The Day at a Glance | December 13 2024

The Top

• The European Central Bank (ECB) cut interest rates and may continue doing so in 2025.

• In the Eurozone, industrial production stagnated in October, with no signs of a short-term recovery.

• According to Reuters, investors expect the Federal Reserve to lower the federal funds rate range by 25 basis points in its December 18^th announcement. They will also closely monitor updated macroeconomic and rate forecasts.

• German exports fell more than expected in October, indicating that the long-awaited recovery in external demand has been delayed.

• The UK economy contracted for a second consecutive month in October (-0.1% m/m vs. -0.1% prior), marking the first back-to-back decline since the onset of the COVID-19 pandemic. This occurred ahead of the government’s first budget.

• Oil prices rose more than 1% on Friday, heading for their first weekly gain since late November, as additional sanctions on Russia fueled supply concerns.

Economic Environment

The European Central Bank (ECB) cut its interest rates and may continue doing so in 2025. The ECB lowered its three key rates—deposit, refinancing, and lending—by 25 basis points, bringing them to 3.0%, 3.15%, and 3.40%, respectively. Regarding the economic outlook, the ECB forecasted that inflation will continue declining, reaching 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and 2.1% in 2027. However, the ECB revised its growth forecasts downward, expecting slower recovery than previously estimated in September. Despite strong third-quarter growth, the fourth quarter is expected to show weakness. The ECB now forecasts GDP growth of 0.7% in 2024, 1.1% in 2025, 1.4% in 2026, and 1.3% in 2027. Additionally, the ECB announced it would cease reinvestments from the Pandemic Emergency Purchase Program (PEPP) by the end of this year. In her press conference, ECB President Christine Lagarde noted that inflation should hover around 2.3% in the short term and is expected to reach 2.0% in the medium term. Long-term inflation expectations and market-based indicators have declined since the previous October meeting.Lagarde also highlighted that risks to growth are tilted to the downside, mainly due to potential global trade frictions, while inflation risks are balanced. Overall, the ECB is likely to continue its rate-cutting cycle in the coming months, given its sole mandate of achieving 2.0% inflation in the medium term.

In the Eurozone, industrial production stagnated in October. The data revealed no monthly growth in industrial activity (previous: -1.5%). The weak performance was driven by declines in durable consumer goods (-1.8% m/m), energy (-1.9% m/m), and non-durable consumer goods (-2.3% m/m), while capital goods increased (1.7% m/m), and intermediate goods remained flat. Annually, industrial production fell by -1.2% in October, with declines in four out of five components. Intermediate goods (-3.5%), durable consumer goods (-3.2%), capital goods (-1.7%), and energy (-1.0%) drove the annual contraction, while non-durable consumer increased 3.3%. Major Eurozone economies also logged annual declines in industrial production during October, including Germany (-4.9% vs. -4.3% prior) and France (-0.8% vs. 0.7% prior). Overall, the Eurozone´sindustrial production data suggests no short-term recovery for a sector that has been in deep recession for nearly two years.

Markets and Companies

US index futures are starting the day with gains, led by Broadcom, whose shares rose more than 17% after reporting a 220% annual increase in AI-related revenues. European markets are trading higher; however, other notable developments include an unexpected contraction in UK GDP and weak export data from Germany. In France, Emmanuel Macron appointed François Bayrou as Prime Minister. Asian markets closed with losses.

Oil prices are up. The International Energy Agency (IEA) raised its global demand forecast for 2025 to 1.1 million barrels per day (bpd), up from the 990,000 bpd projected in November. Meanwhile, gold prices are on track for a positive week, boosted by expectations of US rate cuts and reports of China resuming gold purchases.

The yield on the 2-year US Treasury bond stands at 4.20%, while the 10-year bond stands at 4.35%.

In Mexico, IPC futures are trading higher at 51,342 points. The exchange rate stands at 20.16 pesos per dollar, compared to yesterday´s 20.12 at market close. 

The National Association of Self-Service and Department Stores (ANTAD) reported November sales results. In November, nominal same-store sales, which include stores with more than a year of operation, increased by +4.9%. Total store sales, encompassing both existing stores and those opened in the last 12 months, increased by +7.6% compared to the same period last year.

Corporate News

• Software company Broadcom reported better-than-expected results; total revenues increased 47% year-over-year (y/y), reaching $13.01 billion. For 4Q24, the company anticipates revenues of $14.6 billion, a 57% y/y increase compared to the $9.3 billion reported in 4Q23.

• Donald Trump’s transition team is considering eliminating autonomous vehicle accident reports, a move supported by Tesla. The National Highway Traffic Safety Administration (NHTSA) warned that this would make it more difficult to assess the safety of these technologies.