The Day at a Glance | November 28 2024

The Top

• The Central Bank of Mexico remains cautious.

• Later today, the Central Bank of Mexico’s meeting minutes – from its November monetary policy meeting – will be released, providing greater clarity on the Governing Board’s monetary stance.

• Inflation increased in several German states in November, according to preliminary data released on Thursday, which suggests that the country´s overall inflation rate will also rise. 

• On Thursday, Israel reported that its ceasefire with Hezbollah was violated just hours after Lebanese security sources stated that Israeli tanks had attacked six areas in southern Lebanon, casting doubt on a truce reached after more than a year of fighting.

• Oil prices held steady on Thursday following an unexpected rise in US gasoline inventories and the postponement of the OPEC+ production policy meeting from December 1^st to December 5^th.

Economic Environment

The Central Bank of Mexico remains cautious. In its Quarterly Inflation Report for the June-September period, the central bank signaled caution amidst a complex global environment. This is characterized by robust growth in the US, driven by strong domestic consumption and government spending, a slight improvement in China due to a rebound in exports, and a slowdown in the Eurozone caused by decelerating economic activity. While inflation continues its downward trend, global challenges persist, including geopolitical tensions, supply chain disruptions, and adverse climate events. In Mexico, the central bank revised its 2024 growth forecast up from 1.5% to 1.8%, due tomethodological adjustments by INEGI and expectations of stronger private consumption and investment. However, the growth outlook remains skewed to the downside due to risks such as a potential US economic slowdown, public spending cuts, and episodes of financial volatility. Additionally, the central bank lowered its forecasts for formal job creation and widened the expected ranges for the trade deficit and current account deficit. In this context, Banxico reaffirms its restrictive monetary policy stance, emphasizing a gradual approach to rate cuts amidst a complex environment and persistent inflationary pressures. We believe that the outlook has recently become cloudier. While the last three inflation readings have been positive, the environment remains exceptionally uncertain. With this in mind, the Governing Board appears willing to move forward with implementing the rate-cutting cycle, albeit very cautiously, reinforcing our view that pauses are likely in some monetary policy meetings.

Markets and Companies

The US stock market is closed today for Thanksgiving, following slight declines in the previous session. Yesterday, the PCE index, a key measure for the Federal Reserve, was released, showing a 2.3% annual rise in October, setting in line with expectations.

In Europe, markets are trading higher, driven mainly by the technology sector. In Asia, stock markets closed mixed, with the Bank of Korea’s decision to cut its interest rate by 25 basis points standing out.

In commodities, oil prices are performing positively. OPEC+ is set to review its production policy this Sunday, with discussions focusing on potential delays to planned production increases for 2025. Meanwhile, gold prices are also rising.

In fixed income, US Treasury yields for 2-year and 10-year bonds stand at 4.23% and 4.26%, respectively.

The IPC futures index is trading higher at 50,097 points. Meanwhile, the exchange rate is at 20.40 pesos per dollar, compared to yesterday´s 20.61 at market close. 

Grupo Carso announced an agreement with Heidelberg Materials for the sale of Giant Cement Holding, a subsidiary of Fortaleza Materiales, for $600 million. As part of the transaction, Keystone Cement Company was previously spun off. The deal is expected to close in the first quarter of 2025, subject to necessary conditions. This move reinforces Grupo Carso’s focus on optimizing its portfolio.

Grupo Elektra has called an Extraordinary Meeting to discuss the delisting of its shares from the National Securities Registry (RNV). The meeting will also address restructuring the Board of Directors and appointing delegates to formalize and execute the meeting’s resolutions. The company argues that the market does not adequately reflect its value.

Corporate News

• The French group Rémy Cointreau reported a smaller-than-expected decline in operating profit for the first half of 2024. However, the company forecasts a 15%-18% drop in sales for the year.