Mexico’s economic activity expanded 3.5% YoY, exceeding the 3.2% preliminary estimate and improving the quarterly growth outlook, despite uneven performance across sectors.
Key points
Eurozone Economic Activity Expands at a Slower Pace in October
Oil Extends Rally, Briefly Touching $115 per Barrel
US PMIs Expected to Signal Moderating Activity
Today, the USD/MXN interbank exchange rate could trade between $18.65 and $18.80 spot.
US equity futures extended their declines, with the S&P 500 down 0.5% and the Nasdaq 100 slipping 0.3%, following yesterday’s sharp technology selloff. While pressure on chipmakers has eased somewhat, concerns persist over the returns on massive artificial intelligence investments. In fixed income, safe-haven demand is keeping the 10-year Treasury yield below 5%, although the relief is being tempered by rising oil prices. Brent is approaching $115 per barrel, its highest level in five months, renewing concerns over inflation and the interest rate outlook.
Monitor
Bolsas / Exchanges
S&P 500
7,669
-0.5%
Nasdaq
29,051
-0.3%
Dow Jones
52,597
-0.9%
IPyC
69,995
0.2%
Monedas / FX (Foreign Exchange
USD/MXN
18.7606
0.3%
EUR/MXN
21.0296
0.2%
EUR/USD
1.1206
-0.1%
Índice DXY
101.73
0.1%
Tasas / Exchange Rates
Treasury 2 años
4.66
2.1 bp
Treasury 10 años
4.97
1.2 bp
TIIE 3 meses
6.91
8.0 bp
M Bono 10 años
9.26
-0.1 bp
Commodities / Commodity Markets
Petróleo (Brent)
114.86
1.5%
Oro
4,027
0.1%
What you need to know about the economy and markets
Mexico’s IGAE rose 0.6% MoM in August on a seasonally adjusted basis, exceeding the 0.5% increase projected by the Timely Indicator of Economic Activity (IOAE), while expanding 3.5% YoY. By sector, secondary activities increased 0.6% MoM and 3.6% YoY, supported by manufacturing (1.2% MoM) and construction (7.9% YoY). Tertiary activities moderated to 0.2% MoM from 1.2% in July, while rising 3.7% YoY. In contrast, primary activities contracted 3.3% YoY despite a 3.5% monthly rebound. Over the first eight months of the year, economic activity accumulated growth of 1.74%.
Our Take
The report confirms stronger economic momentum in the third quarter, although monthly growth in services moderated. Moreover, much of the annual expansion was driven by wholesale trade (12.2% YoY), which does not necessarily indicate a broad-based recovery in consumption. Further evidence is therefore needed to confirm a more sustained strengthening of domestic demand. The result is unlikely to change Banxico’s decision to keep rates on hold, although it could somewhat weaken the argument of economic slack and limited demand-side pressures cited by the Board in recent statements.
The Eurozone’s preliminary composite PMI fell to 51.9 in October from 53.1 in September, below expectations of 52.7. The manufacturing PMI declined from 52.9 to 52.4, while the services PMI dropped from 53.0 to 51.7. Although all three readings remained above the 50-point threshold separating expansion from contraction, the figures point to slowing economic momentum at the start of the fourth quarter, particularly in services.
Our Take
The European economy continues to expand, but its capacity to absorb higher energy costs is weakening. We believe this combination complicates the ECB’s policy decisions, as slowing activity calls for caution while persistent cost pressures make monetary easing more difficult.
Brent crude briefly reached $115 per barrel today, its highest level since early May, after gaining approximately 4% yesterday amid Houthi attacks on Saudi Arabia and fears of supply disruptions. The evacuation of Saudi Aramco’s headquarters, risks to shipping through the Bab el-Mandeb Strait, and production disruptions in Libya continue to exert upward pressure on prices. The rally has persisted despite Trump invoking the Defense Production Act to encourage increased US oil production and refining.
Our Take
We believe US measures will have a limited near-term impact, as expanding energy capacity takes time and does not eliminate the risk of further supply disruptions. If oil prices remain elevated, they could intensify pressure on inflation and corporate margins, complicating the path toward monetary easing.
The preliminary US PMIs for October are due today at 7:45 a.m., and we expect them to show some moderation in economic activity, while remaining consistent with solid expansion. Consensus forecasts call for the manufacturing PMI to decline from 55.9 to 55.5 and the services PMI from 58.8 to 57.9, suggesting softer momentum in the composite index as well. New orders, hiring, and prices will be closely watched for signals of how the economy is entering the final quarter of the year.
Our Take
An orderly slowdown accompanied by easing price pressures would be favorable for markets, supporting a Fed pause without materially undermining growth expectations. Conversely, stronger-than-expected activity combined with higher costs could push bond yields higher and strengthen the dollar. We believe the balance between growth and inflation will matter more than the headline PMI reading itself.
Corporate News
SK Hynix has scrapped plans for a potential $10 billion US IPO of Solidigm, amid growing investor unease over the artificial intelligence boom. The unit manufactures memory chips and storage drives used in data centers, a segment facing increasing scrutiny over the returns on AI-related investments.
American Express reported adjusted third-quarter earnings of $4.68 per share, beating expectations of $4.49, and raised its 2026 earnings outlook, supported by spending among its higher-income customers. However, billed business of $454 billion fell short of the $456.9 billion forecast, partly reflecting the termination of certain small-business card partnerships. Shares were down 2.7% in premarket trading.
Kering shares fell sharply after Gucci sales declined 6% in the third quarter, compared with analysts’ expectations for a 3.3% drop. Weak demand in China continues to hamper the Italian luxury brand’s recovery, while group revenue declined 1%.
Shares of US cell tower operators rallied following reports that SpaceX is seeking access to at least 80,000 cell sites as part of its plan to become a nationwide wireless carrier. Crown Castle gained 6.3%, American Tower rose 4.1%, and SBA Communications advanced 4.8%, while T-Mobile, Verizon, and AT&T each declined around 3%.
The To-Do List
Track OpenAI’s approximately $30 billion funding round, targeting a $1.25 trillion valuation, down from the $1.4 trillion expected last month.
Today’s focus is mobility and strength. March in place for two minutes, then complete two rounds of 12 calf raises, 10 wall push-ups, and 10 lateral leg raises per side. Finish with gentle stretching.
Remember that Mexico celebrates National Doctors’ Day today.
Today’s Recommendation…
This Saturday, October 24, from 6 to 10 p.m., enjoy a 13-kilometer ride along Paseo de la Reforma in Mexico City, surrounded by catrinas, ghosts, and vampires. The event will feature a costume contest and fitness activities at Glorieta del Ahuehuete, along with free bicycle rentals at Glorieta del Caballito. A great way to spend time with family or friends and add a festive twist to the weekend.
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Rodrigo Ventre Ruiz rventre@kapital.com
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