The Day at a Glance | October 31 2024

The Top

• The US reported strong figures for consumption and PCE inflation.

• In the Eurozone, inflation rebounded in October, strengthening arguments in favor of greater caution regarding ECB interest rate cuts.

• Democrat Kamala Harris and Republican Donald Trump will seek Latino votes this Thursday in Nevada, the smallest of the seven swing states expected to play a decisive role in the upcoming US presidential election next Tuesday.

• China’s PMI´s show manufacturing activity expanded for the first time in six months (50.1 vs. 49.8 prior), and services improved in October (50.2 vs. 50.0 prior), suggesting Beijing’s recent stimulus measures are helping the economy recover.

• On Thursday, the Bank of Japan kept its benchmark interest rate unchanged but indicated that risks surrounding the US economy were easing somewhat, signaling conditions may be ready enough for further rate hikes.

• In the week ending October 26^th, initial unemployment insurance claims in the US stood at 216,000 (230,000 expected), marking a drop of 12,000 from the prior week’s 228,000.

• Oil prices stabilized on Thursday after climbing the previous day, driven by stronger-than-expected US fuel demand and reports that the OPEC+ group of producers may delay a planned production increase.

Economic Environment

The US reported strong figures for consumption and PCE inflation. In the US, disposable personal income and personal consumption spending increased by 0.3% (0.2% prior) and 0.5% (0.3% prior), respectively, in September. Meanwhile, the annual inflation rate of personal consumption expenditures (PCE)—the indicator used for the Federal Reserve’s inflation target—stood at 2.1% in September, setting in line with consensus expectations and below the 2.3% reported in August. Within the index, annual service inflation rose 3.7% (previously 3.8%), energy prices declined by -8.1% (prior -5.0%), food prices increased 1.2% (prior 1.1%), and goods prices decreased by -1.2% (prior -0.9%). Additionally, the core index remained at 2.7% in September for the third consecutive month. On a monthly basis, PCE inflation increased by 0.2% in September. Looking ahead, the Cleveland Fed’s Nowcasting model estimates general CPI inflation at 2.56% and general PCE inflation at 2.19% for October.

Inflation in the Eurozone rebounded in October, reinforcing arguments in favor of greater caution with ECB interest rate cuts. Annual inflation in the European block reached 2.0% in October, slightly above the consensus expectation of 1.9% and the 1.7% recorded in September, when inflation hit its lowest level since April 2021. By component, food, alcoholic beverages, and tobacco logged2.9% y/y inflation (prior 2.4%), services increased 3.9% y/y (prior 3.9%), non-energy industrial goods set at 0.5% y/y (prior 0.4%), and energy at -4.6% y/y (prior -6.1%). Furthermore, annual inflation among the European block´s major economies increased between September and October; for instance, in Germany, it rose from 1.8% to 2.4% and in France from 1.4% to 1.5%. Overall, the increase in inflation in the European block accelerated more than expected in October due to rising food prices, and it could continue to rise in the coming months. This strengthens the need for caution in ECB interest rate cuts, as price increases are still not fully under control. 

Markets and Companies

In the United States, major indices are down after tech giants like Microsoft and Meta´s quarterly figures set below-expectations. Apple and Amazon are also set to report results today, keeping the spotlight focused on the tech sector. 

In Europe, markets are trading lower due to inflation data in the Eurozone that exceeded expectations, with an increase to 2% in October. Better-than-expected third-quarter economic growth data also affects expectations around the European Central Bank’s decisions on future rate cuts.

In Asia, the Nikkei index fell following the Bank of Japan’s decision to keep its benchmark rate unchanged.

In the commodities market, crude oil continues its rally following a drop in fuel inventories in the US. Meanwhile, gold remains near its highs, driven by safe-haven demand and trading at around $2,759 per ounce.

In fixed income, yields on 2-year US Treasury bonds stand at 4.19%, while 10-year yields stand at 4.30%, reflecting expectations of rate stability if inflation continues to moderate.

Meanwhile, the IPyC is down, trading at 50,738.9 points; the exchange rate is at 20.10 pesos per dollar, after closing at20.16 yesterday.

Corporate News

• Meta Platforms reported user growth set below expectations and warned of higher capital expenditures for 2025, leading to a drop in its stock.

• Uber Technologies saw its shares fall after reporting a decline in third-quarter gross bookings, although it beat revenue expectations.

• Booking Holdings reported strong quarterly results, along with an increase in its outlook for the year.

• Microsoft beat EPS expectations ($3.30 vs. $3.10e), but investors reacted negatively to a lower revenue forecast for the last quarter.