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U.S. Markets Bounce Back; Colombia’s COLCAP Leads LatAm Gains

Inflation has become one of the main fears for both governments and consumers, and the panorama could worsen faster than expected, the IMF says

People walk along Wall St. in New York City, U.S. (Photo by Spencer Platt/Getty Images)
May 02, 2022 | 08:11 pm

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

🗽 On Wall Street:

Opportunity buying saved a day that looked to be in the red for U.S. stocks as investors look ahead to this week’s Federal Reserve meeting.

Fears of an economic slowdown and persistent inflation continue to weigh on market sentiment, which expects the U.S. central bank to hike by 50 basis points this week.

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The S&P 500 advanced 0.57%, after posting its worst monthly decline since the start of the pandemic in April, the Dow Jones Industrials rose 0.26%, while the Nasdaq Composite (CCMPDL) gained 1.63%.

However, analysts are not enticed by these rallies. Michael Wilson, chief U.S. equity strategist at Morgan Stanley (MS), warned that in the short term “nothing” can be ruled out and in his opinion “this bear market is far from over”, he wrote in a note.

🔑 The Day’s Key Events:

Inflation has become one of the main fears for policymakers and consumers and the outlook could worsen even faster than expected.

“The risk of inflation expectations moving away from central banks’ targets is growing, which would trigger a more aggressive tightening response from policy makers,” Kenji Okamura, deputy managing director of the International Monetary Fund (IMF), said in a written interview with Bloomberg News.

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Okamura also insisted that the most important priority for the economy must be an end to the war in Ukraine, as it has a direct impact “on many of the other challenges we face, such as high debt levels, food security and inflation.”

The IMF forecasts a 5.7% rise in the cost of living in advanced economies, while in emerging markets it will be as high as 8.7% in 2022.

In its World Economic Outlook, published last month, it warned that the war in Ukraine will have a “prolonged impact” on commodity prices, which will put further pressure on the cost of living.

👑 The Leader:

Colombia’s COLCAP index had the best performance in Latin America and led a session in which only two indexes in the region showed gains.

The performance was achieved thanks to the strong performance by Ecopetrol (ECOPETL) shares, on a good day for oil prices, and the rebound of Bancolombia (BCOLO) shares, which rose by more than 5% during the day.

Recently, brokerage firm Davivienda Corredores upgraded its price target for the stock, as the post-pandemic recovery has exceeded expectations.

The S&P BMV/IPC (MEXBOL) was the other index that closed higher on Monday, thanks to the performance of the financials, consumer staples and real estate sectors.

Grupo Bimbo (BIMBOA) and Gruma (GRUMAB) shares were among the best performers on the Mexican market.

📉 A Bad Day:

Peru’s stock market had the worst performance among its Latin American peers and started May in the red after closing last month with a decline of more than 12%.

On the first business day of May, the S&P BVL/Peru (SPBLPGPT) fell by 1.90%, dragged down by the performance of the materials, industrial and financial sectors.

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Shares of Aenza (AENZAC1), Volcan Cia Minera (VOLCABC1), and Trevali (TV) were among the worst performers on the day.

The Peruvian market has been affected by political discussions, between a constitutional referendum that President Pedro Castillo is promoting and a possible withdrawal of pension savings that would impact the investments of the retirement fund managers.

Furthermore, during the weekend, in the face of an adverse international scenario and the uncertainty perceived locally, the Ministry of Economy and Finance revised downwards almost all its projections for the Peruvian economy for this year and towards 2025.

Brazil’s Ibovespa (IBOV) also closed lower and was affected by the negative performance of US stocks for most of the day.

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The week will be marked by monetary policy decisions in Brazil and the United States, with investors closely following the meetings amid strong inflation. Interest rates are expected to rise in both countries in order to contain price increases.

🍝 For the Dinner Table Debate:

The largest private bank in Argentina by assets now allows the purchase and sale of bitcoin. Users of Banco Galicia, the banking entity of Grupo Financiero Galicia (GGAL), reported on Monday a new feature in their home banking applications, through which they are able to buy and sell four cryptocurrencies.

When choosing “new investments,” customers of Galicia now find the “cryptos” tab.

The innovation surprised users, since it is the first bank to offer this type of operations, amid growing interest in the use of cryptocurrencies in Argentina.

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At this launch stage, the bank chose to allow access to four cryptocurrencies: Bitcoin (XBT), Ether (XET), USD Coin and Ripple.

Banco Galicia, which did not issue an official communication about the launch of the service, did not immediately respond to Bloomberg Línea’s requests for comment.