The Day at a Glance | June 7 2024

The Top

• In Mexico, general inflation surprised to the downside in May due to the core component.

• May´s non-farm payrolls surprised to the upside.

• China’s exports increased solidly, but a slowdown in imports moderated the Asian giant´s economic outlook. 

• ECB authorities warned on Friday that the final stage of reducing inflation to 2% could be particularly difficult, although they said they were confident that the policy was working as expected; meanwhile, some members even see room to further ease the policy in 2024.

• Oil stabilized on Friday when OPEC+ members, Saudi Arabia and Russia, indicated they were willing to pause or reverse oil production increases.

Economic Environment

In Mexico, general inflation surprised to the downside in May due to the core component. Today, INEGI announced that May´s National Consumer Price Index recorded a monthly -0.19% change, below our estimate and the consensus forecast (-0.06% and -0.03%, respectively). On an annual basis, general inflation set at 4.69% in May, loggingslight acceleration from the 4.65% observed in April. Meanwhile, core inflation, which excludes the most volatile items, such as energy, agricultural products, and government tariffs, increased by 0.17% month-over-month in May, also below our estimate and the consensus forecast (0.26% and 0.24% month-over-month, respectively). On an annual basis, core inflation stood at 4.21% in May, down from 4.37% in April. By components, goods increased by 0.07% month-over-month and 3.38% year-over-year (previously 3.67% year-over-year), and services did the same in 0.30% month-over-month and 5.22% year-over-year (previously 5.21% year-over-year). The next inflation data – for the first biweekly period of June – will be released on June 24^th, ahead of Banxico’s monetary policy announcement on June 27^th. If inflation again surprises to the downside, we do not rule out a cut in the funding rate.

May´s non-farm payrolls surprised to the upside. The Bureau of Labor Statistics (BLS) released employment data for May, which logged an increase of 272,000 jobs, setting above the consensus estimate of 185,000, April´s 165,000figure, and was higher than the average of 232,000 jobs created over the past 12 months. Job creation occurred in the health, government, leisure, and hospitality sectors. Additionally, the BLS revised job creation numbers for March and April down by a total of 15,000 jobs for both months. On the other hand, the unemployment rate was reported at 4.0% in May, up from 3.9% in April. Meanwhile, wage growth was 4.1% in May. May´s data is good news in terms of economic growth, suggesting that the economy is stronger than the consensus expected; however, in this environment, it also contributes to a more patient Fed that will likely continue with considerable monetary tightening for some time.

Markets and Companies

Main U.S. stock indices were down in reaction to May´semployment figures, which showed that job creation set above consensus expectations. More specifically, non-farm payrolls increased by 272,000 jobs, higher than the estimated 190,000 and the 165,000 logged in April. The strength of the labor market increases doubts about whether the Federal Reserve could cut interest rates this year. The next monetary policy decision will be announced on June 12^th, with the market expecting that the reference rate will remain unchanged, while assigning a higher probability to a cut in September.

In Asia, stock markets were mixed, with notable growth in China’s exports during May exceeding expectations. In Europe, markets showed a negative bias as investors digested the European Central Bank’s decision to cut the interest rate for the first time since 2019.

The yield on the Treasury bond rebounded, reaching 4.43% after positive U.S. employment data was released.

Regarding commodities, oil prices are up, while gold recorded declines after China’s central bank stopped buying the metal following 18 months of purchases for its reserves.

In Mexico, the IPC opened lower.

The exchange rate of the peso against the dollar is at 17.944, after closing at 17.985 yesterday.

During May, Volaris recorded a 14.8% year-over-year decline in passenger traffic. By passenger type, domestic traffic fell by 17.8% and international traffic by 4.3%. 

Airport groups reported the following changes in passenger traffic during May: ASUR +3.1%; OMA +0.6%; and GAP -2.3%.

Corporate News

• Lyft shares logged a rebound after the company indicated that it expects strong growth from 2024 to 2027.

• GameStop shares were declining after the significant rebound seen in recent sessions. The company reported a 29% year-over-year drop in revenue and announced that it will continue with the sale of shares.