The Day at a Glance | October 22 2024

The Top

• The International Monetary Fund (IMF) estimates that the global economy could grow by 3.2% in 2024 and 2025. 

• Mexico´s economy contracted in August. 

• Democratic presidential candidate Kamala Harris and her Republican rival, Donald Trump, are picking up the pace during the US election campaign as they try to win over undecided voters in the two weeks leading up to election day. 

• On Monday, four Federal Reserve officials voiced support for further interest rate cuts but seemed to differ on how fast or how deep they believe the cuts should go. 

• According to a Reuters survey, Argentina’s economy will recover in 2025 after two years of recession, as the government tries to trigger a private sector-led recovery with its plan to downsize the state. 

• On Tuesday, Secretary of State Antony Blinkenmet with Israeli Prime Minister Benjamin Netanyahu in the US’s first major attempt for a ceasefire in the Middle East since the death of the Hamas leader last week, and the latest effort before a presidential election that could alter US foreign policy. 

• Oil prices rose to $75 per barrel on Tuesday, extending the previous session’s gains as investors assess the impact of China’s stimulus measures to boost its economy and ongoing concerns over tensions in the Middle East.

Economic Environment

The International Monetary Fund (IMF) estimates that the global economy could grow by 3.2% in 2024 and 2025. Global economic growth could remain stable but disappointing, the IMF stated in its World Economic Outlook report. Compared to the estimates presented inApril, there were considerable revisions to real GDP growth projections. For instance, for the US, the estimate was revised upwards sharply, while for the Eurozone, the Middle East, Central Asia, and Sub-Saharan Africa, there were downward adjustments; the outlook for emerging Asia improved. Specifically, US growth was revised from 2.6% to 2.8% for 2024 and from 1.9% to 2.2% for 2025. For the Eurozone, growth was revised down slightly from 0.9% to 0.8% this year and from 1.5% to 1.2% for 2025. For China, the 2024 estimate was reduced from 5.0% to 4.8% while the forecast remained at 4.5% for 2025. In Mexico´s case, the IMF significantly downgraded its growth forecast (as anticipated in the Article IV review), cutting the 2024 estimate from 2.2% to 1.5% and the 2025 estimate from 1.6% to 1.3%.

Mexico´s economy contracted in August. In Mexico, the Global Indicator of Economic Activity (IGAE), a proxy for monthly GDP, fell by -0.3% m/m in August, after increasingby 0.6% m/m in July and 0.2% m/m in June, according to seasonally adjusted figures. In detail, the primary and secondary sectors declined by -9.1% m/m and -0.5% m/m, while the tertiary sector expanded by 0.3% m/m. On an annual basis, and according to original figures, the IGAE rose by 0.4% in August 2024. By sector, primary activities fell by -2.1%, secondary activities decreased by -0.9%, and tertiary activities increased by 1.3%. From January to August 2024, the economy recorded growth of 1.9% compared to the same period last year. Overall, the IGAE figures retreated due to unusual volatility in the primary component; however, the service sector’s growth momentum could act as a buffer for future growth, as it increased by 2.5% in the first eight months of 2024, well above the secondary sector’s 1.2% and the primary sector’s -0.8%.

Markets and Companies

The US stock market is trading lower, continuing the declines seen since yesterday. It’s worth noting that last week, stock indices reached new highs, so we don’t rule out the possibility that profit-taking is taking place. On the other hand, the rise in bond yields could also be impacting market performance, while in corporate news, attention remains focused on the third-quarter earnings season.

In commodities, gold continues to rise, remaining near its peak levels. Meanwhile, oil is rebounding after last week’s drop.

Treasury bond yields show mixed performance, with the 2-year bond trading at 4.02% and the 10-year bond at 4.17%. In recent days, bonds have risen due to expectations of a slower pace of interest rate hikes by the Fed.

In Mexico, the IPC opened lower, trading at 52,522.4 points.

As for the peso-dollar exchange rate, it is trading at 19.84 after closing at 19.98 yesterday.

Alsea will release its 3Q24 results this afternoon; we expect a neutral report. Its Mexican operations will perform well; however, they will be partially offset by the results in Europe and, particularly, South America. Still, it’s worth noting that we expect an improvement compared to previous quarters in the latter region.

Livepol will release its results after the close; we expect a positive report. We expect Liverpool and Suburbia’s retail sales to rise by a high single digit, outperforming ANTAD figures. We anticipate solid performance in Financial Services and Leasing, which would drive a 9% increase in consolidated revenues. Although the EBITDA margin could be slightly diluted, the amount would rise by a mid-to-high single digit.

Southern Copper Corporation (SCC), a subsidiary of Grupo México, reported its 3Q24 results, highlighting a 17% year-over-year increase in revenues, driven by higher production volumes and improved prices. EBITDA rose by 30.5%. It’s worth mentioning that GMEXICO holds an 88.9% stake in SCC.

Volaris will report its 3Q24 results after the market close. We anticipate a neutral report, in line with the company’s guidance, highlighting margin improvement driven by lower fuel prices, although with a decline in operating revenues.

Corporate News

• General Motors reported better-than-expected quarterly results and raised its guidance for the year.

• 3M shares were up as the company reported better-than-expected results in both revenue and profits.