The Day at a Glance | November 22 2024

El Top

• In Mexico, core inflation dropped to 3.58% in the first half of November.

• The Mexican economy showed a slowdown during Q3 2024.

• Eurozone PMIs reveal a further decline in business activity as the services sector (49.2) joins manufacturing (45.2) in contraction territory.

• Germany’s economy grew less than initially estimated in Q3 2024, the statistics office reported on Friday—another blow for a country set to have the worst performance among G7 democracies this year.

• Japan’s annual inflation rate fell to 2.3% in October 2024 (previously 2.5%), the lowest reading since January. Meanwhile, core inflation remained above the 2.0% target, keeping pressure on the central bank to raise interest rates.

• Oil prices remained stable on Friday, heading for a 5% weekly gain, as the war in Ukraine intensifies and China’s crude imports surge in November.

 Economic Environment

In Mexico, core inflation dropped to 3.58% in the first half of November. INEGI reported that the National Consumer Price Index for the first half of November registered a biweekly variation of 0.37%, below our estimate and consensus of 0.41% and 0.48%, respectively. On an annual basis, general inflation for the first half of November stood at 4.56%, lower than the previous figure of 4.83%. Meanwhile, core inflation, which excludes the most volatile items such as energy, agricultural goods, and regulated tariffs, rose by 0.04% in the first half of November—also below our forecast (0.18%) and consensus (0.17%). Annually, core inflation stood at 3.58% in the first half of November, down from 3.74% in the second half of October. By components, goods recorded 2.46% y/y (previously 2.73%) and services 4.85% y/y (previously 4.92%). In terms of the more volatile categories—non-core inflation—annual inflation rebounded to 7.64% (previously 8.20%). Overall, inflation figures from the first half of November support the expectation of another 25 basis points cut to the benchmark rate before the year ends.

The Mexican economy showed a slowdown during Q3 2024. In Mexico, the Global Indicator of Economic Activity (IGAE), a proxy for monthly GDP, increased by 0.2% m/m in September after a -0.2% decline in August, according to seasonally adjusted data. In October, primary activities rose by 1.3% m/m, secondary by 0.6% m/m, while tertiary activities saw a slight decrease of -0.1% m/m. On an annual basis, according to original figures, the IGAE grew by 0.3% in September 2024. Final GDP figures for Q3 2024 showed the Mexican economy growing by 1.6%, based on original data—slightly above the preliminary figure of 1.5% and below Q2 2024 2.1% growth. Overall, the data confirms a cooling of the Mexican economy at the end of Q3 2024, despite a slight uptick in September. Looking ahead, there is a risk of further moderation in economic activity amid uncertainty surrounding the U.S. administration change and potential trade policy shifts.

Markets and Companies

U.S. index futures opened higher, buoyed by recent quarterly earnings. Notably, apparel retailer Gap surpassed expectations slightly and raised its guidance for the rest of the year, citing anticipated strong performance.

In Europe, markets are trading in positive territory despite weak eurozone business activity data, with the composite PMI slipping to 48.1 in November, signaling contraction.

In Asia, markets closed mixed. Japan’s Consumer Price Index (CPI) showed a year-over-year increase of 2.3%, slightly above forecasts, highlighting persistent inflationary pressures.

In commodities, oil prices opened lower but remain on track for a weekly gain, supported by rising tensions in Ukraine and stronger crude imports from China. On Thursday, China announced measures to boost trade, including support for energy imports. Gold rose to $2,693 per ounce, driven by safe-haven demand amid escalating geopolitical risks.

In fixed income, U.S. Treasury yields edged lower: the 10-year yield stands at 4.39%, and the 2-year yield at 4.33%.

Mexican IPC futures are trading higher at 50,344.0 points, while the peso-to-dollar exchange rate is at 20.46, compared to 20.42 the previous day.

Corporate News

• Gap reported revenues of $8.83 billion, slightly beating expectations, with earnings per share (EPS) at $0.72. Looking ahead, the company raised its guidance for the fourth quarter, citing optimism around a strong holiday shopping season.

• Meanwhile, Bitcoin reached $99,000, with analysts suggesting it could break past the $100,000 milestone.