The Day at a Glance | October 24 2024

The Top

*In Mexico, inflation in the first half of October slightly accelerated to 4.69%.

*Eurozone PMI´s show that business activity decreased slightly amidst weak demand.

*Kamala Harris and Donald Trump’s teams are battling for votes in North Carolina, one of the battleground states that will decide the November 5th election, following damage caused by a hurricane.

*For the week ending October 19th, initial US unemployment insurance claims were 227,000 (expected: 242,000), a decrease of 15,000 from the previous week’s 242,000.

*UK PMI´s pointed to the lowest business confidence level since November 2023, along with the slowest growth in the services and manufacturing sectors in 11 months.

*Oil prices were nearly unchanged on Thursday as uncertainty surrounding the Middle East conflict and reports of North Korean troops ready to assist Russia in Ukraine kept investors on edge ahead of the US presidential elections.

Economic environment

In Mexico, inflation for the first half of October slightly accelerated to 4.69%. INEGI reported that the National Consumer Price Index recorded a bi-weekly increase of 0.43% in the first half of October, above our estimate of 0.37% and the consensus forecast of 0.40%. Year-over-year, general inflation for the first half of October was 4.69%, higher than the previous 4.66% figure. Meanwhile, core inflation, which excludes the most volatile items like energy, agricultural products, and government-regulated prices, rose by 0.23% in the first half of October, above our estimate of 0.21% and the consensus forecast of 0.20%. Year-over-year, core inflation stood at 3.87% in the first half of October, below the 3.95% recorded in the second half of September. By components, goods stood at 2.89% y/y (previously 2.94%), and services at 5.03% y/y (previously 5.15%). As for the most volatile components, non-core inflation reported an annual rate of 7.17% (previously 6.73%). Overall, inflation figures for the first half of October, along with August´s weak economic activity data made public this week, pave the way for another 25-basis-point rate cut in Banxico’s next meeting. However, the outcome of US elections will be important, as it could shift Mexico’s monetary policy outlook.

Eurozone PMI´s show that business activity declined slightly amidst weak demand. The Eurozone´s composite PMI stood at 49.6 points in October, slightly above September’s 49.6 reading, reaching its highest level in two months. The manufacturing PMI reached 45.9 points, above the estimated 45.3, marking 19 consecutive months below the 50-point threshold. Meanwhile, the services sector index fell to an eight-month low, dropping from 51.4 in September to 51.2 in October. Overall, preliminary data for October showed that business activity in the Eurozone slightly declined for the second consecutive month, with the marginal decrease being nearly the same as in September.

Markets and companies

Major US indices are logging mixed performance, with gains in the S&P 500 and Nasdaq being driven by solid results from Tesla. In Europe, markets reacted positively to the latest corporate reports, particularly in the travel, leisure, and automotive sectors. Renault shares rose more than 7% after reporting an unexpected increase in third-quarter revenue, driven by demand for its higher-end models. Meanwhile, markets in Asia recorded mixed performance.

In commodities, crude oil prices rose amidst the intensifying conflict in the Middle East. Geopolitical tensions in Israel and speculation about North Korea’s involvement in the conflict in Ukraine continue to fuel concerns about global oil supply. Precious metals are up, with gold trading at $2,734.96 per ounce.

The 10-year US Treasury yield fell to 4.23%, while the 2-year yield stands at 4.07%.

The local stock market is up, with the IPC trading at 52,198.4 points. 

Meanwhile, the exchange rate stands at 19.87 pesos per dollar, after closing at 19.84 yesterday.

Arca Contal reported its 3Q24 results this morning. Consolidated net sales increased by 10.0% (5.9% excluding the foreign exchange effect), although sales volume excluding water jugs fell by 4.1%. In terms of profits, consolidated EBITDA rose 10.2% (5.7% excluding the foreign exchange effect), with a margin of 20.3%, up 10 basis points.

In 3Q24, Bajío reported a 10.8% year-over-year growth in its loan portfolio, while its financial margin increased by 5.3% year-over-year, and net income fell by 8.3%. Results were below our expectations at the net income level. The primary factor affecting quarterly earnings was provisions for credit risk, which increased by 75.5% year-over-year, significantly higher than expected, leading to a cost of risk of 1.35% compared to 0.85% in 3Q23.

Chedraui released its quarterly results yesterday afternoon. Consolidated sales for 3Q24 increased by 11.8%, driven by strong performance in Mexico, the US, and the Real Estate division, along with a favorable exchange rate effect. However, the start of operations at the new Rancho Cucamonga distribution center led to transition costs and one-time expenses of $22 million, temporarily impacting EBITDA, which increased by 3.5% with a margin of 8.2%. Excluding these costs and expenses, EBITDA rose by 11.1%, with a margin of 8.8%.

In 3Q24, Fibra Monterrey reported a 25.5% year-over-year increase in revenue, while net operating income (NOI) increased by 25.4% year-over-year and funds from operations (FFO) rose by 55.1% year-over-year. The report reflects the impact of the depreciation of the peso against the dollar during the quarter. In dollar terms, the annual changes were: revenue +13.2%; NOI +13.1%; and FFO +39.9%.

In 3Q24, Gentera recorded a 24.5% year-over-year growth in its loan portfolio, while total net income reached Ps. 1,749 million, which entailed a 29.6% year-over-year increase. Net income exceeded both our estimate and consensus expectations, suggesting a positive implication from the report.

In 3Q24, Orbia reported a 4.5% year-over-year decline in revenue and a 10.0% year-over-year drop in EBITDA. The results were below both our and consensus expectations, indicating a negative implication from the report. Orbia revised its 2024 EBITDA generation guidance downwards to a range of $1.10 – $1.15 billion, compared to the previous expectation of $1.3 billion.

Walmex reported its 3Q24 results yesterday afternoon. Walmex posted an 8.0% revenue increase in 3Q24, with strong same-store sales performance driven by Mexico and favorable exchange rate effects in Central America. EBITDA grew by 6.5%, in line with expectations.

Corporate news

*Electric car manufacturer Tesla exceeded third-quarter profit expectations, though it fell short on revenue.

*Unionized Boeing workers rejected a new labor agreement, extending a strike that has now lasted five weeks.

*American Airlines exceeded expectations for its third-quarter report and also raised its guidance for the rest of the year. Investors remain focused on the airline’s restructuring of its sales and distribution strategy.