U.S. Markets Fall; Argentina’s Merval Slumps Following IMF Deal

Oil prices got a boost from rumors that the U.S. and its allies will ramp up sanctions against Russia

The headquarters of the International Monetary Fund (FMI) in Washington, D.C. Argentina's government has reached a new deal with the lender's staff, and which is subject to approval by the country's Congress. Photographer Samuel Corum/Bloomberg
March 04, 2022 | 07:15 PM

A roundup of the region’s stock market results on Friday

🗽 On Wall Street:

The main stock market indices of the U.S. closed the week with losses, as the war in Ukraine intensifies and investors weigh up the effect it could have on global economic growth.

The risk aversion with which the market closed had become apparent earlier in the day following news that Russia had seized Europe’s largest nuclear power plant in Ukraine, after Russian shelling set the facility on fire late Thursday night.

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The S&P 500 dropped 0.79%, while the Dow Jones Industrials slipped 0.53% and the Nasdaq Composite (CCMPDL) fell by 1.66%.

During the day, the S&P index announced that it will remove Russian stocks, joining other global index compilers.

“As EU and U.S. leaders contemplate tougher sanctions, many companies, businesses and, now, stock indexes, are making the decision to remove any exposure to Russia. As Moscow moves further away from the global economy, pressure to cease its activity in Ukraine will increase,” Edward Moya, an analyst at Oanda, said via email.

🔑 Key Developments:

Oil prices received a further boost during the day as rumors grow that the U.S. and its allies will intensify sanctions against Russia.

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On Friday, it emerged that President Joe Biden’s administration is weighing a ban on Russian crude imports to the U.S. as Congress rushes to pass such a restriction to punish the Kremlin for its invasion of Ukraine.

Talks are underway within the administration and with the U.S. oil and gas industry about the impact such a move would have on U.S. consumers and global supply, Bloomberg reported.

“We’re looking at the options we can take right now, whether we reduce U.S. consumption of Russian energy, but most importantly we need to maintain a stable global energy supply,” Cecilia Rouse, chair of the White House Council of Economic Advisors, said at a briefing.

Both oil benchmarks rose in price again, with Brent up 6.94% to $118.13, while WTI gained 6.85% to $115.05.

🏅 The Leader:

Chile’s IPSA (IPSA), the main index of the Chilean stock market, and the S&P BVL Peru (SPBLPGPT) were the two best performers in Latin America and were not affected by the losses on the world’s main stock markets.

Both indices closed with an advance of 1.52%. In the case of the Chilean market, despite the uncertainty generated by the war in Ukraine, it has benefited from the increase in the price of copper, one of the main sources of income for the country’s economy.

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The price on the London Metal Exchange closed with an increase of 1.82% and continues above $10,000 per ton.

In the case of the Peruvian index, César Romero, head of Research at Renta4, highlighted that the best performing sector was raw materials, which rose by 2.83%, while “the sector that fell the most in the market was the industrial sector, which fell by 0.95% on Friday”.

📉 A Bad Day:

Argentina’s Merval (MERVAL) had the worst performance among its Latin American peers, one day after the government announced an agreement with the International Monetary Fund.

The market will now operate amid uncertainty as Congress debates the bill outlining the changes agreed with the IMF to the government’s $44 billion debt.

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Argentina’s Economy Minister Martín Guzmán said Friday that “the main objective in macroeconomic policy” is to reduce inflation and, for this, the first thing that is needed is to “calm expectations”.

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“We can undoubtedly notice again movements around the negotiation with the IMF (...) This could inject volatility to the local market and keeps investors on alert regarding the decision to be made by Congress,” said Ayelén Romero, from Rava Bursátil.

Mexico’s S&P BMV/IPC (MEXBOL) ended the session down 0.38%, while Brazil’s Ibovespa (IBOV), the main index of the largest stock exchange by market capitalization in Latin America, lost 0.60%.

🍝 For the Dinner Table Debate:

President Nicolás Maduro announced an increase of 1,218% increase to the minimum wage in Venezuela, establishing the base income for workers and pensioners at half a petro, equivalent today to $29.

With the official declaration, Venezuelans were torn between skepticism and concern, precisely because of the impact on prices that this increase entails. According to the Venezuelan Observatory of Finance, the basic monthly food basket had a cost of $365 in January, and promises to continue rising.