U.S. Markets Rebound, MEXBOL Suffers LatAm’s Sharpest Losses

The World Bank forecasts “mediocre” growth, and “insufficient” to reduce poverty in Latin America in the next two years

James Bullard, president and chief executive officer of the Federal Reserve Bank of St. Louis.
April 07, 2022 | 07:48 PM

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

🗽 On Wall Street:

U.S. markets rebounded on a volatile day in which they oscillated between losses and gains, after traders weighed the Federal Reserve minutes. At the end of the day, the major stock indices closed higher amid signs of a clear policy from the central bank.

The S&P 500 rose 0.43%, while the Nasdaq Composite (CCMPDL) advanced 0.06% and the Dow Jones Industrials gained 0.25%.

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St. Louis Fed President James Bullard said early in Thursday’s session that he favors raising rates from 3% to 3.25% in the second half of 2022, while Chicago Fed President Charles Evans said he favors a “measured” path to move Fed policy to neutral by late 2022 and early 2023, Bloomberg News reported.

“The risk of inflation getting so ugly that the Fed has to send the economy into a recession is now becoming a baseline scenario for some market traders,” noted Edward Moya, an analyst at Oanda.

🔑 The Day’s Key Events:

The World Bank forecasts “mediocre” and “insufficient” growth to reduce poverty in Latin America over the next two years, according to a report published today, in which it reduces its estimates from the beginning of the year, prior to the war between Russia and Ukraine.

Although the Washington-based organization considers that the impact of the pandemic is fading into the past, it now sees a number of factors that will moderate the region’s recovery. However, although the overall forecast is downward, there are some countries that will grow more than expected six months ago, according to the bank.

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Specifically, the World Bank now expects Latin America and the Caribbean to grow by 2.3% this year and 2.2% the following year, a figure that is not only lower than what it estimated in January, but also practically the same rate as in the 2010s.

Against this backdrop, Latin America’s two largest economies, Brazil and Mexico, show significant downward revisions, impacting overall performance; in contrast, there are countries such as Argentina, Bolivia, Ecuador and Colombia whose performance is now more optimistic.

🥇 The Leader:

Argentina’s Merval (MERVAL) had the best performance in the region and stood out with a rise of 0.64%, after yesterday’s second largest fall.

The stock market’s mood was benefited by the international tone and the recovery of the markets in the United States. Shares of Loma Negra (LOMA), Bolsa y Mercados Argentinos (BYMA) and Cablevision Holding (CVH) were among the highest gainers.

Brazil’s (IBOV) recovered the losses of Wednesday’s session and was the second best performer.

The Brazilian stock market index also followed the trends of the markets in the United States. During the day, Petrobras shares (PETR3; PETR4) rose, reacting to the price of oil and to the definition of the company’s leadership.On the other hand, the president of the Central Bank, Roberto Campos Neto, said in a virtual event that the monetary authority has instruments to fight inflation and that Brazil is on the right track in this sense.

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📉 A Bad Day:

Mexico’s stock market suffered the sharpest drop in Latin America, with S&P BMV/IPC (MEXBOL) down 0.29% at the end of the day.

The industrial, finance and consumer staples sectors were the worst hit during the day.

The performance came amid a day in which it was learned that Mexico’s annual inflation accelerated more than expected in March to its highest level in more than two decades, driven by fuel prices, putting additional pressure on the central bank to continue raising interest rates.

The Bank of Mexico could require further tightening to that of the Federal Reserve when the domestic inflationary outlook demands it, but without introducing excessive monetary tightening, a central banker said in minutes published today.

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🍝 For the Dinner Table Debate:

Some billionaires who move their money and allocate assets to cryptocurrencies will have enormous opportunities to maintain their wealth. That sums up a talk in which Marcelo Claure, Ricardo Salinas Pliego and Orlando Bravo, among others, participated in Bitcoin 2022, a conference held in Miami on Thursday.

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“We are starting to see Bitcoin (XBT) as one of the safest ways to store our wealth,” investor Marcelo Claure, former CEO of Softbank International, told the audience. “But more importantly, it’s probably the only investment out there today where the potential for gains far outweighs the potential for failures.”

Along these lines, Mexican billionaire Salinas Pliego (owner of the Elektra retail chain, TV Azteca and Banco Azteca, among other companies), suggested avoiding the classic 60-40 asset allocation (60% in assets and stocks and 40% in bonds), and focusing more on liquidity.

“I definitely do not have bonds. I have a liquid portfolio (...) I have 60% in Bitcoin and Bitcoin stocks, and then 40% in hard asset stocks, like oil and gas and gold mining,” Salinas said.