The Day at a Glance | July 8 2024

The Top

• Citi survey lacks consensus regarding the next funding rate cut.

• Tomorrow, Mexico’s inflation for June will be published, which we estimate will set at 4.87% y/y.

• Elections in France granted victory to the left, a blow to Marine Le Pen’s far-right party, resulting in a hung parliament.

• German exports fell more than expected in May due to weak demand from China, the US, and European countries, as shown by data from the federal statistics office on Monday.

• Bank of England official Jonathan Haskel said on Monday that he does not want to cut interest rates from their current 16-year high as inflationary pressures persist in the labor market, and it is unclear how quickly they will fade.

• Oil prices fell on Monday as supply disruption concerns eased amidst hopes for a ceasefire agreement in Gaza, although the potential impact of Hurricane Beryl on supply kept the decline in check.

• Main US indices remain stable at the start of the week.

Economic Environment

The Citi survey lacks consensus regarding the next funding rate cut. Last Friday, the Citi survey (formerly Citibanamex survey) was published ahead of June´s inflation data. The consensus expects a 0.28% m/m increase in the general rate and a 0.23% m/m increase in the core rate, while for July, they estimate a 0.42% m/m increase in the general rate and a 0.30% m/m increase in the core rate. For the next 12 months, they estimate that inflation will set at 3.91% annually, above the 3.83% reported 15 days ago. For the end of the year, expectations for general and core inflation are 4.30% and 4.00%, respectively. For 2025, forecasts are set at 3.80% and 3.75%, respectively. Regarding the funding rate, it´s expected to close 2024 at 10.25%; however, there is no consensus on when the next rate cut will occur, as 22 of 34 analysts believe it will happen in August, and the remaining 12 believe it will occur between September and November. The exchange rate is expected to close 2024 at 18.70 pesos per dollar and 2025 at 19.40 pesos per dollar. Real GDP growth for 2024 is forecasted at 2.0% and at 1.7% for 2025. 

Markets and Companies

Main US indices remain stable at the start of the week as investors await key inflation data on Thursday for more clues on the longevity of this year’s market rally. Reports from some financial giants and consumer companies are also on the agenda. In Europe, French stocks are rising as markets react to the left’s victory in the country’s parliamentary elections. The euro remained stable against the dollar, and trading in bond markets was relatively calm as well. In Asia, markets mostly fell; real wages in Japan declined for the 26^th consecutive month, and Chinese stocks dropped for the fifth consecutive day. Regarding commodities, crude oil prices are down. Hurricane Beryl hit land near Matagorda, Texas, as a Category 1 storm; Matagorda is about 150 miles northeast of Corpus Christi, a major crude oil export facility. Metals are down, and cryptocurrencies are up. In Mexico, the IPC is down -0.08% and stands at 52,289 points.

Over the weekend, the exchange rate fluctuated between a low of 18.03 and a high of 18.13, currently trading at 18.03.

Corporate News

• Morphic Holding shares surged more than 75% on the news that Eli Lilly will acquire the biopharma company in a $3.2 billion deal. The deal will give Eli Lilly access to Morphic’s portfolio of treatments in development, such as those for ulcerative colitis and Crohn’s disease. Eli Lilly shares inched up 0.2% on the news.

• SolarEdge rose 5% after Bank of America upgraded its recommendation from “underperform” to “neutral.” However, the firm stated that it seeks a more tangible recovery in margins and cash flow.