The Day at a Glance | August 8 2024

The Top

• Inflation remained very high in July. INEGI anticipates changes will be made to the basket of goods and weighting structure used for the calculation of the INPC starting from the next biweekly period.

• Today at 1:00 p.m., the Central Bank of Mexico will announce its monetary policy decision. We estimate that the funding rate will remain unchanged at 11.0%. We do not rule out a divided decision.

• In the week ending August 3^rd, initial unemployment claims were 233,000, marking a decrease of 17,000 from the previous week’s 250,000.

• The Bank of Japan managed to ease investor concerns during the global market turmoil this week by reversing a strategy aimed at communicating consistent interest rate hikes. However, this change tests the bank’s determination to gradually unwind decades of radical stimulus measures.

• Oil prices remained stable on Thursday after two sessions of gains, where rising supply risks in the Middle East offset demand concerns that had driven prices to their lowest level since early 2024 at the start of the week.

Economic Environment

Inflation remained very high in July. INEGI anticipates changes will be made to the basket of goods and weighting structure used for the calculation of the INPC starting from the next biweekly period. Today, INEGI announced that July´s National Consumer Price Index recorded a monthly 1.05% change, in line with our estimate of 1.04% and the consensus forecast of 1.02%, respectively. On an annual basis, general inflation set at 5.57% in July. Meanwhile, core inflation, which excludes the most volatile items such as energy, agricultural products, and government-regulated prices, increased by 0.32% m/m in July, almost in line with our estimate (0.31%) and slightly above the consensus forecast (0.29%). On an annual basis, core inflation set at 4.05% in July. By component, goods rose by 0.12% m/m and 3.09% y/y, and services by 0.55% m/m and 5.22% y/y. On the other hand, non-core inflation increased by 3.29% m/m and 10.36% y/y. Additionally, INEGI mentioned that an update to the basket of goods, as well as the weighting structure, will be made starting from the next report – the first biweekly period of August. We will closelymonitor the main changes and their effects on the calculation of inflation. 

Markets and Companies

Main US stock indices are trading higher after closing lower yesterday. The market is reacting positively to US weekly unemployment claims, which came in at 233,000, below the consensus expectation. In recent sessions, markets have shown increased sensitivity to economic news due to the anticipation of an economic slowdown while also assessing the monetary policy outlook of major central banks. In Europe and Asia, stock markets maintained a negative trend.

Regarding the debt market, the 10-year Treasury bond yield stands at 4.0%, logging an uptick after the release ofunemployment claims data. Although the yield curve remains inverted, the spread between the 10-year and 2-year bonds has narrowed in recent days.

In the commodities market, gold and silver continue to rise. Metals have benefited from the prospect of interest rate cuts on behalf of the Federal Reserve and geopolitical conflicts, as they are considered safe-haven assets.

In Mexico, the IPC opened higher, reaching 57,741.0 points. The peso-to-dollar exchange rate is at 19.20 after closing at 19.27 yesterday.

Oma reported a 4.2% y/y decline in passenger traffic during July. By origin, domestic traffic fell by 6.2% y/y, while international traffic increased by 10.7% y/y.

The BMV announced that during July, the trading volume in the stock market increased by 37.0% y/y, while the traded amount grew by 9.5% y/y.

Corporate News

• Eli Lilly reported quarterly results that were better than consensus expectations and revised its earnings guidance upward. The company has seen a boost from its diabetes and weight loss treatments.

• Warner Bros. announced it will recognize an asset impairment charge of nearly $9.1 billion in its TV business.

• Under Armour reported quarterly revenue and earnings that exceeded expectations, with its shares trading higher in response to the report.