The Day at a Glance | May 9 2024

The Top

In Mexico, April’s general inflation surprised to the upside, while underlying inflation continued to decline.

• In China, exports and imports are growing again, which suggests that demand is recovering. 

• The United States surpassed China as Germany’s top trading partner during the first quarter of 2024.

• Unemployment claims rose from 209,000 to 231,000 in the week ending May 4^th, its largest increase since August 2023.

• The Bank of England kept its interest rate unchanged at 5.25% in its May 9^th meeting, in a divided decision, as two members voted for a cut.

• Oil rebounded due to a reduction in crude oil storage in the U.S. and increased imports from China.

• The Dow Jones started today´s session in the red for the first time in 7 days, but recovers ground. 

Economic Environment

In Mexico, April’s general inflation surprised to the upside, while underlying inflation continued to decline. Today, INEGI announced that April´s National Consumer Price Index recorded a biweekly 0.20% change, slightly below our estimate of 0.21% and above the consensus forecast of 0.18%. On an annual basis, general inflation was 4.65%, below our estimate of 4.67%, above the consensus estimate of 4.63%, and above March´s 4.42%. Meanwhile, underlying inflation, which excludes the most volatile items such as energy, agricultural products, and government tariffs, increased by 0.21% in April, below our estimate and the consensus 0.24% forecast. On an annual basis, underlying inflation stood at 4.37% in April, down from the 4.55% logged in March. By components, goods rose by 0.30% m/m and 3.67% y/y (prev. 3.88% y/y); services did the same by 0.10% m/m and 5.21% y/y (prev. 5.37% y/y). Inflation surprised to the upside due to a rebound in the most volatile component, while the component reflecting the medium- and long-term inflation trend, i.e., the underlying trend, continued to decline. However, the decline is mainly explained by the goods component, while services remain above 5.0%. Undoubtedly, the progress recorded is welcome, but it is not widespread, so it will be necessary to continue waiting for a change in trend regarding services before Banxico decides to continue with monetary easing.

In China, exports and imports are growing again, which suggests a recovery in demand. April’s exports recorded a year-on-year expansion of 1.5%, in line with consensus expectations. Thus, exports returned to positive territory after a sharp annual decline of -7.5% in March. Meanwhile, imports recorded an 8.4% y/y increase, well above the market’s 4.0% forecast, following the previous month’s-1.9% contraction. Overall, China’s trade balance components returned to growth territory in April after contracting the previous month, indicating an encouraging improvement in both domestic and external demand, while Beijing faces numerous challenges in its efforts to boost the Asian giant´s economic recovery. 

Markets and Companies

Global markets with mixed sentiment. Major U.S. indices closed the previous day with gains. This morning, markets started the day on mixed ground: Dow +0.08%, S&P +0.04%, and Nasdaq -0.38%. In Europe, markets are recording gains, with the Euro Stoxx up +0.08%; sectors are mixed, with the automotive sector down -1.3% while oil and gas stocks increased by +0.9%. In Asia, markets closed mixed: Japan’s Nikkei 225 fell by -0.34% to 38,074, recording two consecutive days of losses, and China +0.83% after its imports exceeded expectations and exports increased, as expected. In Mexico, the IPC opened higher, reaching 57,155 points (+0.13%). Oil logged an increase in its price, although the drop in crude oil reserves in the United States and the increase in Chinese imports supported growth expectations for demand in the world’s two largest crude-consuming nations, reaching $79.29 per barrel. Natural gas is up (+1.55%). Meanwhile, metals are mostly up, with gold at +0.6%, silver at +2.0%, and copper stable. Lastly, cryptocurrencies are down.

The exchange rate fluctuated during the early hours, reaching a low of 16.87 and a high of 16.96, currently trading at 16.91.

Volaris reported its passenger traffic results for April 2024. The company transported a total of 2.2 million passengers. This implies an annual decrease of -20.9% (vs 2.8m in 2023). International passenger traffic recorded a decline of -8.0% (563k vs 611k in 2023), and domestic traffic recorded a decline of -24.3% (1.7m vs 2.2m in 2023). The airline confirmed that changes made in domestic capacity have had positive effects, achieving an occupancy factor of 90.1%. In anticipation of the summer peak season, we have increased capacity in the border market between the United States and Mexico.

Yesterday afternoon, Volaris announced the reactivation of its codeshare with Frontier Airlines, which will improve connectivity between Mexico and the United States. Starting today, Frontier passengers can book flights to Mexico through Volaris for travel after May 16^th. This reactivation allows Frontier passengers to easily book their flights for non-stop Volaris flights or connections between Frontier and Volaris. Likewise, Volaris passengers can now access over 100 destinations in the United States when booking with Volaris.

Corporate News

• Warner Bros Discovery shares fell 4.4% after reporting below-expectation total revenue and earnings.

• Semiconductor Company, Arm, declined more than7.5% due to an unenthusiastic revenue guidance.

• Airbnb fell over 9% after weak guidance overshadowed its good first-quarter report.