4.0%), non-energy industrial goods 0.4% y/y (previous 0.7%), and energy -3.0% y/y (previous 1.2%). Additionally, annual inflation in the Eurozone’s major economies declined between July and August, for example, in Germany from 2.6% to 2.0% and in France from 2.7% to 2.2%. Overall, the drop in inflation in the European block was mainly due to a decrease in energy prices. However, the magnitude of the decline in August seems to set the stage for another ECB rate cut in September.

Markets and Companies

Major US market indicators are logging positive figures in response to the release of the PCE price index, which recorded a 0.2% monthly increase, in line with expectations. The S&P 500 is on track to close with a monthly gain of around 1.7%, while the Dow Jones is pointing to an increase of 1.4%. In Europe and Asia, markets are wrapping up their last day of trading for August. The Stoxx 600 index is near its highest level in the past 52 weeks, driven by strong performance in the technology sector. In Japan, inflation in Tokyo reached its highest level since March, which could signal an upcoming adjustment in the country’s monetary policy.

In the commodities market, the interruption of oil production in Libya, along with Iran’s plans to reduce its output, has raised concerns about a possible surplus. In response to this news, oil prices stabilized but opened with losses. Other commodities, such as gold, are recording slightly positive movements.

The yield on the 10-year bond stands at 3.87%, while the 2-year bond yield is at 3.92%.

In Mexico, the IPC opened lower at 53,102.1 points. The exchange rate is at 19.69, after closing at 19.84 yesterday.

Corporate News

• CrowdStrike shares have recovered slightly after HSBC issued a buy recommendation.

• Alibaba has completed its three-year regulatory rectification following an antitrust fine in 2021, with the Chinese giant’s shares reacting positively.

• Shares of semiconductor manufacturer Intel have posted positive changes as reports surfaced that it has been working with bankers to strengthen its core business.