The Day at a Glance | May 31 2024

The Top

• In the United States, PCE inflation remained unchanged at 2.7%, in line with estimates.

• The Eurozone´s annual inflation rate stood at 2.6% in May.

• China’s PMI´s surprised to the downside, falling below consensus expectations in May; indicators suggest that China´s economy may need more stimulus to bolster an economic recovery.

• Donald Trump became the first U.S. president convicted of a crime after a New York jury found him guilty of falsifying documents to cover up a payment.

• Japan will take appropriate measures against excessive movements in its currency, said Finance Minister Shunichi Suzuki.

• Oil prices remained stable on Friday as investorsawaited U.S. inflation data for clues on demand forecasts before focusing on the OPEC+ meeting on Sunday to determine the supply outlook for the coming year.

Economic Environment

In the United States, PCE inflation remained unchanged at 2.7%, in line with estimates. In the U.S., disposable personal income and personal consumption expenditure increased by 0.3% (0.5% prev.) and 0.2% (0.5% prev.), respectively. Meanwhile, annual personal consumption expenditure (PCE) inflation, the indicator used for the Federal Reserve’s inflation target, remained unchanged at 2.7% annual in April, in line with market expectations. Within the PCE, service prices increased by 3.9%, energy prices by 3.0%, food prices by 1.3%, and goods prices by 0.1%. The core index stood at 2.8% in April, remaining unchanged for a third consecutive month. On a monthly basis, PCE inflation increased by 0.3%, while its core component rose by 0.2%. For May, the Cleveland Fed’s Nowcasting model estimates CPI inflation will set at 3.4% and PCE inflation will again be 2.7%.

The Eurozone´s annual inflation rate stood at 2.6% in May. May´s figure set in line with market expectations after accelerating from the previous month’s 2.4%. By component, food, alcoholic beverages, and tobacco increased 2.9% year-over-year, services 4.1%, non-energy industrial goods 0.8%, and energy 0.3%. Annual inflation figures for the major economies in the European block increased between April and May of this year; for instance, in Germany, it went from 2.4% to 2.8%, and in France, it went from 2.4% to 2.8%. Overall, May´s figures show that the ECB still faces some challenges in reaching its inflation target; however, this is not expected to affect the decision to cut interest rates in its next monetary policy meeting.

Markets and Companies

Main U.S. stock indices are up. Similarly, the market is set to close May on a high note. Investors continue to assesseconomic data to gain greater clarity on the direction of U.S. monetary policy. In this regard, the market is digesting the release of April´s inflation (PCE) figure today, which loggeda monthly 0.2% increase. Core inflation increased by 2.8% on an annual basis. The data set in line with expectations. The market is pricing in two rate cuts this year, although it is also possible that the Fed could keep its benchmark rate unchanged.

Regarding commodities, oil is trading higher, with WTI at $78.07 per barrel and Brent at $82.02 per barrel. Gold is rising, trading at $2,354.37 per ounce.

In Mexico, the IPC is trading lower, standing at 55,244.8 points.

The exchange rate of the peso against the dollar is 16.96.

Corporate News

• Dell shares fell by about 16% as the company issued a weak earnings guidance, expecting margin contractions for this year.

• Nordstrom shares declined after reporting earnings that set below expectations.

• Gap shares increased by about 25% as it revised its earnings guidance upward for 2024.