The Day at a Glance | March 7 2024

The Top

*In Mexico, general inflation in February set at 4.40%

*Producer prices in Mexico recorded an annual 1.42% increase in February, showing little pressure from input costs.

*The European Central Bank kept its interest rates unchanged and suggested inflation is falling faster than expected.

*China’s exports and imports grew 7.1 and 3.5%, respectively, in February, well above the market´s estimates at 1.9% and 2.0%.

*U.S. stock index futures were trading higher. 

Economic environment

In Mexico, general inflation for February stood at 4.40%. Today, INEGI released the National Consumer Price Index for February, showing a variation of 0.09%, below the market estimate of 0.13% and our estimate of 0.17%. Meanwhile, core inflation, which excludes volatile items such as energy, agriculture, and government fees, increased by 0.49% in February, in line with both our and the market’s estimates. The statement highlighted an increase in prices for LP domestic gas (+10.2%) and low-octane gasoline (+2.1%). However, this increase was more than offset by a significant drop in tomato prices (-41.8%). On a year-on-year basis, the general and core inflation for the second month of the year were 4.40% and 4.64%, respectively.

Within core inflation, service prices set at 5.30% in February of this year, slightly lower than the 5.55% recorded a year ago. Within services, housing, the category with the highest weight in the index, was at 3.73% in February (compared to 3.43% in February 2022), education (tuition) at 6.39% (vs. 4.83%), and other services at 6.36% (vs. 7.51%). On the other hand, goods had an inflation rate of 4.11% in February, composed of 5.25% inflation in food, beverages, and tobacco, and 2.75% in non-food goods.

February´s inflationary data reminds us that general inflation is still recording certain surprises throughout its disinflationary process, especially due to its volatile nature.

Markets and companies

U.S. stock index futures were trading higher, following yesterday’s gains, interrupting the three consecutive downward sessions they had logged. Investors are digesting Jerome Powell’s comments before Congress. Yesterday, the Federal Reserve´s Chair stated that interest rates are at their peak, and the Fed will eventually begin cutting rates; however, in the short term, the organization is not ready to start the rate-cutting cycle. Today, Powell will testify before the Senate. Meanwhile, the market is keeping an eye on the release of U.S. labor market figures for February, scheduled for Friday, which will help gauge expectations regarding the direction of monetary policy.

In Europe, stock markets showed a positive bias, awaiting the European Central Bank’s monetary policy decision, where it is expected to keep its reference rate unchanged. In Asia, the Nikkei experienced a decline due to profit-taking after reaching record levels.

In the bond market, the 10-year Treasury bond was at 4.2%, operating with slight variations, assimilating Powell’s words and awaiting the employment figures to be released on Friday.

Regarding commodities, oil prices advanced after it was revealed that U.S. crude inventories increased less than expected last week. WTI was trading at 78.8 dpb, and Brent at 82.6 dpb.

The IPyC futures registered an increase, reaching 55,433.0.

As for the exchange rate, the peso was at 16.87 pesos per dollar, slightly down from yesterday’s closing at 16.88. It reached a maximum of 16.89 and a minimum of 16.85 overnight.

Yesterday, Funo reported that the Tax Administration Service (SAT) has not approved the confirmation criteria that would allow the issuer to place Fibra Next in the market. The authority requested the submission of additional documents. Funo is considering other alternatives to extract value from its industrial assets. Today, the company will hold a conference call with analysts.

Fibra Monterrey announced that it has launched an offer of up to 590,579,711 CBFIs, consisting of (a) a public offering in Mexico (the “Mexican Offer”) and (b) a simultaneous international offering of CBFIs in the United States to qualified institutional buyers. The Mexican Offer is subject to approval by the National Banking and Securities Commission of Mexico and will only be made through a prospectus supplement and a preliminary offering memorandum.

Volaris reported its passenger traffic yesterday afternoon. Volaris’ load factor was 85.9%, compared to 83.2% in 2023. Nationally, it reached 90.7% compared to 83.4% in 2023, while internationally it was 79.5%, compared to 82.7% in 2023. The airline has intensified inspections of Pratt & Whitney engines, reducing capacity, especially in the Mexican market. However, this decrease has been offset by an increase in capacity in international markets. In February, the load factor experienced an increase of 2.8 percentage points, highlighting that it is a low season month. Despite these measures, Volaris continues to show solid performance and remains in line with its 2024 guidance.

Corporate news

*Novo Nordisk shares rose nearly 7% as the company reported satisfactory results in trials of its weight loss medication.

*American Eagle shares rose before the opening after the company announced a plan to boost growth over the next three years. The company also reported better-than-expected results.

*Hugo Boss indicated that it could fall short of its revenue target for 2025 due to weakened demand. The company expects a sales increase for 2024 between 3% and 6%.