The Day at a Glance | September 6 2024

The Top

• The US labor market slightly recovered in August. 

• During the January to August period, 2,651,060 light vehicles were produced (+5.3% y/y) and 2,275,761 units were exported (+7.4% y/y) in the Mexican automotive market. 

• New York Fed President John Williams said on Friday that a more balanced economy has opened the door to cutting rates, and that the full course of action will be determined by economic performance. 

• Former Governor of China’s central bank, Yi Gang, said on Friday that the country should focus on fighting deflationary pressures as the world’s second-largest economy struggles to take off despite a series of economic support policies. 

• German industrial production fell more than expected in July, mainly driven by weak activity in the automotive sector, raising fears that Europe’s largest economy may contract again in 3Q24. 

• Oil prices rose on Friday as investors awaited US employment data, but were headed for a weekly loss as demand concerns offset a delay in supply increases by OPEC+ producers.

Economic Environment

The US labor market slightly recovered in August. The Bureau of Labor Statistics released employment data for August 2024, logging a gain of 142,000 jobs, below the consensus expectation of 160,000 but above the 89,000 jobs added in July. Additionally, the BLS revised job creation down for June and July by a total of 86,000 jobs for the two months. On the other hand, the unemployment rate set at 4.2% in August, in line with consensus estimates and below the 4.3% recorded in July. Meanwhile, annual wage growth in August was 3.8%, above the 3.6% seen in July, but below the 3.9% recorded in June. Employment data was positive, as job creation exceeded July’s figures and the unemployment rate declined, reinforcing expectations of a moderate cooling in the US economy rather than a recession, as markets had feared a month ago. As a result, it´s highly likely that the Fed will cut the federal funds rate by 25 basis points on September 18^th. 

Markets and Companies

Major US indices logged a slight uptick, though they are heading for a week of losses as investors digest US labor market data. With job creation falling short of expectations but a lower unemployment rate, expectations that the Federal Reserve may reduce interest rates by 50 basis points (45%) instead of 25 basis points (55%) in its next meeting have increased, according to FedWatch. In Europe, the Stoxx 600 is experiencing its worst performance since early August. In Asia, most markets are in negative territory following the release of spending data in Japan, showing weak growth that could limit the Bank of Japan’s options for raising interest rates, though wage growth could offset this.

Regarding commodities, crude prices logged a slight rebound, though they have not performed well this week. OPEC+ decided to delay the production increase until December, which did little to ease concerns about oversupply. Falling demand in Asia is a key factor in this trend. Meanwhile, gold prices fell slightly on Friday after the release of weaker-than-expected US employment data.

In the fixed income market, after an inverted US Treasury yield curve since mid-2022, bond yields are now almost at the same level, with the 10-year yield at 3.75% and the 2-year yield at 3.76%.

Meanwhile, in Mexico, the IPC opened higher at 51,669.4 points.

The exchange rate remained unchanged at 19.87, after closing at 19.87 the previous day.

Fibra Mty signed a bilateral loan with BBVA for up to USD $250 million, with an option to increase to USD $280 million, at a variable rate of SOFR 1M plus 175-195 basis points. The loan, unsecured and maturing in five years, will be used for refinancing, investments, and corporate purposes.

Grupo Aeroportuario del Sureste (ASUR) reported its August passenger traffic.

ASUR recorded a 2.8% year-on-year decline in passenger traffic. In Colombia, traffic increased by 16.3%, driven by a 24.8% rise in international traffic. In Puerto Rico, traffic grew by 1.6%, with a 21.6% increase in international traffic. In Mexico, passenger traffic fell by 10.7%, with a 9.1% drop in domestic traffic and a 12.6% decline in international traffic.

Corporate News

• European manufacturer, Volvo, announced a reduction in its margin and electric vehicle sales targets.

• The European Union Aviation Safety Agency ordered inspections of Rolls-Royce engines on Airbus A350-1000 planes following an incident with a Cathay Pacific flight.

• Broadcom shares fell after its fourth-quarter revenue projections set slightly below analysts’ estimates, though it exceeded third-quarter estimates.