The Day at a Glance | May 21 2024

The Top

• Christopher Waller, Governor of the Federal Reserve, stated that he needs to see a considerable number of favorable inflation data before starting to cut interest rates.

• U.S. Treasury Secretary Janet Yellen urged German bank executives to step up efforts to comply with sanctions against Russia on Tuesday.

• U.S. Secretary of State Antony Blinken will present his case for President Joe Biden’s $64 billion foreign affairs budget request to Congress this week, amidst deep divisions with Republicans over spending priorities and policies regarding Israel.

• The IMF warned the British government on Tuesday that it was on track to miss its debt target and should not cut taxes before this year’s elections, indicating that tax increases will likely be necessary in the future.

• Japanese Finance Minister Shunichi Suzuki expressed concern about the negative implications regarding the yen´s current weakness and its effect on incentives to raise wages.

• Oil prices fell by more than $1 on Tuesday, extending losses due to the possibility that persistent inflation in the U.S. will keep interest rates high for a longer period of time, affecting industrial and consumer demand.

• Nvidia will present its quarterly results today after market close; analysts expect a solid report.

Economic Environment

Federal Reserve Governor Christopher Waller statedthat he needs to see a considerable amount of favorable inflation data before starting to cut interest rates. In a monetary policy speech carried out at the Peterson Institute, Governor Waller recounted how initial economic and inflation data for 2024 were a cold shower for monetary policy forecasts, especially since the declines in inflation halted and economic data pointed to a very strong economy, leading markets to once again price in the possibility of rate hikes. Waller indicated that, in his opinion, inflation is not accelerating and these rate hikes might not be necessary. What economic data is the Governor considering to reach this conclusion? 

1. Q1 2024 GDP growth set at 1.6%, far below Q4 2023’s 3.4%.

2. Retail sales stagnated in April.

3. Delinquency rates for credit cards and auto loans are above pre-pandemic levels.

4. The manufacturing and services ISM contracted in April, both setting below the 50-point threshold.

5. Job creation fell from 315,000 jobs in March to 175,000 in April.

6. Job vacancies divided by the number of unemployedpeople stood at 1.3x.

7. April´s CPI inflation showed that prices are not accelerating.

Markets and Companies

Global markets carry negative sentiment. Main U.S. indices closed the previous day with gains. This morning, the markets started the day mixed: Dow +0.10%, S&P -0.09%, and Nasdaq -0.36%. The Nasdaq is coming down from its record levels logged in the previous session as Nvidia shares decrease ahead of its quarterly report. In Europe, markets are recording losses, with the Euro Stoxx down -0.72% and most sectors in the red; banks dropped 1.1%, while mining stocks rose 0.3%. In Asia, markets experienced receded: The Nikkei 225 ended the session with a -0.31% decline and set at 38,946.93 and China was down -0.42%. In Mexico, the IPC is down, standing at 57,234 points (-0.30%). Oil prices decreased to $79.95 per barrel (-1.0%). Natural gas is down (-2.14%). Meanwhile, most metals are up, with gold +0.10%, silver +0.80%, and copper +1.0%. Lastly, cryptocurrencies are up.

The exchange rate fluctuated during the early hours, reaching a minimum of 16.52 and a maximum of 16.57, currently trading at 16.55.

Vinte reported that it signed a contract with 63.97% of Javer’s shareholders to launch a public acquisition offer by Vinte with the intention of acquiring up to 100% of the shares representing Javer’s share capital at a set price of $14.9355 pesos per share. In the event that the rest of Javer’sshareholders also decide to sell their shares through the public offer, Vinte would be paying the equivalent of up to $4.29 billion pesos for 100% of the outstanding shares representing Javer’s share capital.

The National Association of Self-Service and Department Stores (ANTAD for its acronym in Spanish) reported April´s sales results. During April, same-store sales, which include those with more than one year of operation, recorded a nominal increase of +0.6%. As for total store sales, which encompass both existing stores and those opened in the last 12 months, there was +3.5% growth compared to the same month of the previous year.

Corporate News

• Macy’s shares rose around 3% after surpassing expected earnings for the first quarter and raising its full-year outlook. Macy’s highlighted its recovery plan as a driver for the first quarter´s strong results.

• Xpeng’s shares gained 5% after the Chinese electric vehicle company exceeded first-quarter estimates in both revenue and earnings. XPeng also expects vehicle deliveries to increase between 25% and 40% year over year in the second quarter.