Argentina Leads LatAm Market Gains; NYSE Closes Mixed

Argentina’s Merval index gained more than 3% on Wednesday, while US stocks fell during the day but trimmed losses to a minimum by the end of the session

Photographer: Michael Nagle/Bloomberg
By Bloomberg Línea
January 25, 2023 | 11:04 PM

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

👑 Argentina’s Merval index gains 3.16%:

Latin American stock markets closed mixed again on Monday, with Argentina’s Merval (MERVAL) being the region’s index that led the session’s gains after adding 3.16%.

Transener (TRAN), Grupo Supervielle (SUPV) and Grupo Financiero Galicia (GGAL) shares were among the day’s best performers.

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Argentina’s GDP will likely have grown by more than 5% in 2022, but activity would stagnate this year, in a scenario marked by a shortage of foreign currency and high inflation. Despite the consensus regarding a slowdown in 2023, 65% of local companies expect their revenues to increase over the next 12 months, marking a four percentage point improvement in expectations compared to the first half of 2022, according to a private survey.

According to a report by Grant Thornton’s International Business Report (IBR), globally, the industries projecting the highest growth in earnings are banking (67%), life sciences (63%), financial services (64%) and healthcare (62%).

When consulted by Bloomberg Línea, Grant Thornton confirmed that the increases anticipated by Argentine companies are in real terms. In other words, they foresee improvements in their revenues in percentages higher than an inflation that is projected to be close to 100% this year.

📉 A bad day for Colombia’s Colcap:

Colombia’s Colcap (COLCAP) was the Latin American index with the sharpest declines for the third consecutive day on Wednesday, falling 0.70%, dragged down by the performance of the materials, consumer staples and financial sectors.

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The shares of Cementos Argos (CEMARGOS), Preferencial de Cementos Argos (PFCEMARG), Grupo Argos (GRUPOARG) and Preferencial Grupo Argos (PFGRUPOA) suffered the largest losses of the day and dragged the Colombian index into negative territory.

Banco de Bogotá (BOGOTA) and Canacol Energy (CNEC) shares also closed lower.

High interest rates are an obstacle for the Colombian capital market. In 2022 thematic private debt issuances reached $842 billion, 54.1% less than in 2021. The demand for thematic private debt barely exceeded $1.26 trillion, equivalent to a bid to 1.49x over the total allotted.

Casa de Bolsa’s recent study explains that the low level of placements was mainly explained by a significant increase in interest rates, which exceeded double digits due to the increase in inflation.

Additionally, according to the document, there was an increase in risk premiums as a consequence of the withdrawal of economic and fiscal stimuli and an increase in risk aversion due to expectations of economic recession.

🗽On Wall Street:

Wall Street shook off most of the losses driven by a dire sales warning from Microsoft Corp., with stock traders now shifting their focus to Tesla Inc.’s earnings report.

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The S&P 500 posted a small drop, following a slump that approached 2% earlier in the day. Elon Musk’s electric-vehicle giant whipsawed — and its results may inject another dose of volatility. Options pricing suggests the stock might fluctuate 11% in either direction after the report, which would be the biggest such move since 2021, according to data compiled by Bloomberg.

At the close of the session, the S&P 500 closed 0.02% lower, the Nasdaq Composite slipped 0.18%, while the Dow Jones Industrial Average closed 0.03% higher.

“The push-and-pull of bulls and bears continues, with technology earnings the latest data point to energize the bears, though the positive momentum, continued heavy skepticism of the rally and the attractiveness of several areas of the markets could break equities out to the upside,” said Mark Hackett, chief of investment research at Nationwide.

The S&P 500 is headed for the best January since 2019 driven by expectations that the Federal Reserve will moderate its rate hikes. The equity rebound came just as the economy is headed for a downturn — setting the stage for a selloff, JPMorgan Chase & Co.’s Marko Kolanovic told CNBC.

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Investors should use any rallies to reduce exposure to the equity market, according to Richard Saperstein at Treasury Partners. Slower economic growth caused by the Fed’s tightening and its impact on corporate earnings will likely be priced into stocks over the next several months, he added.

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“We have not been impressed with the quality of earnings in recent weeks. Looking forward, margins remain at risk as inflation softens and economic growth slows,” Saperstein noted.

In other corporate news, AT&T Inc. rallied after beating analysts’ profit estimates even as the company’s 2023 outlook came up short of Wall Street targets. Boeing Co. reported a surprise loss to end 2022 — its sixth straight money-losing quarter — as higher costs slowed the planemaker’s recovery even though a late flurry of jet deliveries drove a surge in cash.

The New York Stock Exchange said a manual error caused wild price swings and trading halts for hundreds of company stocks when the market opened on Tuesday.

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The root cause of the issue, which the exchange operator says has been resolved, was tied to the company’s so-called “disaster recovery configuration” at the start of the day. Over 1,300 trades and some 84 stocks were impacted and marked as “aberrant,” NYSE said in an updated statement on its website.

Elsewhere, the loonie fell as the Bank of Canada raised rates for an eighth consecutive and potentially final time — saying it expects to move to the sidelines and weigh the impact of its rapid tightening.

Traders also kept an eye on the latest geopolitical developments.

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The US will send Ukraine 31 of its M1 Abrams battle tanks, adding to a German commitment to supply some of its top-line armor and infusing the country with a major new capability as it looks to pry Russian forces from the east.

The Bloomberg Dollar Spot Index fell 0.3%, the euro rose 0.2% to $1.0911, the British pound rose 0.5% to $1.2395 and the Japanese yen rose 0.4% to 129.61 per dollar.

🔑 The day’s key events:

Oil prices gained ground on Wednesday amid a volatile session. Market indicators suggest that higher prices may be just around the corner. According to Bloomberg, at least one technical indicator seemed to prove bulls right.

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WTI’s 25-day moving average is about to cross its 50-day moving average, which markets interpret as a sign of long-term strength that usually spurs buying.

Today, West Texas Intermediate managed to hold above $80 a barrel after oscillating for much of the session. Meanwhile, Brent for March delivery closed at $86 a barrel, after a slight gain of 0.10%. Rising US crude inventories and corporate earnings slowed the gains, while confidence in China’s recovery boosted the overall advance.

Crude oil is virtually unchanged on the month after a weak start to the year. The outlook for China and a weaker dollar, which makes commodities priced in that currency more attractive, have helped oil to regain ground.

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🍝 For the dinner table debate:

Investor Marcelo Claure, former COO of SoftBank, is in talks to acquire Millicom Celular, a Luxembourg-based telecommunications company that in Latin America operates the Tigo brand.

The information was first reported by the Financial Times, which cited people familiar with the matter, and then confirmed by Millicom International Cellular’s board of directors to Bloomberg News, which added that there is no certainty that a transaction will materialize or the terms, timing or form of any potential deal.

The deal could value Millicom at nearly $10 billion, including debt, and would involve Apollo Global Management.

Claure is not the only telecommunications executive to have expressed interest in Millicom, which offers services in countries such as Colombia, Panama and El Salvador. French billionaire Xavier Niel acquired a stake in the company late last year, calling it an attractive investment.

Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.