The Day at a Glance | February 4 2025

The Top

• Mexico temporarily avoided the imposition of a 25% tariff on all its exports to the US.

• Annual consumer inflation in the Eurozonekicked off 2025 with an increase.

• The ISM manufacturing index returned to contraction territory after reaching 49.8 in January, down from 50.9 at the end of last year.

• China’s government announced limited tariffs on US imports, potential sanctions on American companies over monopolistic practices—including Google—and some export controls on metals.

• Some Federal Reserve members have expressed concerns about the US president’s tariff policy, as their latest statements suggest inflation could rise again.

• Oil prices fell on Tuesday following the implementation of a 10% tariff on Chinese imports and China’s countermeasures to mitigate the impact.

Economic Environment

Mexico temporarily avoided the imposition of a 25% tariff on all its exports to the US. On February 1st, US President Donald Trump signed an executive order under the International Emergency Economic Powers Act (IEEPA), mandating a 25% tariff on all goods from Mexico and Canada (with Canadian oil facing only a 10% tariff) and a 10% tariff on all Chinese goods. The rationale behind these tariffs was migration and drug trafficking, including fentanyl. Subsequently, the Mexican government reached a preliminary agreement with the US administration, deploying 10,000 National Guard members at the US southern border, which led to the postponement of saidtariffs for at least one month. During the Asian trading session on Sunday, the exchange rate hit 21.29 pesos per dollar. Following Mexico’s agreement with the US, the exchange rate returned to 20.50 pesos per dollar.

Annual consumer inflation in the Eurozone kicked off2025 with an increase. The block’s annual inflation rate reached 2.5% in January, exceeding market consensus expectations and December 2024’s reading of 2.4%. This marks the fifth consecutive monthly increase. By component, in January 2025, food, alcoholic beverages, and tobacco posted an annual inflation rate of 2.3% (previously 2.7%), services stood at 3.9% (previously 4.0%), non-energy industrial goods remained at 0.5%, and energy rose to 1.8% (previously 0.1%). Additionally, annual inflation in the Eurozone’s major economies increased between December and January—Italy rose from 1.4% to 1.7%, Spain from 2.8% to 2.9%, while Germany and France remained at 2.8% and 1.8%, respectively. Overall, Eurozone inflation accelerated again due to energy prices, surprising market expectations. However, declines in other components could factor into the European Central Bank’s upcoming monetary policy decisions.

Markets and Companies

S&P and Nasdaq futures show slight gains following yesterday’s volatility, which was triggered by the initial announcement of US tariffs on imports from Canada, China, and Mexico. However, a few hours later, it was announced that tariffs on Mexico and Canada would be put on hold for a month. While this helped ease initial concerns, the risk of tariffs has not been entirely eliminated. On the other hand, in the US, the release of January´s employment data is expected on Friday. In Mexico, the stock market is reopening after yesterday’s holiday, while today, the Bank of Mexico’s monetary policy decision is expected.

In the debt market, US Treasury yields are rising. The 2-year bond is trading at 4.26% and the 10-year bond at 4.59%.

In Mexico, IPC futures are trending higher.

Regarding the exchange rate, the Mexican peso is trading at 20.49 per dollar, after setting at 20.33 at market close yesterday.

Funo reported that on January 31st, 2025, NEXT received favorable confirmation of criteria from the Tax Administration Service (“SAT”). This confirmation allows NEXT to proceed with the Initial Public Offering of an industrial FIBRA vehicle.

Corporate News

• PepsiCo shares were declining before the market opened as its quarterly results fell short of expectations.

• Pfizer reported results above consensus expectations.

• Merck shares were down nearly 8% before the market opened after issuing earnings guidance below expectations.

• Palantir Technologies shares were rising significantly as its quarterly report and earnings guidance exceeded expectations.

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