The Day at a Glance | October 28 2024

The Top

• Mexico’s trade balance logged a slight trade deficit in September.

• On Monday, China’s central bank launched a new lending tool to inject more liquidity into the market, aiming to support credit flow within the banking system before trillions of Yuan in loans mature by year-end.

• Sentiment in Germany’s export industry darkened in October, with the automotive and metallurgical sectors anticipating the largest losses in international trade, according to Monday’s Ifosurvey results.

• UK retail sales fell in October as consumers postponed spending ahead of the budget announcement by Finance Minister Rachel Reeves this week, the Confederation of British Industry said on Monday.

• The loss of a parliamentary majority by Japan’s ruling block has raised expectations that the new government will need to increase spending, with possible complications from further central bank interest rate hikes.

• On Monday, oil prices fell nearly $5 per barrel after Israel’s weekend retaliation against Iran bypassed oil and nuclear facilities, leaving energy supply unaffected.

Economic Environment

Mexico’s trade balance logged a slight deficit in September. In September 2024, the trade deficit (exports minus imports) was just $579 million, far below the $1,498 million reported a year earlier. In September, exports were flat year-over-year, reflecting a -44.9% slump in oil exports alongside a 3.3% rise in non-oil exports. Within non-oil exports, agricultural exports increased 12.5% y/y, mineral extractions rose 26.4% y/y, and manufacturing exports increased 2.6% y/y. Imports decreased by -1.8% y/y in September, driven by a sharp drop in oil imports (-33.8% y/y) and a slight increase in non-oil imports (+1.4% y/y). By type, imports of consumer goods, intermediates, and capital goods fell -5.3% y/y, -0.7% y/y, and -4.5% y/y, respectively. For the January-September period, the trade balance loggeda cumulative deficit of $11,017 million, compared to a $9,926 million deficit in the same period last year. In general, the trade balance data indicates a neutral trend, likely reflecting Mexico’s economic slowdown and stagnation in the US manufacturing sector.

Markets and Companies

The US stock market started the session with gains in a week focused on high-cap tech company reports, including Alpha, Apple, Amazon, Meta, and Microsoft. Economically, attention will be on the initial estimate of US GDP for 3Q24, October’s nonfarm payrolls, and personal consumption expenditure inflation—a key indicator for the Federal Reserve. These figures are expected to clarify the future of monetary policy, where rate cuts are anticipated, though the extent may vary.

In commodities, oil prices are down significantly after Israel’s weekend attacks on Iran avoided Iran’s oil infrastructure, easing concerns of potential crude supply disruptions. Treasury yields are up, with the 2-year yield at 4.11% and the 10-year at 4.24%.

In Mexico, the IPC is down, trading at 51,650.1 points. The peso-dollar exchange rate stands at 19.99 after closing at 19.95 yesterday.

Cemex reported its 3Q24 results. The company generated $4.09 billion in consolidated sales, representing a 6% year-over-year decline, while EBITDA dropped by 13%. These results reflect the impact of adverse weather conditions in most of its operating regions, along with higher costs and lower volumes, which offset the price increases of its products.

Femsa reported its quarterly results this morning. Total revenues rose by 8.3%, driven by growth across all business units and favorable exchange rate effects. Gross profit increased by 12.1%, with a 130-basis-point expansion in the gross margin, while operating profit rose by 14.6%, with a 50-basis-point margin expansion, led by Proximity Americas and Europe, Coca-Cola FEMSA, and Fuels.

Today after the close, Alfa’s 3Q24 results are expected, where a strong performance from Sigma and stable numbers for Alpek are anticipated. 

Regional is also set to report, with expected strong loan growth but a slower pace in net income growth after a high-growth first half.

Corporate News

• Robinhood shares rose as the platform announced US investors could trade contracts tied to Kamala Harris’s or Donald Trump’s election outcomes. 

• Boeing announced a stock offering aiming to raise up to $19 billion.