Inflation Surprises to the Upside in the First Half of October
Mexico’s headline inflation reached 3.62% year over year in the first half of October, with prices rising 0.41% over the two-week period.
Key points
Mexico’s consumer prices rose 0.41% in the first half of October, bringing annual inflation to 3.62%.
Mexico’s unemployment rate falls to 2.8% in September.
U.S. initial jobless claims decline to 194,000, below expectations of 200,000.
The USD/MXN exchange rate could trade between $18.62 and $18.82 spot today. The $18.60 level represents a key resistance threshold, with a sustained breakout potentially paving the way for further dollar gains.
Tech earnings fell short of lofty expectations, triggering a broad risk-off move, with the Nasdaq falling 1.7% and the S&P 500 losing 1.0%. Sentiment was hit by Lam Research’s disappointing outlook and Tesla’s decision to scale back spending plans, as investors increasingly demand evidence that artificial intelligence investments are translating into growth rather than simply higher costs. Adding to the pressure, Brent crude climbed above $112 per barrel after the U.S. ordered the departure of some diplomats from Saudi Arabia amid Houthi threats. In fixed income, the 10-year Treasury yield fell 11 basis points to 5.03%.
Monitor
Bolsas / Exchanges
S&P 500
7,726
-1.0%
Nasdaq
29,513
-1.7%
Dow Jones
52,758
-0.6%
IPyC
70,366
0.2%
Monedas / FX (Foreign Exchange
USD/MXN
18.7445
0.4%
EUR/MXN
21.0010
0.2%
EUR/USD
1.1204
-0.3%
Índice DXY
101.76
0.0%
Tasas / Exchange Rates
Treasury 2 años
4.72
-9.8 bp
Treasury 10 años
5.03
-11.2 bp
TIIE 3 meses
6.65
8.0 bp
M Bono 10 años
9.29
1.8 bp
Commodities / Commodity Markets
Petróleo (Brent)
112.02
2.9%
Oro
4,081
-1.4%
What you need to know about the economy and markets
Mexico’s headline inflation reached 3.62% year over year in the first half of October, with a biweekly increase of 0.41%. The reading exceeded market expectations, with annual inflation accelerating from 3.45% in September. A year earlier, prices had risen 0.28% over the same two-week period. Core inflation increased 0.25%, with its annual rate edging up from 3.75% to 3.78%, driven by a 0.31% rise in services and a 0.17% increase in goods. Noncore inflation climbed 0.98%. Green tomatoes and electricity led the increases, while lime prices fell 10% and avocados declined 4.7%.
Our Take
While the upside surprise in core inflation, concentrated in services, is unfavorable, it does not, on its own, signal a deanchoring of inflation expectations. Part of the headline increase appears attributable to volatile components, including electricity and agricultural products. Nevertheless, the reading is likely to influence Banxico’s Governing Board by narrowing the scope for additional rate cuts and strengthening the case for an extended pause.
Mexico’s unemployment rate stood at 2.8% of the labor force in September, down from 3.0% in August. On a seasonally adjusted basis, the rate fell to 2.6%, 0.1 percentage points below both August and September 2025. However, the decline did not reflect stronger hiring. Employment fell by 267,000 workers year over year, while the labor force participation rate dropped to 58.5% from 59.6%, and the economically inactive population increased by 1.7 million.
Our Take
The decline in unemployment appears to reflect falling labor force participation rather than a stronger labor market, as wage and salaried employment contracted by 782,000 workers year over year. At the same time, IMSS reported the creation of 128,800 formal jobs in September, suggesting the data do not, on their own, point to an abrupt deterioration, but rather to increasing labor market slack.
U.S. initial jobless claims fell by 6,000 to 194,000 in the week ended October 17. The previous reading was revised upward from 199,000 to 200,000, while the latest figure came in below the consensus estimate of 200,000. The four-week moving average declined by 1,000 to 197,750, while unadjusted claims remained below their year-earlier level. In contrast, continuing claims increased by 25,000 to 1.728 million in the week ended October 10.
Our Take
Although initial claims fell to 194,000, below the 200,000 consensus, confirming that layoffs remain contained, the 25,000 increase in continuing claims to 1.728 million tempers the improvement. The four-week average, at 197,750, was virtually unchanged, suggesting the reading does not, on its own, signal a shift in the layoff trend. Combined with September payroll gains of just 29,000 jobs, the rise in continuing claims points to a labor market characterized by weak hiring rather than overheating.
Corporate News
Meta Platforms disclosed commitments to spend approximately $825 billion in the future through various leases and contractual agreements, many tied to computing capacity and artificial intelligence infrastructure. Despite signs that its investments are beginning to pay off, shares declined, highlighting investors’ increasingly demanding expectations for returns on AI spending.
Barclays announced plans to cut 5,000 jobs, approximately 5% of its total workforce, as part of a technology-driven cost reduction initiative amid the bank’s growing adoption of artificial intelligence across its operations.
DeepSeek raised approximately 100 billion yuan, or about $15 billion, in its latest funding round, one of the largest in Chinese history and a sign that investor appetite for artificial intelligence remains strong in the country.
The To-Do List
Assess the impact of higher Brent crude prices on margins for companies exposed to energy and transportation costs.
Monitor the rotation out of semiconductor stocks, which could persist until major technology companies report earnings.
Take a moment to slow down during the day and enjoy lunch away from your desk, without screens.
Quote of the Day…
“The scariest moment is always just before you start.”
- Stephen King
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Rodrigo Ventre Ruiz rventre@kapital.com
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