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Powell Comments Boost U.S. Markets; Chile’s IPSA Leads LatAm Gains

Oil prices rose after the European Union announced a new package of measures against Russia

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, May 4, 2022. The Federal Reserve today raised interest rates by the steepest increment since 2000 and decided to start shrinking its massive balance sheet. Photographer: Al Drago/Bloomberg
May 04, 2022 | 09:31 pm

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

🗽 On Wall Street:

U.S. stock markets closed with gains after Federal Reserve Chairman Jerome Powell dispelled doubts about whether the central bank would take an even more aggressive stance in future interest rate hikes.

The banker’s remarks came after the Federal Open Market Committee decided to raise the benchmark rate by 50 basis points to a range between 0.75% and 1%. Although it is the highest increase in two decades, the decision was already widely expected by the market.

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The S&P 500 advanced 2.99%, while the Dow Jones Industrials rose 2.81%, and the Nasdaq Composite (CCMPDL) gained 3.19%.

The increases in the Dow Jones and S&P 500 were the largest gains since 2020.

Investors were waiting for Powell to signal whether the Fed planned to hike by 75 basis points at upcoming meetings, but in the end his remarks gave the market a boost.Powell said a hike of this magnitude “is not something the Committee is actively considering.”

🔑 The Day’s Key Events:

Oil prices rose after the European Union unveiled a new package of measures against Russia aimed at definitively cutting dependence on supplies from Moscow.

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European Commission President Ursula von der Leyen said Wednesday that “the import of all Russian oil, both sea and pipeline, crude and refined, will be completely banned”.

The EU also proposes to exclude Russia’s Sberbank from the international SWIFT payment system, von der Leyen said.

“We will ensure that we phase out Russian oil in an orderly manner, in a way that allows us and our partners to secure alternative supply routes and minimize the impact on global markets,” she added.

The proposals include a ban on all services related to the transportation of Russian oil, including European vessels, financing, brokering, technical assistance and financial assistance, said officials quoted by Bloomberg.

👑 The Leader:

The Chilean stock market led the gains in Latin America, in a volatile session in which the region’s main markets moved to the rhythm of US stocks and the Federal Reserve meeting.

The Chilean IPSA index (IPSA) advanced thanks to the performance of the communication services, materials and energy sectors.

Shares of Entel (ENTEL), SQM/B (SQM/B), and SMU (SMU) were among the best performers of the day.

The Mexican index (MEXBOL) and Brazil’s Ibovespa (IBOV) also closed with gains.

📉 A Bad Day:

The Peruvian stock market retreated from yesterday’s gains and had the worst performance among its Latin American peers, on a day of green numbers for practically all markets in the region.

The S&P BVL Peru (SPBLPGPT) was dragged down mainly by the performance of the materials sector.

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Specifically, shares of Sociedad Minera Cerro Verde (CVERDEC1), Trevali Mining (TV) and Minsur (MINSUR1) were among the worst performers.

The Peruvian market has been under pressure not only because of political instability, but also because of two bills being discussed in Congress that would enable withdrawals of pension savings, which would impact the investments made by pension fund managers.

The Congressional Labor Committee approved an opinion that seeks to allow the withdrawal of up to the equivalent of $4,829. This initiative is added to another one recently approved and ruled by the Economy Committee. Both are about to be scheduled for debate and vote in Congress.

🍝 For the Dinner Table Debate:

Although Latin America has a tradition of entrepreneurship, it is now a constant in the countries of the region after the reconfiguration its economies suffered due to the Covid-19 pandemic.

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Figures from the Association for Venture Capital Investors in Latin America show that in 2021 Latin American ventures attracted $15.3 billion in investment capital.

However, most of them are at constant risk of falling into the ‘valley of death’, a term that emerged in business schools to describe the moment when entrepreneurs run out of funding resources to continue with their business.

No venture is free from this process and can be generated by the sum of different obstacles or mistakes.

As defined by the Pontificia Universidad Católica de Valparaíso, this is the “period in which the projects are still insolvent, where the costs are greater than the benefits” and usually occurs, especially in the first months, when the venture is underway.