The Day at a Glance | January 3 2024

The Top

• China will significantly increase Treasury bond financing to boost economic growth in 2025.

• China’s central bank indicated it will likely cut interest rates from the current 1.5% “at the appropriate time” in 2025, according to the Financial Times.

• On Friday, US President Joe Biden fulfilled his promise to block Nippon Steel’s $14.9 billion bid to acquire US Steel, citing national security concerns.

• In Mexico, the unemployment rate rose slightly to 2.6% in November, up from 2.5% in October, remaining below the market’s 2.7% forecast.

• In Germany, the number of unemployed people rose less than expected in December, according to federal employment office data released Friday (10,000 vs. 15,000 expected).

• Consumer credit in the UK grew at its slowest pace since mid-2022 in November, while lenders approved fewer mortgages than anticipated, consistent with other indicators showing a slowing economy.

• Oil prices held steady on Friday, poised for weekly gains after closing the previous session at their highest level in over two months, boosted by colder weather in Europe and the US, along with additional economic stimulus announced by China.

Economic Environment

China plans to intensify fiscal stimulus in 2025 through a historic increase in long-term Treasury bond issuance to spur business investment and boost consumption. The funds will primarily target strategic projects, including key infrastructure improvements, equipment renewal programs, and subsidies for durable consumer goods, such as digital devices. Additionally, the stimulus includes surprise wage hikes for government employees and increased issuance of local bonds, raising the budget deficit to nearly 10% of GDP—an unprecedented level in China’s recent history. These measures underscore Beijing’s commitment to counter deflationary risks, strengthen domestic demand, and tackle challenges such as the real estate crisis, high government debt, and weak consumption. The central bank is also expected to lower its benchmark rate in 2025, complementing fiscal stimulus to sustain growth. Lastly, while exports may face new hurdles, such as potential additional US tariffs, Chinese officials remain confident these policies will foster sustained economic recovery and achieve the 5% growth target for the coming year.

Markets and Companies

In the United States, futures for major indices are up. In contrast, European markets were mostly in negative territory, affected by geopolitical uncertainties, including tensions in Ukraine and the upcoming elections in Germany. Meanwhile, Asian markets closed with mixed results: in China, investors perceive uncertain signs regarding economic policy, while in South Korea, political uncertainty remains a key factor, especially following the failed attempt to arrest former President Yoon Suk Yeol.

In the commodities market, crude oil prices posted slight gains. In the United States, crude inventories decreased less than expected last week, decreasing by 1.2 million barrels to 415.6 million, compared to the estimated drop of 2.8 million. On the other hand, gold prices stood at $2,645 per ounce.

In fixed income, US Treasury bond yields edged down slightly. The 10-year bond yield fell 1.8 basis points to 4.54%, while the 2-year bond yield decreased by 0.8 basis points, settling at 4.23%.

In Mexico, IPC futures are up, standing at 50,386 points. As for the exchange rate, it´s trading at 20.56 pesos per dollar, logging slight appreciation compared to the previous close of 20.60 pesos.

FEMSA announced that it completed the sale of its plastic solutions operations to AMMI, a subsidiary of Milenio Capital focused on non-GMO corn and sustainable packaging, for $3.165 billion pesos, net of cash and debt.

Corporate News

• Shares of electric vehicle manufacturer Tesla fell 6% after reporting its first annual drop in deliveries, with 1.79 million vehicles sold in 2024 (-1.1% year-on-year).

• President Joe Biden announced the blocking of Nippon Steel’s acquisition of U.S. Steel, arguing that the steel industry is a national security priority for the United States.