Weekly Reports

12/02/2024
12/02/2024

Weekly Market Report

The main US equity indices closed mostly higher, with the S&P 500 and the Dow Jones reaching new all-time highs for the week. The Nasdaq stood out in performance, with an increase of +2.3%. Meanwhile, US Treasury bond yields widened across all maturities during the week, following statements by members of the Federal Reserve (Fed) ratifying their caution in initiating cuts in the benchmark rate. Thus, the 1-year closed at 4.86%, the 3-year at 4.27% and the 10-year at 4.18%. At the regional level, inflation in Brazil registered a +4.5% year-on-year increase in January, above the +4.4% expected by analysts. In Mexico, retail prices in January reached +4.9% y-o-y, while the Central Bank maintained the interest rate at 11.25%.

Weekly Monitor

International

The epicenter of the week in the United States will be the inflation data for January. The analysts' consensus foresees year-on-year increases of +2.9% and +3.7% for the non-food and non-fuel measure, both lower than in December. In the Eurozone, industrial production for December will be released, with an estimated decline of -4.1% YoY.

Major U.S. equity indices closed mostly higher with the S&P 500 and Dow Jones reaching new all-time highs for the week. Specifically, the Nasdaq led the gains with +2.3%, followed by the S&P 500 with +1.3%.

On the other hand, U.S. Treasury yields widened across all maturities during the week, following the cautious tone of various members of the Federal Reserve (Fed) on the start of benchmark rate cuts. Thus, the 1-year rate went from 4.79% to 4.86%, the 3-year from 4.14% to 4.27% and the 10-year from 4.02% to 4.18%. On the other hand, the average yield of Investment Grade corporate bonds (ETF LQD) ended at 5.4%. 

With the Q4 2023 corporate earnings season advanced, of the 67% of S&P 500 companies reporting, 75% beat earnings per share expectations; while in terms of revenue, 65% reported above expectations. On a weighted average basis, earnings were up +2.9% versus the +1.5% estimate as of December 31.

In the Eurozone, retail sales declined -1.1% month-on-month in December, versus -0.9% expected; while on a year-on-year basis they posted -0.8%, slightly better than expectations. In this context, the EuroStoxx 50 index advanced +1.3% on a weekly basis, while the German 10-year Treasury bond yield closed at 2.4%.

Regional

This week, the focus in Brazil will be on the IGP-10 inflation index for February, which measures the change in prices from the 11th day of the previous month to the 10th day of the current month, with expectations of a -0.4% monthly decline. Meanwhile, in Peru, the economic activity for December will be released, and a +0.4% y-o-y expansion is expected.

In Brazil, the consumer price index decelerated in January, rising +0.4% monthly and +4.5% yoy. However, both results were higher than expected (+0.3% and +4.4%, respectively). Meanwhile, retail sales -as an indicator of activity- slowed down in December, registering -1.3% monthly and +1.3% year-on-year. In this context, the Bovespa index closed with a +0.6% improvement in the week.

In Mexico, the Central Bank decided to maintain the reference rate at the current 11.25%, in line with expectations. January inflation rose +0.9% month-on-month and +4.9% year-on-year, as expected, but accelerated for the third consecutive month. As a result, the exchange rate declined -0.4% to $17.1 per dollar, and the equity index declined -1.5% on a weekly basis. 

Regarding the performance of Latin American sovereign debt, 10-year dollar bond yields in Brazil and Mexico moved from 6.06% and 5.39% at the end of the previous week to the current level of 6.10% and 5.74%, respectively.

 

05/02/2024
05/02/2024

Weekly Market Report

The US Federal Reserve (Fed) maintained the reference rate at the current range of 5.25%-5.5%, in line with expectations. Meanwhile, January's new job creation came in at 353 thousand payrolls, exceeding the estimate of 168 thousand; while unemployment remained at 3.7% versus the projected 3.8%. In this scenario, U.S. Treasury bond yields showed mixed performance across all maturities during the week, with the 1-year at 4.81%, the 3-year at 4.14% and the 10-year at 4.02%. In the Eurozone, the 2023 Gross Domestic Product (GDP) expanded by +0.5% y/y. Regionally, Brazil's central bank cut its interest rate to 11.25% from 11.75%. Mexico's Gross Domestic Product (GDP) closed 2023 with +3.1% y/y growth, after posting +2.4% y/y in the last quarter.

Weekly Monitor

International

The epicenter of the week in the United States will revolve around various comments from members of the monetary policy-making committee. At the same time, the December trade balance will be published, with an estimated deficit of USD 62.3 billion, and the official government purchasing managers' indices (PMI) for January. In the Eurozone, retail sales for December will be released (with the latest reading at -1.1% y-o-y), while in China, inflation for January will be released, with the expectation of a -0.5% y-o-y decline.

The US Federal Reserve (Fed) maintained the interest rate in the current range of 5.25%-5.50%, as expected. Chairman Powell reaffirmed the commitment to bring inflation down to the 2% target, indicating that the tightening cycle had reached its limit and that the easing would begin sometime this year.

On the other hand, new job creation in January stood at 353 thousand payrolls, exceeding the 168 thousand estimated and the revised figure of 333 thousand in December. At the same time, unemployment remained at 3.7%, lower than the 3.8% forecast. As a result, the market's discounted probability for the first 25 basis point cut in the Fed rate fell to 64% for May.

In this context of better-than-expected data, Treasury bond yields showed a mixed performance during the week, compressing in the long tranches. Thus, the 1-year yield went from 4.77% to 4.81%, the 3-year from 4.15% to 4.14% and the 10-year from 4.14% to 4.02%. Meanwhile, the average yield of Investment Grade corporate bonds (LQD ETFs) fell to 5.2%. Equity indices closed positive, with the S&P 500 closing up 1.5%.

In the Eurozone, the Gross Domestic Product (GDP) for the fourth quarter of 2023 advanced +0.1% year-on-year, with no changes on a quarterly basis. Thus, it closed with an annual growth of +0.5%. At the same time, January inflation fell -0.4% monthly and rose +2.8% y-o-y (in line with forecasts), while in the measurement without food and fuels it registered -0.9% monthly and +3.3% y-o-y (+3.4% expected). In this context, the EuroStoxx 50 increased +0.4%, while the euro ended at 1.08 per dollar.

Regarding Q4 2023 corporate results, of the 46% of S&P 500 companies that reported, 72% exceeded earnings per share expectations; while in terms of revenues, 65% reported above expectations. On a weighted average basis, earnings were up +1.6% versus the +1.5% estimate as of December 31.

Regional

This week, the focus will be on January inflation in Brazil, Mexico and Chile, with the latest records showing year-on-year increases of +4.6%, +4.7% and +3.9%, respectively. Additionally, the evolution of Brazilian retail sales for December will be released.

The Central Bank of Brazil decided to set the reference rate at 11.25%, which implied a cut of half a percentage point. This action was in line with expectations and represents the fifth consecutive decrease. Against this backdrop, the real advanced +1.2% to 5 to the dollar, while the Bovespa index closed with a -1.3% decline.

In Mexico, 4Q2023 GDP grew +2.4% y-o-y and +0.1% q-o-q, below expectations (+3% and +0.4%, respectively). Thus, it ended with an increase of +3.1% year-on-year. Against this backdrop, the equity index increased +2.4% on a weekly basis.

Regarding the performance of Latin American sovereign debt, 10-year dollar bond yields in Brazil and Mexico went from 6.23% and 5.61% at the end of the previous week, to the current level of 6.06% and 5.39%, respectively, after the Fed meeting.

 


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