The Day at a Glance | May 3 2024

The Top

● April´s non-farm payroll surprised to the downside.

● In Mexico, gross fixed investment and private consumption increased by 12.5% and 5.3% in February.

● Yannis Stournaras, an ECB official, foresees only three interest rate cuts in 2024 due to greater-than-expectedgrowth.

● The Eurozone´s unemployment rate remained at a historic low of 6.5% in March, the same as in the previous three months and in line with market expectations.

● Oil prices rose on Friday but are still on track to record their largest weekly loss in three months, pressured by concerns about demand and high interest rates.

Economic Environment

April´s non-farm payroll surprised to the downside. The Bureau of Labor Statistics (BLS) released employment data for April, which showed an increase of 175,000 jobs, below the consensus estimate of 250,000, March’s figure of 315,000, and February’s 236,000, marking the first below-expectation data of the year and pointing to an initial sign of cooling. Job creation occurred in the healthcare, social assistance, transportation, and warehousing sectors. Additionally, the BLS revised job creation downward for February and March by a total of 22,000 jobs for both months. On the other hand, the unemployment rate set at3.9% in April. Wage growth was 3.9%, below the 4.1% recorded a month ago. April´s employment data suggests an initial sign of cooling in the labor market and could serve as a catalyst to facilitate the Federal Reserve´s actions. At the time of writing this report, markets are pricing in two Fed rate cuts for the remainder of the year.

In Mexico, gross fixed investment and private consumption increased by 12.5% and 5.3% in February. Fixed investment increased in construction (21.2%) and in machinery and equipment (12.3%), on a year-on-year basis, and according to unadjusted figures. By sector, private investment increased by 12.8% year-on-year and public investment did the same in 10.5% year-on-year. Within the private sector, construction hiked by 12.9% and machinery and equipment by 12.7%, while the public sector loggedgrowth rates of 12.1% and 1.3%, respectively. Private consumption in Mexico logged an annual 5.3% year-on-year increase – and according to original figures. Spending on imported goods increased by 31.1% year-on-year and on domestic goods and services by 1.8% year-on-year, according to original figures. On a month-on-month basis, gross fixed investment and consumption increased by 0.7% and 0.6% respectively, according to seasonally adjusted figures. February´s data points to what was expected by the IGAE for February: A rebound in economic activity after January´s stumble. According to preliminary GDP figures, both components of aggregate demand should continue to grow marginally in March. 

Markets and Companies

Main US stock indices were trading higher, reacting positively to April´s non-farm payroll, which showed the creation of 175,000 jobs, below the 240,000 expected by the consensus. This could contribute to the expectation that the Federal Reserve will decrease the interest rate by the end of the year. In this regard, Jerome Powell’s comments during the week stood out, indicating that while it´s unlikely for the Fed to raise rates, short-term cuts are also not expected. In Europe, markets were trading higher, while mixed movements were observed in Asia.

In the bond market, the yield on the 10-year Treasury bond was at 4.5%, recording a decline due to US employment data.

In commodities, oil is up, although it´s on track to end the week with losses. Gold recorded a rebound after declining in recent days, reaching $2,291 per ounce.

In Mexico, the IPC was trading higher, reaching 56,938.9 points.

The peso-to-dollar exchange rate is at 16.8870, after closing at 16.9842 yesterday. Overnight, the exchange rate reached a high of 16.9940 and a low of 16.8312.

Corporate News

Apple’s shares were trading higher as it reported better-than-expected results. Additionally, the company announced a $110 billion share buyback program.

Expedia’s shares were declining after the company provided guidance below expectations for the second quarter.

Coinbase reported better-than-expected revenues; however, it expects a rise in costs.