Argentina’s Merval Continues Climb; NYSE Closes Lower as Debt Debate Drags On

The Argentine stock index rose more than 2% on Friday, while Wall Street closed lower as the debate over the debt ceiling in the US hit an impasse

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By Bloomberg Línea
May 19, 2023 | 08:20 PM

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

🌎 Argentina’s Merval leads the gains in LatAm:

The majority of Latin American markets closed higher Friday, led by Argentina’s Merval (MERVAL), which gained 2.25%, boosted by the shares of Bolsas y Mercados Argentinos (BYMA), which rose 8.75%; Mirgor (MIRG), which climbed 7.81%; and Transportadora Gas del Norte (TGNO4), which ended the session 6.88% higher.

Mexico’s stock market (MEXBOL) slipped 1.75%, with the sharpest losses seen by the shares of América Móvil (AMXB), falling 3.22%, and Televisa (TLEVICPO), which dropped.

Grupo México SAB’s (GMEXICOB) shares fell 4.29% after news broke that the government of President Andrés Manuel López Obrador on Friday expropriated a stretch of rail line in the state of Veracruz that is operated by the company for freight services, with the plan to integrate it into a government project to link the Pacific coast with the Gulf of Mexico across the Tehuantepec Isthmus.

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Colombia’s Colcap (COLCAP) fell 1.13% on Friday, with declines by shares of Nutresa (NUTRESA), Interconexión Eléctrica SA (ISA) and Empresa de Energía de Bogotá (GEB) weighing on the index.

Economic data in Peru point to a 12% drop in private investment in the first quarter of 2023, one of the worst slumps since the third quarter of 2009, without considering the quarters that were severely affected by the Covid-19 pandemic in 2020.

The International Monetary Fund (IMF) cut its projection for the country’s economic growth from 2.4% to 2.2% for 2023.

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🗽On Wall Street:

Traders pared bets on a Federal Reserve rate hike in June to 25% as Jerome Powell signaled a pause. Stocks fell amid a slide in banks and concern US lawmakers are struggling to reach a deal to prevent a default.

The S&P 500 halted a two-day rally, failing to stay above the closely watched level of 4,200. The $3.2 billion SPDR S&P Regional Banking exchange-traded fund slumped almost 2% on a news report that Treasury Secretary Janet Yellen told the chiefs of large lenders that more mergers may be needed.

Debt-limit negotiations hit an impasse as House Speaker Kevin McCarthy blamed the White House for resisting spending cuts. “We’ve got to get movement by the White House and we don’t have any movement,” McCarthy, who was not in the Friday meeting, said. “So yeah, we’ve got to pause.”

“With the walkout of Republican debt-ceiling negotiators hindering chances for a viable conclusion before the upcoming X-date,” that would weaken chances for the Fed to raise rates on June 14, said Quincy Krosby, chief global strategist at LPL Financial.

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The Treasury had just $92 billion in funds left for extraordinary measures to help keep the government’s bills paid as of May 17, the department said in a statement Friday. That’s up from around $88 billion on May 10 and means that a little over a quarter of the $333 billion of authorized measures are still available to keep the US government from running out of borrowing room under the statutory debt limit.

‘Reasonable odds’

Stocks are primed for a precipitous drop if the US fails to raise the debt limit and delays government payments.

That’s the warning from a team of UBS strategists. Although it’s unlikely, if the US formally defaults and delays all payments beyond principal payments for a week, the S&P 500 will fall as much as 20% toward 3,400, the team led by Jonathan Pingle said.

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“At the moment, we see reasonable odds, roughly 50%, that Congress passes a short-term extension. However, given the two sides ruling that out, our assessment could be very wrong,” said the strategists.

The Bloomberg Dollar Spot Index fell 0.3% on Friday, the euro rose 0.3% to $1.0807, the British pound rose 0.3% to $1.2451 and the Japanese yen rose 0.5% to 137.99 per dollar.

🍝 For the dinner table debate:

Competition is coming for Twitter Inc as Instagram, owned by Meta Platforms is planning to launch a text-centric application that would become a direct player in the field of the social network of the little blue bird, according to Bloomberg.

According to the latest reports, the app being developed by an Instagram team will be independent of Instagram but will allow accounts to be connected, and could debut as early as June. Lia Haberman, a professor of social and influencer marketing at UCLA, posted a screenshot of an early description of the app.

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It may eventually be compatible with other Twitter competitor apps, including Mastodon, according to what Haberman’s screenshot showed.

Instagram is currently testing the project with influencers and celebrities, according to people familiar with the project who spoke to Bloomberg News. It has been secretly available to select creators for months. To date, Instagram did not respond to a request for comment on the matter.

Elon Musk acquired Twitter in a process not without controversy that alienated various users opposed to the billionaire’s stance and his decisions on the platform.

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After the purchase of Twitter, Musk launched the monetizable alternative, Twitter Blue, which limited the verification checks to those who pay the monthly subscription for this service. Along the way, people who used Twitter began to look for alternatives but to date there is a gap in the market that no other social network has been able to fill.

“Historically, we know that Meta likes to test and recreate features from other third-party apps and tools based on what they anticipate will be popular with their users,” Haberman said. The professor also noted that Musk has talked about turning Twitter into an “everything app,” with many features in addition to informational posts.

“Based on Meta’s history of borrowing from other platforms, they’re much more likely to get there first by consolidating all these experiences they’re building,” she said.

Paola Villar S., a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this story.