Argentina’s Merval Deepens Losses; NYSE Closes Lower as Energy and Tech Stocks Fall

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

🥇 Latin America’s Leader

Mexico’s stock market rebounded on Tuesday, closing in positive territory with the region’s strongest gain on a volatile day for Latin American markets.

The S&P BMV/IPC (MEXBOL) rose 0.59% thanks to the performance of the financial, communication services and non-core consumer goods sectors.

Grupo Financiero Banorte (GFNORTEO), Industrias Peñoles and Cemex (CEMEXCP0) shares were among the best performers during the day.

In Mexico, the monthly industrial activity index rose 3.1% in May, compared to the same month of 2021, according to the country’s statistics bureau INEGI.

On a disaggregated basis, the manufacturing industries component drove the result with a 5.6% increase and there was a 4.3% rise in the generation, transmission and distribution of electricity, water and gas.

The Brazilian stock exchange had a volatile day between losses and gains, with the Ibovespa index (IBOV) managing to climb, but which was affected by risk aversion and the fall in the price of raw materials, including oil and iron ore.

📉 A Bad Day:

Argentina’s stock market closed with losses for the second consecutive day, as uncertainty continues amid external pressures and the direction the country will take after the change in the government’s economic team.

The Merval index (MERVAL) posted the region’s sharpest decline, with a drop of more than 1%.

Economy Minister Silvina Batakis has announced a package of measures to be implemented, saying it is necessary to “bring some order and balance to public finances”.

Despite the easing of exchange restrictions for the agricultural and automotive sectors, the scenario continues to be adverse for most of the productive sectors, which are warning about the shortage of supplies, while Argentine importers continue to warn about the lack of access to US dollars.

🗽 On Wall Street:

Asian stocks appear set for a cautious start Wednesday amid deepening concerns about the economic outlook and an anxious countdown to US data that may show inflation hit a fresh four-decade high.

Futures edged up for Japan and Hong Kong but Australia’s were steady.

US contracts wavered after a near-1% Wall Street drop on Tuesday, led by tech and energy.

The S&P 500 dropped 0.92%, the Dow Jones Industrial 0.62% and the Nasdaq Composite (CCMPDL) 0.95%.

The 10-year US Treasury yield at one point dropped as much as 12.4 basis points below the 2-year rate -- a magnitude unseen since 2007. Such inversions are one of the most widely watched signals of recession risk.

A rapid tightening of monetary policy in the US and elsewhere to fight price pressures is stoking growth worries and roiling markets.

Oil held a tumble to under $100 a barrel. The US dollar is at the highest level since March 2020, and the euro remains in sight of parity with the greenback for the first time in two decades.

Bitcoin slipped further below $20,000.

Economists project US inflation likely hit a pandemic peak in June that will keep the Federal Reserve geared for another big interest-rate hike. The consumer-price index probably rose 8.8% from a year earlier, the largest jump since 1981, according to the median forecast in a Bloomberg survey.

“This is widely expected to be a really strong print,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said on Bloomberg Television. “Even if it is not, I don’t think that changes the Fed’s perspective in a couple of weeks. We won’t have enough evidence that inflation is convincingly turning over.”

The International Monetary Fund cut its growth projections for the US economy and warned that a broad-based surge in inflation poses “systemic risks” to both the country and the global economy.

Traders are also on tenterhooks for the latest corporate earnings reports and monitoring for a potential energy crisis in Europe if Russia cuts off gas supplies.

PepsiCo (PEP) increased its revenues forecast, expecting a 10% increase this year, but which the company attributes to the higher costs paid by its customers.

Earnings reports are also due this week from JPMorgan, Morgan Stanley, Citigroup and Wells Fargo.

🔑 The Day’s Key Events:

Oil prices plunged as concerns grew over the outlook for demand amid renewed fears of a rise in Covid-19 cases and the possibility of an economic downturn.

The World Health Organization called on governments to impose new controls to deal with a new wave of infections. Subvariants of the Omicron variant are driving up the number of cases and causing more fatalities, the WHO’s director general Tedros Adhanom Ghebreyesus said Tuesday, Bloomberg reported.

In China, the world’s top oil importer, about 30 million people face some form of restriction amid a strict Zero Covid policy, while Shanghai residents fear a return to lockdowns as contagions rise.

Prices also came under pressure after the head of the International Energy Agency, Fatih Birol, warned that the worst of the energy crisis is yet to come.

“This winter in Europe will be very, very difficult,” Birol told a conference in Sydney. “This is a major concern, and it can have serious consequences for the global economy.”

🍝 For the Dinner Table Debate:

Startups in the crypto world are starting to feel the cold winter the industry is going through, amid plummeting prices of major cryptocurrencies and fears of a possible economic downturn.

Funding for private cryptocurrency companies in the second quarter fell to its lowest level in a year, according to data from research firm PitchBook.

In the second quarter, venture capital investors invested $6.76 billion in cryptocurrency companies, down 31% from the previous quarter, Bloomberg reported.

Among startups, deals have collapsed, with investors pulling back offers in recent weeks, added crypto venture capital firm CoinFund’s managing partner David Pakman.

-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Sunil Jagtiani of Bloomberg News, contributed to this report