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Inflation Data Sinks U.S. Markets; Argentina’s MERVAL Leads LatAm Gains

Airline Avianca announced an alliance with Brazil’s GOL to create a new airline group to compete with Latam

A statue of George Washington stands outside Federal Hall near the New York Stock Exchange (NYSE) in New York, U.S.,Photographer: Jeenah Moon/Bloomberg
May 11, 2022 | 06:00 pm

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

🗽 On Wall Street:

Inflation remains on investors’ radar and was again the cause of another day of losses for U.S. stocks. Despite Tuesday’s gains, the downtrend continues to dominate the markets after investors began to weigh slower economic growth amid the high cost of living.

The S&P 500 fell 1.65% on Wednesday, while the Nasdaq Composite (CCMPDL) sank 3.18%, the Dow Jones Industrials chalked up five consecutive days of losses with a 1.02% decline.

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“The Fed is still lagging in the fight against inflation and now risks missing the soft landing it was trying to navigate,” Edward Moya, an analyst at Oanda, said.

The core consumer price index, which excludes food and energy, rose 0.6% from the previous month and 6.2% versus April 2021. Overall CPI rose 0.3% versus March and 8.3% compared to April last year, Bloomberg reported.

Adding to the bearish market sentiment were statements by Raphael Bostic, president of the Atlanta Fed, in which he assured that the central bank is ready to “move further” in its tightening of monetary policy if high inflation persists.

The declines also continue in the crypto world, which is being affected not only by increased risk aversion but also by the collapse of UST and Luna cryptocurrencies.

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Bitcoin (XBT) traded below $30,000 on Wednesday.

🔑 The Day’s Key Events:

The airline Avianca announced an alliance with the Brazilian giant GOL (GOL) to create a new airline group that will compete with regional carrier Latam, the largest in Latin America after the merger of LAN and TAM 12 years ago.

The main shareholders of both companies signed the agreement that will create a “leading air transportation group in all Latin America”, according to the joint presentation on Wednesday.

The resulting company will be Grupo Abra, although the alliance still needs regulatory approvals.

In addition to the operations of Avianca and GOL, Grupo Abra would also have 100% of the economic rights of the low-cost Viva airline in Colombia and Peru, and would have a credit facility convertible into a minority investment in Chile’s Sky Airline.

“The Abra Group will be co-controlled by Avianca’s major shareholders and GOL’s majority shareholder, and will be led by a management team with extensive aviation experience in the region,” the airlines’ statement said.

Both Avianca and GOL will maintain their brands and personnel independently.

🥇 The Leader:

Three Latin American stock exchanges uncoupled from the losses in U.S. markets, and Argentina’s Merval (MERVAL) was again the best performing index, repeating the leadership seen on Tuesday, when it was boosted by the recovery of the U.S. markets that day.

On Wednesday, the shares of Transportadora de Gas del Sur (TGSU2), Central Puerto (CEPU) and Edenor (EDN) were among the best performers.

The Mexican stock market, with a 0.33% increase by its S&P BMV/IPC index, and the Brazilian stock market, boosted by a 1.25% increase in the Ibovespa, also performed positively during the day.

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The Brazilian market benefited from the good performance of companies linked to commodities and with great weight in the index, such as Vale (VALE3) and Petrobras (PETR3; PETR4).

📉 A Bad Day:

The Peruvian stock market followed the trend of U.S. markets and once again registered the sharpest losses, after Tuesday’s losses.

The utilities, finance and materials sectors were among the worst performers of the day.

Specifically, shares of Trevali Mining (TV), Banco Bbva (BBVAC1) and Engie Energia Peru (ENGIEC1) were among the worst performers.

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The overall performance of the index was impacted by the fall in the price of copper, which fell to $9,228 per ton on the London Metal Exchange.

Investors are concerned about the economic consequences of the Covid-19 restrictions imposed in China and warnings of a possible recession in the world’s main economies.

🍝 For the Dinner Table Debate:

Latin America has a new unicorn, Colombian proptech Habi, the second Colombian company to achieve this status after Rappi hot the $1-billion valuation in 2018.

Habi is Latin America’s 43rd unicorn.

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The company closed a Series C round, raising $200 million, and investors included Softbank, Homebrew, Tiger Global and Inspired Capital. The company’s A round in 2020 had raised $12.5 million, followed by a Series B in late 2021 that netted $100 million, the largest fundraising round to date in Colombia.

Habi’s business model promises users to buy their home in 10 days, remodel it in less than 15 days and sell it in 45 to 60 days. The company’s digital tool, known as the Habimetro, is the jewel in its crown, giving users a price for their property depending on its characteristics.

The process, moreover, is practically all digitized, from the mortgage to the deed signing. The company has 900 real estate agents and its own portals for property sales.