:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/HJE54CHQA5A4RLL2T7ZMMI43SE.png "Silvina Batakis, Argentina's new economy minister")
A roundup of Tuesday’s stock market results from across the region
👑 Latin America’s Leader:
Argentina’s stock market rebounded after Monday’s fall in reaction to the resignation of Economy Minister Martín Guzmán and the naming of left-leaning Silvina Batakis as his successor.
The Merval (MERVAL) rebounded more than 3% thanks to the performance of shares of Central Puerto (CEPU), Banco Macro (BMA) and Loma Negra (LOMA) shares.
“Argentine peso stocks remained in positive territory, with the most attractive performers being BMA and CEPU, both up 10%, settling in after the U.S. holiday Monday following yesterday’s lack of reference prices of the main ADRs,” said Cecilia Mangione, an analyst at Rava Bursátil.
In her first statements, Batakis assured that there could be modifications to the agreement signed with the International Monetary Fund.
:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/E45JMNCFNVD5NAETEI3HDEA2FI.jpg "Argentina’s New Economy Minister Says She Won’t Overhaul Economic Policy")
US bank Wells Fargo warned that Argentina could face a new large devaluation of the peso in the next quarters due to the combination of “insufficient foreign exchange reserves, political uncertainty, the risk of another failed program with the IMF and the increased risk of sovereign default”.
📉 A Bad Day:
Tuesday was not a good day for the main stock markets in Latin America, amidst the clouds of a possible recession and the fall of the main raw materials. Against this backdrop, the Colombian stock market closed with the worst performance among its peers in the region.
Colombia’s Colcap index (COLCAP) fell by close to 1.8% following the poor performance of Ecopetrol (ECOPETL) shares, which were adversely affected by the slump in oil prices.
The company, which has also been affected by President-elect Gustavo Petro’s plan to gradually cease oil exploration, accumulated a fall of more than 8%.
Although the international context weighed more on the market’s mood, Environment Minister Susana Muhamad, told BLU Radio that fracking was going to cease in the country. In Colombia, pilots are being carried out, led by Ecopetrol, to evaluate the possibility of implementing the extractive method.
The Mexican stock market also closed lower, with the S&P BMV/IPC (MEXBOL) falling more than 1%, dragged down by the performance of the consumer staples, raw materials and finance sectors.
Femsa’s (FEMSAUBD) shares posted the sharpest decline of the day following the company’s announcement of the purchase of Valora, a European food services and retail company.
In Brazil, the Ibovespa also closed in the red, adversely affected by the fall of stocks linked to raw materials.
🗽 On Wall Street:
US Treasuries rallied as talks of easing tariffs on China imposed by the former administration failed to alleviate recession fears. Commodities from oil to copper remained under pressure as the dollar rose.
The S&P 500 advanced 0.16%, after falling as much as 2.2% as easing energy prices and bond yields took pressure off higher-valuation shares, and the Nasdaq Composite (CCMPDL) gained 1.75%, while the Dow Jones slipped 0.42%.
Treasury yields declined, with the 10-year yield around 2.83%. Data released Tuesday also showed durable goods orders and factory orders rose more than expected in May.
Investors continued to fret over a potential US recession and stubborn inflation despite talks of tariff reductions. US and Chinese officials held discussions after reports that Washington is close to rolling back some of the trade levies imposed by the former administration. Reducing tariffs on imported Chinese goods could impact consumer prices in the US, but some suggest that it would do little to cool inflation.
“With the first half of the year moving into the rear-view mirror, investors can’t help but wonder what lies ahead in a year that thus far has wrought heightened levels of uncertainty, disruption and dysfunction that has rattled asset class values across the spectrum of the good, the bad, and the ugly,” said John Stoltzfus, chief investment strategist at Oppenheimer & Co.
The odds of a US recession in the next year are now 38%, according to latest forecasts from Bloomberg Economics. Signs of a rapidly deteriorating US economic outlook have spurred bond traders to pencil in a complete policy turnaround by the Federal Reserve in the coming year, with interest-rate cuts in the middle of 2023.
“If the Fed changes course now, they might as well pack their bags and turn the lights off,” Kenneth Polcari, senior market strategist for Slatestone Wealth LLC, wrote in a note. “Yes, the economy is slowing but inflation continues to be an issue and that is the focus now.”
Bitcoin rose after waffling throughout the session. It traded around the $20,000 level.
🔑 The Day’s Key Events:
Oil prices plummeted as recession fears continue to dominate the market. The two main benchmarks fell by more than 8% and WTI fell below $100 per barrel, in its largest contraction since March 9.
Investors are weighing the possibility of slower growth impacting demand in the world’s major economies.
“Oil prices have plunged as concerns about weakening demand are starting to outweigh fears about supply shortages,” Fawad Razaqzada, a market analyst at City Index, told Bloomberg.
The plunge comes on the same day that analysts at Citigroup warned that the price could fall to US$65 per barrel this year.
The report warned that the decline could reach as low as $45 by the end of 2023 if a recession cripples demand for crude, although the analysis did not take into account any kind of intervention by OPEC and its allies, according to Bloomberg.
🍝 For the Dinner Table Debate:
The survival of British Prime Minister Boris Johnson is once again in doubt after two of his key ministers resigned from their posts on Tuesday afternoon, amid divisions within the Conservative Party.
Chancellor of the Exchequer Rishi Sunak and Health Minister Sajid Javid announced their departure from government, sending letters to Johnson within minutes of each other.
“Citizens rightly expect the government to conduct itself properly, competently and seriously,” Sunak wrote. “I believe these standards are worth fighting for and that is why I am resigning.”
The departures came after Johnson acknowledged that it had been a mistake to promote Chris Pincher to the position as chief whip, despite having been told of allegations of misconduct against him two years earlier.
This is the latest in a series of scandals following the so-called “partygate”, as gatherings in 10 Downing Street during the pandemic were dubbed, and for which the prime minister was fined by the police after being found to have broken the law.
Johnson survived a no-confidence motion in early June, but members within his party are now trying to push for a new vote.
-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Isabelle Lee and Peyton Forte of Bloomberg News, contributed to this report
