The Day at a Glance | February 21 2024

The Top

*Retail sales in Mexico surprised with a year-on-year decline of -0.2% in December (2.5% expected).

*The wealthiest provinces in China accelerate fixed asset investment to boost growth.

*The Biden administration will cancel another $1.2 billion in student loans.

*Germany cuts its growth forecast for 2024 (0.2% vs. 1.3% previous).

*The drop in natural gas prices in the U.S. proves unstoppable and harms producers.

*Global markets mixed; volatility in U.S. tech stocks.

Economic environment

In December, retail sales in Mexico recorded a year-on-year decline of -0.2%. This reading set below the consensus´ expected 2.5% year-on-year and the previous 2.7% year-on-year. Notably, motor vehicle sales showed a significant negative variation of -9.9% year-on-year. Additionally, significant decreases were observed in hardware items (-7.8% year-on-year), followed by healthcare products (-5.4% year-on-year), while online sales continue to show considerable strength with a growth of 31.2% year-on-year. On a monthly basis, retail sales fell sharply from a slight growth in November of 0.1% to a significant decline of -0.9% in December, far from the consensus estimate of a 0.2% expansion. Thus, we observe that the decrease in consumption during the last quarter of the year aligns with the deceleration presented in this period by the Mexican economy.

Markets and companies

Global markets mixed. U.S. stock futures fell on Wednesday morning after major indices incurred their second day of losses, driven by a decline in Nvidia. Before the opening bell, Palo Alto Networks dropped more than 22% after the cybersecurity company reduced its full-year revenue guidance. Solar Edge Technologies lost over 19%, falling due to weak guidance for the first quarter. S&P 500 and Dow Jones futures are mostly neutral (+0.02% and +0.01%, respectively), while Nasdaq futures falls -0.28%. In Europe, markets show mixed movements. The Stoxx 600 index was down 0.1%; health care stocks dropped 1%, while automakers rose 1.6%. Notably, HSBC shares fell 6.7% after reporting an 80% decline in pre-tax profits in the last three months of 2023 due to a $3 billion charge on its stake in a Chinese bank. Meanwhile, Hong Kong stocks gained more than 3% as broader Asia-Pacific markets traded mixed overnight following losses on Wall Street on Wednesday, while investors assessed Japan’s trade data and worsening business sentiment among large manufacturers. In Mexico, IPC futures are up +0.79%, with the index reaching 57,680 points. The price of oil rose in early Asian trade on Wednesday as investors weighed concerns about production cuts by major producers and attacks on shipments in the Red Sea against reduced expectations of U.S. interest rate cuts. Meanwhile, metals are up: gold +0.3%, silver +0.4%, copper +0.6%. Lastly, cryptocurrencies are down: Bitcoin -2.17%, Ethereum -2.42%. After yesterday’s closing, the exchange rate fluctuated between a low of 17.04 and 17.08, currently trading at 17.06.

In 4Q23, Alfa’s revenues reached $3,885 million, representing a year-on-year decrease of 12.7%. The EBITDA for the quarter declined by 18.5%, although the decrease in comparable cash flow was 8.1% year-on-year. The report was mainly impacted by the results of Alpek, which offset the good performance of Sigma. However, it’s worth noting that Alpek’s figures include an impact from hyperinflation in Argentina.

During 4Q23, Alpek recorded a year-on-year drop of 31.2% in revenues and a decrease of 71.5% in EBITDA. The comparable EBITDA retreated by 38.1% year-on-year. Alpek’s results continue to be affected by the challenges facing the petrochemical industry, given the weak demand in China and the oversupply in the markets where the company operates.

Gruma will report its 4Q23 results this afternoon. We expect a low double-digit annual increase in revenue with stable volumes and price increases. Regarding profits, we anticipate that, at the gross level, the company will benefit from a more favorable cost environment, although expenses could increase and partially offset

Corporate news

*Nvidia fell almost 2% as investors grappled with concerns that the stock has become too overvalued ahead of its highly anticipated fourth-quarter earnings release. Nvidia is scheduled to release its results after the market closes on Wednesday.

*Shares of SolarEdge Technologies fell more than 20% after the company reported mixed quarterly results.

*Palo Alto Networks’ stock fell more than 23% after reducing its revenue and billing guidance for the full year. Palo Alto Networks exceeded earnings and revenue expectations for the recent quarter but said it anticipates slower growth for the full year.

*Amazon’s shares increased by 1% after the news that the company would be added to the Dow Jones Industrial Average, replacing Walgreens Boots Alliance. The change will officially take effect before the market opens on February 26. Walgreens Boots Alliance’s stock fell by 3%.

*HSBC shares fell 7% after the bank reported a full-year pre-tax profit for 2023 that missed analyst expectations.

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