The Day at a Glance | June 6 2024

The Top

• The European Central Bank cut its interest rates by 25 basis points and revised its inflation estimates upwards. 

• Retail sales in the Eurozone stagnated in April, settingbelow market expectations. 

• In Mexico, 1,651,930 light vehicles were produced (+5.4% year-on-year) and 1,426,110 units were exported (+12.3% year-on-year) during the January-May 2024 period. 

• The number of unemployment insurance claims in the U.S. rose from 221,000 to 229,000 in the week ending June 1st

• The Governor of the Bank of Japan, Kazuo Ueda, stated that the central bank should reduce its massive bond purchases as it moves towards exiting massive monetary stimulus. 

• Oil extended its gains on Thursday amidst growing expectations that the U.S. Federal Reserve will cut the federal funds rate in its September monetary policy meeting.

• Main U.S. indices are waiting for the jobs report to be released tomorrow.

Economic Environment

The European Central Bank cut its interest rates by 25 basis points and revised its inflation estimates upwards. Today, the ECB decided to cut its refinancing, lending, and deposit rates by 25 basis points to 4.25%, 4.50%, and 3.75%, respectively. This is the first rate adjustment carried out by the ECB in nine months since it ended its increasing rates cycle. Additionally, the ECB announced it will reduce its pandemic emergency purchase program (PEPP) balance sheet at a rate of 7.5 billion euros per month during the second half of the year. Furthermore, it revised its inflation estimates: From 2.3% to 2.5% for 2024, and from 2.0% to 2.2% for 2025; and it kept its 2026 estimate at 1.9%. The 2024 figure was revised mainly due to increased domestic inflationary pressures stemming from wage revisions. Thus, the European Central Bank emphasized that it will maintain monetary restriction for as long as necessary to ensure inflation converges to its target level and will keep a close eye on data without committing to a specific guidance, suggesting a likely pause in rate cuts that we anticipate could end towards the last quarter of the year.

Retail sales in the Eurozone stagnated in April 2024, setting below market expectations. In April, retail sales stalled after increasing 0.7% year-on-year the previous month. This result compares negatively with the consensus expectation of 0.3% annual growth. Internally, food sales fell 0.5% year-on-year, while non-food product stores increased 0.4% year-on-year, and gas stations increased 0.3% year-on-year. On a monthly rate, retail sales also failed to meet market expectations of a -0.3% drop, as they recorded a deeper contraction (-0.5%) following the 0.7% rate of growth logged the previous month. Overall, April data recorded a slowdown in consumption in the European blockat the start of the second quarter, which could cloud forecastsof a continued economic recovery.

Markets and Companies

Global markets carry positive sentiment. Main U.S. indices closed the previous day with gains. Today, they are in mixed territory and are awaiting U.S. economic data to be released tomorrow. The Dow is up +0.39%, the S&P is up +0.09%, and the Nasdaq is down -0.08%. Meanwhile, the 10-year Treasury yield stands at 4.29%. In Europe, the Euro Stoxx 600 is up +0.64% with the vast majority of sectors in the green. In Asia, Japan’s Nikkei 225 rose +0.55% to close at 38,703.51. India’s Nifty 50 and Sensex indices rose +0.64% and +0.75%, respectively, as the country’s National Democratic Alliance, led by Prime Minister NarendraModi’s Bharatiya Janata Party, appeared set to form the next government. China ended slightly lower at 3,048.8 (-0.54%). In Mexico, the IPC is up and stands at 54,569.9 points (+0.29%). Oil prices were up +1.0% yesterday, breaking a losing streak caused this week by OPEC+’s decision to increase supply later this year. Today, the price stands at $74.60 per barrel. Natural gas prices are up +3.16%. Meanwhile, gold rose +0.2% to $2,360 per ounce. Silver is trading at $30.43 per ounce (+1.4%) and copper at $466.95 per pound (+1.4%). Lastly, cryptocurrencies are mixed. After yesterday´s trading session, the exchange rate fluctuated between a low of 17.44 and a high of 17.61, currently trading at 17.55.

Corporate News

• Lululemon jumped +8% as it exceeded revenue and profit expectations in its first quarter.

• Nvidia reached a market value of $3 trillion, surpassing Apple. Earlier this week, the company announced its next generation of artificial intelligence chips, known as “Rubin.”

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