U.S. Stocks Close Lower; Mexico Leads LatAm Losses

West Texas Intermediate (WTI) crude hits $95 per barrel for the first time since 2014

Antony Blinken
February 14, 2022 | 08:31 PM

A roundup of Monday’s stock market results from across the region

🗽 On Wall Street:

U.S. stock markets closed with losses Monday amid the escalation of news about the conflict between Ukraine and Russia. On Monday afternoon, U.S. Secretary of State Anthony Blinken announced that Washington will relocate the remaining staff of the country’s embassy in Kiev to Lviv, a city near the Polish border.

Blinken said the decision was made following “the dramatic acceleration of the buildup of Russian forces”. He also made a plea to Vladimir Putin’s government and said the path of diplomacy remains available if they choose to “engage in good faith”.

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The S&P 500 fell 0.38%, while the Dow Jones Industrials lost 0.49%. The Nasdaq Composite (CCMPDL) managed to reverse the trend late in the session and closed flat.

“If an armed conflict between Russia and Ukraine is somehow averted, a short-lived relief rally is likely, but there are still too many concerns on the horizon,” George Ball, president of Sanders Morris Harris, told Bloomberg.

Beyond the conflict, investors are nervous about the prospect of interest rate hikes by the Federal Reserve. St. Louis Fed President James Bullard said Monday that the central bank needs to move forward with its plans to raise rates to underscore its credibility in fighting inflation.

🔑 The Day’s Key Developments:

As the tension between Ukraine and Russia grows, oil prices continue to soar, at a time when supply has not reacted at the same pace as demand from economies that have revived after the pandemic-induced shutdowns.

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US benchmark West Texas Intermediate (WTI) crude reached $95 per barrel for the first time since 2014. The Brent benchmark, meanwhile, touched $96 and also remains at seven-year highs.

Although higher oil prices could mean higher profits for companies and for economies exporting the commodity, it would also inject more upward pressure on inflation.

According to Bloomberg Economics’ Shock model, a rise in crude oil to $100 later this month from around $70 at the end of 2021 would raise inflation by about half a percentage point in the U.S. and Europe in the second half of this year.

Natural gas and electricity prices in Europe also shot up by more than 10%. Russia is Europe’s main source of natural gas and about one-third of its exports pass through Ukrainian pipelines.

🥇 The Leader:

Brazil’s Ibovespa (IBOV), the leading index of the largest stock market by market capitalization in Latin America, was the only one in the region to close with gains after registering a slight rise of 0.29%.

Consumer stocks boosted the index this afternoon, such as Magazine Luiza (MGLU3); Americanas (AMER3) and Petz (PETZ3). The IT and industrial sectors also performed positively during the day.

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In addition to the external situation, investors are following the visit by Brazil’s President Jair Bolsonaro to Russia, as well as the disclosure of the fourth quarter balance sheets of companies such as Itaúsa (ITSA3), Engie (EGIE3) and Banco Brasil (BBAS3).

📉 A Bad Day:

In a session in which practically all the stock markets closed in the red, Mexico’s stock market registered the largest decline. The S&P/BMV IPC, the Mexican stock market’s main index, ended the day down 1.67%.

Hit by the international mood, with the S&P 500 and the Dow Jones Industrials closing with losses, the index began the week with declines after having closed last Friday with the highest increase among its Latin American peers.

In addition to tensions over the conflict between Ukraine and Russia, in the local market multinational companies are threatening to pull out of Mexico if the country does not meet its renewable energy goals, warned Alberto de la Fuente, the president of the Executive Council of Global Companies and also president of Shell in Mexico.

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Chile’s stock market had the second largest setback, after the Ipsa (IPSA) fell 1.02%. Uncertainty in the country is accompanying the debates of the Constitutional Convention, charged with drawing up a new constitution, and the blow that inflation continues to generate.

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🍝 For the Dinner Table Debate:

Less than half of Chileans would approve the new Constitution, as confidence in the Constituent Convention falls, according to a Cadem survey.

Specifically, only 47% of Chileans would approve the new text in the national referendum to be voted on in the second half of the year, a drop from the 56% of people who said they would approve it when asked in January.

In addition, confidence in the convention fell to 50% from the 59% recorded in the previous survey.

The results come at a time when the convention has been debating ideas such as the nationalization of mining, in a discussion that has not been free of setbacks, for example, and took a step back last week from one of its most extreme proposals: to allow the government to expropriate private property for social improvement.