The Day at a Glance | November 19 2024

The Top

• The Central Bank of Mexico may continue cutting its interest rate.

• On Tuesday, Germany’s central bank stated that Germany´s economy is likely to stagnate in 4Q24 as the labor market continues to weaken and potential new trade tariffs loom.

• According to a Reuters poll, China is widely expected to leave its benchmark interest rates unchanged on Wednesday, as the Yuan faces renewed pressure with Donald Trump returning to the White House.

• On Tuesday, Bank of England officials said that the main concern in gradually reducing interest rates is the potential inflationary impact of tax hikes implemented by the new British government.

• Next month, the Bank of Japan will publish its findings on the pros and cons of various unconventional monetary easing tools used in its 25-year battle against deflation, marking another symbolic step toward ending its massive stimulus program.

• On Tuesday, Ukraine used US missiles to strike Russian territory for the first time, Moscow said, marking a significant escalation on the 1,000^th day of the war.

• Oil prices fell on Tuesday, pressured by the restart of production at Norway’s Johan Sverdrup oil field, though investor caution over fears of an escalation in the Russia-Ukraine war limited the decline.

Economic Environment

The Central Bank of Mexico may continue cutting its interest rate. In an interview with Reuters, Victoria Rodríguez Ceja, Governor of the Central Bank of Mexico, stated that, given the progress in reducing inflation, they(within the Bank of Mexico’s Governing Board) believe theycan continue lowering the reference rate, and in upcoming meetings, they will assess the inflation outlook and make the corresponding decisions. Additionally, she highlighted that depending on inflationary developments, there could be more aggressive cuts, noting that the rate has been reduced four times this year by 25 basis points each. Despite the outcome of the US election, operating conditions in the foreign exchange market have remained relatively orderly, making intervention by the Bank of Mexico unnecessary. However, market conditions are being monitored for potential action if needed. Similarly, after announcing the 2025 budget, markets have remained stable, which is undoubtedly a positive sign, according to the Governor. The comments clearly indicate a preference within the Bank of Mexico to continue cutting the funding rate. However, with the Federal Reserve likely to make only minor rate cuts, if any, next year, we estimate that Banxico’s room for further rate cuts is significantly constrained. The outlook for monetary policy remains challenging.

Markets and Companies

Futures for major US stock indices are trading lower amidstrising geopolitical tensions due to the escalation of the Russia-Ukraine conflict. Over the weekend, Ukraine received authorization to use US missiles to strike Russian territory, while Russia expanded the range of circumstances under which it might deploy nuclear weapons. European stock markets are also trading negatively, weighed down by heightened geopolitical tensions.

On the corporate front, investors are digesting quarterly reports from retail companies this week, with Wal-Mart standing out positively after delivering results that exceeded expectations. Nvidia’s report is expected after the market close.

US Treasury yields are declining following the post-election surge in the US and increased demand for safe-haven assets amidst geopolitical tensions. The 2-year yield is at 4.22%, and the 10-year yield stands at 4.34%.

In commodities, gold and silver are trading higher, while oil is logging marginal declines after yesterday’s rebound.

In Mexico, the IPC futures are trading higher.

As for the peso-dollar exchange rate, the peso is trading at 20.30, above yesterday´s 20.20 at market close. 

Corporate News

• Wal-Mart shares were up pre-market after reporting better-than-expected quarterly results, prompting the company to raise its guidance for the year.

• Lowe’s also posted a better-than-expected quarterly report but now anticipates slower sales growth.

• Nvidia shares were up pre-market, with the market eagerly awaiting the company’s earnings report, set to be released after the market close.