Mexico’s public-sector revenue rose 1.3% while spending increased 3.3%. VAT and oil revenue offset a decline in income-tax receipts, while physical investment grew 1.9% in real annual terms. Meeting the fiscal target will require sustaining revenue collection while protecting investment.
Key points
Eurozone manufacturing activity expands in September at its fastest pace in 52 months
Brent rises to $100 after China announces a suspension of crude exports
The UK becomes the first major economy to see bond yields reach 6% since the euro crisis
US manufacturing is set to accelerate in September
For the rest of the day, the interbank exchange rate could trade between MXN 17.xx and MXN 18.xx per dollar in the spot market
Wall Street futures are starting October higher, with the S&P 500 up 0.3% and the Nasdaq 100 gaining 0.4%. Artificial intelligence-linked companies are supporting the advance despite volatility in bonds and another rise in oil prices, with traders now awaiting Friday’s US nonfarm payrolls report. Brent crude is up 1.60% at $99.56 per barrel in a session marked by sharp swings, as traders weigh recovering flows from the Middle East against the risk of renewed escalation and China’s restrictions on fuel exports. In fixed income, the global bond selloff remains in focus, pushing the 10-year Treasury yield to 5.31%, its highest level since 2002.
Monitor
Bolsas / Exchanges
S&P 500
7,735
0.30%
Nasdaq
30,830
0.40%
Dow Jones
51,392
0.20%
IPyC
64,493
0.40%
Monedas / FX (Foreign Exchange
USD/MXN
18.1912
0.70%
EUR/MXN
20.5276
0.40%
EUR/USD
1.1285
-0.40%
Índice DXY
101.79
0.30%
Tasas / Exchange Rates
Treasury 2 años
4.87
-1.9 bp
Treasury 10 años
5.31
1.3 bp
TIIE 3 meses
6.76
10.0 bp
M Bono 10 años
9.62
-1.2 bp
Commodities / Commodity Markets
Petróleo (Brent)
99.56
1.60%
Oro
4,175
0.50%
What you need to know about the economy and markets
Between January and August, Mexico’s public revenue rose 1.3% in real annual terms. In particular, VAT receipts increased 11.4% and oil revenue climbed 10.5%, offsetting a 5.6% decline in income-tax revenue. Public spending rose 3.3%, although it remained MXN 477.07 billion below budget. Interest costs declined 3.5% to MXN 822.50 billion, while Public Sector Borrowing Requirements, or PSBR, totaled MXN 734.70 billion. Physical investment increased 1.9% in real annual terms, supported by a 22.3% rebound in August. The Finance Ministry expects the year to close with a deficit of 4.1% of GDP, down from 4.8% a year earlier.
Our Take
The strength in VAT receipts, the recovery in oil revenue and lower interest costs provide some relief, but revenue is still growing more slowly than spending. Budget underspending is containing financing needs, while the improvement in physical investment is positive, albeit modest on a year-to-date basis. Meeting the 4.1% of GDP deficit target will require sustaining revenue collection and controlling spending without weakening investment or public services.
The final Eurozone manufacturing PMI rose to 52.9 in September from 52.7 in August and in the preliminary reading, reaching its highest level in 52 months. Output increased to 53.6, while new orders expanded at their fastest pace since early 2022. Demand for AI- and defense-related equipment supported the expansion, although input costs and selling prices also accelerated.
Our Take
The industrial recovery supports European growth and points to investment demand that remains resilient despite the energy shock. However, firmer activity gives policymakers room to maintain a restrictive monetary stance and could support further hikes if inflation remains persistent. For companies, the challenge will be translating stronger orders into better margins as input costs rise.
Oil prices are rebounding on Thursday after Reuters reported that Chinese refiners suspended exports of petroleum products outside Hong Kong and Macau, with no timetable yet for resumption. The market fears another supply constraint as uncertainty persists over a US-Iran agreement that would allow the Strait of Hormuz to fully reopen.
Our Take
Brent’s return above $100 is reviving inflation risks just as central banks seek to consolidate disinflation, while adding pressure to the global bond selloff that has already pushed yields to multi-decade highs.
The UK 30-year government bond yield rose six basis points to 6.01%, its highest level since March 1998. The UK is the first G-7 economy to move above 6% since Italy in 2012. The move reflects the global bond selloff amid higher oil prices and rising inflation risks, with markets pricing in four Bank of England rate hikes through the end of 2027.
Our Take
The UK’s energy dependence and fiscal vulnerability leave it particularly exposed to higher interest rates. Rising financing costs are adding pressure to public finances, where debt servicing is already the second-largest spending item, behind healthcare. This narrows the room for maneuver ahead of the October 28 budget and could prolong volatility if the government fails to present a credible fiscal path.
The US ISM Manufacturing PMI is due today at 8:00 a.m., with consensus expecting a reading of 55.0. If confirmed, it would show that the industrial sector remains in expansion. Attention will be on new orders and production to gauge demand, as well as employment and prices paid for signs of cost pressures.
Our Take
A reading of 55.0 would reinforce the resilience of the US economy and give the Fed room to maintain a restrictive stance. For markets, the mix will be critical, as firm activity alongside softer price pressures would support equities, while a pickup in prices paid could increase bets on another rate hike and push bond yields higher.
Corporate News
Micron Technology reported fiscal 4Q26 results yesterday, with earnings and fiscal 1Q27 guidance coming in above expectations, supported by demand for memory chips used in AI infrastructure. Even so, the initial investor reaction was fairly muted, reflecting elevated expectations for the sector. The company guided to a strong quarter, although it warned of higher costs.
Nu Holdings gained as much as 4.2% after Nubank’s parent company ruled out pursuing a deal with UK digital bank Monzo, following reports last week of potential acquisition talks.
Sanofi rose 3.7% in Paris after expanding its partnership with Regeneron. The pharmaceutical company will make an upfront payment of $1 billion for the right to jointly develop new treatments for immune-system diseases.
Shares of Constellation Energy rose 3.3% after the company agreed to supply Amazon with 690 megawatts of electricity over 20 years. The contract will help the largest US nuclear operator expand capacity at its only reactors in Maryland.
The To-Do List
Follow remarks from the ten Fed officials speaking today, particularly Christopher Waller on economic data and Philip Jefferson on the economy and monetary policy.
Complete 3 rounds of 20 high-knee marching steps, 15 calf raises and 12 wall push-ups. Finish each round with a 30-second side plank on each side and rest for 30 seconds. Approximate duration: 8 minutes.
Watch whether the 10-year Treasury yield, already at its highest level since 2002, continues to rise, and monitor the impact on high-yield corporate bond spreads, which have already moved above 1,000 basis points for the first time since 2023.
Remember that today, October 1, is International Coffee Day, recognizing a crop for which Mexico is one of the world’s leading producers.
Quote of the Day…
“We have a trillion-dollar debt because we spend too much, not because we tax too little.”... Ronald Reagan
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Rodrigo Ventre Ruiz rventre@kapital.com
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