The Day at a Glance | February 22 2024

The Top

*In Mexico, the overall inflation for the first half of February surprised on the downside.

*The Global Economic Activity Indicator (IGAE) showed stagnation in December.

*Eurozone PMIs indicate that the economic slowdown in the Eurozone is moderating as the services sector stabilizes (50.0 vs 48.4 prev.). Meanwhile, the manufacturing PMI dropped from 46.6 in January to 46.1 in February.

*Pressure is increasing on China to carry out additional measures to boost the economy.

*The S&P and Nasdaq indices are poised to experience an increase following Nvidia’s strong earnings report.

Economic environment

In Mexico, general inflation for the first half of February surprised to the downside. Today, INEGI released the National Consumer Price Index for the first half of February, showing a decline of -0.1%, below the market estimate of 0.15%. On the other hand, core inflation, which excludes the most volatile items such as energy and agricultural products, and government fees, increased by 0.28% in the first half of February. The statement highlights the increase in prices of household LP gas; however, this increase was more than offset by a significant drop in tomato prices. In its year-on-year change, general and core inflation for the first half of January was 4.45% and 4.63%, respectively. The surprise in the inflation data is mainly that both general and core inflation set below the consensus´ estimates. 

In Mexico, the Global Economic Activity Indicator (IGAE), a proxy for monthly GDP, showed no variation in December according to seasonally adjusted figures. Within the figures, it is observed that the stagnation in December was due to a 7.9% increase in primary activities and a -0.7% decrease in secondary activities, while the services sector showed no change. In its year-on-year variation, the IGAE for October grew by 1.1%, averaging 3.2% from January to December 2023. By sectors, the annual growth in December was: agriculture 3.5%, industry 0.0%, and services 1.5%. Additionally, Mexico’s GDP expanded by 2.5% compared to the corresponding period of the previous year in the fourth quarter of 2023, slowing down from the 3.3% growth rate in the third quarter and slightly above preliminary estimates of a 2.4% increase. In 2023, with seasonally adjusted figures, GDP increased by 3.2%.

Markets and companies

Global markets show positive sentiment, with enthusiasm in futures of major U.S. indices being boosted by Nvidia. The S&P 500 and Nasdaq are set to rise after the company reported another solid quarter, causing its stocks to surge more than 10%. Nasdaq leads the way with a +2.41% increase, S&P +1.61%, and Dow +0.65%. Meanwhile, the 10-year Treasury bond yield is at 4.34%. The Stoxx rose +1.44%, with most sectors logging positive figures. Automotive stocks increased by 2.8%, while food and beverages declined by 1.1%. The Nikkei reached a historic high of 39,156.97, surpassing the previous record set in 1989, despite discouraging business activity data in the country. China is up +2.19%. In Mexico, IPC futures continue to be up, reaching 57,441 points (+0.74%). Oil prices are up amid signs of tighter supply, standing at $77.67 per barrel. Natural gas prices are down by -4.51%. Gold prices increased due to the weakness of the dollar and the conflict in the Middle East, with an ounce trading at $2,024. Silver is trading at $22.97, and copper at $389.20. Lastly, cryptocurrencies are on the rise, with Bitcoin trading at 51,208.

After yesterday’s trading session, the exchange rate fluctuated between a low of 17.01 and a high of 17.10, currently quoting at 17.09.

Gruma reported its 4Q23 results yesterday afternoon. Revenues increased by +5.3%, and EBITDA by +9.5%. While there was a slowdown in growth, it’s important to note that during 4Q22, the performance of operations in the U.S., Asia, and Oceania reflected an extraordinary effect of an additional week of operations, in line with the closing of its fiscal year-end accounting, which occurs every six years. Therefore, 4Q23 faced a higher comparative base in those regions.

Kof reported its quarterly results this morning. Revenues (+8.0% vs +7.4%e.) and EBITDA (+10.0% vs +7.2%e.) showed solid growth and were driven by a +6.1% increase in volume, although partially offset by unfavorable currency conversion effects from most operational currencies to Mexican pesos. Excluding this effect, total revenues would have increased by +15.7%.

In 4Q23, Gentera recorded a year-on-year portfolio growth of 21.4% and a net profit increase of 48.6%. The results were in line with our estimates. Positively, we highlight the company’s guidance for 2024, where they expect a growth between 18%-20% in the loan portfolio and between 17%-20% in earnings per share.

Orbia reported quarterly revenues of $1,772 million, representing a 15.6% year-on-year decline. The EBITDA for the quarter decreased by 26.6% year-on-year. For 2024, Orbia expects an EBITDA generation between USD $1.35 billion to USD $1.45 billion, implying a variation between -7.5% to -0.7% compared to 2023

Corporate news

*Nvidia exceeded estimates for its fourth quarter, recording a 265% year-on-year increase in revenues. Strong demand for artificial intelligence chips for servers, especially the company’s “Hopper” chips, drove the revenue increase. Nvidia’s stock price has risen nearly 200% in the last year, becoming the primary beneficiary of the artificial intelligence boom in the industry.

*Rolls-Royce rises more than 8% in early London trading after doubling its annual profits in 2023 and forecasting further momentum for this year.

*Moderna increased by more than 5% after reporting better-than-expected revenues for the fourth quarter.