The Day at a Glance | July 12 2024

The Top

• In Mexico, industrial production continued to increase in May, and was mainly driven by construction.

• In China, exports exceeded expectations, but imports surprised by logging a decline in June.

• President Joe Biden continues to face increased pressure from Democrats to drop his reelection bid.

• According to a Reuters poll, China’s central bank is widely expected to leave the medium-term interest rate unchanged and withdraw liquidity from the banking system when it renews loans maturing on Monday.

• It is estimated that Japan may have spent up to 3.57 trillion yen ($22.6 billion) in its latest currency market intervention to lift the yen from its 38-year lows.

• Oil prices rose on Friday amidst signs of easing inflationary pressures in the US, the world’s largest oil consumer, though Brent crude is still heading for a weekly decline.

Economic Environment

In Mexico, industrial production continued to increase in May, and was mainly driven by construction. May´s figures logged an annual 1.0% increase in industrial activity in our country, according to original figures, which is below the 5.1% recorded a month earlier. Two of the four components recorded annual expansions, the most significant being construction, which increased 10.2%, followed by the generation and distribution of water, gas, and electricity at 5.1%. Meanwhile, mining and manufacturing fell by -2.4% and -1.4%, respectively. Thus, industrial production in Mexico accumulated 1.7% year-over-year growth in the January-May period. On a monthly rate, industrial production in our country increased by 0.7% in May, according to seasonally adjusted figures. May’s industrial production figures showed that growth mainly came from construction, as foreign demand for manufacturing has remained virtually stagnant since mid-2022, and has recently recorded a downward trend.

In China, exports exceeded expectations, but imports surprised by logging a decline in June. June´s exports recorded an 8.6% year-over-year expansion, above the consensus expectation of 8.0% year-over-year. Thus, exports have recorded three consecutive months of expansion following a 7.6% year-over-year increase in May and 1.5% year-over-year in April. On the other hand, imports surprised negatively with a -2.3% year-over-year decline, well below the market’s 2.9% forecasted increase and after having logged two months of growth (1.8% year-over-year in May and 8.4% year-over-year in April). Overall, exports have been one of the few very positive components of an economy that is otherwise still struggling to gain momentum despite efforts to stimulate domestic demand after the pandemic. Consequently, the market expects China to implement greater political support measures in the short term, which could happen at the Third Plenum, which is scheduled to take place from July 15^th to the 18^th, with hundreds of senior officials from the Communist Party of China meeting in Beijing for a meeting held every five years.

Markets and Companies

Main US stock indices are trading higher, after the S&P 500 and Nasdaq logged an adjustment yesterday. Today, investors are digesting the start of the Q2 2024 corporate earnings season, with banks like Wells Fargo, JPMorgan, and Citi releasing mixed results. It is estimated that for the quarter, earnings for the S&P 500 companies will increase by 10.1% year-over-year. On the economic front, producer price inflation was published today, following yesterday’s announcement that consumer inflation rose less than expected, raising expectations that the Federal Reserve may lower its benchmark interest rate in September.

In Asia, stock markets closed mixed, with Japan’s Nikkei 225 adjusting after reaching record highs, while in Europe, markets are trading higher.

In the debt market, the 10-year Treasury bond yield stands at 4.2%, showing a slight uptick in reaction to the producer price inflation data.

In Mexico, the IPC is trading lower, standing at 54,353.6 points.

Regarding the peso-dollar exchange rate, it stands at 17.71 after closing at 17.77 yesterday.

Corporate News

• Shares of Wells Fargo are falling because the bank reported a 9% year-over-year decline in net interest margin for Q2 2024.

• JPMorgan reported quarterly revenues above analysts’ consensus expectations.

• AT&T shares were down after the company announced it suffered a cyberattack that resulted in the extraction of consumer data.