The Day at a Glance | September 19 2024

The Top

• The Timely Indicator of Economic Activity (IOAE for its acronym in Spanish) anticipates that the economy could grow below 1.0% in the third quarter. 

• The Bank of England kept its reference rate unchanged at 5.0% on Thursday, as expected by the market consensus. Additionally, it adjusted the pace of reducing its bond holdings.

• The People’s Bank of China is scheduled to make a monetary policy announcement in the afternoon. Currently, the 1- and 5-year prime lending rates stand at 3.35% and 3.85%, respectively.

• In the week ending September 14^th, initial unemployment insurance claims in the US totaled 219,000 (230,000 expected), logging a surprising drop of 12,000 from the previous week’s 231,000.

• Tomorrow, the Bank of Japan will announce its monetary policy decision. The market expects interest rate to remain unchanged at 0.25%.

• Oil prices rose more than 1% on Thursday after the US Federal Reserve cut the federal funds rate by 50 basis points. As a result, Brent crude is now slightly above $74 per barrel, up from $69 last week.

Economic Environment

The Timely Indicator of Economic Activity anticipates that the economy could grow below 1.0% in the third quarter. The IOAE, a Nowcasting model for the IGAE, estimates that Mexico´s economy grew by 1.1% year-over-year (y/y) in both July and August 2024, based on seasonally adjusted figures. By components, industrial production, an indicator that includes construction, manufacturing, electricity generation, and mining, increased by 0.6% y/y in July, and the IOAE estimates it could increase by 0.7% y/y in August. In the services sector, the IOAE anticipates growth of 1.3% y/y in July and 1.5% y/y in August. Marginally, this would translate to IGAE growth of 0.1% month-over-month (m/m) in July and 0.3% m/m in August, also based on seasonally adjusted data. Thus, incorporating IOAE growth figures into the IGAE, we can anticipate that the economy will grow by 0.8% in 3Q24 compared to 3Q23, a considerably low figure that continues to reflect an economic slowdown.

Markets and Companies

The US stock market is up as investors digest the Federal Reserve´s latest monetary policy decision; the agency announced a 50 basis point cut to its reference rate, setting it within a range of 4.75% to 5.0%, marking the beginning of a rate-cutting cycle. Simultaneously, the central bank’s outlook for the US economy points to a soft landing, meaning a moderate slowdown while inflation converges to its target. This has fueled greater optimism in markets, which have posted positive returns this year. In Asia and Europe, stock markets also logged positive performance.

In the debt market, Treasury bond yields rose after the market had already priced in the Fed’s rate cut. The 10-year bond is trading at 3.75%, and the 2-year bond at 3.61%.

In commodities, oil prices rose following the Fed’s announcement. Throughout the year, crude prices have been impacted by slower demand in China, while metals such as gold and silver continue their upward trend, driven by lower interest rates.

In Mexico, the IPC is up and is trading at 52,694.3 points.

Regarding the peso-dollar exchange rate, the peso is trading at 19.32 after closing at 19.28 yesterday.

Corporate News

• Shares of Darden Restaurants were boosted after the announcement of its partnership with Uber for home delivery services.

• FedEx shares rose ahead of the quarterly report release, which will be announced at market close. The consensus expectation for revenue generation is $21.9 billion and $4.81 earnings per share. 

• Alibaba launched over 100 open-source artificial intelligence models with applications across various sectors. The announcement was well received by the market.