Mexico's GDP fell -0.6% quarterly in Q1 2026, though it recorded annual growth of 0.4% on seasonally adjusted figures. By component, primary activities retreated -1.7% quarterly, secondary activities -1.0%, and tertiary activities -0.4%. On an annual basis, only tertiary activities maintained growth (1.1%), while secondary activities declined -1.1%. Within the services sector, retail trade advanced 0.8% annually, moderating compared to prior quarters.

Our Take

The quarterly GDP contraction confirms a more evident deceleration of Mexico's economy at the start of 2026, with broad-based weakness across sectors. Although services continue to partially sustain activity, the lower dynamism in trade and the decline in industry reflect a moderation in domestic and external demand. Taken together, the economic environment shows fragile growth, affected by the global slowdown and trade uncertainty.

US Secretary of State Marco Rubio stated that "some positive signals" had been observed in the talks to end the nearly three-month war in the Middle East, but differences persist over Tehran's uranium reserves and control of the waterway. According to the latest reports, Washington continues to demand that Tehran hand over its enriched uranium reserves and end enrichment for at least a decade, while the Iranian regime insists it will not back down on this matter.

Our Take

Despite the narrowing in negotiating positions, the unrestricted reopening of Hormuz and Iran's nuclear program remain the main obstacles to reaching an agreement. We are seeing an unusually strong relationship between oil prices and global rates that reflects how widespread and cross-border this shock has become. If traffic through the Strait of Hormuz is not fully restored by July, oil reserves could decline to alarming levels.

Germany's IFO Institute Business Climate Index improved unexpectedly in May 2026 to 84.9 points, surpassing market estimates of 84.2 and the upwardly revised April figure of 84.5 points. The Current Assessment sub-index advanced from 85.5 to 86.1 points, while the Expectations sub-index rose from 83.5 to 83.8 points, both above analyst forecasts. The improvement was driven primarily by the manufacturing and services sectors; in manufacturing, sentiment advanced from -12.1 to -11.3, supported by some moderation in supply chain disruptions and a degree of stabilization in external demand.

Our Take

May's results send a moderately positive signal about the state of Germany's economy, though without room for excessive optimism. The fact that all three components surpassed forecasts suggests that Germany's business sector is gaining some resilience against the adverse environment that has characterized recent months. The May rebound could suggest an inflection point, though current levels, still below 90 points, continue to reflect contractionary conditions.

UK retail sales recorded a monthly decline of 1.3% in April 2026, the largest contraction since May 2025. The result reversed the 0.6% advance recorded in March and doubled the 0.6% decline analyst consensus had anticipated. The main factor behind the fall was a 10.2% decline in gasoline sales, the sharpest since November 2020. Excluding the gasoline category, sales retreated 0.4%.

Our Take

April's figure represents a negative impact on UK private consumption and reinforces the narrative of an economy losing traction. The result is framed in a context of weakening consumer spending in the face of the Iran war and rising energy costs. Taken together, the report raises caution about the solidity of UK GDP recovery in the second quarter of 2026.

Japan's core Consumer Price Index, which excludes fresh food prices, recorded an annual advance of 1.4% in April 2026, below the 1.7% expected by consensus and the 1.8% observed in March, marking its lowest level since March 2022, a more than four-year low. The deceleration was driven by processed food prices. Energy prices fell 3.9% in April, compared to a decline of 5.7% in March, in the context of the Iran conflict.

Our Take

April's report suggests that price pressures in Japan are more moderate than expected, which could somewhat complicate the Bank of Japan's upcoming decisions, just as it is evaluating the possibility of further interest rate hikes. At its April meeting, the institution robustly raised its core inflation forecast from 1.9% to 2.8%.

Kevin Warsh is sworn in today as Federal Reserve Chair, relieving Jerome Powell. Warsh assumes the presidency at a moment of high complexity for monetary policy, where the energy shock from the war with Iran has pushed inflation away from the Fed's 2% target, and the debate over whether it will be necessary to raise interest rates to bring prices back under control has moved to the center of the central bank's internal deliberations.

Our Take

The great unknown is whether Warsh, under pressure from Trump to cut rates aggressively, will manage to build consensus within the FOMC, or whether his first meeting as chair, scheduled for June 16 and 17, will unleash an internal dispute.

Corporate News

International Business Machines Corp. will receive $1 billion from the US government to build a quantum processor foundry in Albany, New York, as part of a broader $2 billion package from the Department of Commerce funded with resources from the 2022 CHIPS Act. IBM will also invest $1 billion of its own in a new company called Anderon, which will manufacture these processors. Other beneficiaries include GlobalFoundries ($375 million), D-Wave Quantum, Rigetti Computing, PsiQuantum, and Infleqtion ($100 million each).

The multi-billion dollar merger between Puig Brands SA and Estée Lauder Cos. was cancelled after compensation demands from makeup artist Charlotte Tilbury, who holds a minority stake in Puig after selling her brand in 2020, could not be resolved, according to people familiar with the matter cited by Bloomberg. Although both companies issued statements Thursday without detailing the reasons, sources indicate that a change-of-control clause in Tilbury's favor was the trigger, though not the only obstacle. Puig shares fell 15% in Madrid, their largest decline since 2024, while Estée Lauder advanced as much as 11% in pre-market trading in New York. On a combined basis, both companies had a market capitalization of nearly $39 billion and sales of approximately $20 billion in 2025.

Workday Inc. reported Q1 2026 revenues above market consensus, with shares rising 8.2% in pre-market trading. The company projected stronger-than-expected sales growth, attributed to adoption of its expanded enterprise collaboration product suite and AI tools. The number of users paying for Zoom's AI Companion nearly tripled compared to the same quarter the prior year. Workday shares have accumulated a positive return for the year, standing out among peers in the enterprise software segment.

The to-do list

Today's recommendation…

For this weekend, a read well worth it: 10 Minutes 38 Seconds in This Strange World by Elif Shafak. An extraordinary novel that opens at the moment of its protagonist's death and builds backward through a whole life of friendship, resistance, and memory. Hard to put down once you start. The kind of book that changes how you see things when you finish it.