The Day at a Glance | May 23 2024

The Top

• Mexico´s economy grew by 0.3% q/q in Q1 2024, above the preliminary estimate of 0.2% q/q, according to seasonally adjusted figures.

• In Mexico, general inflation for the first half of May set at 4.78%, above the 4.67% logged in the second half of April.

• Eurozone PMI´s show that the European block´s economic recovery is accelerating as new orders increased at their fastest pace in over a year.

• The number of unemployment insurance claims in the US dropped from 223,000 to 215,000 in the week ending May 18^th, indicating a strong labor market.

• The Governor of the Bank of Japan, Kazuo Ueda, said that Q1 2024 GDP figures did not change the central bank’s view that the economy is on route to a moderate recovery; meanwhile, the 10-year bond reached a level of 1% for the first time in 11 years as investors bet on higher interest rate increases.

• Oil prices rose after three days of losses, despite the US Federal Reserve’s expectation of further interest rate hikes if inflation risks increase.

• Nvidia rose 9%, pushing shares above $1,000 after reporting stronger-than-expected first-quarter results.

Economic Environment

Mexico´s economy grew by 0.3% q/q in Q1 2024, above the preliminary estimate of 0.2% q/q, according to seasonally adjusted figures. The adjustment was due to a revision in the primary sector from -1.1% to +1.7% q/q, while there was slightly less momentum in the services (0.6% vs. a preliminary 0.7%) and the industrial sectors(-0.5% vs. a preliminary -0.4%). On an annual basis, and according to original figures, accumulated growth for the first three months of the year was 1.6%. The Monthly Economic Activity Indicator (IGAE), a proxy for monthly GDP, revealed that the economy grew by 0.3% m/m and 3.3% y/y, according to seasonally adjusted figures. Additionally, the services sector appears to be gaining momentum, as it logged an annual 3.8% figure in March, after 3.3% in February and 1.3% in January. GDP and IGAE figures suggest that we should see greater momentum in the economy in the second quarter. For now, we maintain our 2.2% growth estimate for the entire year. 

In Mexico, general inflation for the first half of May set at 4.78%, above the 4.67% logged in the second half of April. Today, INEGI announced that the National Consumer Price Index for the first half of May recorded a -0.21% biweekly change. On an annual basis, general inflation for the first half of May set at 4.78%, in line with the market consensus and above our 4.73% estimate. In the second half of April, annual inflation was 4.67%. The index’s decrease in the biweekly period in question is mainly due to a drop in electricity prices, especially due to the start of seasonal subsidies for electricity rates in 11 cities across the country. Meanwhile, core inflation, which excludes the most volatile items, such as energy, agricultural products, and government-set prices, increased by 0.15% biweekly and 4.31% y/y in the first half of May. Within core inflation, the services sector stood at 5.23% y/y. Although core inflation continued to decline, the services sector´s inflation remained high and general inflation rose again from one biweekly period to the next. Going forward, we expect it to rise to around 5.0% by June, mainly due to base effects from non-core inflation. In our opinion, this will make it difficult for the Bank of Mexico to cut the funding rate.

Markets and Companies

Global markets carry mixed sentiment. Major US indices closed the previous day with losses. This morning, markets started mixed, incorporating Nvidia’s quarterly results: Dow -0.56%, S&P +0.38%, and Nasdaq +0.47%. In Europe, markets show gains, with the Euro Stoxx up +0.53% and its sectors mixed, with technology stocks up 1.7% driven by Nvidia. In Asia, markets posted mixed results: Japan’s Nikkei 225 rose 1.26% to close at 39,103.22, while China was down -1.33%. In Mexico, the IPC opened lower, standing at 56,403 points (-0.05%). Oil prices rose after a three-day decline but are still on track for a weekly loss, currently at $78.41 per barrel. Natural gas is up (+2.32%). Meanwhile, most metals are down, with gold -1.2%, silver -0.8%, and copper -0.1%. Lastly, cryptocurrencies are up.

The exchange rate fluctuated overnight, with a low of 16.61 and a high of 16.68, currently trading at 16.64.

Cemex is the first company in the construction materials industry to develop a sales assistant powered by generative artificial intelligence. Cemex has developed the first AI tool in the construction materials industry, transforming how the sales team interacts with customers by providing real-time support for greater customer experience.

Corporate News

• Nvidia rose 7.4% thanks to strong first-quarter results, better-than-expected guidance, and the announcement of a stock split.

• Live Nation fell 6% after Bloomberg reported that the Department of Justice and a group of states are expected to file an antitrust lawsuit against the company.

• News Corp rose more than 5% after announcing a “multi-year global partnership” with OpenAI.