US headline inflation reached 3.7% year-over-year in September, while core inflation came in at 2.6%, both above expectations and complicating the case for a Fed pause in October.
Key points
New York Fed President signals limited further tightening
China posts record trade surplus in September
China's producer prices rise 5% year-over-year, the largest increase since June 2022
The USD/MXN exchange rate could trade between $18.43 and $18.58 spot today, with potential for further peso depreciation toward $18.68.
September's hotter-than-expected US inflation report erased earlier gains in equity futures, with the S&P 500 down 0.4% and the Nasdaq 100 falling 0.7%, putting both indexes on track for a third consecutive day of losses. The sharpest monthly price increase in five months reinforced expectations that the Fed may need to keep interest rates higher for longer. Bond markets reacted immediately, with the 10-year Treasury yield climbing nine basis points, even as Bowman and Williams reiterated that they see no urgency to raise rates again. Oil prices continue to add to inflationary pressures, with Brent trading near $106 per barrel, also supported by reports that offices belonging to Aramco were struck in renewed attacks by Iran-backed Houthi militants across Saudi Arabia.
Monitor
Bolsas / Exchanges
S&P 500
7,826
-0.4%
Nasdaq
30,568
-0.7%
Dow Jones
51,813
-0.2%
IPyC
67,115
0.2%
Monedas / FX (Foreign Exchange
USD/MXN
18.4890
0.7%
EUR/MXN
20.5955
0.3%
EUR/USD
1.1140
-0.5%
Índice DXY
102.69
0.5%
Tasas / Exchange Rates
Treasury 2 años
4.93
13.4 bp
Treasury 10 años
5.30
8.7 bp
TIIE 3 meses
6.62
10.0 bp
M Bono 10 años
9.25
0.6 bp
Commodities / Commodity Markets
Petróleo (Brent)
105.98
0.3%
Oro
4,105
-1.3%
What you need to know about the economy and markets
US inflation accelerated to 3.7% year-over-year in September, above the 3.6% consensus estimate and its highest level in five months. Consumer prices rose 0.6% month-over-month, their largest increase since April, driven largely by fuel costs. Core inflation also exceeded expectations, rising 0.3% month-over-month and 2.6% year-over-year, compared with forecasts of 0.2% and 2.5%, respectively.
Our Take
The report strengthens the case for another rate hike this year and weakens the argument for an October pause, although it does not rule one out. The core inflation surprise warrants additional caution beyond energy-driven price pressures. For markets, this could keep Treasury yields elevated and support the dollar.
John Williams, president of the New York Fed, reiterated that an additional rate hike this year could be appropriate, although he currently sees no reason for further increases in 2027, leaving that assessment dependent on incoming data. His remarks are consistent with his September 29 stance, when he indicated there was no urgency to act and that policymakers could gather more information. Williams highlighted the moderation in core inflation, while remaining attentive to the demand boost associated with artificial intelligence.
Our Take
Williams supports limited, gradual tightening, which reduces pressure for an immediate October hike and challenges expectations of a prolonged tightening cycle. This could support bonds and temper interest-rate-driven dollar strength. However, an upside inflation surprise could alter that outlook, meaning his remarks should be interpreted as a data-dependent assessment, rather than a commitment to keeping rates unchanged in 2027.
China reported that exports surged 36% year-over-year in September, their strongest increase in five years, while imports rose 31%, generating a trade surplus of nearly $134 billion, the largest on record. Growth was supported by strong shipments of technology products linked to artificial intelligence.
Our Take
The external sector remains a key source of support for China's economic growth, benefiting from strong global technology demand. However, higher imports also reflect rising energy costs and do not, on their own, establish that domestic demand has strengthened. The widening trade surplus could intensify trade frictions and increase China's exposure to new restrictions.
China's consumer inflation edged higher to 0.9% year-over-year in September, from 0.8% in August, while core inflation held steady at 1.0%. Consumer prices rose 0.2% month-over-month. In contrast, producer price inflation accelerated to 5.0% year-over-year from 3.8%, with prices rising 1.2% month-over-month, primarily driven by higher energy and raw material costs, alongside price pressures in certain technology industries.
Our Take
China's inflation is accelerating primarily due to cost pressures, rather than stronger demand. The gap between producer and consumer inflation could squeeze margins for companies with limited pricing power. This environment complicates efforts to support economic activity, as higher input costs may limit the benefits of additional stimulus measures.
Corporate News
Bank of America reported a weaker-than-expected third quarter, with earnings per share of $0.93, below the $1.10 consensus estimate, and revenue of $29.96 billion, missing expectations of $30.58 billion. Results were weighed down by a $1.2 billion regulatory fine related to anti-money-laundering and sanctions compliance violations. Weakness in trading operations also pressured performance.
Morgan Stanley delivered a strong quarter, driven primarily by equity trading. Earnings per share reached $3.07, beating the $2.90 consensus estimate, while revenue totaled $20.34 billion, above expectations of $19.89 billion.
BlackRock reported revenue of $7.75 billion for the July–September quarter, above expectations of $7.40 billion and representing 19% year-over-year growth, supported by higher fee income. The firm also attracted $205 billion in net inflows, reinforcing momentum in its asset management business.
Grupo Televisa and Fintech Holdings agreed to acquire AT&T Mexico for $2 billion through a consortium in which each partner will hold a 50% stake. The transaction, financed through cash and debt, remains subject to regulatory approvals and is expected to close in the first quarter of 2027. The acquisition would add a mobile operator with approximately 24.7 million subscribers, while AT&T would refocus its investment efforts on the United States.
The To-Do List
Follow the release of the Fed's Beige Book at 12 p.m. Mexico City time.
Today is back, arms, and core day. Complete three sets of 12 repetitions each of rows, biceps curls, and triceps extensions. Finish with three 30-second planks and a 10-minute brisk walk.
Remember that today marks the anniversary of the opening ceremony of the 2011 Pan American Games in Guadalajara, one of the largest sporting events ever held in Mexico.
Quote of the Day…
Inflation is always and everywhere a monetary phenomenon… Milton Friedman
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Rodrigo Ventre Ruiz rventre@kapital.com
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