Pessimism Sinks U.S. Markets; Argentina’s MERVAL Leads LatAm Gains

Oil prices rise after two sessions of declines, with both WTI and Brent remaining above the $100 threshold

A woman walks past a residential area which was destroyed as a result of a rocket strike two weeks ago on March 28, 2022 in Kyiv, Ukraine.
March 30, 2022 | 06:46 PM

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

🗽 On Wall Street:

Optimism regarding peace talks between Russia and Ukraine did not last more than a day, and which was felt by the U.S. stock markets, having posted gains on Tuesday with Russia’s announcement of a military de-escalation in the conflict. On Wednesday markets slipped back after the talks ended without any agreement.

The Kremlin said it is regrouping its forces in Ukraine to complete the seizure of the eastern Donbas region, sending signals that Moscow is not curbing all military activity, despite a pledge to scale back operations near Kyiv and Chernihiv.

“The aim of the redeployment of the Russian armed forces is to activate operations in the priority directions, first of all, the completion of the full liberation of Donbas,” Defense Ministry spokesman Igor Konashenkov said in a statement.


Following the news, the S&P 500 fell 0.63%, halting a four-day winning streak, as did the Dow Jones Industrials, which dropped 0.19%. The Nasdaq Composite (CCMPDL) lost 1.21%.

The economic damage from the war is worsening across Europe as record inflation soars further and Germany faces the danger of a recession due to its dependence on Russian energy.

🔑 The Day’s Key Movements:

Oil prices recovered, after two sessions of declines amid the good mood on Tuesday with the negotiations between Moscow and Kyiv, and the announcement of new lockdowns in China that cast doubt on the demand outlook.


Both references continue above $100 per barrel, while the concerns about the effects of the war in Ukraine remain. A note from OilX consultancy, reviewed by Bloomberg News, estimated that Russian production fell below 11 million barrels per day in the second half of March.

Supply is starting to show a “significant decline relative to the beginning of the month,” it said.

Despite the upward trend, crude oil prices moderated their increase after data from the U.S. Energy Information Administration showed that demand for gasoline in the U.S. is starting to fall because of high prices.

A third consecutive weekly decline in gasoline demand brought the four-week moving average to 8.76 million barrels per day last week, down more than 4% compared to the same period in 2019.


🥇 The Leader:

Argentina’s Merval (MERVAL) led gains in Latin America and distanced itself from losses in the United States, rising by 1% at closing, following two consecutive days of losses, caused mainly by commodity-related stocks.

Wednesday’s recovery was achieved thanks to the performance of stocks such as Telecom Argentina (TECO2), Transportadora Gas del Sur (TGSU2) and Edenor (EDN).

Brazil’s Ibovespa (IBOV) accompanied the gains in Argentina, supported by commodity-linked papers, which advanced during the positive session for oil, and boosted by communication services, materials and information technology sector shares.


📉 A Bad Day:

The Mexican stock market slid after reaching its seventh highest level so far this year in Tuesday’s session. The S&P BMV/IPC, which groups the 35 most traded companies in the country, broke through the 56,000-unit ceiling, but fell back from that mark on Wednesday.

Risk aversion, generated by the lack of progress towards a negotiated solution to the conflict in Ukraine, affected the leading index of the Mexican market.

Before trading began, an analysis by Ve por Más has already predicted that there was a “high probability” of a return to a feeling of caution in the markets, “due to the lack of confidence that Russia will comply with the withdrawal of some troops in Ukraine and comments by the Kremlin spokesperson that are less optimistic about the outcome of the negotiations”.

In this context, the materials, financial and real estate sectors were the worst hit in the session.


🍝 Fo the Dinner Table Debate:

The correlation between Tesla (TSLA) shares and Bitcoin (XBT) is getting higher and higher, to the point that they look like two assets that are practically twins in their behavior. The 40-day correlation coefficient between Bitcoin and the electric car company’s stock has grown to such an extent that it is at an all-time high, according to calculations by Bloomberg Línea.

The coefficient was at 0.64 on Tuesday. A score of one means the assets are moving in unison, while less than one would show they are moving in opposite directions. After the correlation turned negative late last year, the increase in 2022 has been consistent, and is even higher than the correlation the cryptocurrency has with the S&P 500 and Nasdaq 100.

According to an analysis by Joel Levington, director of Credit Research at Bloomberg Intelligence, at the end of fiscal 2021, the company had around $2 billion in Bitcoin, which while low compared to the $17.7 billion in cash and equivalents it recorded on its balance sheet, was making an impact.

Levington’s report outlined a $101 million loss to the company from the impairment of its holdings in digital assets during that period.