U.S. Markets Suffer Worst Quarterly Fall Since 2020; Mexico Heads LatAm Gains

Oil prices drop after President Biden decides to use reserves to calm spiraling fuel costs

U.S. President Joe Biden speaks about reducing energy prices in the Eisenhower Executive Office Building in Washington, D.C., U.S., on Thursday, March 31, 2022. The U.S. will release roughly a million barrels of oil a day from its reserves for six months, a historic drawdown that underscores White House concern about rising gas prices and supply shortages following Russia's invasion of Ukraine. Photographer: Al Drago/Bloomberg
March 31, 2022 | 06:20 PM
Reading time: 4 min.

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

🗽 On Wall Street:

U.S. stock markets closed with losses once again on Thursday as concerns persist about the effects that the war in Ukraine will have on the global economy.

With this performance, the main stock market indices closed the first quarter with the sharpest declines in two years, with the S&P 500 down 1.57% to chalk up a three-month decline of 4.9%, the worst since March 2020, when the first effects of the Covid-19 pandemic were beginning to be felt.

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“Wall Street will have a lot to debate in the coming months, but the stock market seems likely to be choppy, as there will be no clear answers as to when inflation will peak and how aggressive the Fed will be with tightening until geopolitical risks are resolved,” Eduard Moya, an analyst at Oanda, said.

The Dow Jones Industrials slipped 1.56% on the day and accumulated a decline of 4.6% in the quarter, while the Nasdaq Composite (CCMPDL) dropped 1.54%, making for a quarterly loss of 9%.

The slide is the result of markets facing the beginning of the Federal Reserve’s rate hike cycle, the highest inflation in decades, and the war in Eastern Europe.

🔑 The Day’s Key Events:

Oil prices retreated after U.S. President Joe Biden decided to use his country’s reserves to try to contain the escalating cost of fuel, affected by the war between Russia and Ukraine.

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Washington gave the order to release approximately one million barrels per day of crude oil reserves. The goal of Biden’s plan is to bridge U.S. supply until the fall, when domestic production is expected to increase, the White House said.

A large U.S. oil release “would reduce the amount of price-induced demand destruction,” Goldman Sachs Group (GS) analyst Damien Courvalin wrote in a note to clients and seen by Bloomberg. “This would remain, however, a release of oil inventories, not a persistent source of supply for years to come.”

Biden has already ordered two oil releases from U.S. stockpiles in the past six months, but that has done little to ease prices.

The Organization of Petroleum Exporting Countries (OPEC) and its partners ratified a 432,000 barrels per day supply increase planned for May at a meeting on Thursday.

🥇 The Leader:

The Mexican stock market rebounded after putting in the region’s worst performance on Wednesday and falling from the historic maximum it had reached in Tuesday’s session after surpassing 56,000 points.

The S&P BMV/IPC index (MEXBOL) ended the day up 1.29%. Sectors such as industrials, materials and consumer discretionary had the best performance of the day.

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Specifically, the shares that had the sharpest rises were those of Arca Continental (AC*), Controladora Vuela Cia (VOLARA) and Coca-Cola FEMSA (KOFUBL).

Coca-Cola FEMSA presented its fourth quarter results report this week, in which it said it will continue to actively seek new acquisitions and boost its sales channels.

“We are working on six strategic corridors: building an omnichannel platform; offering a winning consumer-centric portfolio; fostering an agile, digital and people-centric culture; placing sustainability at the heart of our organization; digitizing the operation; and actively seeking value-generating acquisitions,” said John Santa María, CEO of Coca-Cola FEMSA, according to a press release.

📉 A Bad Day:

The Peruvian stock market had the worst performance among its Latin American peers and, along with Brazil, was the worst performer during the session.

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The S&P BVL/Peru index (SPBLPGPT) dropped 1.12%, dragged down by the industrial, financial and consumer discretionary sectors. Among the most affected stocks were Casa Grande (CASAGRC1), Sociedad Minera Cerro Verde (CVERDEC) and Ferreycorp (FERREYC1).

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During the day there was a transport company strike, which is requesting talks with the government in a bid to reduce the cost of fuel, among other demands.

In addition, a debate on a motion of censure against the Minister of Health, Hernán Condori, is taking place in Congress. A minimum of 66 votes is required for the motion to be approved and if this number is reached, Condori would have to resign.

Brazil’s Ibovespa (IBOV) dropped 0.22%.

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🍝 For the Dinner Table Debate:

Despite concerns about rising inflation in Latin America, the stock market world is reporting good news at the close of the first quarter of the year. The MSCI regional index, known as MXLA, has soared 26% in the first quarter, its best start to the year since the early 1990s.

The returns are even better when compared with the U.S. stock market, which is down 3.7%; Western Europe’s, which have lost 5.6%; and emerging markets overall, which have retreated 6.7%, Bloomberg News calculated.

Gains are seen across the region. In Brazil, the benchmark index is up more than 30% in U.S. dollar terms in the quarter, while in Chile, Colombia and Peru they are up more than 20%. Banks, mining and oil companies are leading the way. In Argentina, stocks have gained 1%.

Russia’s invasion of Ukraine has done nothing but reduce the global supply of key commodities, further boosting prices and generating a steady flow of dollars that has helped the region’s economies.