The Day at a Glance | February 18 2025

The Top

• The Timely Indicator of Economic Activity (IOAE) estimates a slight improvement in the Mexican economy at the start of 2025.

• The US and Russia have begun negotiations to end the war in Ukraine without the participation of Kyiv or the European block. 

• Federal Reserve Governor Christopher Waller stated that his “baseline” view is that the new tariffs from the Trump administration will have a moderate impact on prices, which the central bank should consider secondary when shaping monetary policy.

• China has requested a debate at the World Trade Organization on “trade turbulence” and the organization’s response to it, in an apparent reference to US-imposed or threatened tariffs.

• In February, German investor confidence improved at its fastest pace in two years, and was driven by expectations of an economic recovery under a new government following Sunday’s elections, though the current situation remains weak.

• Wage growth in the United Kingdom accelerated at the end of 2024, according to data indicating the labor market’s resilience, explaining the Bank of England’s cautious approach to cutting interest rates despite overall economic weakness.

• On Tuesday, former top Japanese currency diplomat Hiroshi Watanabe stated that the Bank of Japan could raise interest rates two more times this year if inflation remains at current levels, helping prevent the yen from hitting new lows.

• Oil extended its gains on Tuesday after a drone attack on a pumping station in Russia reduced flows from Kazakhstan. However, expectations of an increase in supply capped price advances.

Economic Environment

The Timely Indicator of Economic Activity (IOAE) estimates a slight improvement in the Mexican economy at the start of 2025. The IOAE, a nowcast of the Global Indicator of Economic Activity (IGAE), estimates that in December 2024 and January 2025, the Mexican economy expanded by 0.8% y/y and 1.8% y/y, respectively, based on seasonally adjusted figures. By components, industrial production—which includes construction, manufacturing, electricity generation, and mining—declined by 2.4% in December, and the IOAE estimates a 1.7% y/y drop in January. On the services side, the timely indicator estimates 2.4% y/y growth in December and a 2.8% y/y increase in January. On the margin, this would translate into a 0.3% m/m decline in December and a slight 0.1% increase in January, based on seasonally adjusted figures. Thus, the IOAE suggests that the economy could regain some momentum in the first month of 2025, contrasting with most data pointing to a slowdown.

Markets and Companies

US stock futures are trading higher, suggesting a positive start to the week following yesterday’s holiday. Investors remain focused on US import tariffs. In this regard, President D. Trump signed a memorandum stating that the tariffs imposed will be reciprocal to those maintained by other countries on US exports.

Internationally, attention is on the US government’s negotiations with Russia over a peace agreement with Ukraine, while European leaders have held separate meetings on the issue. European stock markets have reacted positively to the possibility of an end to the conflict.

In the debt market, US Treasury yields are rising as investors await the release of the Federal Reserve’s latest monetary policy meeting minutes on Wednesday. The 2-year bond is trading at 4.27%, while the 10-year bond stands at 4.51%.

In Mexico, IPC futures are trading higher.

Regarding the exchange rate, the Mexican peso is trading at 20.24 per dollar, after reaching a high of 20.29 overnight.

Chedraui will release its 4Q24 results this afternoon. We anticipate negative results, with an EBITDA margin contraction due to higher year-over-year costs and expenses. Although revenue would benefit from exchange rate effects, profitability would be significantly impacted, with an estimated 150 bp decline in the consolidated EBITDA margin.

Corporate News

• Delta Airlines shares were declining following an accident on a flight from Minnesota to Toronto yesterday afternoon.

• Southwest Airlines shares were reacting positively to the announcement of a 15% workforce reduction.