Argentina Leads Latin American Market Gains; Nasdaq Breaks 7-Day Downward Streak

US markets remain volatile as investors await a decision from the Federal Reserve

People pass in front of the entrance sign to the Buenos Aires Stock Exchange in Buenos Aires, Argentina. Photographer: Diego Giudice/Bloomberg
By Bloomberg Línea and Bloomberg News
September 07, 2022 | 10:37 PM

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

🥇 Argentina leads in Latin America:

The momentum of the U.S. stock markets helped the gains in Argentinean shares, which posted the largest increase among their Latin American peers.The Merval (MERVAL) rose amid the performance of shares such as those of YPF (YPFD), Transportadora de Gas del Sur (TGSU2) and Central Puerto (CEPU).

Investors were also attentive to the trip of the Minister of Economy, Sergio Massa. He will meet with the International Monetary Fund for the second review of the extended facilities program agreed this year.

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The organization is preparing the launching of a new credit line to which the country could have access. In addition, the World Bank committed on Wednesday to disburse another US$900 million in the next six months, which will be added to the $1.1 billion approved this year for new projects.

Mexico’s S&P/BMV IPC (MEXBOL) also advanced with the good performance of the health care, consumer discretionary and finance sectors.The Brazilian stock exchange did not trade today due to the Brazilian holiday.

📉 A bad day for Colombia and Chile:

The Chilean and Colombian stock exchanges were the only ones that failed to recover from Tuesday’s falls and added two consecutive sessions of losses.

Chile’s IPSA (IPSA) continues to retreat after two consecutive days of gains, due to the expectation and results of the weekend vote rejecting the proposal for a new Constitution.

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Investors reacted to Tuesday afternoon’s decision in which the Central Bank surprisingly raised interest rates by 100 basis points. Monetary policymakers said they will remain “especially” alert to upside risks to inflation, both because of the “elevated level it has reached and the fact that two-year inflation expectations remain above 3%”.

Diego Mora, senior market strategist at XTB Latam, said that the most aggressive scenario proposed by the Central Bank to try to control inflation, which reached 13.1% year-on-year, was met.

Colombia’s Colcap (COLCAP), meanwhile, fell, dragged down by the performance of the energy and financial sectors. Ecopetrol’s (ECOPETL) shares, which usually move the most trading volume, were impacted by the plunge in oil prices.

🗽 On Wall Street:

On the NYSE, the S&P 500 gained 1.83% on its best day in almost a month, while the Dow Jones Industrial Average climbed 1.40% and the Nasdaq Composite (CCMPDL) 2.14%.

An Asian stock gauge may rebound Thursday from the lowest level since 2020, helped by a plunge in oil that eased some concerns about high inflation and contributed to a drop in bond yields.

Futures gained for Japan, Australia and Hong Kong. US contracts were steady after the S&P 500 and the Nasdaq 100 advanced the most in about a month. Product launches including the iPhone 14 bolstered Apple Inc.

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Treasuries climbed Wednesday, lowering the 10-year yield to 3.26%, as the drop in crude turned the spotlight on the possibility of cooling price pressures. Oil traded at about $82 a barrel, sapped by demand risks from a wave of monetary tightening and China’s Covid and property-sector travails.

A dollar gauge eased from a record. Greenback strength has rattled currencies including the yen and the pound, which earlier hit the lowest level since 1985.

Central banks are walking a tightrope, raising interest rates sharply to tackle inflation while remaining leery of sparking a damaging economic contraction in the process. The uncertainty is whipsawing markets and has saddled equities and bonds with steep losses this year.

“The stock market has rallied several times even as the bond market has shown lots of negative volatility and the dollar continues to creep up,” Federated Hermes Senior Equity Strategist Linda Duessel said on Bloomberg Television. “You have to wonder when can we expect a sustained rally here or to think we are out of the woods.”

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Fed officials reiterated their determination to get inflation under control. Vice Chair Lael Brainard said interest rates will need to rise to restrictive levels, while cautioning risks would become more two-sided in the future. Chair Jerome Powell is due to speak on Thursday.

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Monetary policy has tightened further with rate hikes in Canada and Australia this week. The European Central Bank takes center stage later Thursday -- Bloomberg Economics predicts a 75 basis points increase to front-load tightening even as the region grapples with an energy crisis.

The Fed’s Beige Book report said US economic expansion prospects were weak and set to slump further over the next year, while adding that price growth showed signs of decelerating.

On the currency markets, the Bloomberg Dollar Spot Index was steady, the euro was at $1.0009, the Japanese yen was at 143.96 per dollar, down 0.2%, and the offshore yuan was at 6.9591 per dollar.

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🔑 The day’s key events:

Oil prices plummeted, dragged down by the decisions that China continues to take to deal with Covid-19 and which involve the closure of new cities.

Chengdu reported that it extended quarantines in most downtown areas. The Sichuan provincial capital is the largest to close since Shanghai’s two-month quarantine earlier this year, Bloomberg reported.

Oil markets were also hit after the dollar hit a record high on Wednesday, making commodities priced in that currency less attractive.

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“Elevated volatility is the story here,” Rebecca Babin, senior energy trader at CIBC Private Wealth Management, told Bloomberg. “There’s no way to have conviction and want to make bets when the market is trading in huge ranges with limited liquidity.”

🍝 For the dinner table debate

From the Steve Jobs Theater in Cupertino, California, Apple (AAPL) on Wednesday unveiled the new iPhone 14, AirPods and the new series of smartwatches, at its ‘Far Out’ event.

The first of the launches was the Apple Watch Series 8, defined by the company as a “durable” device, resistant to water and dust. The main features are “security and connectivity”, as Apple said in the new announcement.

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On the Airpods side, the new model will have up to six hours of continuous listening on a single charge and can be extended to a full 30 hours. In addition, it will be possible to detect the location of the AirPods, in case of loss, with the emission of a separate sound from each earphone, just like the charging case.

At the end of the event, the company made its most anticipated announcement and launched the new iPhone 14, which will work with the iOS 16 operating system. Its battery is designed to last “all day,” said the technology company, and its screen is protected by one of the most resistant types of glass on the market.

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