The Day at a Glance | January 22 2025

The Top

• Citi’s survey estimates that the Central Bank of Mexico´s next move will be a rate cut in February.

• US President Donald Trump pledged to impose tariffs on the European Union and announced that his administration was considering a punitive 10% tariff on imports from China.

• On Wednesday, ECB officials supported further interest rate cuts, signaling that next week’s reduction is virtually assured and that additional moves are likely, even if the Fed maintains a cautious stance.

• The UK posted a larger-than-expected budget deficit in December, driven by debt interest costs and a one-off purchase of military housing, according to official data highlighting the fiscal pressure faced by Finance Minister Rachel Reeves.

• Retailers in Japan, traditionally among the most reluctant employers to grant pay raises, are offering significant salary increases for the second consecutive year. This could signal favorable conditions for further rate hikes by the central bank.

• Oil prices held steady on Wednesday as investors closely monitored President Donald Trump’s proposed tariffs and the potential impact of the national energy emergency he declared on his first day in office.

Economic Environment

Citi’s survey estimates that the Central Bank of Mexico´snext move will be a funding rate cut in February. The survey consensus predicts that on February 6^th, the Central Bank of Mexico will lower the funding rate, with 13 of the 30 respondents expecting a 50-basis-point cut and the remainder forecasting a 25-basis-point reduction. For the rest of the year, the consensus forecasts the funding rate to close 2025 at 8.50% and 2026 at 7.50%. Regarding GDP growth, the consensus estimates that the economy expanded by 1.5% in 2024, with growth of 1.0% expected for 2025 and 1.8% for 2026. Meanwhile, the exchange rate is expected to close 2025 at 20.95 pesos per dollar and 2026 at 21.49 pesos per dollar. Regarding inflation, the consensus predicts that in the first half of January 2025, the national consumer price index will rise by 0.27%, with the core component increasing by 0.23%. By year-end, general inflation is expected to set at3.91%, while core inflation is expected to set at 3.68%.

Markets and Companies

Futures of major US indices are up due to strong quarterly results; the S&P 500 is approaching its all-time high once again, driven by a rally in tech stocks like Oracle and Nvidiadue to optimism regarding artificial intelligence.

In Europe, Germany’s DAX index reached an all-time high on Wednesday for the second time this week, while the Stoxx 600 is up +0.74%. Financial services, consumer goods, industrials, technology, and insurance sectors led the gains.

Meanwhile, in Asian markets, Chinese stocks fell after Trump suggested that tariffs on Beijing could take effect next month.

Regarding commodities, oil prices are rising on Wednesday due to a weaker dollar, while the market focuses on US inventories, Trump’s proposed tariffs, and the potential impact of the national energy emergency he declared on his first day in office.

Metals are logging mixed figures. However, gold prices are rising to a nearly three-month high, boosted by uncertainty surrounding US policies, Donald Trump, and a weaker dollar. In Mexico, IPC futures are up +1.44%.

The exchange rate stands at 20.57 after setting at 20.63 at market close yesterday.

Corporate News

• Netflix shares rose more than 15% after the company reported results exceeding expectations in both revenue and earnings on Tuesday night.

• United Airlines shares increased 5% after issuing a better-than-expected forecast. United anticipates adjusted earnings between 75 cents and $1.25 per share in the first three months of 2025, surpassing the 54 cents analysts had anticipated, according to LSEG.