Dow Jones Hits Year-to-Date Low; Bank Stocks Boost Colombia Market

Commodity prices continue to rise, while supply cut risks amid the geopolitical tensions make safe haven assets such as gold shine brighter

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February 23, 2022 | 06:29 PM

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

🗽 On Wall Street:

Tension in Ukraine continues and U.S. stock markets added another day of losses, amid nervousness about the escalation of the crisis in Eastern Europe.

President Joe Biden’s administration announced new sanctions and this time targeted the builder of the Nord Stream 2 gas pipeline, a project personally led by President Vladimir Putin that would carry gas from Russia to Germany.

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“As I have made clear, we will not hesitate to take further action if Russia continues its escalation,” Biden said in a statement.

The S&P 500 fell 1.84%, while the Dow Jones Industrials lost 1.38% and closed at its lowest level in 2022. The Nasdaq Composite (CCMPDL) sank 2.57% following a massive sell-off of technology stocks.

“Our sense is that this saga is far from over and most of our contacts also expect additional sanctions in the coming days, such as a targeted legislative package,” BTIG’s Isaac Boltansky wrote in a note seen by Bloomberg.

🔑 The Day’s Key Data:

Commodities continue their bullish behavior, as the possibility of a cut in supplies and geopolitical tensions make safe-haven assets such as gold shine brighter.

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The metal continues to trade above $1,900 and its next barrier to break is $1,950, according to an analysis by Oanda’s Edward Moya.

“Previous optimism that the Russia-Ukraine conflict could find a path to diplomacy quickly evaporated, leading investors to seek safe haven,” he added.

Oil continues on its path towards $100, despite the possibility of a nuclear deal with Iran, which would increase the supply of crude oil, emerging as the main obstacle to bullish behavior.

From aluminum to nickel and copper, raw material prices continue to rise, while the prices of soybean and wheat reached a nine-year high.

In the case of the latter, possible supply disruptions in the Black Sea region have already added further pressure to global food commodity costs. Russia and Ukraine are two heavyweights in the global grain trade, so any disruption would add to price pressure.

🏅 The Leader:

Colombia’s main index Colcap was the leader among its Latin American peers, closing with a 1.19% hike.

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Colombia’s stock market benefited from the performance of the financial sector. Bancolombia (BCOLO) shares led the day, after the entity reported its annual results for 2021 on Tuesday afternoon and announced an increase in the dividends it will deliver to its shareholders.

“The results are positive for all relationship groups. We ensured quality employment for more than 30,000 people with an impact on the welfare of their families, while we accompanied the strengthening of more than 22,000 suppliers,” said the bank’s president Juan Carlos Mora.

Ecopetrol (ECOPETL) shares, which was the highest volume share in the session, also closed with a positive performance, driven by the rise in oil prices.

📉 A Bad Day:

Mexico’s stock market was the worst performer in Latin America on Wednesday, and its main index, the S&P BMV/IPC (MEXBOL) closed down 2.35%. International tensions, as the crisis between Ukraine and Russia grows, continue to weigh on market performance in Latin America.

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Cemex (CEMEXCPO) shares plummeted during the session, falling more than 7%. Credit Suisse cut its price target on the stock on expectations that higher energy and shipping costs would overwhelm price increases.

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“We now believe that elevated, and more lasting than we originally imagined, cost pressures will fully offset pricing initiatives, leading to a decline in Ebitda during 1H22 and minimal organic growth for the full year,” said analyst Vanessa Quiroga.

Brazil’s Ibovespa (IBOV), the leading index of the largest stock exchange by market capitalization in the region, retreated from the positive performance it showed on Tuesday and ended the day with a drop of 0.78%.

🍝 For the Dinner Table Debate:

The Inter-American Development Bank (IDB) scrapped a loan to Marfrig Global Foods, Brazil’s second-largest beef producer, over fears that it is driving deforestation in the Amazon.

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The bank could not agree with the company on the environmental goals or financial terms of the loan, said one of the people cited by Bloomberg. The loan is now inactive, according to the IDB’s website, and will no longer be put to a vote.

Marfrig in an e-mail confirmed that the loan is no longer under consideration, but would not comment further. The IDB told Bloomberg by email that it “reached mutual agreement that conditions were not ideal to move forward with the loan”.

Amazon deforestation is now at its highest point in 15 years, and more than 70% of cleared land is being illegally converted to grazing land for animals.