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U.S. Shares Extend Gains Ahead of Fed Decision; Mexico Posts LatAm’s Sharpest Decline

Oil prices fall as investors weigh the effects of Europe’s decisions regarding a blockade of Russian supply

Stock market information on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Photographer: Michael Nagle/Bloomberg
May 03, 2022 | 05:45 pm

A roundup of Tuesday¡s stock market results from across the region

🗽 On Wall Street:

U.S. stock markets extended Monday’s gains and remained in the green on Tuesday, a day before the Federal Reserve’s decision on whether or not to raise interest rates to control the highest inflation in decades.

The S&P 500 gained 0.48%, while the Dow Jones Industrials rose 0.20% and the Nasdaq Composite (CCMPDL) advanced 0.22%.

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“Despite all the risks to economic growth, investors remain mostly optimistic that stocks will finish much higher by the end of the year. Market volatility is expected to remain elevated at the upcoming Fed meetings and that could mean stocks could drop another 5% before traders aggressively buy into the dip,” Edward Moya, an analyst at Oanda, wrote in a note.

The Fed is expected to raise rates by 50 basis points and signals it is on track to raise them to around 2.5% by the end of the year amid its battle to control inflation that is above the central bank’s 2% target.

🔑 The Day’s Key Events:

Oil prices fell as investors weighed the effects that further European Union decisions against Russian supply could have. The attention outweighed lockdowns amid Covid-19 in China that continue to dull the demand outlook for the top oil importer.

“Crude is trading sideways as we await more details from the EU on what a Russian oil ban will look like,” Rebecca Babin, senior energy trader at CIBC Private Wealth Management, told Bloomberg. “Demand concerns are in the back of everyone’s mind and remain limited for the time being.”

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The industry was also hit after news that OPEC failed to raise output last month as members continued to be affected by capacity constraints. According to a Bloomberg survey, while Iraq implemented a significant production rise, production from countries such as Libya and Nigeria fell amid operational disruptions and lower investment.

The cartel is likely to stick to its stated plan, ratifying another moderate addition of 430,000 barrels per day when it meets Thursday, Bloomberg reported.

👑 The Leader:

Argentina’s Merval (MERVAL) recovered from Monday’s losses and was the index with the best performance among its Latin American peers on Tuesday, a day on which only two stock market indices in the region registered closed with losses.

The Argentine stock market benefited from the performance of shares such as Transener (TRAN)), Banco BBVA Argentina (BBAR), Banco Macro (BMA) and Loma Argentina (LOMA).

“The local market matched the performance of the US market, and ended with generalized increases in its quotations”, said Priscila Bruno, an analyst at Rava Bursátil.

In the local arena, investors received the news from the Chamber of the Oil Industry, which informed that during April companies in the agro-export sector generated $3.17 billion in revenues, which represents the best April in the last eight years.

This exceeds the revenues of the same month of 2021 ($3.03 billion).

So far in 2022, agricultural revenues tptal $11.09 billion.

📉 A Bad Day:

Mexico’s stock exchange (MEXBOL) had the worst performance in the region, closing down 1.6%.

In particular, Bimbo shares were among the worst performers, one day before the plan to be announced by the government of President Andrés Manuel López Obrador to control commodity prices, according to Bloomberg.

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The food company’s shares retreated more than 7%, leading losses in the Mexbol index, in its biggest intraday drop since March 27, 2020 and after reaching a record high in yesterday’s session.

The index was also weighed down by profit taking and portfolio rebalancing, according to CI Banco’s deputy director of financial and economic analysis, James Salazar.

Salazar said the season “was good”, so investors are taking advantage of it to make these adjustments.

“That is why we see the stock market disengaging from its peers that are trading with gains today,” he said.

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For Salazar, in the case of the Bimbo (BIMBOA) sell-off, it wa a case of profit-taking, since the issuer had accumulated six consecutive days in positive territory.

Brazil’s Ibovespa (IBOV) also closed lower in a week in which the country’s central bank will also make a decision on interest rates.

🍝 For the Dinner Table Debate:

Quarantines and social distancing are beginning to be measures from the past, as the world overcomes Covid-19. One of the beneficiaries of the return of social gatherings was wine consumption, with record exports reported last year, according to the International Organisation of Vine and Wine (OIV).

In 2021, global wine exports were 111.6 million hectoliters (mhL), the highest volume in history. According to the organization, world wine exports in 2021 increased by 4% compared to 2020. In value terms, they totaled $36.17 billion, up 16% year-on-year.

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Globally, 236 mhL of wine were consumed in 2021, 0.7% more than the previous year, placing the United States as the individual leader in consumption of the beverage with 33.1 million hectoliters, or 14% of global consumption, according to OIV data through April 2022.

Among the main wine consuming countries, two from Latin America stood out: Argentina and Brazil, which together account for 6% of world consumption of this beverage, with 8.4 mhL and 4.1 mhL, respectively.